SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/DOMESTIC
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Scudder Growth and
Income Fund
Fund #064
Semiannual Report
June 30, 2000
The fund seeks long-term growth of capital, current income, and growth of
income.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
15 Glossary of Investment Terms
16 Investment Portfolio
21 Financial Statements
24 Financial Highlights
26 Notes to Financial Statements
34 Shareholder Meeting Results
35 Officers and Trustees
36 Investment Products and Services
38 Account Management Resources
2| Scudder Growth and Income Fund
<PAGE>
Scudder Growth and Income Fund
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ticker symbol SCDGX fund number 064
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Date of o Scudder Growth and Income Fund -- Scudder Shares
Inception: returned 1.06% in the six months ended June 30, 2000,
5/31/29 beating the -0.42% return of its unmanaged benchmark,
the S&P 500. In addition, the fund has outperformed
its peer group over the one-, three-, five-, and
ten-year time periods, according to Lipper Analytical
Total Net Services.^1
Assets as of
6/30/00: o The fund continues to employ a disciplined approach
$6 billion that focuses on establishing long-term positions in
well-managed, attractively valued companies.
o Performance was helped by the fund's holdings in the
technology, consumer staples, and health care
sectors.
^1 Lipper Analytical Services, Inc., is an independent analyst of
investment performance. Performance includes reinvestment of dividends
and capital gains. For the period ended June 30, 2000, Scudder Growth
and Income Fund -- Scudder Shares' Lipper ranking was 203 out of 485
funds for the one-year period, 156 out of 328 funds for the three-year
period, 69 out of 206 for the five-year period, and 24 out of 88 for
the ten-year period. Past performance is no guarantee of future
results.
Scudder Growth and Income Fund | 3
<PAGE>
Letter from the Fund's President
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Dear Shareholders,
We are pleased to report the results of the Scudder Growth and Income Fund for
the six-month period ended June 30, 2000. During the first half of the year, a
powerful first quarter rally in growth stocks gave way to a violent correction
during April and May, as concerns built that the Fed would be forced to raise
interest rates several times in order to stem inflation pressures. Just as
market sentiment reached its nadir, however, the U.S. economy began to show
signs of cooling to a more manageable rate of growth. Taking this to mean that
the Fed would be less likely to raise rates over the second half of the year,
investors moved back into equities during June. The net result of these
fluctuations was that the U.S. market, as measured by the S&P 500, finished the
period virtually unchanged.
We believe that the lesson from the last six months is that no matter what is
taking place in the financial markets, it is essential to stay focused on your
goals and ensure that your investments are appropriately suited for your needs.
For many investors, however, the strong performance of the U.S. stock market
during the second half of the 1990s diminished the attractiveness of
diversification and a long-term point of view. But as the events of the first
half of 2000 demonstrated, these factors are still important components of a
successful investment strategy. In a
4 | Scudder Growth and Income Fund
<PAGE>
period in which stocks experienced significant volatility, portfolios with
exposure to several asset classes were generally better positioned to ride out
the market's fluctuations than portfolios that were concentrated in a single
area, such as technology. Unless you plan to devote your energies to investing
every day, we think that you will benefit from taking a long-term approach that
includes exposure to several asset classes.
As a shareholder of the Scudder Growth and Income Fund, you already own shares
of a fund that invests in value stocks. Although the value style has not
performed well over the past two years, the rapid sector rotations during the
first half of 2000 have demonstrated the benefit of maintaining exposure to
several areas of the stock market.
Thank you for your continued investment in Scudder Growth and Income Fund. For
current information on the fund or your account, visit our Web site at
www.scudder.com. There you'll find a wealth of information, including fund
performance, the most recent news on Scudder products and services, and the
opportunity to perform account transactions. You can also speak with one of our
representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Linda C. Coughlin
Linda C. Coughlin
President,
Scudder Growth and Income Fund
Scudder Growth and Income Fund | 5
<PAGE>
Performance Update
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June 30, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Growth and
Income Fund -- Scudder Shares S&P 500 Index*
----------------------------- --------------
'90 10000 10000
'91 10693 10738
'92 12858 12180
'93 14708 13841
'94 15832 14036
'95 18797 17694
'96 23267 22293
'97 31006 30032
'98 37410 39092
'99 40482 47991
'00 38720 51474
Yearly periods ended June 30
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 6/30/2000 $10,000 Cumulative Annual
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Scudder Growth and Income Fund -- Scudder Shares
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1 year $ 9,565 -4.35% -4.35%
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5 year $ 20,600 106.00% 15.55%
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10 year $ 38,721 287.21% 14.50%
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S&P 500 Index*
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1 year $ 10,726 7.26% 7.26%
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5 year $ 29,092 190.92% 23.78%
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10 year $ 51,474 414.74% 17.79%
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* The Standard & Poor's 500 Index is a capitalization-weighted index of
500 stocks. The index is designed to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing all major industries. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
6 | Scudder Growth and Income Fund
<PAGE>
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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 (%)
BAR CHART DATA:
Yearly periods ended June 30
Scudder Growth and
Income Fund -- Scudder Shares S&P 500 Index*
----------------------------- --------------
1991 6.93 7.38
1992 20.25 13.43
1993 14.39 13.65
1994 7.64 1.40
1995 18.72 26.07
1996 23.78 26.00
1997 33.26 34.72
1998 20.66 30.17
1999 8.21 22.76
2000 -4.35 7.26
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 6.93 20.25 14.39 7.64 18.72 23.78 33.26 20.66 8.21 -4.35
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Index Total
Return (%) 7.38 13.43 13.65 1.40 26.07 26.00 34.72 30.17 22.76 7.26
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Net Asset
Value ($) 13.81 16.04 17.20 17.00 18.53 21.85 27.02 29.50 29.12 26.70
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Income
Dividends ($) .64 .52 .51 .47 .51 .56 .59 .74 .59 .31
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Capital Gains
Distributions ($) -- -- .54 1.04 .94 .42 1.18 2.09 1.92 .82
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</TABLE>
* The Standard & Poor's 500 Index is a capitalization-weighted index of
500 stocks. The index is designed to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing all major industries. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased.
