-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T5gJQ+RU7dEuIYdM/zjJF06fIFomB50til5J+nlPj0LgzuMhxviAmrfwSuhyeDDv 9OHrx114xdIrWBHdyQtdlg== 0000088053-04-000365.txt : 20040609 0000088053-04-000365.hdr.sgml : 20040609 20040609124430 ACCESSION NUMBER: 0000088053-04-000365 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040609 EFFECTIVENESS DATE: 20040609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCUDDER ADVISOR FUNDS CENTRAL INDEX KEY: 0000797657 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04760 FILM NUMBER: 04855406 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWERS CITY: PITTSBURGH STATE: PA ZIP: 15222-3770 BUSINESS PHONE: 412881401 MAIL ADDRESS: STREET 1: ONE SOUTH STREET STREET 2: XX CITY: BALTIMORE STATE: MD ZIP: 21202 FORMER COMPANY: FORMER CONFORMED NAME: BT INVESTMENT FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BT TAX FREE INVESTMENT TRUST DATE OF NAME CHANGE: 19880530 N-CSRS 1 mscap.htm SEMIANNUAL REPORT Zurich Scudder Investments 

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM N-CSRS

Investment Company Act file number 811-04760

                              SCUDDER ADVISOR FUNDS
                             ----------------------
               (Exact Name of Registrant as Specified in Charter)

                   One South Street, Baltimore, Maryland 21202
                  --------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's Telephone Number, including Area Code: (617) 295-2663
                                                            --------------

                               Salvatore Schiavone
                             Two International Place
                           Boston, Massachusetts 02110
                     ---------------------------------------
                     (Name and Address of Agent for Service)

Date of fiscal year end:        9/30

Date of reporting period:       3/31/2004



ITEM 1.  REPORT TO STOCKHOLDERS

[Scudder Investments logo]

Scudder Mid Cap Fund

Scudder Small Cap Fund

Scudder Micro Cap Fund

Semiannual Report to Shareholders

March 31, 2004


Contents


<Click Here> Portfolio Management Review

Scudder Mid Cap Fund

<Click Here> Performance Summary

<Click Here> Portfolio Summary

<Click Here> Investment Portfolio

<Click Here> Financial Statements

<Click Here> Financial Highlights

<Click Here> Notes to Financial Statements

Scudder Small Cap Fund

<Click Here> Performance Summary

<Click Here> Portfolio Summary

<Click Here> Investment Portfolio

<Click Here> Financial Statements

<Click Here> Financial Highlights

<Click Here> Notes to Financial Statements

Scudder Micro Cap Fund

<Click Here> Performance Summary

<Click Here> Portfolio Summary

<Click Here> Investment Portfolio

<Click Here> Financial Statements

<Click Here> Financial Highlights

<Click Here> Notes to Financial Statements

<Click Here> Account Management
Resources

<Click Here> Privacy Statement


This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about each fund. Please read the prospectus carefully before you invest.

Investments in mutual funds involve risk. Some funds have more risk than others. Scudder Mid Cap Fund is subject to stock market risk. Stocks of medium-sized companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Scudder Small Cap Fund is subject to stock market risk. Stocks of small companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Scudder Micro Cap Fund is subject to stock market risk. Stocks of micro capitalization companies (minimum market capitalization of $10 million) involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Please read each fund's prospectus for specific details regarding its investments and risk profile.

Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company.

Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal.


Portfolio Management Review


In the following interview, Lead Portfolio Manager Audrey M.T. Jones and Portfolio Managers Samuel Dedio and Robert Janis discuss the three funds' performance, strategies and the market environment during the six-month period ended March 31, 2004. Ms. Jones is retiring on June 30, 2004. Effective July 1, 2004, Mr. Dedio and Mr. Janis will become co-lead Portfolio Managers of each fund.

Q: How did Scudder Micro Cap Fund, Scudder Small Cap Fund and Scudder Mid Cap Fund perform for their most recent semiannual period?

A: Each of the three funds underperformed its index benchmark and peer group for the six-month period ended March 31, 2004. Scudder Micro Cap Fund posted a 16.21% total return for the semiannual period and Scudder Small Cap Fund posted a 13.63% total return, compared with the 21.69% return of the Russell 2000 Index. Scudder Mid Cap Fund returned 9.95% for the six-month period, compared with the 18.92% return of the S&P MidCap 400 Index. (All fund returns are for Class A shares, unadjusted for sales charges. If sales charges had been included, returns would have been lower.) The Lipper Small-Cap Growth Funds category average return was 17.13% for the six-month period, the Lipper Small-Cap Core Funds category average return was 21.79% and the Lipper Mid-Cap Growth Funds category average return was 15.36%.1 Past performance is no guarantee of future results. Please see the Performance Summary that begins on page 11 (Scudder Mid Cap Fund), page 37 (Scudder Small Cap Fund) and page 61 (Scudder Micro Cap Fund) for standardized performance for all share classes and for additional performance information.

1 Source: Lipper Inc. The Lipper Small-Cap Growth Funds category includes portfolios that invest at least 75% of equity assets in companies with market capitalizations of less than 300% of the dollar-weighted median market capitalization of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. These portfolios typically have above-average price-to-earnings ratios and price-to-book ratios compared with the S&P SmallCap 600 Index.
The Lipper Small-Cap Core Funds category includes portfolios that invest at least 35% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less that 300% of the dollar-weighted median of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index.
The Lipper Mid-Cap Growth Funds category includes portfolios that invest at least 75% of equity assets in companies with market capitalizations of less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. These portfolios typically have above-average price-to-earnings ratios and price-to-book ratios compared with the S&P MidCap 400 Index. It is not possible to invest directly in an index or a Lipper category.

The funds' underperformance relative to their benchmarks was due mainly to mixed results from specific stock selections and sector positioning. Performance was also negatively affected by the fact that the most illiquid, most speculative and smallest companies, many without real earnings, were snapped up by investors during the six-month period after having been beaten down from 2000 to 2002. By contrast, we have kept a steady, long-term focus on high-quality companies with consistent operating results, strong balance sheets and a stable history of operations.

Q: What were the best and worst stock performers for each of the three funds?

A: For Scudder Micro Cap Fund, the top contributing securities were Wabash National Corp. and Shuffle Master, Inc. Wabash National Corp. manufactures standard as well as customized truck trailers, freight vans, refrigerated trailers, railway cars, parts and equipment. In a move to strengthen its balance sheet, in October Wabash National Corp. announced the planned sale of a substantial portion of the remaining finance contracts in its finance portfolio. The company also reported solid third-quarter results. And in February, Wabash National Corp. announced strong fourth-quarter as well as year-end results, with increased year-over-year net sales. Shuffle Master, Inc. manufactures automatic card-shuffling systems as well as gaming-related devices, including game tables. In an effort to focus on its core competencies, Shuffle Master, Inc. sold its slot assets for a profit in February. Later that same month, the company announced two acquisitions which analysts expected to immediately benefit the company's earnings and a 30% year-over-year increase in both revenues and operating income.

Both of the companies that detracted the most from Scudder Micro Cap Fund's performance during the period - - InterVideo, Inc. and GRIC Communications Inc. - are part of the technology sector. InterVideo, Inc., which the fund sold in December, is a provider of DVD software that allows users to record, edit and play digital multimedia content on personal computers as well as consumer electronics. The company posted disappointing earnings back in November and was subsequently downgraded by a leading technology analyst. GRIC Communications, Inc., which the fund purchased during the first quarter, provides software as well as managed security services that allow customers to manage Internet-based transactions and communications worldwide. GRIC Communications, Inc. is one of the few micro-cap companies that participate in the Wi-Fi market, where businesspersons connect to the Internet on a remote basis at "hot spots" around the world. GRIC Communications, Inc. has been winning multiyear contracts from blue chip companies such as Procter & Gamble. We believe that recent selling by two large institutional investors - GRIC Communications, Inc. has only $150 million in market capitalization - has hurt the stock's short-term performance. We will be monitoring this holding carefully over the coming months.

For Scudder Mid Cap Fund, the two stocks that contributed most to performance during the six-month period were Harman International Industries, Inc. and Symantec Corp. Harman International Industries, Inc. designs and manufactures high-fidelity audio products as well as "infotainment" systems for professional, consumer and automotive markets worldwide. In January, Harman International Industries, Inc. announced record results for the fiscal second quarter, with a 24% year-over-year increase in net sales and a 50% year-over-year increase in net income. Symantec Corp. provides content as well as network security software and solutions to individuals, businesses and service providers, and is perhaps best known for its Norton antivirus software. In January the company beat analysts' earnings expectations based on strong sales of the software and raised its earnings expectations for the next fiscal quarter. Symantec Corp. was subsequently upgraded by two major brokerage firms.

The most disappointing stocks for Scudder Mid Cap Fund were ITT Education Services, Inc. and Maxtor Corp. ITT Educational Services, Inc. is a for-profit provider of technology-oriented associates, bachelors and masters degree programs, as well as nondegree curricula. Despite record enrollments and strong earnings per share, the company's stock price dropped sharply in late February upon news that federal agents were searching its headquarters and other facilities for information related to placement, retention, graduation rates, attendance figures and student grades. No official charges have been filed against ITT Educational Services, Inc., which has been cooperating with the investigation. We are continuing to monitor this situation closely. Maxtor Corp. designs and manufactures computer disk drives for personal computers and Intel-based servers as well as consumer electronics. In January, despite the company's announcement that it had narrowly exceeded top- and bottom-line expectations for the fourth quarter, Maxtor's stock price was negatively affected by rival-firm Seagate Technology's announcement that it was going to miss earnings expectations due to inventory and pricing pressures. Maxtor Corp. then announced lower-than-expected first-quarter earnings guidance, citing the same issues that had affected Seagate Technology. After we sold the fund's position in Maxtor Corp. in February, the company announced the resignation of its CFO, and Seagate Technology issued more disappointing results, again dragging down the subsector.

The two stocks that contributed the most to Scudder Small Cap Fund's results during the period were Fairchild Semiconductor Corp. and Documentum, Inc. (As of March 31, 2004, the fund's position in Documentum, Inc. was sold.) Fairchild Semiconductor Corp. develops memory semiconductors for the personal computer, telecom, consumer electronics, automotive and industrial markets. In October and again in January, Fairchild Semiconductor Corp. beat analysts' earnings estimates by 4 cents per share and benefited from an analyst's upgrade. The company also acquired the RF Components Division of Raytheon Company, which gives it immediate entry into the advanced radio frequency market. In March, Fairchild raised its first-quarter sales forecast, driven by continued strong demand for its power semiconductors. During the first quarter, we sold the fund's position as Fairchild hit our price target and its market capitalization grew beyond the fund's market-cap size guidelines. Documentum, Inc. is a software company that provides enterprise content-management solutions. In mid-October, EMC announced the signing of a definitive agreement to acquire Documentum, Inc. Following the announcement, the fund took profits in this stock.

Detracting the most from Scudder Small Cap Fund's performance were Enterasys Networks, Inc. and ITT Educational Services, Inc. Enterasys Networks, Inc. is the largest of four former subsidiaries of Cabletron Systems Company. Enterasys Networks, Inc. was the section of Cabletron Systems Company focused on networking solutions, including switching, routing and security. In January, Bank of America reported that it expected Foundry Networks, Inc., another significant player in this market, to gain market share at the expense of companies such as Enterasys Networks, Inc. and Nortel Networks Corp. In March, Enterasys Networks, Inc. lowered its revenue forecast due to an expected decline in service revenue as well as increased competition. It also announced a plan to cut costs. The fund sold the security in March, purchasing in its place a competitor that we felt possessed a stronger business outlook.

Q: What impact did sector positioning and stock selection have on the funds' results?

A: During the semiannual period, Scudder Micro Cap Fund's sector allocation caused its underperformance versus its benchmark. The fund benefited from an overweight (its relatively larger stake than the benchmark index) in energy and an underweight (its relatively smaller stake than the benchmark index) in consumer stocks but was hurt by its underweight in process industries and its overweight in transportation. Overall stock selection also had a negative effect on performance during the period. Favorable stock selection in the consumer and transportation sectors was more than offset by stock selection in technology and health care.

For Scudder Mid Cap Fund, sector allocation also had a net negative effect on performance. The fund benefited from underweights in the capital goods and consumer sectors, but overweights in technology and transportation detracted from returns. Stock selection was the main driver of the fund's underperformance versus the S&P MidCap 400 Index for the period. Stock selection in the credit-sensitive2 and energy sectors outpaced benchmark counterparts, though stock selection in the technology and consumer sectors lagged the benchmark.

2 The credit-sensitive sector includes financials and other companies affected by interest rates.

In the case of Scudder Small Cap Fund, sector positioning and stock selection also detracted from performance over the period. The fund benefited from overweights in the energy and consumer sectors but was hurt by an overweight in technology and an underweight in capital goods. However, stock selection was the main detractor, as favorable stock selection in energy and service companies was more than offset by stock selection in the technology and credit-sensitive sectors.

Q: What were the major factors affecting small-cap and mid-cap equities during the period?

A: Over the six-month period, stocks - especially small-cap stocks - provided strong returns. Signs that the US economy was beginning to emerge from its slowdown appeared in the second and third quarters of 2003, and the equity market began a strong rebound. During the fourth quarter, the government reported the largest year-over-year profit growth in 19 years, and stocks continued to surge. In January, the Federal Reserve Board left interest rates unchanged at 1%. However, employment growth remained sluggish as the unemployment rate declined from 5.9% to 5.7%. In February, the economy continued to improve as fourth-quarter gross domestic product (the total market value of all goods and services produced in the United States) grew at a solid 4.1% rate, primarily as a result of stronger business equipment and software spending, higher inventory investment and greater export volume. Inflation remained subdued, rising by 0.5% in January, and industrial production benefited from these supports, rising 0.8%. The consumer continued to support the economy, as same-store sales rose 5.8% in January and retail sales, excluding autos, also remained solid. On the other hand, consumer confidence faltered somewhat as a result of negative political-economic news, a slow job recovery environment and the recent increase in energy prices. The small-cap equity segment continued to outperform the other size segments, with value outperforming growth. As always, the consumer remains the key to economic recovery, but for the recovery to be sustained, there has to be a revival in business investment spending in addition to stable labor market conditions.

Q: In light of the results for the most recent period, what investment strategies will you be pursuing going forward?

A: We continue to seek fundamentally sound companies with strong balance sheets. We will also remain disciplined in our investment process. Within our investment strategy, we will continue to:

• Focus on small-cap companies with above-average growth prospects selling at reasonable valuations with the potential to be the blue chips of the future

• Focus on individual stock selection with the goal of providing value-added performance relative to the universe of smaller US companies

• Use extensive and intensive fundamental research to identify companies with innovation, leading or dominant positions in their markets, a high rate of return on invested capital, and/or the ability to finance a major part of growth from internal sources

• Strictly adhere to our sell discipline to reduce exposure to stocks with diminished appreciation potential

We will continue to monitor economic conditions and their effect on financial markets as we seek capital growth over the long term.

The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.


Performance Summary March 31, 2004


Scudder Mid Cap Fund

All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit scudder.com for the product's most recent month-end performance.

The maximum sales charge for Class A shares is 5.75%. For Class B shares, the maximum contingent deferred sales charge (CDSC) is 4% within the first year after purchase, declining to 0% after six years. Class C shares have no adjustment for front-end sales charges but redemptions within one year of purchase may be subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and would have been lower if they had. Investment Class, Class R and Institutional Class shares are not subject to sales charges.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares. Returns and rankings may differ by share class.

Returns shown for Class A, B and C shares prior to June 28, 2002 and Class R prior to July 1, 2003 are derived from the historical performance of Investment Class shares of the Scudder Mid Cap Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses and the current applicable sales charges of each specific class. Any difference in expenses will affect performance.

At the close of business on August 31, 2000, shares of Equity Appreciation - Institutional Class merged into Institutional Class shares of Mid Cap Fund. Equity Appreciation - Institutional Class was managed by the same investment management team with the same objectives, policies and strategies as Mid Cap. The performance shown reflects Equity Appreciation - Institutional Class shares' actual returns from its inception on October 12, 1993. Performance for periods after August 31, 2000 reflect the performance of the Mid Cap Fund - Institutional Class.

Average Annual Total Returns (Unadjusted for Sales Charge) as of 3/31/04

Scudder Mid Cap Fund

6-Month++

1-Year

3-Year

5-Year

10-Year

Class A

9.95%

35.63%

2.91%

4.17%

10.90%

Class B

9.52%

34.67%

2.02%

3.21%

9.84%

Class C

9.52%

34.67%

2.02%

3.21%

9.84%

Investment Class

9.95%

35.63%

2.91%

4.17%

10.90%

Class R

9.96%

35.05%

2.59%

3.87%

10.61%

Institutional Class

10.13%

36.04%

3.18%

4.51%

11.19%

S&P MidCap 400 Index+
 18.92%
 49.10%
 10.71%
 11.76%
 14.93%

Sources: Lipper Inc. and Deutsche Asset Management, Inc.

++ Total returns shown for periods less than one year are not annualized.


Net Asset Value

Class A

Class B

Class C

Investment Class

Class R

Institutional Class

Net Asset Value:
3/31/04
 $ 12.60 $ 12.43 $ 12.43 $ 12.60 $ 12.59 $ 12.72
9/30/03
 $ 11.46 $ 11.35 $ 11.35 $ 11.46 $ 11.45 $ 11.55

Investment Class Lipper Rankings - Mid-Cap Growth Funds Category as of 3/31/04

Period

Rank

Number of Funds Tracked

Percentile Ranking

1-Year

393

of

497

79

3-Year

125

of

399

32

5-Year

103

of

249

42

10-Year

26

of

92

28


Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Investment Class shares; other share classes may vary.



Scudder Mid Cap Fund

Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)

[] Scudder Mid Cap Fund - Class A

[] S&P MidCap 400 Index+
mscap_g10k680

Yearly periods ended March 31


The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net investment of $9,425.

Comparative Results (Adjusted for Maximum Sales Charge) as of 3/31/04


Scudder Mid Cap Fund

1-Year

3-Year

5-Year

10-Year

Class A

Growth of $10,000

$12,783

$10,273

$11,561

$26,526

Average annual total return

27.83%

.90%

2.94%

10.25%

Class B

Growth of $10,000

$13,167

$10,419

$11,623

$25,565

Average annual total return

31.67%

1.38%

3.05%

9.84%

Class C

Growth of $10,000

$13,467

$10,619

$11,714

$25,565

Average annual total return

34.67%

2.02%

3.21%

9.84%

S&P MidCap 400 Index+
Growth of $10,000

$14,910

$13,569

$17,434

$40,222

Average annual total return

49.10%

10.71%

11.76%

14.93%


The growth of $10,000 is cumulative.



Scudder Mid Cap Fund

Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)

[] Scudder Mid Cap Fund - Investment Class

[] S&P MidCap 400 Index+
mscap_g10k670

Yearly periods ended March 31


Comparative Results as of 3/31/04

Scudder Mid Cap Fund

1-Year

3-Year

5-Year

10-Year

Investment Class

Growth of $10,000

$13,563

$10,900

$12,267

$28,144

Average annual total return

35.63%

2.91%

4.17%

10.90%

Class R

Growth of $10,000

$13,505

$10,799

$12,092

$27,400

Average annual total return

35.05%

2.59%

3.87%

10.61%

S&P MidCap 400 Index+
Growth of $10,000

$14,910

$13,569

$17,434

$40,222

Average annual total return

49.10%

10.71%

11.76%

14.93%


Scudder Mid Cap Fund

1-Year

3-Year

5-Year

10-Year

Institutional Class

Growth of $250,000

$340,100

$274,600

$311,650

$722,025

Average annual total return

36.04%

3.18%

4.51%

11.19%

S&P MidCap 400 Index+
Growth of $250,000

$372,750

$339,225

$435,850

$1,005,550

Average annual total return

49.10%

10.71%

11.76%

14.93%


The growth of $10,000/$250,000 is cumulative.

The minimum investment for Institutional Class shares is $250,000.

+ S&P MidCap 400 Index is an unmanaged index that tracks the stock movement of 400 mid-sized US companies. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Portfolio Summary March 31, 2004


Scudder Mid Cap Fund

Asset Allocation

3/31/04

9/30/03


Common Stocks
 92%
 96%
Cash Equivalents, net
 8%
 4%

100%
 100%

Sector Diversification (Excludes Cash Equivalents)

3/31/04

9/30/03


Consumer Discretionary
 25%
 14%
Information Technology
 23%
 24%
Financials
 15%
 11%
Industrials
 11%
 13%
Health Care
 10%
 17%
Energy
 6%
 7%
Materials
 6%
 6%
Consumer Staples
 3%
 7%
Telecommunication Services
 1%
 1%

100%
 100%

Ten Largest Equity Holdings at March 31, 2004 (26.8% of Portfolio)

1. Corinthian Colleges, Inc. Provider of higher education

3.3%

2. Symantec Corp. Producer of software products

3.2%

3. Packaging Corp. of America Manufacturer of containerboard and corrugated packaging products

3.0%

4. Harman International Industries, Inc. Manufacturer of high fidelity audio and video components

2.9%

5. Protein Design Labs, Inc. Developer of human and humanized antibodies

2.8%

6. Tech Data Corp. Distributor of microcomputer, hardware and software

2.5%

7. BJ Services Co. Provider of pressure pumping and other oilfield services for the petroleum industry

2.3%

8. Columbia Sportswear Co. Manufacturer of active outdoor apparel

2.3%

9. Friedman, Billings, Ramsey Group, Inc. "A" Operator of property management services

2.3%

10. Legg Mason, Inc. Provider of various financial services

2.2%


Asset allocation, sector diversification and portfolio holdings are subject to change.

For more complete details about the fund's investment portfolio, see page 16. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end is available upon request on the 16th of the following month. Please see the Account Management Resources section for contact information.


Investment Portfolio as of March 31, 2004 (Unaudited)


Scudder Mid Cap Fund


Shares

Value ($)



Common Stocks 92.2%

Consumer Discretionary 22.6%
Automobiles 1.4%
Thor Industries, Inc.
359,800

9,664,228

Hotels Restaurants & Leisure 5.3%
Alliance Gaming Corp.*
423,900
 13,619,907
GTECH Holdings Corp.
238,000
 14,075,320
The Cheesecake Factory, Inc.*
166,500
 7,680,645

35,375,872

Household Durables 6.5%
Harman International Industries, Inc.
240,500
 19,143,800
Leggett & Platt, Inc.
448,200
 10,626,822
Tempur-Pedic International, Inc.*
894,900
 13,996,236

43,766,858

Media 1.0%
Entercom Communications Corp.*
141,600

6,410,232

Multiline Retail 1.5%
Tuesday Morning Corp.*
301,100

10,375,906

Specialty Retail 4.6%
Advance Auto Parts, Inc.*
250,200
 10,175,634
Chico's FAS, Inc.*
303,000
 14,059,200
Regis Corp.
151,900
 6,750,436

30,985,270

Textiles, Apparel & Luxury Goods 2.3%
Columbia Sportswear Co.*
272,700

15,118,488

Consumer Staples 2.9%
Beverages 1.2%
Constellation Brands, Inc. "A"*
261,900

8,406,990

Food Products 1.7%
Dean Foods Co.*
333,450

11,137,230

Energy 6.0%
Energy Equipment & Services
BJ Services Co.*
351,800
 15,222,386
Rowan Companies, Inc.*
566,500
 11,947,485
Smith International, Inc.*
241,800
 12,938,718

40,108,589

Financials 14.2%
Consumer Finance 1.0%
Providian Financial Corp.*
486,600

6,374,460

Diversified Financial Services 11.9%
CapitalSource, Inc.*
484,700
 10,881,515
Chicago Mercantile Exchange
58,100
 5,620,594
Friedman, Billings, Ramsey Group, Inc. "A"
556,600
 15,022,634
Investment Technology Group, Inc.*
309,100
 4,729,230
Investors Financial Services Corp.
355,000
 14,668,600
Labranche & Co., Inc.*
433,500
 4,859,535
Legg Mason, Inc.
161,200
 14,956,136
The First Marblehead Corp.*
309,400
 9,111,830

79,850,074

Insurance 1.3%
Assurant, Inc.*
125,900
 3,166,385
Axis Capital Holdings Ltd.
191,300
 5,652,915

8,819,300

Health Care 8.8%
Biotechnology 5.6%
Genzyme Corp. (General Division)*
184,300
 8,669,472
Gilead Sciences, Inc.*
184,500
 10,289,565
Protein Design Labs, Inc.*
782,300
 18,634,386

37,593,423

Health Care Equipment & Supplies 0.3%
Kinetic Concepts, Inc.*
40,100

1,798,485

Health Care Providers & Services 1.6%
Coventry Health Care, Inc.*
252,900

10,705,257

Pharmaceuticals 1.3%
Barr Laboratories, Inc.*
184,350

8,461,665

Industrials 9.7%
Airlines 1.0%
JetBlue Airways Corp.*
264,000

6,676,560

Commercial Services & Supplies 7.9%
Corinthian Colleges, Inc.*
664,200
 21,958,452
Hewitt Associates, Inc. "A"*
248,000
 7,938,480
ITT Educational Services, Inc.*
279,700
 8,726,640
Stericycle, Inc.*
299,900
 14,353,214

52,976,786

Road & Rail 0.8%
Swift Transportation Co., Inc.*
323,500

5,554,495

Information Technology 21.2%
Communications Equipment 2.1%
Advanced Fibre Communications, Inc.*
648,800

14,293,064

Electronic Equipment & Instruments 5.8%
AVX Corp.
746,300
 12,306,487
Jabil Circuit, Inc.*
335,700
 9,879,651
Tech Data Corp.*
412,100
 16,871,374

39,057,512

IT Consulting & Services 1.3%
Cognizant Technology Solutions Corp.*
186,200

8,425,550

Semiconductors & Semiconductor Equipment 6.0%
Applied Micro Circuits Corp.*
1,269,100
 7,297,325
Fairchild Semiconductor International, Inc.*
598,900
 14,391,567
LTX Corp.*
476,800
 7,199,680
Teradyne, Inc.*
490,900
 11,698,147

40,586,719

Software 6.0%
Symantec Corp.*
459,200
 21,260,960
TIBCO Software, Inc.*
1,276,100
 10,425,737
VERITAS Software Corp.*
306,500
 8,247,915

39,934,612

Materials 5.6%
Containers & Packaging 3.0%
Packaging Corp. of America
893,000

20,146,080

Metals & Mining 2.6%
Peabody Energy Corp.
244,600
 11,376,346
United States Steel Corp.
163,900
 6,108,553

17,484,899

Telecommunication Services 1.2%
Wireless Telecommunication Services
Nextel Partners, Inc. "A"*
616,700

7,807,422

Total Common Stocks (Cost $511,618,694)

617,896,026


Cash Equivalents 7.4%

Scudder Cash Management QP Trust 1.10% (b) (Cost $49,552,887)
49,552,887

49,552,887


Scudder Mid Cap Fund

% of Net Assets

Value ($)



Total Investment Portfolio (Cost $561,171,581) (a)
99.6

667,448,913

Other Assets and Liabilities, Net
0.4

2,661,843

Net Assets
100.0

670,110,756


* Non-income producing security.
(a) The cost for federal income tax purposes was $561,784,722. At March 31, 2004, net unrealized appreciation for all securities based on tax cost was $105,664,191. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $128,237,239 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $22,573,048.
(b) Scudder Cash Management QP Trust, is also managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of the financial statements.