Effective August 2, 1999, the Fund offers two share classes: Scudder
shares and Class R shares. The total return information provided is for
the Fund's Scudder share class.
Scudder Growth and Income Fund | 7
<PAGE>
Portfolio Summary
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June 30, 2000
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Asset Allocation
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THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
Common Stocks 96% Management seeks to
Cash Equivalents 3% remain fully invested in
Short-Term Investments 1% equities at all times.
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100%
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Sector Diversification
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(excludes 3% Cash Equivalents)
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
Technology 20% The fund's increased
Financial 17% weighting in technology
Health 13% and health care stocks
Manufacturing 12% boosted performance
Energy 10% during the period.
Communications 8%
Consumer Staples 7%
Media 4%
Durables 3%
Other 6%
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100%
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8 | Scudder Growth and Income Fund
<PAGE>
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Ten Largest Equity Holdings
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(34% of Portfolio) The fund's top holdings
reflect a focus on
stocks that management
believes to be
attractively valued in
relation to their
earnings growth.
1. Corning, Inc.
Specialty glass manufacturer
2. Intel Corp.
Producer of semiconductor memory circuits
3. Oracle Corp.
Provider of database management software
4. Exxon Mobil Corp.
International oil company
5. General Electric Co.
Producer of electrical equipment
6. American Home Products Corp.
Diversified pharmaceutical company
7. Citigroup, Inc.
Diversified financial services company
8. PepsiCo, Inc.
Provider of soft drinks, snack foods and food services
9. American International Group, Inc.
International insurance holding company
10. Marsh & McLennan Companies, Inc.
Insurance, brokerage, consulting and investment
management services
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
Scudder Growth and Income Fund | 9
<PAGE>
Portfolio Management Discussion
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June 30, 2000
In the following interview, Kathleen T. Millard, lead portfolio manager of
Scudder Growth and Income Fund, discusses the recent market environment and the
fund's current investment strategy.
Q: The first half of 2000 was marked by extreme fluctuations in the
U.S. stock market. What has this meant for value stocks?
A: Value stocks were subject to high volatility and rapid sector
rotations throughout the first half of 2000. In the first two months of
the year, the overall market posted negative returns despite a rally in
a small group of technology stocks and small cap growth names.
Meanwhile, value-oriented stocks responded negatively to rising
long-term interest rates, higher energy prices, and the threat of
increases in short-term interest rates by the U.S. Federal Reserve.
However, the March-May period brought a significant rotation in market
leadership. Value stocks generally outperformed growth stocks in this
period as stronger-than-expected corporate earnings, fears regarding
more aggressive Fed action, and a steep correction in technology shares
weighed heavily on the market. But by June, a powerful Nasdaq-driven
rally propelled large-cap growth indices higher, while softness in the
financial and energy sectors set the tone for a decline in large-cap
value stocks.
Market volatility challenges us to remain focused on our disciplined
strategy of finding and holding attractively valued securities with
positive fundamental outlooks. We also emphasize our sell discipline,
which includes not only reducing positions that have violated our
fundamental investment thesis, but also selling stocks as they reach
full valuation. In a period characterized by its volatility, this
steady approach -- along with the fund's extensive diversification --
helped mitigate the fluctuations of the broader market.
10 | Scudder Growth and Income Fund
<PAGE>
Stock Selection Process
The portfolio management team employs a three-step investment process in
selecting stocks for the fund that is based on: 1) attractive valuations, 2)
solid fundamentals, and 3) risk management. To uncover attractive valuations,
the 1000 largest companies in the fund's investment universe are screened using
measures such as relative dividend yield, price/cash flow,
price/forward-earnings, and other earnings measures. Stocks are then ranked into
quintiles according to these variables. Stocks falling into quintiles 1 and 2
are in the "buy" zone, 3 and 4 are in the "hold" zone, and 5 is in the "sell"
zone.
Analyst ratings are then used to identify companies with attractive
fundamentals. This helps to narrow the list of potential purchase candidates.
From this perspective, the portfolio managers focus on the management strategy
of the company and the dynamics of the company's financial statements.
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3-Step Investment Process
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Valuation Fundamental Research Risk Management
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Criteria Analyst ratings are Company-Specific Risk
-------- used to narrow the ---------------------
Multi-factor model list. Focus is on the Valuation,
screens stocks for management strategy of fundamentals, and
attractive valuations. the company and the position sizes.
dynamics of the
Rank stocks by quintile company's financial Portfolio Risk
----------------------- statements. --------------
o 1-2 Buy Diversification, value
o 3-4 Hold tilt, and monitor
o 5 Sell performance deviation
from S&P 500.
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With regard to risk, the portfolio management team looks at two kinds of risk:
company-specific risk and portfolio risk. Company-specific risk is managed
through valuation, fundamentals, and by limiting position sizes. On the
portfolio level, risk is managed three ways: by maintaining adequate
diversification across industry sectors (no major sector bets); by maintaining a
portfolio with greater value characteristics than the fund's benchmark (the
portfolio's value tilt provides a measure of protection if the overall market
declines); and by monitoring the source and amount of the portfolio's deviation
from its benchmark (individual holdings are monitored to determine what helped
and hurt the portfolio).