Financial Statements


Scudder Mid Cap Fund

Statement of Assets and Liabilities as of March 31, 2004 (Unaudited)

Assets

Investments:
Investments in securities, at value (cost $511,618,694)
$ 617,896,026
Investment in Scudder Cash Management QP Trust (cost $49,552,887)
49,552,887
Total investments in securities, at value (cost $561,171,581)
 667,448,913
Cash
 18,496
Receivable for investments sold
 3,325,280
Dividends receivable
 444,828
Interest receivable
 43,819
Receivable for Fund shares sold
 686,098
Other assets
 80,659
Total assets
 672,048,093
Liabilities
Payable for investments purchased
 132,638
Payable for Fund shares redeemed
 1,077,676
Accrued investment advisory fee
 352,269
Other accrued expenses and payables
 374,754
Total liabilities
 1,937,337
Net assets, at value

$ 670,110,756

Net Assets
Net assets consist of:
Accumulated net investment loss
 (2,207,361)
Net unrealized appreciation (depreciation) on investments
 106,277,332
Accumulated net realized gain (loss)
 (63,641,371)
Paid-in capital
 629,682,156
Net assets, at value

$ 670,110,756


The accompanying notes are an integral part of the financial statements.



Scudder Mid Cap Fund

Statement of Assets and Liabilities as of March 31, 2004 (Unaudited) (continued)

Net Asset Value

Class A
Net Asset Value and redemption price per share ($251,208,765 / 19,937,440 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 12.60

Maximum offering price per share (100 / 94.25 of $12.60)

$ 13.37

Class B
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($9,098,577 / 731,900 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 12.43

Class C
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($7,617,266 / 612,778 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 12.43

Investment Class
Net Asset Value, offering and redemption price per share ($43,174,425 / 3,425,192 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 12.60

Class R
Net Asset Value, offering and redemption price per share ($319,093 / 25,349 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 12.59

Institutional Class
Net Asset Value, offering and redemption price per share ($358,692,630 / 28,202,197 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 12.72


The accompanying notes are an integral part of the financial statements.



Scudder Mid Cap Fund

Statement of Operations for the six months ended March 31, 2004 (Unaudited)

Investment Income

Income:
Dividends
 $ 1,207,587
Interest - Cash Management Fund Institutional
 48,733
Interest - Scudder Cash Management QP Trust
 228,221
Total Income
 1,484,541
Expenses:
Investment advisory fee
 2,081,331
Administrator service fee
 1,353,290
Distribution and shareholder servicing fees
 375,787
Auditing
 54,588
Legal
 14,365
Trustees' fees and expenses
 11,013
Reports to shareholders
 1,830
Registration fees
 12,400
Other
 9,381
Total expenses, before expense reductions
 3,913,985
Expense reductions
 (222,083)
Total expenses, after expense reductions
 3,691,902
Net investment income (loss)

(2,207,361)

Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) from investments
 37,158,833
Net unrealized appreciation (depreciation) during the period on investments
 23,272,130
Net gain (loss) on investment transactions

60,430,963

Net increase (decrease) in net assets resulting from operations

$ 58,223,602


The accompanying notes are an integral part of the financial statements.



Scudder Mid Cap Fund

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets

Six Months Ended March 31, 2004 (Unaudited)

Year Ended September 30, 2003

Operations:
Net investment income (loss)
 $ (2,207,361) $ (2,389,261)
Net realized gain (loss) on investment transactions
 37,158,833 (5,611,344)
Net unrealized appreciation (depreciation) on investment transactions during the period
 23,272,130 98,214,735
Net increase (decrease) in net assets resulting from operations
 58,223,602 90,214,130
Fund share transactions:
Proceeds from shares sold
 87,344,856 272,735,092
In-kind subscription
 - 103,862,346
Cost of shares redeemed
 (56,725,789) (79,546,144)
Net increase (decrease) in net assets from Fund share transactions
 30,619,067 297,051,294
Increase (decrease) in net assets

88,842,669

387,265,424

Net assets at beginning of period
 581,268,087 194,002,663
Net assets at end of period (including accumulated net investment loss of $2,207,361 at March 31, 2004)

$ 670,110,756

$ 581,268,087


The accompanying notes are an integral part of the financial statements.


Financial Highlights


Scudder Mid Cap Fund

Class A

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 11.46

$ 9.31

$ 11.49

Income (loss) from investment operations:
Net investment income (loss)c
(.05) (.08) (.01)
Net realized and unrealized gain (loss) on investment transactions
1.19 2.23 (2.17)

Total from investment operations

1.14 2.15 (2.18)
Net asset value, end of period

$ 12.60

$ 11.46

$ 9.31

Total Return (%)d
 9.95** 23.09 (18.97)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 251 212 .6
Ratio of expenses before expense reductions (%)
 1.32* 1.34 1.48*
Ratio of expenses after expense reductions (%)
 1.25* 1.25 1.25*
Ratio of net investment income (loss) (%)
 (.79)* (.74) (.63)*
Portfolio turnover rate (%)
 97* 82 120e
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class A shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
e On March 28, 2002, the Capital Appreciation Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Mid Cap Fund as a stand-alone fund in addition to the Capital Appreciation Portfolio.
* Annualized
** Not annualized

Scudder Mid Cap Fund

Class B

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 11.35

$ 9.29

$ 11.49

Income (loss) from investment operations:
Net investment income (loss)c
(.09) (.15) (.03)
Net realized and unrealized gain (loss) on investment transactions
1.17 2.21 (2.17)

Total from investment operations

1.08 2.06 (2.20)
Net asset value, end of period

$ 12.43

$ 11.35

$ 9.29

Total Return (%)d
 9.52** 22.17 (19.15)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 9 6 .3
Ratio of expenses before expense reductions (%)
 2.07* 2.09 2.22*
Ratio of expenses after expense reductions (%)
 2.00* 2.00 2.00*
Ratio of net investment income (loss) (%)
 (1.54)* (1.49) (1.38)*
Portfolio turnover rate (%)
 97* 82 120e
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class B shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
e On March 28, 2002, the Capital Appreciation Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Mid Cap Fund as a stand-alone fund in addition to the Capital Appreciation Portfolio.
* Annualized
** Not annualized

Scudder Mid Cap Fund

Class C

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 11.35

$ 9.29

$ 11.49

Income (loss) from investment operations:
Net investment income (loss)c
(.09) (.16) (.03)
Net realized and unrealized gain (loss) on investment transactions
1.17 2.22 (2.17)

Total from investment operations

1.08 2.06 (2.20)
Net asset value, end of period

$ 12.43

$ 11.35

$ 9.29

Total Return (%)d
 9.52** 22.17 (19.15)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 8 5 .1
Ratio of expenses before expense reductions (%)
 2.07* 2.09 2.20*
Ratio of expenses after expense reductions (%)
 2.00* 2.00 2.00*
Ratio of net investment income (loss) (%)
 (1.54)* (1.49) (1.38)*
Portfolio turnover rate (%)
 97* 82 120e
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class C shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
e On March 28, 2002, the Capital Appreciation Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Mid Cap Fund as a stand-alone fund in addition to the Capital Appreciation Portfolio.
* Annualized
** Not annualized

Scudder Mid Cap Fund

Investment Class

Years Ended September 30,

2004a

2003

2002

2001

2000

1999

Selected Per Share Data
Net asset value, beginning of period

$ 11.46

$ 9.31

$ 10.66

$ 17.57

$ 14.77

$ 11.38

Income (loss) from investment operations:
Net investment income (loss)
(.05)b (.08)b (.06)b (.03) (.06) (.07)
Net realized and unrealized gain (loss) on investment transactions
1.19 2.23 (1.29) (6.41) 6.79 4.99

Total from investment operations

1.14 2.15 (1.35) (6.44) 6.73 4.92
Less distributions from:
Net realized gains on investment transactions
- - - (.47) (3.93) (1.53)
Net asset value, end of period

$ 12.60

$ 11.46

$ 9.31

$ 10.66

$ 17.57

$ 14.77

Total Return (%)c
 9.95** 23.09 (12.66) (37.26) 53.65 47.05
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 43 36 29 36 48 29
Ratio of expenses before expense reductions (%)
 1.32* 1.34 1.39d 1.43d 1.70d 1.88d
Ratio of expenses after expense reductions (%)
 1.25* 1.25 1.25d 1.25d 1.25d 1.25d
Ratio of net investment income (loss) (%)
 (.79)* (.74) (.55) (.21) (.40) (.58)
Portfolio turnover rate (%)
 97* 82 120e 251 146 155
a For the six months ended March 31, 2004 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d The expense ratio of the Capital Appreciation Portfolio is included in this ratio.
e On March 28, 2002, the Capital Appreciation Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Mid Cap Fund as a stand-alone fund in addition to the Capital Appreciation Portfolio.
* Annualized
** Not annualized

Scudder Mid Cap Fund

Class R

2004a

2003b

Selected Per Share Data
Net asset value, beginning of period

$ 11.45

$ 10.78

Income (loss) from investment operations:
Net investment income (loss)c
(.06) (.03)
Net realized and unrealized gain (loss) on investment transactions
1.20 .70

Total from investment operations

1.14 .67
Net asset value, end of period

$ 12.59

$ 11.45

Total Return (%)d
 9.96** 6.22**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 .03 .01
Ratio of expenses, before expense reductions (%)
 1.58* 1.59*
Ratio of expenses, after expense reductions (%)
 1.50* 1.50*
Ratio of net investment income (loss) (%)
 (1.04)* (1.12)*
Portfolio turnover rate (%)
 97* 82
a For the six months ended March 31, 2004 (Unaudited).
b For the period July 1, 2003 (commencement of operations of Class R shares) to September 30, 2003.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized

Scudder Mid Cap Fund

Institutional Class

Years Ended September 30,

2004a

2003

2002

2001

2000b

Selected Per Share Data
Net asset value, beginning of period

$ 11.55

$ 9.36

$ 10.69

$ 17.57

$ 18.60

Income (loss) from investment operations:
Net investment income (loss)
(.03)c (.05)c (.04)c .01 (.00)d
Net realized and unrealized gain (loss) on investment transactions
1.20 2.24 (1.29) (6.42) (1.03)

Total from investment operations

1.17 2.19 (1.33) (6.41) (1.03)
Less distributions from:
Net realized gains on investment transactions
- - - (.47) -
Net asset value, end of period

$ 12.72

$ 11.55

$ 9.36

$ 10.69

$ 17.57

Total Return (%)e
 10.13** 23.40 (12.44) (37.15) 55.50f**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 359 323 164 231 414
Ratio of expenses before expense reductions (%)
 1.07* 1.09 1.14g 1.18g 1.45g*
Ratio of expenses after expense reductions (%)
 1.00* 1.00 1.00g 1.00g 1.00g*
Ratio of net investment income (loss) (%)
 (.54)* (.49) (.30) .04 (.17)*
Portfolio turnover rate (%)
 97* 82 120h 251 146
a For the six months ended March 31, 2004 (Unaudited).
b For the period August 31, 2000 (commencement of operations of Institutional Class shares) to September 30, 2000.
c Based on average shares outstanding during the period.
d Amount is less than $.005.
e Total return would have been lower had certain expenses not been reduced.
f At the close of business on August 31, 2000, shares of Equity Appreciation - Institutional Class merged into Institutional Class shares of Mid Cap. Equity Appreciation - Institutional Class was managed by the same investment management team with the same objectives, policies and strategies as Mid Cap. The performance shown reflects Equity Appreciation - Institutional Class shares' actual returns from its inception on October 12, 1993. Performance for periods after August 31, 2000 reflect the performance of the Mid Cap Fund - Institutional Class.
g The expense ratio of the Capital Appreciation Portfolio is included in this ratio.
h On March 28, 2002, the Capital Appreciation Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Mid Cap Fund as a stand-alone fund in addition to the Capital Appreciation Portfolio.
* Annualized
** Not annualized


Notes to Financial Statements (Unaudited)


Scudder Mid Cap Fund

A. Significant Accounting Policies

Mid Cap Fund ("Scudder Mid Cap Fund" or the "Fund") is a diversified series of Scudder Advisor Funds (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 offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Prior to March 1, 2004, Class C shares were offered with an initial sales charge. Class C shares do not convert into another class. Investment Class shares are not subject to initial or contingent deferred sales charges. Class R shares are only available to participants in certain retirement plans and are offered to investors without an initial sales charge. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes.

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 distribution fees, service fees, administrator fees and certain other class-specific expenses. Differences in class-level 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 of America which require the use of management estimates. Actual results could differ from those 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 on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.

Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.

Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.

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.

At September 30, 2003 the Fund had a net tax basis capital loss carryforward of approximately $100,178,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until September 30, 2009 ($16,640,000), September 30, 2010 ($54,208,000) and September 30, 2011 ($29,330,000), the respective expiration dates, whichever occurs first.

Distribution of Income and Gains. Distributions of net investment income, if any, are made annually. 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 accounting principles generally accepted in the United States of America. These differences primarily relate to securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on 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.

Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust.

B. Purchases and Sales of Securities

During the six months ended March 31, 2004, purchases and sales of investment securities (excluding short-term investments) aggregated $292,872,422 and $293,622,985, respectively.

C. Related Parties

Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG. Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Fund's Advisor. Investment Company Capital Corporation ("ICCC" or the "Administrator"), also an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Fund's Administrator.

Investment Advisory Agreement. Under the Investment Advisory Agreement, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. The investment advisory fee payable under the Investment Advisory Agreement is equal to an annual rate of 0.65% of the Fund's average daily net assets, computed and accrued daily and payable monthly. The Fund did not impose a portion of its advisory fees equivalent to the advisory fees charged on assets invested in the affiliated money market fund, Cash Management Fund Institutional.

For the six months ended March 31, 2004, the Advisor and Administrator have agreed to waive their fees or reimburse expenses to the extent necessary to maintain the annualized expenses of the classes of the Fund as follows:

Class A

1.25%

Class B

2.00%

Class C

2.00%

Investment Class

1.25%

Class R

1.50%

Institutional Class

1.00%


Accordingly, for the six months ended March 31, 2004, the Advisor waived a portion of its fee pursuant to the an Expense Limitation Agreement aggregating $222,083 and the amount imposed aggregated $1,859,248, which was equivalent to an annualized effective rate of 0.57% of the Fund's average daily net assets.

Administrator. For its services as Administrator, ICCC receives a fee (the "Administrator Service Fee") of 0.65% of the average daily net assets for the Investment Class shares and 0.40% of average daily net assets for Class A, B, C, R and Institutional Class shares for the Fund, computed and accrued daily and payable monthly. For the six months ended March 31, 2004, the Administrator Service Fee was as follows:

Administrator Service Fee

Total Aggregated

Unpaid at March 31, 2004

Class A
 $ 480,322 $ 95,632
Class B
 16,774 3,290
Class C
 13,353 2,709
Investment Class
134,831 29,593
Class R
 215 153
Institutional Class
 707,795 134,311

$ 1,353,290

$ 265,688


Distribution Agreement. Under the Distribution Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc. ("SDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.25% of the average daily net assets of the Class A and R shares and 0.75% of average daily net assets of the Class B and C shares. Pursuant to the agreement, SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the six months ended March 31, 2004, the Distribution Fee was as follows:

Distribution Fee

Total Aggregated

Unpaid at March 31, 2004

Class A
 $ 300,201 $ 58,262
Class B
 31,451 5,931
Class C
 25,037 4,881
Class R
 134 96

$ 356,823

$ 69,170


In addition, SDI provides information and administrative services ("Shareholder Servicing Fee") to Class B, C and R shareholders at an annual rate of 0.25% of average daily net assets for each such class. SDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the six months ended March 31, 2004, the Shareholder Servicing Fee was as follows:

Shareholder Servicing Fee

Total Aggregated

Unpaid at March 31, 2004

Effective Rate

Class B
 $ 10,484 $ 2,029

.25%

Class C
 8,346 1,640

.25%

Class R
 134 85

.25%


$ 18,964

$ 3,754


Underwriting Agreement and Contingent Deferred Sales Charge. SDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A and C shares for the six months ended March 31, 2004 aggregated $14,502 and $158, respectively.

In addition, SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the six months ended March 31, 2004, the CDSC for the Fund's Class B and C shares was $4,894 and $491, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the six months ended March 31, 2004, SDI received $40.

Other. The Fund may invest in Cash Management Fund Institutional, an open-end management investment company managed by DeAM, Inc.

Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregate annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each Fund in the Fund Complex for which he or she serves. In addition, the Chairman of the Fund Complex's Audit Committee receives an annual fee for his services.

Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.

D. Line of Credit

The Fund and several other affiliated funds (the "Participants") share in a $1.25 billion revolving credit facility administered by J.P. Morgan Chase Bank 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, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.

E. Share Transactions

The following table summarizes share and dollar activity in the Fund:


Six Months Ended
March 31, 2004

Year Ended September 30, 2003


Shares

Dollars

Shares

Dollars

Shares sold
Class A
 2,722,111 $ 33,765,791 19,601,740 $ 199,012,862
Class B
 276,701 3,400,844 576,020 5,883,977
Class C
 257,215 3,145,840 432,633 4,390,031
Investment Class
 829,834 10,392,167 1,330,437 13,297,401
Class R
 28,492 365,280 933** 10,052**
Institutional Class
2,878,295 36,274,934 4,698,398 50,140,769

$ 87,344,856

$ 272,735,092

In-kind subscription
Institutional Class
 - - 10,955,944 $ 103,862,346

-

$ 103,862,346

Shares redeemed
Class A
 (1,264,464) $ (15,628,665) (1,186,677) $ (12,330,075)
Class B
 (94,401) (1,152,653) (54,560) (555,530)
Class C
 (53,961) (658,582) (33,414) (349,493)
Investment Class
 (542,359) (6,722,589) (1,318,483) (13,349,817)
Class R
 (4,071) (52,048) (5)** (56)**
Institutional Class
(2,599,163) (32,511,252) (5,242,506) (52,961,173)

$ (56,725,789)

$ (79,546,144)

Net increase (decrease)
Class A
 1,457,647 $ 18,137,126 18,415,063 $ 186,682,787
Class B
 182,300 2,248,191 521,460 5,328,447
Class C
 203,254 2,487,258 399,219 4,040,538
Investment Class
 287,475 3,669,578 11,954 (52,416)
Class R
 24,421 313,232 928** 9,996**
Institutional Class
279,132 3,763,682 10,411,836 101,041,942

$ 30,619,067

$ 297,051,294


** For the period July 1, 2003 (commencement of operations of Class R shares) to September 30, 2003.

F. In-Kind Subscription

As part of Deutsche Bank's effort to consolidate various legacy retirement plans, Deutsche Bank implemented a program to transfer various plan assets as a means to streamline the number of investment options offered to employee plan participants. As part of the consolidation program, on March 28, 2003 the Scudder Mid Cap Fund accepted securities and cash in payment for fund shares (received an in-kind subscription) from the BT Partnershare retirement plan in accordance with the Fund's purchase in-kind procedures. The transaction represented a percentage of the Fund's net assets at March 31, 2003 as follows:

Purchase Amount

% of Net Assets

Mid Cap Fund
 $ 103,862,346

37


G. Regulatory Matters and Litigation

Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. We are unable to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisers. Publicity about mutual fund practices arising from these industry wide inquiries serve as the general basis of a number of private lawsuits against the Scudder Funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, Deutsche Asset Management ("DeAM") and its affiliates, certain individuals, including in some cases Fund Trustees/Directors, and other parties. DeAM has undertaken to bear all liabilities and expenses incurred by the Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding fund valuation, market timing, revenue sharing or other subjects of the pending inquiries. Based on currently available information, DeAM believes the likelihood that the pending lawsuits will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect its ability to perform under its investment management agreements with the Scudder funds.


Performance Summary March 31, 2004


Scudder Small Cap Fund

All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit scudder.com for the product's most recent month-end performance.

The maximum sales charge for Class A shares is 5.75%. For Class B shares, the maximum contingent deferred sales charge (CDSC) is 4% within the first year after purchase, declining to 0% after six years. Class C shares have no adjustment for front-end sales charges but redemptions within one year of purchase may be subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and would have been lower if they had. Investment Class and Class R shares are not subject to sales charges.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares. Returns and rankings may differ by share class.

Returns shown for Class A, B and C shares prior to June 28, 2002 and Class R shares prior to October 1, 2003 are derived from the historical performance of Investment Class shares of the Scudder Small Cap Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses and the current applicable sales charge of each specific class. Any difference in expenses will affect performance.

Average Annual Total Returns (Unadjusted for Sales Charge) as of 3/31/04


Scudder Small Cap Fund

6-Month++

1-Year

3-Year

5-Year

10-Year

Class A

13.63%

42.05%

.48%

6.46%

13.23%

Class B

13.29%

41.15%

-.24%

5.68%

12.39%

Class C

13.29%

41.15%

-.24%

5.68%

12.39%

Investment Class

13.73%

42.18%

.51%

6.48%

13.24%

Class R

13.74%

41.93%

.20%

6.12%

12.84%

Russell 2000 Index+
 21.69%
 63.83%
 10.90%
 9.66%
 10.44%

Source: Lipper Inc. and Deutsche Asset Management, Inc.

++ Total returns shown for periods less than one year are not annualized.


Scudder Small Cap Fund

Net Asset Value

Class A

Class B

Class C

Investment Class

Class R

Net Asset Value:
3/31/04
 $ 22.44 $ 22.16 $ 22.16 $ 22.45 $ 22.47
10/1/03 (commencement of operations for Class R)
 $ - $ - $ - $ - $ 20.06
9/30/03
 $ 19.74 $ 19.56 $ 19.56 $ 19.74 $ -

Investment Class Lipper Rankings - Small-Cap Growth Funds Category as of 3/31/04

Period

Rank

Number of Funds Tracked

Percentile Ranking

1-Year

437

of

488

90

3-Year

312

of

406

77

5-Year

141

of

270

53

10-Year

11

of

73

15


Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for the Investment Class shares; other classes may vary.

Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)

[] Scudder Small Cap Fund - Class A

[] Russell 2000 Index+
mscap_g10k660

Yearly periods ended March 31


The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net investment of $9,425.

The growth of $10,000 is cumulative.



Scudder Small Cap Fund

Comparative Results (Adjusted for Maximum Sales Charge) as of 3/31/04

Scudder Small Cap Fund

1-Year

3-Year

5-Year

10-Year

Class A

Growth of $10,000

$13,388

$9,561

$12,887

$32,637

Average annual total return

33.88%

-1.48%

5.20%

12.56%

Class B

Growth of $10,000

$13,815

$9,729

$13,084

$32,158

Average annual total return

38.15%

-.91%

5.52%

12.39%

Class C

Growth of $10,000

$14,115

$9,929

$13,184

$32,158

Average annual total return

41.15%

-.24%

5.68%

12.39%

Russell 2000 Index+
Growth of $10,000

$16,383

$13,639

$15,855

$26,988

Average annual total return

63.83%

10.90%

9.66%

10.44%


Growth of an Assumed $10,000 Investment

[] Scudder Small Cap Fund - Investment Class

[] Russell 2000 Index+
mscap_g10k650

Yearly periods ended March 31


Comparative Results as of 3/31/04

Scudder Small Cap Fund

1-Year

3-Year

5-Year

10-Year

Investment Class

Growth of $10,000

$14,218

$10,154

$13,686

$34,659

Average annual total return

42.18%

.51%

6.48%

13.24%

Class R

Growth of $10,000

$14,193

$10,061

$13,461

$33,465

Average annual total return

41.93%

.20%

6.12%

12.84%

Russell 2000 Index+
Growth of $10,000

$16,383

$13,639

$15,855

$26,988

Average annual total return

63.83%

10.90%

9.66%

10.44%


The growth of $10,000 is cumulative.