Scudder Growth and Income Fund | 11
<PAGE>
Q: One of the fund's goals is to outperform the S&P 500 Index in down
markets. Did it achieve this goal during the most recent period?
A: We are pleased to report that the 1.06% return of Scudder Growth and
Income Fund -- Scudder Shares outperformed the -0.42% return of its
benchmark, the S&P 500 Index. We believe that the fund's favorable
relative performance in the first half is a reflection of our
disciplined value framework. Our quantitative valuation screens helped
during the second quarter as momentum strategies -- those that focus on
investing in the market's most recent winners regardless of their
valuations -- quickly reversed to the negative. As the market once
again recognizes the importance of valuation characteristics such as
low price/earnings, low price/cash flow, and high relative dividend
yield, we believe that investors will be rewarded for making decisions
based on rational investment criteria. We feel that this approach has
helped the fund to hold up well amid the recent volatility by enabling
it to post strong relative performance during the periods in which the
stock market was falling. Our disciplined investment style has also
enabled the fund to outperform its peer group over the one-, three-,
five-, and ten-year time periods, according to Lipper Analytical
Services.
Q: How did the fund's holdings in the technology sector impact
performance?
A: The combination of the fund's underweighted position in the sector
and strong stock selection within the group helped fund performance
during the second quarter correction. Relative to its benchmark, the
fund's weighting in tech stocks has increased in the past three months
as its holdings have outperformed the technology component of the S&P
500. The fund's two largest positions, Intel and Corning, were both
down much less than the sector as a whole during the spring correction.
We opted to cut back on the fund's position in Corning, which we bought
two years ago at 15 times earnings and trimmed at 100 times
12 | Scudder Growth and Income Fund
<PAGE>
earnings. A recent addition to the portfolio was Intuit, which we
believe will successfully exploit its dominant consumer finance
software franchise through distribution on the Internet.
Q: What other fund holdings contributed positively to performance?
A: The fund's holdings in the consumer staples area performed well in
the second quarter as the volatile market environment prompted
investors to seek more defensive holdings. The fund benefited from the
rallies in Anheuser-Busch, PepsiCo, and Avon. Health care stocks, a
sector in which we have been adding throughout the first half of the
year, also contributed to performance. The fund's weighting in the
sector currently stands at 12.6% of net assets, up from 6.6% six months
ago. We moved into health care during the first quarter on the theory
that the sector's valuations were extremely attractive in relation to
its growth rate. This disparity was the result of concerns over the
Medicare drug benefit that, in our view, were overblown. What's more,
health care stocks tend to perform well when growth is expected to
slow, since their earnings are less vulnerable to fluctuations in the
economy. Stocks that have performed well for us in this area include
Amgen and American Home Products.
Q: What moves have you made within the financial area, the fund's
second largest sector holding?
A: Our strategy within the financial services sector has been to tilt
the portfolio toward insurance stocks and large global financial
services companies with diversified, fee-oriented revenue streams. Our
hypothesis is that these groups will outperform the average financial
services stock as interest rates rise, credit conditions deteriorate,
and traditional lending businesses become increasingly commoditized. An
example of a stock that fits our criteria is Mellon Financial, which
offers higher growth and a higher-return portfolio of financial
services businesses than the average regional bank. We are also
enthusiastic on
Scudder Growth and Income Fund | 13
<PAGE>
management's strategy of investing in the company's growth businesses
and exiting its lower-return segments. If well-executed, this strategy
should continue to improve Mellon's growth rate and valuation over
time. The fund's largest positions in the financial sector are American
International Group, Marsh & McLennan, and Citigroup.
Q: What is your outlook as we move into the second half of the year?
A: Consistent with the nature of the market environment over the past
six months, the second half offers both risks and opportunities. On one
hand, rising unit labor costs and higher energy prices were rapidly
priced into basic materials, manufacturing, and bank stocks during the
second quarter, which in our view highlighted the possibility that
there is little room for improvement in the profit margins of companies
in these sectors. Cheap valuations did not protect these stocks from
underperforming, so our discipline of avoiding peak margin situations
helped steer us around many of these "value traps." We see potential
opportunity in selected consumer staples, health care, aerospace, and
insurance companies, where we believe the potential for margin
expansion still exists. We are also favorably inclined toward energy
stocks despite the run-up in the price of oil to seemingly
unsustainable levels north of $30 a barrel, since the stocks are
generally discounting $20 oil.
We are pleased with the portfolio's positioning and this year's trend
in relative performance. We continue to focus on generating returns
through individual stock selection, while diligently managing our risk
profile. Our investment discipline has been consistently applied, as we
have adhered to our value-oriented style through extremely volatile
market conditions. The pace of change in the markets and the economy is
moving at a blistering rate, but we believe that with a sound process
and a strong investment organization, we will continue to deliver a
superior value-based investment product to our shareholders.
14 | Scudder Growth and Income Fund
<PAGE>
Glossary of Investment Terms
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Consumer Products purchased by consumers on a regular
Staples basis, such as food, beverages, alcohol, and tobacco. In
the aggregate, sales of consumer staples tend to be steady
and less sensitive to economic fluctuations.
Dividend With stocks, a company's payment out of earnings to
Yield shareholders divided by its share price. For example, a
stock that sells for $10 and pays annual dividends
totaling $1 has a yield of 10%; if the stock price goes up
to $20 and the dividend were to remain at $1, the yield
would fall to 5%.