+ Russell 2000 Index is an unmanaged index that tracks the common stock price movement of the 2000 smallest companies of the Russell 3000 Index, which measures the performance of the 3000 largest US companies based on total market capitalization.
Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Portfolio Summary March 31, 2004


Scudder Small Cap Fund

Asset Allocation

3/31/04

9/30/03


Common Stocks
 93%
 94%
Cash Equivalents, net
 7%
 6%

100%
 100%

Sector Diversification (Excludes Cash Equivalents)

3/31/04

9/30/03


Information Technology
 27%
 27%
Consumer Discretionary
 20%
 12%
Health Care
 15%
 15%
Financials
 13%
 13%
Industrials
 10%
 18%
Materials
 6%
 5%
Energy
 5%
 4%
Consumer Staples
 4%
 5%
Utilities
 -
 1%

100%
 100%

Ten Largest Equity Holdings at March 31, 2004 (24.4% of Portfolio)

1. United Natural Foods, Inc. Distributor of natural foods and related products

3.6%

2. Cooper Companies, Inc. Producer of medical products

2.7%

3. DSP Group, Inc. Developer of digital signal processing solutions for telecommunications and computers

2.7%

4. Affiliated Managers Group, Inc. Operator of integrated asset management services

2.4%

5. Jos. A. Bank Clothiers, Inc. Manufacturer of classic men's clothing

2.2%

6. Joy Global, Inc. Manufacturer of mining equipment

2.2%

7. Skyworks Solutions, Inc. Provider of front-end modules, radio frequency systems

2.2%

8. Microsemi Corp. Manufacturer of semiconductors

2.2%

9. Avocent Corp. Supplier of connectivity solutions

2.2%

10. Packaging Corp. of America Manufacturer of containerboard and corrugated packaging products

2.0%


Asset allocation, sector diversification and portfolio holdings are subject to change.

For more complete details about the fund's investment portfolio, see page 41. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end is available upon request on the 16th of the following month. Please see the Account Management Resources section for contact information.


Investment Portfolio as of March 31, 2004 (Unaudited)


Scudder Small Cap Fund


Shares

Value ($)



Common Stocks 92.6%

Consumer Discretionary 18.1%
Automobiles 1.3%
Thor Industries, Inc.
196,200

5,269,932

Hotels Restaurants & Leisure 6.2%
Alliance Gaming Corp.*
220,300
 7,078,239
Panera Bread Co. "A"*
143,800
 5,596,696
RARE Hospitality International, Inc.*
145,200
 4,029,300
Shuffle Master, Inc.*
161,800
 7,522,082

24,226,317

Household Durables 1.2%
Furniture Brands International, Inc.
148,000

4,765,600

Internet & Catalog Retail 0.9%
Sharper Image Corp.*
108,100

3,521,898

Media 2.0%
Harris Interactive, Inc.*
457,300
 3,855,039
Journal Communications, Inc. "A"
201,100
 4,022,000

7,877,039

Multiline Retail 0.9%
Fred's, Inc.
141,100

3,424,497

Specialty Retail 3.7%
Cost Plus, Inc.*
138,700
 5,790,725
Jos. A. Bank Clothiers, Inc.*
242,800
 8,740,800

14,531,525

Textiles, Apparel & Luxury Goods 1.9%
Carter's, Inc.*
125,200
 3,579,468
Gildan Activewear, Inc. "A"*
125,000
 3,918,750

7,498,218

Consumer Staples 3.5%
Food & Drug Retailing
United Natural Foods, Inc.*
289,300

13,912,437

Energy 5.0%
Energy Equipment & Services 1.9%
FMC Technologies, Inc.*
271,800

7,346,754

Oil & Gas 3.1%
Ultra Petroleum Corp.*
241,900
 7,259,419
Western Gas Resources, Inc.
95,700
 4,866,345

12,125,764

Financials 12.5%
Banks 0.8%
First Niagara Financial Group
239,200

3,265,080

Diversified Financial Services 9.4%
Affiliated Managers Group, Inc.*
169,650
 9,259,497
Investment Technology Group, Inc.*
363,800
 5,566,140
Labranche & Co., Inc.*
342,600
 3,840,546
National Financial Partners Corp.
181,100
 5,840,475
Piper Jaffray Companies, Inc.*
127,300
 6,893,295
The First Marblehead Corp.*
183,400
 5,401,130
TNS, Inc.*
17,900
 342,785

37,143,868

Insurance 2.3%
Direct General Corp.
136,600
 4,944,920
Platinum Underwriters Holdings Ltd.
124,700
 3,996,635

8,941,555

Health Care 13.9%
Biotechnology 3.4%
Martek Biosciences Corp.*
101,900
 5,808,300
Neurocrine Biosciences, Inc.*
130,300
 7,700,730

13,509,030

Health Care Equipment & Supplies 4.7%
Cooper Companies, Inc.
198,300
 10,708,200
Edwards Lifesciences Corp.*
241,700
 7,722,315

18,430,515

Health Care Providers & Services 2.5%
Beverly Enterprises, Inc.*
945,100
 6,048,640
Centene Corp.*
119,800
 3,664,682

9,713,322

Pharmaceuticals 3.3%
NeighborCare, Inc.*
231,000
 5,601,750
NPS Pharmaceuticals, Inc.*
265,900
 7,591,445

13,193,195

Industrials 9.5%
Airlines 1.7%
Frontier Airlines, Inc.*
105,200
 1,096,184
SkyWest, Inc.
284,500
 5,473,780

6,569,964

Commercial Services & Supplies 0.9%
ITT Educational Services, Inc.*
115,600

3,606,720

Construction & Engineering 0.8%
Quanta Services, Inc.*
425,100

3,009,708

Electrical Equipment 0.8%
General Cable Corp.*
418,600

3,089,268

Machinery 2.2%
Joy Global, Inc.
311,300

8,738,191

Road & Rail 2.1%
Heartland Express, Inc.
210,521
 4,795,668
USF Corp.
106,400
 3,641,008

8,436,676

Transportation Infrastructure 1.0%
Overnite Corp.
168,200

3,868,600

Information Technology 24.8%
Communications Equipment 4.8%
Avocent Corp.*
228,600
 8,410,194
Equinix, Inc.*
55,900
 2,024,195
Extreme Networks, Inc.*
389,900
 2,811,179
Westell Technologies, Inc. "A"
754,700
 5,509,310

18,754,878

Computers & Peripherals 1.4%
Applied Films Corp.*
196,900

5,493,510

Electronic Equipment & Instruments 1.1%
Global Imaging Systems, Inc.*
128,000

4,252,160

IT Consulting & Services 1.5%
CACI International, Inc. "A"*
136,500

5,869,500

Semiconductors & Semiconductor Equipment 13.2%
AMIS Holdings, Inc.*
360,000
 5,842,800
Cree, Inc.*
278,900
 6,219,470
DSP Group, Inc.*
415,600
 10,693,388
LTX Corp.*
402,100
 6,071,710
Micrel, Inc.*
436,200
 5,823,270
Microsemi Corp.*
626,000
 8,563,680
Skyworks Solutions, Inc.*
734,800
 8,567,768

51,782,086

Software 2.8%
THQ, Inc.*
182,000
 3,681,860
Universal Technical Institute, Inc.*
188,800
 7,561,440

11,243,300

Materials 5.3%
Chemicals 0.3%
Compass Minerals International, Inc.
78,300

1,283,337

Containers & Packaging 2.0%
Packaging Corp. of America
350,000

7,896,000

Metals & Mining 3.0%
Peabody Energy Corp.
141,400
 6,576,514
Steel Dynamics, Inc.*
201,600
 4,995,648

11,572,162

Total Common Stocks (Cost $307,916,540)

364,162,606


Cash Equivalents 6.8%

Scudder Cash Management QP Trust 1.10% (b) (Cost $26,484,466)
26,484,466

26,484,466



% of Net Assets

Value ($)



Total Investment Portfolio (Cost $334,401,006) (a)
99.4

390,647,072

Other Assets and Liabilities, Net
0.6

2,516,783

Net Assets
100.0

393,163,855


* Non-income producing security.
(a) The cost for federal income tax purposes was $334,630,943. At March 31, 2004, net unrealized appreciation for all securities based on tax cost was $56,016,129. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $68,646,633 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $12,630,504.
(b) Scudder Cash Management QP Trust, is also managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of the financial statements.


Financial Statements


Scudder Small Cap Fund

Statement of Assets and Liabilities as of March 31, 2004 (Unaudited)

Assets

Investments:
Investments in securities, at value (cost $307,916,540)
$ 364,162,606
Investment in Scudder Cash Management QP Trust (cost $26,484,466)
26,484,466
Total investments in securities, at value (cost $334,401,006)
 390,647,072
Receivable for investments sold
 754,100
Dividends receivable
 103,957
Interest receivable
 20,555
Receivable for Fund shares sold
 5,440,434
Other assets
5,847
Total assets
 396,971,965
Liabilities
Payable for Fund shares redeemed
 3,450,404
Accrued investment advisory fee
 141,017
Other accrued expenses and payables
 216,689
Total liabilities
 3,808,110
Net assets, at value

$ 393,163,855

Net Assets
Net assets consist of:
Accumulated net investment loss
 (1,801,283)
Net unrealized appreciation (depreciation) on investments
56,246,066
Accumulated net realized gain (loss)
 (6,643,098)
Paid-in capital
 345,362,170
Net assets, at value

$ 393,163,855


The accompanying notes are an integral part of the financial statements.



Scudder Small Cap Fund

Statement of Assets and Liabilities as of March 31, 2004 (Unaudited) (continued)

Net Asset Value

Class A
Net Asset Value and redemption price per share ($33,538,055 / 1,494,303 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 22.44

Maximum offering price per share (100 / 94.25 of $22.44)

$ 23.81

Class B
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($3,108,090 / 140,238 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 22.16

Class C
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($4,315,950 / 194,743 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 22.16

Investment Class
Net Asset Value, offering and redemption price per share ($351,033,375 / 15,639,470 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 22.45

Class R
Net Asset Value, offering and redemption price per share ($1,168,385 / 51,992 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 22.47


The accompanying notes are an integral part of the financial statements.



Scudder Small Cap Fund

Statement of Operations for the six months ended March 31, 2004 (Unaudited)

Investment Income
Income:
Dividends
 $ 487,664
Interest - Cash Management Fund Institutional
 39,586
Interest - Scudder Cash Management QP Trust
 49,777
Total Income
 577,027
Expenses:
Investment advisory fee
 1,216,836
Administrator service fee
 1,173,709
Distribution and shareholder servicing fees
 70,517
Auditing
 31,130
Legal
 7,380
Trustees' fees and expenses
 8,981
Reports to shareholders
 7,810
Registration fees
 32,818
Other
 8,994
Total expenses, before expense reductions
 2,558,175
Expense reductions
 (181,348)
Total expenses, after expense reductions
 2,376,827
Net investment income (loss)

(1,799,800)

Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) from investments
 22,549,856
Net unrealized appreciation (depreciation) during the period on investments
 24,768,888
Net gain (loss) on investment transactions

47,318,744

Net increase (decrease) in net assets resulting from operations

$ 45,518,944


The accompanying notes are an integral part of the financial statements.



Scudder Small Cap Fund

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets

Six Months Ended March 31, 2004 (Unaudited)

Year Ended September 30, 2003

Operations:
Net investment income (loss)
 $ (1,799,800) $ (2,303,918)
Net realized gain (loss) on investment transactions
 22,549,856 (14,930,010)
Net unrealized appreciation (depreciation) on investment transactions during the period
 24,768,888 66,694,997
Net increase (decrease) in net assets resulting from operations
 45,518,944 49,461,069
Fund share transactions:
Proceeds from shares sold
 90,677,829 183,028,197
In-kind subscription
 - 52,899,162
Cost of shares redeemed
 (86,443,392) (146,431,067)
Net increase (decrease) in net assets from Fund share transactions
 4,234,437 89,496,292
Increase (decrease) in net assets
49,753,381 138,957,361
Net assets at beginning of period
 343,410,474 204,453,113
Net assets at end of period (including accumulated net investment loss of $1,801,283 and $1,483, respectively)

$ 393,163,855

$ 343,410,474



The accompanying notes are an integral part of the financial statements.