Growth Stock Stock of a company that has displayed above average
earnings growth and is expected to continue to increase
profits faster than the overall market. Stocks of such
companies usually trade at higher valuations and
experience more price volatility than the market as a
whole. Distinct from value stock.
Market The market value of a company's outstanding shares of
Capitalization common stock, determined by multiplying the number of
shares outstanding by the share price (shares x price =
market capitalization). The universe of publicly traded
companies is frequently divided into large-, mid-, and
small-capitalization. "Large-cap" stocks tend to be more
liquid.
Momentum The practice of investing in the market's top performing
Investing stocks in order to capture additional upward movements
in their prices.
Value Stock A company whose stock price does not fully reflect its
intrinsic value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some other
valuation measure, relative to its industry or the market
overall. Value stocks tend to display less price
volatility and may carry higher dividend yields. Distinct
from growth stock.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
An expanded list of terms is located at our Web site, www.scudder.com.
Scudder Growth and Income Fund | 15
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
----------------------------------------------------------------------------------------
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Repurchase Agreements 2.5%
----------------------------------------------------------------------------------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette, 6.53%, to be repurchased
at $156,531,388, on 7/3/2000**
(Cost $156,503,000) .................................... 156,503,000 156,503,000
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Short-Term Investments 1.5%
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Bell Atlantic Network Funding Corp.:
6.62%, 8/7/2000*** ..................................... 5,000,000 4,966,238
6.54%, 8/10/2000*** .................................... 15,000,000 14,890,500
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Total Short-Term Investments (Cost $19,856,738) 19,856,738
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Shares
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Common Stocks 96.0%
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Consumer Discretionary 2.0%
Department & Chain Stores
Wal-Mart Stores, Inc. ..................................... 2,195,300 126,504,163
-----------
Consumer Staples 6.5%
Alcohol & Tobacco 2.0%
Anheuser-Busch Companies, Inc. ............................ 1,513,000 113,002,188
-----------
Food & Beverage 2.5%
PepsiCo, Inc. ............................................. 3,405,900 151,349,681
-----------
Package Goods/Cosmetics 2.0%
Avon Products, Inc. ....................................... 2,850,500 126,847,250
-----------
Health 12.0%
Biotechnology 1.0%
Amgen Inc.* ............................................... 748,900 52,610,225
-----------
Medical Supply & Specialty 2.2%
Becton, Dickinson & Co. ................................... 1,120,100 32,132,869
</TABLE>
The accompanying notes are an integral part of the financial statements
16 | Scudder Growth and Income Fund
<PAGE>
<TABLE>
Shares Value ($)
--------------------------------------------------------------------------------
<S> <C> <C>
Medtronic, Inc. .......................... 2,074,000 103,311,125
-----------
135,443,994
-----------
Pharmaceuticals 8.8%
American Home Products Corp. ............. 2,873,300 168,806,375
Bristol-Myers Squibb Co. ................. 1,492,500 86,938,125
Eli Lilly & Co. .......................... 944,300 94,311,963
Johnson & Johnson, Inc. .................. 881,500 89,802,813
Merck & Co., Inc. ........................ 1,395,400 106,922,525
-----------
546,781,801
-----------
Communications 7.5%
Telephone/Communications
Bell Atlantic Corp. ...................... 1,669,596 84,836,347
BellSouth Corp. .......................... 2,164,500 92,261,813
GTE Corp. ................................ 1,572,200 97,869,450
SBC Communications, Inc. ................. 2,220,762 96,047,957
Sprint Corp. ............................. 1,443,900 73,638,900
-----------
444,654,467
-----------
Financial 16.0%
Banks 3.5%
Chase Manhattan Corp. .................... 2,279,700 105,008,681
FleetBoston Financial Corp. .............. 1,906,000 64,804,000
US Bancorp ............................... 2,107,000 40,559,750
-----------
210,372,431
-----------
Insurance 2.5%
American International Group, Inc. ....... 1,278,100 150,176,750
-----------
Consumer Finance 4.0%
American Express Co. ..................... 821,400 42,815,475
Citigroup, Inc. .......................... 2,775,700 167,235,925
Mellon Financial Corp. ................... 10,301,200 47,412,475
-----------
257,463,875
-----------
Other Financial Companies 6.0%
Federal National Mortgage Association..... 2,406,900 125,610,094
Marsh & McLennan Companies, Inc. ......... 1,401,400 146,358,713
Morgan Stanley Dean Witter & Co. ......... 1,123,100 93,498,075
-----------
365,466,882
-----------
Media 4.0%
Advertising 1.0%
Interpublic Group of Companies, Inc...... 1,433,600 61,644,800
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Growth and Income Fund | 17
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Broadcasting & Entertainment 2.0%
Walt Disney Co. ........................ 3,056,900 118,645,931
-----------
Cable Television 1.0%
Comcast Corp. "A"* ..................... 1,385,800 56,124,900
-----------
Service Industries 2.5%
EDP Services 1.0%
First Data Corp. ....................... 1,515,800 75,221,575
-----------
Printing/Publishing 1.5%
McGraw-Hill, Inc. ...................... 1,835,400 99,111,600
-----------
Durables 2.0%
Aerospace 1.0%
Boeing Co. ............................. 717,600 30,004,650
Rockwell International Corp. ........... 1,206,000 37,989,000
-----------
67,993,650
-----------
Automobiles 0.5%
Ford Motor Co. ......................... 999,000 42,957,000
-----------
Construction/Agricultural Equipment 0.5%
Deere & Co. ............................ 1,235,600 45,717,200
-----------
Manufacturing 11.0%
Chemicals 2.0%
Dow Chemical Co. ....................... 3,159,600 95,380,425
-----------
Electrical Products 3.0%
General Electric Co. ................... 3,258,300 172,689,900
-----------
Industrial Specialty 5.0%
Corning, Inc. .......................... 1,212,750 327,290,906
-----------
Machinery/Components/Controls 1.0%
Parker-Hannifin Corp. .................. 2,363,800 80,960,150
-----------
Technology 19.0%
Computer Software 8.0%
America Online, Inc. ................... 972,700 51,309,925
The accompanying notes are an integral part of the financial statements.