Financial Highlights


Scudder Small Cap Fund

Class A

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 19.74

$ 16.58

$ 20.69

Income (loss) from investment operations:
Net investment income (loss)c
(.10) (.16) (.03)
Net realized and unrealized gain (loss) on investment transactions
2.80 3.32 (4.08)

Total from investment operations

2.70 3.16 (4.11)
Net asset value, end of period

$ 22.44

$ 19.74

$ 16.58

Total Return (%)d
 13.68** 19.06 (19.86)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 34 25 .6
Ratio of expenses before expense reductions (%)
 1.35* 1.37 1.37*
Ratio of expenses after expense reductions (%)
 1.25* 1.25 1.25*
Ratio of net investment income (loss) (%)
 (.94)* (.90) (.75)*
Portfolio turnover rate (%)
 94* 74 87e
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class A shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
e On March 28, 2002, the Small Cap Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Small Cap Fund as a stand-alone fund in addition to the Small Cap Portfolio.
* Annualized
** Not annualized

Scudder Small Cap Fund

Class B

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 19.56

$ 16.55

$ 20.69

Income (loss) from investment operations:
Net investment income (loss)c
(.18) (.30) (.06)
Net realized and unrealized gain (loss) on investment transactions
2.78 3.31 (4.08)

Total from investment operations

2.60 3.01 (4.14)
Net asset value, end of period

$ 22.16

$ 19.56

$ 16.55

Total Return (%)d
 13.29** 18.19 (20.01)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 3 2 .3
Ratio of expenses before expense reductions (%)
 2.10* 2.12 2.12*
Ratio of expenses after expense reductions (%)
 2.00* 2.00 2.00*
Ratio of net investment income (loss) (%)
 (1.69)* (1.65) (1.50)*
Portfolio turnover rate (%)
 94* 74 87e
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class B shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
e On March 28, 2002, the Small Cap Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Small Cap Fund as a stand-alone fund in addition to the Small Cap Portfolio.
* Annualized
** Not annualized

Scudder Small Cap Fund

Class C

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 19.56

$ 16.55

$ 20.69

Income (loss) from investment operations:
Net investment income (loss)c
(.18) (.30) (.06)
Net realized and unrealized gain (loss) on investment transactions
2.78 3.31 (4.08)

Total from investment operations

2.60 3.01 (4.14)
Net asset value, end of period

$ 22.16

$ 19.56

$ 16.55

Total Return (%)d
 13.29** 18.19 (20.01)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 4 2 .1
Ratio of expenses before expense reductions (%)
 2.10* 2.12 2.12*
Ratio of expenses after expense reductions (%)
 2.00* 2.00 2.00*
Ratio of net investment income (loss) (%)
 (1.69)* (1.65) (1.50)*
Portfolio turnover rate (%)
 94* 74 87e
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class C shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
e On March 28, 2002, the Small Cap Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Small Cap Fund as a stand-alone fund in addition to the Small Cap Portfolio.
* Annualized
** Not annualized

Scudder Small Cap Fund

Investment Class

Years Ended September 30,

2004a

2003

2002

2001

2000

1999

Selected Per Share Data
Net asset value, beginning of period

$ 19.74

$ 16.57

$ 19.73

$ 26.95

$ 21.89

$ 14.96

Income (loss) from investment operations:
Net investment income (loss)
(.10)b (.16)b (.13)b (.12) (.15) (.15)
Net realized and unrealized gain (loss) on investment transactions
2.81 3.33 (3.03) (5.53) 8.53 7.13

Total from investment operations

2.71 3.17 (3.16) (5.65) 8.38 6.98
Less distributions from:
Net realized gains on investment transactions
- - - (1.57) (3.32) (.05)
Net asset value, end of period

$ 22.45

$ 19.74

$ 16.57

$ 19.73

$ 26.95

$ 21.89

Total Return (%)c
 13.73** 19.13 (16.02) (21.77) 41.59 46.52
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 351 313 204 241 292 216
Ratio of expenses before expense reductions (%)
 1.35* 1.37 1.40d 1.46d 1.44d 1.46d
Ratio of expenses after expense reductions (%)
 1.25* 1.25 1.25d 1.25d 1.25d 1.25d
Ratio of net investment income (loss) (%)
 (.94)* (.90) (.63) (.53) (.60) (.74)
Portfolio turnover rate (%)
 94* 74 87e 109 136 159
a For the six months ended March 31, 2004 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d The expense ratio of the Small Cap Portfolio is included in this ratio.
e On March 28, 2002, the Small Cap Portfolio was closed. This ratio includes the purchase and sale of portfolio securities of the Small Cap Fund as a stand-alone fund in addition to the Small Cap Portfolio.
* Annualized
** Not annualized

Scudder Small Cap Fund

Class R

2004a

Selected Per Share Data
Net asset value, beginning of period

$ 20.06

Income (loss) from investment operations:
Net investment income (loss)b
(.14)
Net realized and unrealized gain (loss) on investment transactions
2.55

Total from investment operations

2.41
Net asset value, end of period

$ 22.47

Total Return (%)c
 12.01**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 1
Ratio of expenses before expense reductions (%)
 1.60*
Ratio of expenses after expense reductions (%)
 1.50*
Ratio of net investment income (loss) (%)
 (1.19)*
Portfolio turnover rate (%)
 94*
a For the period October 1, 2003 (commencement of operations of Class R shares) to March 31, 2004 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized


Notes to Financial Statements (Unaudited)


Scudder Small Cap Fund

A. Significant Accounting Policies

Small Cap Fund ("Scudder Small Cap Fund" or the "Fund") is a diversified series of Scudder Advisor Funds (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 offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Prior to March 1, 2004, Class C shares were offered with an initial sales charge. Class C shares do not convert into another class. Investment Class shares are not subject to initial or contingent deferred sales charges. On October 1, 2003, the Fund commenced offering Class R shares which are only available to participants in certain retirement plans and are offered to investors without an initial sales charge.

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 distribution fees, service fees, administrator fees and certain other class-specific expenses. Differences in class-level 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 of America which require the use of management estimates. Actual results could differ from those 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 on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.

Money market investments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.

Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.

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.

At September 30, 2003 the Fund had a net tax basis capital loss carryforward of approximately $17,532,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until September 30, 2008 ($232,000), September 30, 2009 ($66,000), September 30, 2010 ($4,518,000) and September 30, 2011 ($12,716,000), the respective expiration dates, whichever occurs first.

In addition, from November 1, 2002 through September 30, 2003, the Fund incurred approximately $11,080,000 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 ending September 30, 2004.

Distribution of Income and Gains. Distributions of net investment income, if any, are made annually. 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 accounting principles generally accepted in the United States of America. These differences primarily relate to securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.

Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust.

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on 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 March 31, 2004, purchases and sales of investment securities (excluding short-term investments) aggregated $167,044,097 and $172,775,479, respectively.

C. Related Parties

Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG. Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Fund's Advisor. Investment Company Capital Corporation ("ICCC" or the "Administrator"), also an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Fund's Administrator.

Investment Advisory Agreement. Under the Investment Advisory Agreement, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. The investment advisory fee payable under the Investment Advisory Agreement is equal to an annual rate of 0.65% of the Fund's average daily net assets, computed and accrued daily and payable monthly. The Fund did not impose a portion of its advisory fees equivalent to the advisory fees charged on assets invested in the affiliated money market fund, Cash Management Fund Institutional.

For the six months ended March 31, 2004, the Advisor and Administrator have contractually agreed to waive their fees or reimburse expenses to the extent necessary to maintain the annualized expenses of the classes of the Fund as follows:

Class A

1.25%

Class B

2.00%

Class C

2.00%

Investment Class

1.25%

Class R

1.50%


Accordingly, for the six months ended March 31, 2004, the Advisor waived a portion of its advisory fee pursuant to the Expense Limitation Agreement aggregating $181,348 and the amount imposed aggregated $1,035,488 which was equivalent to an annualized effective rate of 0.55% of the Fund's average daily net assets.

Administrator. For its services as Administrator, ICCC receives a fee (the "Administrator Service Fee") of 0.65% of the average daily net assets for the Investment Class and 0.40% of average daily net assets for Class A, B, C and R shares for the Fund, computed and accrued daily and payable monthly. For the six months ended March 31, 2004, the Administrator Service Fee for the Fund was as follows:

Administrator Service Fee

Total Aggregated

Unpaid at March 31, 2004

Class A
 $ 60,378 $ 11,342
Class B
 5,681 1,066
Class C
 7,012 1,421
Investment Class
 1,099,801 197,685
Class R
 837 837

$ 1,173,709

$ 212,351


Distribution Agreement. Under the Distribution Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc. ("SDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.25% of the average daily net assets of the Class A and R shares and 0.75% of average daily net assets of the Class B and C shares. Pursuant to the agreement, SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the six months ended March 31, 2004, the Distribution Fee was as follows:

Distribution Fee

Total Aggregated

Unpaid at March 31, 2004

Class A
 $ 37,736 $ 6,806
Class B
 10,653 2,060
Class C
 13,148 2,738
Class R
 523 523

$ 62,060

$ 12,127


In addition, SDI provides information and administrative services ("Shareholder Servicing Fee") to Class B, C and R shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. SDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the six months ended March 31, 2004, the Shareholder Servicing Fee was as follows:

Shareholder Servicing Fee

Total Aggregated

Unpaid at March 31, 2004

Effective Rate

Class B
 $ 3,551 $ 636

.25%

Class C
 4,383 849

.25%

Class R
 523 284

.25%


$ 8,457

$ 1,769


Underwriting Agreement and Contingent Deferred Sales Charge. SDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the six months ended March 31, 2004 aggregated $6,237. There were no underwriting commissions paid in connection with the distribution of Class C shares for the six months ended March 31, 2004.

In addition, SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the six months ended March 31, 2004, the CDSC for the Fund's Class B and C shares was $3,466 and $246, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the six months ended March 31, 2004, SDI received $556.

Other. The Fund may invest in Cash Management Fund Institutional, an open-end management investment company managed by DeAM, Inc.

Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregate annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each Fund in the Fund Complex for which he or she serves. In addition, the Chairman of the Fund Complex's Audit Committee receives an annual fee for his services.

Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.

D. Line of Credit

The Fund and several other affiliated funds (the "Participants") share in a $1.25 billion revolving credit facility administered by J.P. Morgan Chase Bank 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, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.

E. Share Transactions

The following table summarizes share and dollar activity in the Fund:


Six Months Ended March 31, 2004

Year Ended September 30, 2003


Shares

Dollars

Shares

Dollars

Shares sold
Class A
 887,989 $ 19,374,920 1,752,188 $ 31,091,653
Class B
 50,138 1,075,647 122,357 2,190,104
Class C
 85,905 1,844,379 124,742 2,254,363
Investment Class
3,023,850 67,125,427 7,905,657 147,492,077
Class R
 55,877* 1,257,456* - -

$ 90,677,829

$ 183,028,197

In-kind subscription
Investment Class
- - 3,329,085 $ 52,899,162

-

$ 52,899,162

Shares redeemed
Class A
 (684,523) $ (14,870,341) (496,536) $ (9,283,647)
Class B
 (26,827) (577,269) (21,791) (392,644)
Class C
 (14,438) (319,694) (5,440) (100,282)
Investment Class
(3,255,167) (70,588,113) (7,646,213) (136,654,494)
Class R
 (3,885)* (87,975)* - -

$ (86,443,392)

$ (146,431,067)

Net increase (decrease)
Class A
 203,466 $ 4,504,579 1,255,652 $ 21,808,006
Class B
 23,311 498,378 100,566 1,797,460
Class C
 71,467 1,524,685 119,302 2,154,081
Investment Class
(231,317) (3,462,686) 3,588,529 63,736,745
Class R
 51,992* 1,169,481* - -

$ 4,234,437

$ 89,496,292


*For the period October 1, 2003 (commencement of operations of Class R shares) to March 31, 2004.

F. In-Kind Subscription

As part of Deutsche Bank's effort to consolidate various legacy retirement plans, Deutsche Bank implemented a program to transfer various plan assets as a means to streamline the number of investment options offered to employee plan participants. As part of the consolidation program, on March 28, 2003 the Scudder Small Cap Fund accepted securities and cash in payment for fund shares (received an in-kind subscription) from the BT Partnershare retirement plan in accordance with the Fund's purchase in-kind procedures. The transaction represented a percentage of the Fund's net assets at March 31, 2003 as follows:

Purchase Amount

% of Net Assets

Small Cap Fund
 $ 52,899,162

25


G. Regulatory Matters and Litigation

Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. We are unable to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisers. Publicity about mutual fund practices arising from these industry wide inquiries serve as the general basis of a number of private lawsuits against the Scudder Funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, Deutsche Asset Management ("DeAM") and its affiliates, certain individuals, including in some cases Fund Trustees/Directors, and other parties. DeAM has undertaken to bear all liabilities and expenses incurred by the Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding fund valuation, market timing, revenue sharing or other subjects of the pending inquiries. Based on currently available information, DeAM believes the likelihood that the pending lawsuits will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect its ability to perform under its investment management agreements with the Scudder funds.


Performance Summary March 31, 2004


Scudder Micro Cap Fund

All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit scudder.com for the product's most recent month-end performance.

The maximum sales charge for Class A shares is 5.75%. For Class B shares, the maximum contingent deferred sales charge (CDSC) is 4% within the first year after purchase, declining to 0% after six years. Class C shares have no adjustment for front-end sales charges but redemptions within one year of purchase may be subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and would have been lower if they had. Institutional Class and Investment Class shares are not subject to sales charges.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares. Returns and rankings may differ by share class.

Returns shown for Class A, B and C shares for the periods prior to June 28, 2002 are derived from the historical performance of Institutional Class shares of the Scudder Micro Cap Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses and the current applicable sales charge of each specific class. Any difference in expenses will affect performance.

Average Annual Total Returns (Unadjusted for Sales Charge) as of 3/31/04


Scudder Micro Cap Fund

6-Month++

1-Year

3-Year

5-Year

Life of Class*

Class A

16.21%

51.99%

7.87%

16.89%

14.62%

Class B

15.77%

50.77%

7.07%

16.02%

13.76%

Class C

15.88%

50.95%

7.08%

16.03%

13.76%

Institutional Class

16.38%

52.42%

8.12%

17.17%

14.90%

Russell 2000 Index+
 21.69%
 63.83%
 10.90%
 9.66%
 8.35%

Scudder Micro Cap Fund

6-Month++

1-Year

3-Year

5-Year

Life of Class**

Investment Class

16.28%

52.03%

7.86%

16.88%

12.92%

Russell 2000 Index+
 21.69%
 63.83%
 10.90%
 9.66%
 6.52%

Sources: Lipper Inc. and Deutsche Asset Management, Inc.

++ Total returns shown for periods less than one year are not annualized.
* The Fund commenced operations on December 18, 1996. Index returns begin December 31, 1996.
** Investment Class commenced operations on August 21, 1997. Index returns begin August 31, 1997.