18 | Scudder Growth and Income Fund
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Computer Associates International, Inc. ... 1,053,400 53,920,913
Intuit, Inc. .............................. 718,500 29,727,938
Microsoft Corp.* .......................... 1,362,400 108,992,000
Oracle Corp.* ............................. 2,793,800 234,853,813
-----------
478,804,589
-----------
Electronic Components/Distributors 2.0%
Cisco Systems, Inc. ....................... 1,748,700 111,151,721
-----------
Electronic Data Processing 3.3%
Compaq Computer Corp. ..................... 2,707,300 69,205,356
Hewlett-Packard Co. ....................... 489,000 61,063,875
International Business Machines Corp. ..... 766,300 83,957,744
-----------
214,226,975
-----------
Semiconductors 5.5%
Intel Corp. ............................... 2,386,500 319,045,219
Texas Instruments, Inc. ................... 475,400 32,654,038
-----------
351,699,257
-----------
Miscellaneous 0.2%
Agilent Technologies, Inc.* ............... 204,430 15,076,742
-----------
Energy 9.5%
Oil & Gas Production 5.5%
Exxon Mobil Corp. ......................... 2,355,253 184,887,361
Royal Dutch Petroleum Co. (New York shares) 1,811,800 111,538,938
Texaco, Inc. .............................. 1,050,300 55,928,475
-----------
352,354,774
-----------
Oil Companies 3.0%
Chevron Corp. ............................. 471,800 40,014,538
Total FINA ELF S.A. "B" ................... 662,723 101,468,188
-----------
141,482,726
-----------
Oilfield Services/Equipment 1.0%
Schlumberger Ltd. ......................... 778,000 58,058,250
-----------
Metals & Minerals 1.0%
Steel & Metals
Alcoa, Inc. ............................... 1,570,400 45,541,600
-----------
Transportation 0.5%
Airlines
AMR Corp. ................................. 654,700 17,308,631
-----------
The accompanying notes are an integral part of the financial statements.
Scudder Growth and Income Fund | 19
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
---------------------------------------------------------------------------------------------
<S> <C> <C>
Utilities 2.5%
Electric Utilities
FPL Group, Inc. ............................................ 1,252,700 62,008,650
Unicom Corp. ............................................... 2,147,400 83,077,538
-------------
145,086,188
---------------------------------------------------------------------------------------------
Total Common Stocks (Cost $4,426,034,467) 5,855,203,197
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $4,602,394,205) (a) 6,031,562,935
---------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
*** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $4,604,183,435. At June
30, 2000, net unrealized appreciation for all securities based on tax
cost was $1,427,379,500. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $1,545,799,241 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $118,419,741.
The accompanying notes are an integral part of the financial statements.
20 | Scudder Growth and Income Fund
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $4,602,394,205) ............... $ 6,031,562,935
Foreign currency, at value (cost $1,113,559) ............................ 1,113,559
Receivable for investments sold ......................................... 19,346,734
Dividends receivable .................................................... 5,008,882
Interest receivable ..................................................... 28,388
Receivable for Fund shares sold ......................................... 850,900
Foreign taxes recoverable ............................................... 1,556,242
Due from Adviser ........................................................ 42,887
Other assets ............................................................ 22,739
---------------
Total assets ............................................................ 6,059,533,266
Liabilities
-------------------------------------------------------------------------------------------
Due to custodian bank ................................................... 1,413,932
Payable for investments purchased ....................................... 60,012,222
Payable for Fund shares redeemed ........................................ 17,751,334
Accrued management fee .................................................. 2,244,757
Accrued reorganization costs ............................................ 2,855,286
Accrued Trustees' fees and expenses ..................................... 91,167
Other accrued expenses and payables ..................................... 2,337,496
---------------
Total liabilities ....................................................... 86,706,194
---------------
-------------------------------------------------------------------------------------------
Net assets, at value $ 5,972,827,072
-------------------------------------------------------------------------------------------
Net Assets
-------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ..................................... 2,138,399
Net unrealized appreciation (depreciation) on:
Investments ........................................................... 1,429,168,730
Foreign currency related transactions ................................. (98,508)
Accumulated net realized gain (loss) .................................... 320,553,718
Paid-in capital ......................................................... 4,221,064,733
-------------------------------------------------------------------------------------------
Net assets, at value $ 5,972,827,072
-------------------------------------------------------------------------------------------
Net Asset Value
-------------------------------------------------------------------------------------------
Scudder Shares
Net Asset Value, offering and redemption price per share ($5,966,691,013 /
223,438,401 outstanding shares of beneficial interest, $.01 par value, ---------------
unlimited number of shares authorized)................................ $ 26.70
---------------
Class R Shares
Net Asset Value, offering and redemption price per share
($6,136,059 / 232,389 outstanding shares of beneficial interest, ---------------
$.01 par value, unlimited number of shares authorized).............. $ 26.40
---------------
The accompanying notes are an integral part of the financial statements.
Scudder Growth and Income Fund | 21
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $251,975) .......... $ 45,340,269
Interest ....................................................... 2,618,940
-------------
Total Income ................................................... 47,959,209
-------------
Expenses:
Management fee ................................................. 14,070,732
Services to shareholders ....................................... 10,490,892
Custodian and accounting fees .................................. 342,953
Administrative services fees ................................... 7,783
Auditing ....................................................... 42,849
Legal .......................................................... 67,678
Trustees' fees and expenses .................................... 115,441
Reports to shareholders ........................................ 470,718
Registration fees .............................................. 47,419
Reorganization ................................................. 3,230,929
Other .......................................................... 103,334
-------------
Total expenses, before expense reductions ...................... 28,990,728
Expense reductions ............................................. (153,220)
-------------
Total expenses, after expense reductions ....................... 28,837,508
--------------------------------------------------------------------------------
Net investment income (loss) 19,121,701
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 319,067,792
Foreign currency related transactions .......................... 5,392
-------------
319,073,184
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (292,268,682)
Foreign currency related transactions .......................... 916,109
-------------
(291,352,573)
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 27,720,611
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 46,842,312
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
22 | Scudder Growth and Income Fund
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
----------------------------------------------------------------------------------------
Operations:
Net investment income (loss) ...................... $ 19,121,701 $ 127,835,510
Net realized gain (loss) on investment transactions 319,073,184 204,568,011
Net unrealized appreciation (depreciation) on
investment transactions during the period....... (291,352,573) 80,707,122
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations................................. 46,842,312 413,110,643
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Scudder Shares .................................. (16,982,189) (134,071,528)
--------------- ---------------
Class R Shares .................................. (1,113) (131,770)
--------------- ---------------
Net realized gains:
Scudder Shares .................................. (46,198,585) (177,492,521)
--------------- ---------------
Class R Shares .................................. (52,957) (31,861)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ......................... 421,230,956 1,519,001,419
Reinvestment of distributions .................... 59,270,083 294,028,961
Cost of shares redeemed ........................... (1,262,266,077) (2,725,680,063)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions.............................. (781,765,038) (912,649,683)
--------------- ---------------
Increase (decrease) in net assets ................. (798,157,570) (811,266,720)
Net assets at beginning of period ................. 6,770,984,642 7,582,251,362
Net assets at end of period (including
undistributed net investment income of --------------- ---------------
$2,138,399 at June 30, 2000) ................... $ 5,972,827,072 $ 6,770,984,642
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Growth and Income Fund | 23
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information
derived from the financial statements.
Scudder Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Years Ended December 31, 2000(b) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $26.69 $26.31 $27.33 $23.23 $20.23 $16.26
-----------------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment
operations:
------------------------------------------------------------------------------------
Net investment income (loss) .08(a) .48(a) .62(a) .62(a) .60(a) .55
------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions .21 1.11 1.0 6.26 3.84 4.46
-----------------------------------------------------
------------------------------------------------------------------------------------
Total from investment
operations .29 1.59 1.68 6.88 4.44 5.01
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.08) (.51) (.61) (.58) (.57) (.56)
------------------------------------------------------------------------------------
Net realized gains on
investment transactions (.20) (.70) (2.09) (2.20) (.87) (.48)
-----------------------------------------------------
------------------------------------------------------------------------------------
Total distributions (.28) (1.21) (2.70) (2.78) (1.44) (1.04)
------------------------------------------------------------------------------------
Net asset value, end of period $26.70 $26.69 $26.31 $27.33 $23.23 $20.23
-----------------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) 1.06** 6.15 6.07 30.31 22.18 31.18
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 5,967 6,765 7,582 6,834 4,186 3,061
------------------------------------------------------------------------------------
Ratio of expenses (%) .89(c)* .80 .74 .76 .78 .80
------------------------------------------------------------------------------------
Ratio of net investment income
(loss) (%) .63* 1.76 2.20 2.31 2.77 3.10
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 58* 70 41 22 27 27
------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended June 30, 2000 (Unaudited).
(c) The ratio of operating expenses excluding costs incurred in connection
with the reorganization was .84%.
* Annualized
** Not annualized
24 | Scudder Growth and Income Fund
<PAGE>
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class R Shares
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
2000(c) 1999(b)
----------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 26.65 $ 28.16
------------------------
Income (loss) from investment operations:
Net investment income (loss) (a) (.19) .09
Net realized and unrealized gain (loss) on investment
transactions .14 (.76)
------------------------
Total from investment operations (.05) (.67)
Less distributions from:
Net investment income .00(d) (.22)
Net realized gains on investment transactions (.20) (.62)
------------------------
Total distributions (.20) (.84)
Net asset value, end of period $ 26.40 $ 26.65
------------------------
Total Return (%) (.18)** (2.31)**
Ratios to Average Net Assets and Supplemental Data
----------------------------------------------------------------------------------
Net assets, end of period ($ millions) 6 6
Ratio of expenses (%) 3.33(e)* 1.34*
Ratio of net investment income (loss) (%) (1.83)* .98*
Portfolio turnover rate (%) 58* 70
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the period August 2, 1999 (commencement of Class R shares) to
December 31, 1999 (Note A).
(c) For the six months ended June 30, 2000 (Unaudited).
(d) Net investment income was less than $.005 per share.
(e) The ratio of operating expenses excluding costs incurred in connection
with the reorganization was 3.28%.
* Annualized
** Not annualized
Scudder Growth and Income Fund | 25
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Growth and Income Fund (the "Fund") is a 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.
Effective August 2, 1999, the Fund offers two classes of shares: Scudder shares
and Class R shares. Class R shares are available for purchase by participants of
certain employer-sponsored retirement plans.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class such as shareholder
services, administrative services and certain other class-specific expenses.