Scudder Micro Cap Fund

Net Asset Value

Class A

Class B

Class C

Investment Class

Institutional Class

Net Asset Value:
3/31/04
 $ 21.72 $ 21.44 $ 21.45 $ 21.71 $ 22.03
9/30/03
 $ 18.69 $ 18.52 $ 18.51 $ 18.67 $ 18.93

Institutional Class Lipper Rankings - Small-Cap Core Funds Category as of 3/31/04

Period

Rank

Number of Funds Tracked

Percentile Ranking

1-Year

413

of

526

79

3-Year

351

of

419

84

5-Year

63

of

296

22


Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Institutional Class shares; other share classes may vary.

Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)

[] Scudder Micro Cap Fund - Class A

[] Russell 2000 Index+
mscap_g10k640

Yearly periods ended March 31


The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net investment of $9,425.

The growth of $10,000 is cumulative.

* The Fund commenced operations on December 18, 1996. Index returns begin December 31, 1996.


Scudder Micro Cap Fund

Comparative Results (Adjusted for Maximum Sales Charge) as of 3/31/04

Scudder Micro Cap Fund

1-Year

3-Year

5-Year

Life of Class*

Class A

Growth of $10,000

$14,325

$11,830

$20,567

$25,470

Average annual total return

43.25%

5.76%

15.51%

13.69%

Class B

Growth of $10,000

$14,777

$12,074

$20,922

$25,581

Average annual total return

47.77%

6.48%

15.91%

13.76%

Class C

Growth of $10,000

$15,095

$12,280

$21,032

$25,592

Average annual total return

50.95%

7.08%

16.03%

13.76%

Russell 2000 Index+
Growth of $10,000

$16,383

$13,639

$15,855

$17,881

Average annual total return

63.83%

10.90%

9.66%

8.35%


The growth of $10,000 is cumulative.

Growth of an Assumed $250,000 Investment

[] Scudder Micro Cap Fund - Institutional Class

[] Russell 2000 Index+
mscap_g10k630

Yearly periods ended March 31


The growth of $250,000 is cumulative.

* The Fund commenced operations on December 18, 1996. Index returns begin December 31, 1996.


Scudder Micro Cap Fund

Comparative Results as of 3/31/04

Scudder Micro Cap Fund

1-Year

3-Year

5-Year

Life of Class*

Institutional Class

Growth of $250,000

$381,050

$315,950

$552,050

$687,625

Average annual total return

52.42%

8.12%

17.17%

14.90%

Russell 2000 Index+
Growth of $250,000

$409,575

$340,975

$396,375

$447,025

Average annual total return

63.83%

10.90%

9.66%

8.35%

1-Year

3-Year

5-Year

Life of Class**

Investment Class

Growth of $10,000

$15,203

$12,549

$21,809

$22,321

Average annual total return

52.03%

7.86%

16.88%

12.92%

Russell 2000 Index+
Growth of $10,000

$16,383

$13,639

$15,855

$15,158

Average annual total return

63.83%

10.90%

9.66%

6.52%


The growth of $10,000/$250,000 is cumulative.

The minimum investment for Institutional Class shares is $250,000.

* The Fund commenced operations on December 18, 1996. Index returns begin December 31, 1996.
** Investment Class commenced operations on August 21, 1997. Index returns begin August 31, 1997.
+ Russell 2000 Index is an unmanaged index that tracks the common stock price movement of the 2,000 smallest companies of the Russell 3000 Index, which measures the performance of the 3,000 largest US companies based on total market capitalization. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Portfolio Summary March 31, 2004


Scudder Micro Cap Fund

Asset Allocation

3/31/04

9/30/03


Common Stocks
 89%
 96%
Cash Equivalents, net
 9%
 4%
Preferred Stocks
 2%
 -

100%
 100%

Sector Diversification (Excludes Cash Equivalents)

3/31/04

9/30/03


Information Technology
 31%
 38%
Consumer Discretionary
 17%
 15%
Industrials
 15%
 10%
Financials
 14%
 10%
Health Care
 12%
 18%
Energy
 6%
 3%
Materials
 3%
 -
Consumer Staples
 2%
 3%
Utilities
 -
 3%

100%
 100%

Ten Largest Equity Holdings at March 31, 2004 (26.7% of Portfolio)

1. Jos. A. Bank Clothiers, Inc. Manufacturer of classic men's clothing

3.7%

2. ANSYS, Inc. Developer of software solutions for design analysis

3.2%

3. Connetics Corp. Producer of pharmaceuticals

3.1%

4. Harris Interactive, Inc. Provider of consulting services

2.8%

5. Digitas, Inc. Provider of integrated strategy, technology and marketing solutions

2.5%

6. Keystone Automotive Industries, Inc. Distributor of aftermarket collision replacement parts for automobiles and light trucks

2.5%

7. United Natural Foods, Inc. Distributor of natural foods and related products

2.4%

8. NS Group, Inc. Manufacturer of specialty steel products for the energy industry

2.2%

9. Education Lending Group, Inc. Provider of financial aid products to schools

2.2%

10. Cache, Inc. Retail stores specializing in high fashion apparel and accessories

2.1%


Asset allocation, sector diversification and portfolio holdings are subject to change.

For more complete details about the fund's investment portfolio, see page 66. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end is available upon request on the 16th of the following month. Please see the Account Management Resources section for contact information.


Investment Portfolio as of March 31, 2004 (Unaudited)


Scudder Micro Cap Fund


Shares

Value ($)



Common Stocks 89.1%

Consumer Discretionary 15.6%
Auto Components 2.4%
Keystone Automotive Industries, Inc.*
143,400

3,923,424

Hotels Restaurants & Leisure 2.7%
Red Robin Gourmet Burgers*
47,700
 1,354,680
Shuffle Master, Inc.*
65,400
 3,040,446

4,395,126

Media 2.8%
Harris Interactive, Inc.*
529,500

4,463,685

Specialty Retail 7.7%
Cache, Inc.*
103,200
 3,402,504
Hancock Fabrics, Inc.
193,100
 3,068,359
Jos. A. Bank Clothiers, Inc.*
161,850
 5,826,600

12,297,463

Consumer Staples 2.4%
Food & Drug Retailing
United Natural Foods, Inc.*
78,700

3,784,683

Energy 5.4%
Energy Equipment & Services 0.6%
Dril-Quip, Inc.*
59,400

976,536

Oil & Gas 4.8%
Brigham Exploration Co.*
198,600
 1,459,710
Carrizo Oil & Gas, Inc.*
432,400
 3,134,900
Southwestern Energy Co.*
128,900
 3,109,068

7,703,678

Financials 10.7%
Banks 4.5%
Dime Community Bancshares
96,900
 1,971,915
Fidelity Bancshares, Inc.
43,600
 1,597,940
Franklin Bank Corp.*
125,800
 2,338,622
Mercantile Bank Corp.
37,200
 1,320,600

7,229,077

Diversified Financial Services 3.0%
Encore Capital Group, Inc.*
147,100
 2,443,331
Marlin Business Services, Inc.*
135,800
 2,285,514
TNS, Inc.*
7,100
 135,965

4,864,810

Insurance 2.5%
Donegal Group, Inc. "A"
137,300
 2,751,492
Navigators Group, Inc.*
41,800
 1,203,004

3,954,496

Real Estate 0.7%
Capital Lease Funding, Inc.*
42,300
 542,286
Government Properties Trust, Inc.
42,300
 557,091

1,099,377

Health Care 10.8%
Health Care Equipment & Supplies 2.4%
Advanced Neuromodulation Systems, Inc.*
46,500
 1,678,185
Zoll Medical Corp.*
54,900
 2,194,902

3,873,087

Health Care Providers & Services 4.1%
Centene Corp.*
82,100
 2,511,439
Gentiva Health Services, Inc.*
106,100
 1,643,489
Sierra Health Services, Inc.*
66,200
 2,409,680

6,564,608

Pharmaceuticals 4.3%
Adolor Corp.*
132,500
 1,991,475
Connetics Corp.*
223,300
 4,950,561

6,942,036

Industrials 13.6%
Aerospace & Defense 0.9%
EDO Corp.
63,100

1,519,448

Commercial Services & Supplies 5.1%
Bright Horizons Family Solutions, Inc.*
68,300
 3,221,028
Concorde Careet Colleges Inc.*
35,750
 858,000
CoStar Group, Inc.*
76,700
 2,829,463
Marten Transport Ltd.*
70,050
 1,330,950

8,239,441

Electrical Equipment 2.7%
General Cable Corp.*
282,300
 2,083,374
Ultralife Batteries, Inc.*
105,800
 2,256,714

4,340,088

Machinery 2.1%
Wabash National Corp.*
139,600

3,294,560

Road & Rail 1.7%
Celadon Group, Inc.*
163,300

2,715,679

Transportation Infrastructure 1.1%
Quality Distribution, Inc.*
123,600

1,742,760

Information Technology 28.1%
Communications Equipment 2.1%
Equinix, Inc.*
18,800
 680,767
Westell Technologies, Inc. "A"
370,600
 2,705,380

3,386,147

Computers & Peripherals 5.1%
Applied Films Corp.*
116,700
 3,255,930
Synaptics, Inc.*
167,400
 2,936,196
TransAct Technologies, Inc.*
53,600
 2,087,720

8,279,846

Electronic Equipment & Instruments 5.8%
Craftmade International, Inc.
125,500
 3,396,030
Identix, Inc.*
197,345
 1,140,457
Keithley Instruments, Inc.
154,300
 3,195,553
OSI Systems, Inc.*
78,700
 1,574,000

9,306,040

Internet Software & Services 4.0%
Digitas, Inc.*
387,100
 3,983,259
WebMethods, Inc.*
260,100
 2,444,940

6,428,199

IT Consulting & Services 2.9%
GRIC Communications, Inc.*
402,300
 1,347,705
ManTech International Corp. "A"*
74,400
 1,524,456
Modem Media, Inc.*
277,400
 1,803,100

4,675,261

Software 8.2%
Agile Software Corp.*
261,300
 2,286,375
ANSYS, Inc.*
129,400
 5,142,356
Docucorp International, Inc.*
97,500
 1,144,650
Open Solutions, Inc.*
146,900
 3,243,552
Tradestation Group, Inc.*
192,600
 1,296,198

13,113,131

Materials 2.5%
Chemicals 0.3%
Compass Minerals International, Inc.
26,500

434,335

Metals & Mining 2.2%
NS Group, Inc.*
272,400

3,541,200

Total Common Stocks (Cost $113,970,559)

143,088,221


Preferred Stock 2.2%

Financials 2.2%
Diversified Financials
Education Lending Group, Inc.* (Cost $2,644,187)
219,900

3,478,818


Cash Equivalents 8.0%

Scudder Cash Management QP Trust 1.10% (b)
(Cost $12,939,139)
12,939,140

12,939,139



% of Net Assets

Value ($)



Total Investment Portfolio (Cost $129,553,885) (a)
99.3

159,506,178

Other Assets and Liabilities, Net
0.7

1,017,784

Net Assets
100.0

160,523,962


* Non-income producing security.
(a) The cost for federal income tax purposes was $129,755,156. At March 31, 2004, net unrealized appreciation for all securities based on tax cost was $29,751,022. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $33,819,681 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,068,659.
(b) Scudder Cash Management QP Trust, is also managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of the financial statements.


Financial Statements


Scudder Micro Cap Fund

Statement of Assets and Liabilities as of March 31, 2004 (Unaudited)

Assets

Investments:
Investments in securities, at value (cost $116,614,746)
$ 146,567,039
Investment in Scudder Cash Management QP Trust (cost $12,939,139)
12,939,139
Total investments in securities, at value (cost $129,553,885)
 159,506,178
Receivable for investments sold
 1,172,675
Dividends receivable
 48,320
Interest receivable
 7,860
Receivable for Fund shares sold
 503,203
Other assets
 28,333
Total assets
 161,266,569
Liabilities
Payable for investments purchased
 321,245
Payable for Fund shares redeemed
 244,334
Accrued investment advisory fee
 74,617
Other accrued expenses and payables
 102,411
Total liabilities
 742,607
Net assets, at value

$ 160,523,962

Net Assets
Net assets consist of:
Accumulated net investment loss
 (969,811)
Net unrealized appreciation (depreciation) on investments
 29,952,293
Accumulated net realized gain (loss)
 1,134,467
Paid-in capital
 130,407,013
Net assets, at value

$ 160,523,962


The accompanying notes are an integral part of the financial statements.



Scudder Micro Cap Fund

Statement of Assets and Liabilities as of March 31, 2004 (Unaudited) (continued)

Net Asset Value

Class A
Net Asset Value and redemption price per share ($24,748,017 / 1,139,375 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 21.72

Maximum offering price per share (100 / 94.25 of $21.72)

$ 23.05

Class B
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($5,528,473 / 257,817 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 21.44

Class C
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($14,519,793 / 676,986 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 21.45

Investment Class
Net Asset Value, offering and redemption price per share ($21,674,395 / 998,535 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 21.71

Institutional Class
Net Asset Value, offering and redemption price per share ($94,053,284 / 4,268,384 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)

$ 22.03


The accompanying notes are an integral part of the financial statements.