Differences in class expenses may result in payment of different per share
dividends by class. All shares of the Fund have equal rights with respect to
voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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.
26 | Scudder Growth and Income Fund
<PAGE>
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.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions. Net
realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
subcustodian 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.
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
Scudder Growth and Income Fund | 27
<PAGE>
regulations which may differ from accounting principles generally accepted in
the United States. 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.
B. Purchases and Sales of Securities
During the six months ended June 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,711,994,834 and
$2,170,072,461, respectively.
C. Related Parties
Under the Investment 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 approximately 0.60% on
the first $500,000,000 of the Fund's average daily net assets, 0.55% on the next
$500,000,000, 0.50% on the next $500,000,000, 0.475% on the next $500,000,000,
0.45% on the next $1,000,000,000, 0.425% on the next $1,500,000,000, 0.405% on
the next $1,500,000,000, 0.3875% on the next $4,000,000,000 and 0.37% of such
net assets in excess of $10,000,000,000, computed and accrued daily and payable
monthly. For the six months ended June 30, 2000, the fee pursuant to the
Agreement amounted to $14,070,732, which was equivalent to an annual effective
rate of 0.46% of the Fund's average daily net assets.
Administrative Services Fees. Kemper Distributors, Inc. ("KDI"), an affiliate of
the Adviser, provides information and administrative services to Class R
shareholders at an annual rate of up to 0.25% of average daily net assets for
28 | Scudder Growth and Income Fund
<PAGE>
the class. KDI in turn has various agreements with financial services firms that
provide these services and pays these firms based on assets of shareholder
accounts the firms service. For the six months ended June 30, 2000, the
Administrative Services Fee was as follows:
Total Fees Waived Unpaid at
Administrative Services Fee Aggregated by KDI June 30, 2000
--------------------------------------------------------------------------------
Class R .................. $ 7,783 $ -- $ 7,783
Shareholder Services Fees. Kemper Service Company ("KSC"), an affiliate of the
Adviser, is the transfer, dividend-paying and shareholder service agent for the
Fund's Class R shares. For the six months ended June 30, 2000, the amount
charged to Class R aggregated $18,669 of which $15,296 is unpaid at June 30,
2000. Scudder Service corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Scudder shares
of the Fund. For the six months ended June 30, 2000, the amount charged to the
Scudder shares of the Fund by SSC aggregated $3,070,593, of which $469,423 is
unpaid at June 30, 2000.
The Scudder shares of the Fund is one of several Scudder Funds (the "Underlying
Funds") in which the Scudder Pathway Series Portfolios (the "Portfolios")
invest. In accordance with the Special Servicing Agreement entered into by the
Adviser, the Portfolios, the Underlying Funds, SSC, SFAC, STC and Scudder
Investor Services, Inc., expenses from the operation of the Portfolios are borne
by the Underlying Funds based on each Underlying Fund's proportionate share of
assets owned by the Portfolios. No Underlying Funds will be charged expenses
that exceed the estimated savings to each respective Underlying Fund. These
estimated savings result from the elimination of separate shareholder accounts
which either currently are or have the potential to be invested in the
Underlying Funds. For the six months ended June 30, 2000, the Special Servicing
Agreement expense charged to the Scudder Shares of the Fund amounted to
$769,391.
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 the Scudder shares of the Fund. For the
six months ended June 30, 2000, the amount charged to the Scudder shares of the
Fund by STC aggregated $4,787,620, of which $769,391 is unpaid at June 30, 2000.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and
Scudder Growth and Income Fund | 29
<PAGE>
maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 2000, the amount charged to the Fund by SFAC aggregated $197,589,
of which $29,749 is unpaid at June 30, 2000.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the six months ended June 30, 2000, Trustees' fees and expenses aggregated
$29,668. In addition, a one-time fee of $85,773 was accrued for payment to those
Trustees not affiliated with the Adviser who are not standing for re-election,
under the reorganization discussed in Note G. Inasmuch as the Adviser will also
benefit from administrative efficiencies of a consolidated Board, the Adviser
has agreed to bear $42,887 of such costs.
D. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. For the six months ended June 30, 2000,
the Fund's custodian and transfer agent fees were reduced by $6,042 and
$104,291, respectively, under these arrangements.
30 | Scudder Growth and Income Fund
<PAGE>
E. Share Transactions
The following table summarizes shares of beneficial interest and dollar activity
in the Fund:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000
--------------------------------------
Shares sold Shares Dollars
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Scudder Shares ............................................... 15,949,199 $ 417,996,694
Class R Shares ............................................... 123,194 3,234,262
---------------
421,230,956
Shares issued to shareholders in reinvestment of distributions
----------------------------------------------------------------------------------------------------
Scudder Shares ............................................... 2,196,485 $ 59,216,013
Class R Shares ............................................... 2,017 54,070
---------------
59,270,083
Shares redeemed
----------------------------------------------------------------------------------------------------
Scudder Shares ............................................... (48,151,526) $(1,259,128,383)
Class R Shares ............................................... (118,468) (3,137,694)
---------------
(1,262,266,077)
Net increase (decrease)
----------------------------------------------------------------------------------------------------
Scudder Shares ............................................... (30,005,842) $ (781,915,676)
Class R Shares ............................................... 6,743 150,638
---------------
(781,765,038)
</TABLE>
Scudder Growth and Income Fund | 31
<PAGE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
---------------------------------
Shares sold Shares Dollars
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Scudder Shares ............................................... 55,610,771 $ 1,512,658,263
Class R Shares** ............................................. 236,864 6,343,156
---------------
1,519,001,419
Shares issued to shareholders in reinvestment of distributions
----------------------------------------------------------------------------------------------------
Scudder Shares ............................................... 11,116,741 $ 293,871,537
Class R Shares** ............................................. 6,011 157,424
---------------
294,028,961
Shares redeemed
----------------------------------------------------------------------------------------------------
Scudder Shares ............................................... (101,429,027) $(2,725,221,775)
Class R Shares** ............................................. (17,229) (458,288)
---------------
(2,725,680,063)
Net increase (decrease)
----------------------------------------------------------------------------------------------------
Scudder Shares ............................................... (34,701,515) $ (918,691,975)
Class R Shares** ............................................. 225,646 6,042,292
---------------
(912,649,683)
</TABLE>
** For the period August 2, 1999 (commencement of sale of Class R shares)
to December 31, 1999.
F. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion 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 based upon net assets, 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.
G. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds,
32 | Scudder Growth and Income Fund
<PAGE>
mergers of certain funds with similar investment objectives, the creation of one
Board of Directors/Trustees and the adoption of an administrative fee covering
the provision of most of the services currently paid for by the affected funds.
Costs incurred in connection with this restructuring initiative are being borne
jointly by Scudder Kemper and certain of the affected funds. These costs,
including printing, shareholder meeting expenses and professional fees, are
presented as reorganization expenses in the Statement of Operations of the Fund.
Scudder Growth and Income Fund | 33
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Growth and Income
Fund (the "fund") was held on July 13, 2000, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To elect Trustees of the fund.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 128,870,669 3,799,163
Linda C. Coughlin 128,799,388 3,870,444
Dawn-Marie Driscoll 128,902,802 3,767,030
Edgar R. Fiedler 128,662,995 4,006,836
Keith R. Fox 128,892,024 3,777,808
Joan E. Spero 128,779,173 3,890,659
Jean Gleason Stromberg 128,752,334 3,917,498
Jean C. Tempel 128,917,776 3,752,056
Steven Zaleznick 128,730,476 3,939,356
--------------------------------------------------------------------------------
2. To approve a new Investment Management Agreement for the fund with Scudder
Kemper Investments, Inc.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
104,000,856 5,083,844 4,882,119 18,703,013
--------------------------------------------------------------------------------
3. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the current fiscal year.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
128,235,562 1,922,741 2,511,528 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the fund from brokers or
nominees when the broker or nominee neither has received instructions
from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter.
34 | Scudder Growth and Income Fund
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* Bruce F. Beaty*
o President and Trustee o Vice President
Henry P. Becton, Jr. Jennifer P. Carter*
o Trustee; President, WGBH o Vice President
Educational Foundation
James M. Eysenbach*
Dawn-Marie Driscoll o Vice President
o Trustee; President, Driscoll
Associates; Executive Fellow, William F. Gadsden*
Center for Business Ethics, Bentley o Vice President
College
Valerie F. Malter*
Peter B. Freeman o Vice President
o Trustee, Corporate Director
Kathleen T. Millard*
George M. Lovejoy, Jr. o Vice President
o Trustee; President and Director,
Fifty Associates Ann M. McCreary*
o Vice President
Wesley W. Marple, Jr.
o Trustee; Professor of Business Robert D. Tymoczko*
Administration, Northeastern o Vice President
University
John Millette*
Kathryn L. Quirk* o Vice President and Secretary
o Trustee, Vice President and
Assistant Secretary John R. Hebble*
o Treasurer
Jean C. Tempel
o Trustee; Managing Director, Caroline Pearson*
First Light Capital, LLC o Assistant Secretary
*Scudder Kemper Investments, Inc.
Scudder Growth and Income Fund | 35
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
The Scudder Family of Funds@
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares*
Managed Shares* Growth
Scudder Tax Free Money Fund+ Scudder Classic Growth Fund***
Scudder Capital Growth Fund***
Tax Free+ Scudder Large Company Growth Fund***
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund*** Scudder Small Company Stock Fund***
Scudder California Tax Free Fund** Scudder 21st Century Growth Fund***
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund** Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund++
Scudder GNMA Fund*** Scudder Global Discovery Fund***
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.***
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Choice Series
Scudder Pathway Growth Portfolio Scudder Health Care Fund
Scudder Technology Fund
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
</TABLE>
36 | Scudder Growth and Income Fund
<PAGE>
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1-800-SCUDDER www.scudder.com
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Retirement Programs and Education Accounts
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Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**@@
Scudder Horizon Advantage**@@@
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Closed-End Funds#
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The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia 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 Class S 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 Kemper Investments'
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 Kemper Investments' 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.
Scudder Growth and Income Fund | 37
<PAGE>
Account Management Resources
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For shareholders of Scudder funds including those in the AARP Investment Program
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average"
-- buy more shares when the fund's price is lower and
fewer when it's higher, which can reduce your average
purchase price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government
checks -- invested in up to four Scudder funds at one
time.
* 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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to exchange
or redeem shares, and information on other Scudder funds
and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.scudder.com
Personal Investment Organizer: Offering account
information and transactions, interactive worksheets,
prospectuses and applications for all 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.
38 | Scudder Growth and Income Fund
<PAGE>
Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days
withdrawal after each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Scudder Class S Shareholders:
information Call a Scudder representative at
about these 1-800-SCUDDER
services
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 2291
Boston, Massachusetts
02107-2291
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 2540
Boston, Massachusetts
02208-2540
Scudder Growth and Income Fund | 39
<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 $290 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 over 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
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Corp.