Scudder Micro Cap Fund

Statement of Operations for the six months ended March 31, 2004 (Unaudited)

Investment Income

Dividends
 $ 183,079
Interest - Scudder Cash Management QP Trust
 35,492
Interest
 10,579
Total Income
 229,150
Expenses:
Investment advisory fee
 1,077,645
Administrator service fee
 158,057
Distribution and shareholder servicing fees
 125,447
Custody fees
 3,312
Auditing
 36,490
Legal
 2,090
Trustees' fees and expenses
 3,631
Reports to shareholders
 7,470
Registration fees
 45,235
Other
 1,801
Total expenses, before expense reductions
 1,461,178
Expense reductions
 (263,591)
Total expenses, after expense reductions
 1,197,587
Net investment income (loss)

(968,437)

Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) from investments
 15,944,758
Net unrealized appreciation (depreciation) during the period on investments
 4,618,142
Net gain (loss) on investment transactions

20,562,900

Net increase (decrease) in net assets resulting from operations

$ 19,594,463


The accompanying notes are an integral part of the financial statements.



Scudder Micro Cap Fund

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets

Six Months Ended March 31, 2004 (Unaudited)

Year Ended September 30, 2003

Operations:
Net investment income (loss)
 $ (968,437) $ (852,531)
Net realized gain (loss) on investment transactions
 15,944,758 (10,409,423)
Net unrealized appreciation (depreciation) on investment transactions during the period
 4,618,142 39,153,860
Net increase (decrease) in net assets resulting from operations
 19,594,463 27,891,906
Fund share transactions:
Proceeds from shares sold
 52,264,307 62,524,070
Cost of shares redeemed
 (27,051,405) (40,548,787)
Net increase (decrease) in net assets from Fund share transactions
 25,212,902 21,975,283
Increase (decrease) in net assets

44,807,365

49,867,189
Net assets at beginning of period
 115,716,597 65,849,408
Net assets at end of period (including accumulated net investment loss of $969,811 and $1,374, respectively)

160,523,962

$ 115,716,597



The accompanying notes are an integral part of the financial statements.


Financial Highlights


Scudder Micro Cap Fund

Class A

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 18.69

$ 14.07

$ 18.24

Income (loss) from investment operations:
Net investment income (loss)c
(.15) (.18) .03
Net realized and unrealized gain (loss) on investment transactions
3.18 4.80 (4.20)

Total from investment operations

3.03 4.62 (4.17)
Net asset value, end of period

$ 21.72

$ 18.69

$ 14.07

Total Return (%)d
 16.21** 32.84 (22.86)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 25 11 .6
Ratio of expenses before expense reductions (%)
 2.11* 2.16 2.22*
Ratio of expenses after expense reductions (%)
 1.74* 1.74 1.74*
Ratio of net investment income (loss) (%)
 (1.42)* (1.09) .70*
Portfolio turnover rate (%)
 78* 74 66
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class A shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized

Scudder Micro Cap Fund

Class B

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 18.52

$ 14.04

$ 18.24

Income (loss) from investment operations:
Net investment income (loss)c
(.23) (.30) (.00)d
Net realized and unrealized gain (loss) on investment transactions
3.15 4.78 (4.20)

Total from investment operations

2.92 4.48 (4.20)
Net asset value, end of period

$ 21.44

$ 18.52

$ 14.04

Total Return (%)e
 15.77** 31.91 (23.03)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 6 3 .3
Ratio of expenses before expense reductions (%)
 2.86* 2.91 2.97*
Ratio of expenses after expense reductions (%)
 2.49* 2.49 2.49*
Ratio of net investment income (loss) (%)
 (2.17)* (1.84) (.05)*
Portfolio turnover rate (%)
 78* 74 66
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class B shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Amount is less than $0.005.
e Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized

Scudder Micro Cap Fund

Class C

Years Ended September 30,

2004a

2003

2002b

Selected Per Share Data
Net asset value, beginning of period

$ 18.51

$ 14.04

$ 18.24

Income (loss) from investment operations:
Net investment income (loss)c
(.23) (.31) (.00)d
Net realized and unrealized gain (loss) on investment transactions
3.17 4.78 (4.20)

Total from investment operations

2.94 4.47 (4.20)
Net asset value, end of period

$ 21.45

$ 18.51

$ 14.04

Total Return (%)e
 15.88** 31.84 (23.03)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 15 5 .3
Ratio of expenses before expense reductions (%)
 2.86* 2.91 2.97*
Ratio of expenses after expense reductions (%)
 2.49* 2.49 2.49*
Ratio of net investment income (loss) (%)
 (2.17)* (1.84) (.05)*
Portfolio turnover rate (%)
 78* 74 66
a For the six months ended March 31, 2004 (Unaudited).
b For the period June 28, 2002 (commencement of operations of Class C shares) to September 30, 2002.
c Based on average shares outstanding during the period.
d Amount is less than $0.005.
e Total return would have been lower had certain expenses not been reduced. Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized

Scudder Micro Cap Fund

Investment Class

Years Ended September 30,

2004a

2003

2002

2001

2000

1999b

1998c

Selected Per Share Data
Net asset value, beginning of period

$ 18.67

$ 14.06

$ 17.05

$ 24.36

$ 16.12

$ 9.88

$ 12.62

Income (loss) from investment operations:
Net investment income (loss)
(.15)d (.17)d (.18)d (.15) (.14) (.14) (.06)
Net realized and unrealized gain (loss) on investment transactions
3.19 4.78 (2.81) (5.33) 9.79 6.38 (2.19)

Total from investment operations

3.04 4.61 (2.99) (5.48) 9.65 6.24 (2.25)
Less distributions from:
Net realized gains on investment transactions
- - - (1.83) (1.41) - (.49)
Net asset value, end of period

$ 21.71

$ 18.67

$ 14.06

$ 17.05

$ 24.36

$ 16.12

$ 9.88

Total Return (%)e
 16.28** 32.79 (17.54) (22.71) 63.87 63.16** (18.33)
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 22 18 12 7 5 1 1
Ratio of expenses before expense reductions (%)
 2.11* 2.16 2.21 2.23 2.55 3.25* 2.68
Ratio of expenses after expense reductions (%)
 1.74* 1.74 1.74 1.74 1.74 1.74* 1.74
Ratio of net investment income (loss) (%)
 (1.42)* (1.09) (1.02) (1.03) (1.05) (1.29)* (.98)
Portfolio turnover rate (%)
 78* 74 66 79 137 115 85
a For the six months ended March 31, 2004 (Unaudited).
b For the eleven months ended September 30, 1999.
c For the year ended October 31, 1998.
d Based on average shares outstanding during the period.
e Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized

Scudder Micro Cap Fund

Institutional Class

Years Ended September 30,

2004a

2003

2002

2001

2000

1999b

1998c

Selected Per Share Data
Net asset value, beginning of period

$ 18.93

$ 14.22

$ 17.21

$ 24.52

$ 16.16

$ 9.90

$ 12.62

Income (loss) from investment operations:
Net investment income (loss)
(.13)d (.14)d (.14)d (.13) (.14) (.14) (.05)
Net realized and unrealized gain (loss) on investment transactions
3.23 4.85 (2.85) (5.35) 9.91 6.40 (2.18)

Total from investment operations

3.10 4.71 (2.99) (5.48) 9.77 6.26 (2.23)
Less distributions from:
Net realized gains on investment transactions
- - - (1.83) (1.41) - (.49)
Net asset value, end of period

$ 22.03

$ 18.93

$ 14.22

$ 17.21

$ 24.52

$ 16.16

$ 9.90

Total Return (%)e
 16.38** 33.12 (17.37) (22.55) 64.49 63.23** (18.16)
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 94 79 52 33 37 17 14
Ratio of expenses before expense reductions (%)
 1.86* 1.91 1.96 1.98 2.30 3.00* 2.59
Ratio of expenses after expense reductions (%)
 1.49* 1.49 1.49 1.49 1.49 1.49* 1.49
Ratio of net investment income (loss) (%)
 (1.17)* (.84) (.77) (.78) (.78) (1.07)* (.75)
Portfolio turnover rate (%)
 78* 74 66 79 137 115 85
a For the six months ended March 31, 2004 (Unaudited).
b For the eleven months ended September 30, 1999.
c For the year ended October 31, 1998.
d Based on average shares outstanding during the period.
e Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized


Notes to Financial Statements (Unaudited)


Scudder Micro Cap Fund

A. Significant Accounting Policies

Micro Cap Fund ("Scudder Micro Cap Fund" or the "Fund") is a diversified series of Scudder MG Investments 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 Delaware business trust.

The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Prior to March 1, 2004, Class C shares were offered with an initial sales charge. Class C shares do not convert into another class. Investment Class shares are not subject to initial or contingent deferred sales charges. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes.

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 distribution fees, service fees and certain other class-specific expenses. Differences in class-level 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 of America which require the use of management estimates. Actual results could differ from those 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 on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.

Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.

Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.

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.

At September 30, 2003 the Fund had a net tax basis capital loss carryforward of approximately $6,650,000 which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until September 30, 2010 ($1,687,000) and September 30, 2011 ($4,963,000), the respective expiration dates, whichever occurs first.

In addition, from November 1, 2002 through September 30, 2003, the Fund incurred approximately $7,931,000 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 ending September 30, 2004.

Distribution of Income and Gains. Distributions of net investment income, if any, are made annually. 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 accounting principles generally accepted in the United States of America. These differences primarily relate to securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on 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 March 31, 2004, purchases and sales of investment securities (excluding short-term investments) aggregated $66,666,005 and $51,368,998, respectively.

C. Related Parties

Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG. Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Advisor and Administrator for the Fund.

Investment Advisory Agreement. Under the Investment Advisory Agreement the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. The investment advisory fee payable under the Investment Advisory Agreement is equal to an annual rate of 1.50% of the Fund's average daily net assets, computed and accrued daily and payable monthly.

For the six months ended March 31, 2004, the Advisor and Administrator have contractually agreed to waive their fees or reimburse expenses to the extent necessary to maintain the annualized expenses of the classes of the Fund as follows:

Class A

1.74%

Class B

2.49%

Class C

2.49%

Investment Class

1.74%

Institutional Class

1.49%


Accordingly, for the six months ended March 31, 2004, the Advisor waived a portion of its fee pursuant to an Expense Limitation Agreement aggregating $263,591 and the amount imposed aggregated $814,054 which was equivalent to an annualized effective rate of 1.13% of the Fund's average daily net assets.

Administrator. For its services as Administrator, DeAM, Inc. receives a fee (the "Administrator Service Fee") of 0.22% of the average daily net assets of the Fund, computed and accrued daily and payable monthly. For the six months ended March 31, 2004, the Administrator Service Fee was $158,057, of which $31,045 is unpaid.

Distribution Agreement. Under the Distribution Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc. ("SDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.25% of the average daily net assets of the Class A shares and 0.75% of average daily net assets of the Class B and C shares. Pursuant to the agreement, SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the six months ended March 31, 2004, the Distribution Fee was as follows:

Distribution Fee

Total Aggregated

Unpaid at March 31, 2004

Class A
 $ 22,862 $ 4,914
Class B
 17,622 3,578
Class C
 39,729 9,497

$ 80,213

$ 17,989


In addition, SDI provides information and administrative services ("Shareholder Servicing Fee") to Class B, C and Investment Class shareholders at an annual rate of 0.25% of average daily net assets for each such class. SDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the six months ended March 31, 2004, the Shareholder Servicing Fee was as follows:

Shareholder Servicing Fee

Total Aggregated

Unpaid at March 31, 2004

Effective Rate

Class B
 $ 5,874 $ 1,119

.25%

Class C
 13,243 3,013

.25%

Investment Class
 26,117 37,302

.25%


$ 45,234

$ 41,434


Underwriting Agreement and Contingent Deferred Sales Charge. SDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A and C shares for the six months ended March 31, 2004 aggregated $7,534 and $72, respectively.

In addition, SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the six months ended March 31, 2004, the CDSC for the Fund's Class B and Class C shares was $1,452 and $987, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the six months ended March 31, 2004, SDI received $21.

Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregate annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each Fund in the Fund Complex for which he or she serves. In addition, the Chairman of the Fund Complex's Audit Committee receives an annual fee for his services.

Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.

D. Line of Credit

The Fund and several other affiliated funds (the "Participants") share in a $1.25 billion revolving credit facility administered by J.P. Morgan Chase Bank 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, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.

E. Share Transactions

The following table summarizes share and dollar activity in the Fund:


Six Months Ended March 31, 2004

Year Ended
September 30, 2003


Shares

Dollars

Shares

Dollars

Shares sold
Class A
 782,737 $ 16,621,769 580,974 $ 9,280,233
Class B
 103,558 2,140,255 176,480 2,818,390
Class C
 486,115 10,058,585 269,304 4,320,522
Investment Class
 380,088 8,106,405 678,872 11,349,080
Institutional Class
720,970 15,337,293 2,203,386 34,755,845

$ 52,264,307

$ 62,524,070

Shares redeemed
Class A
 (227,381) $ (4,888,686) (74,483) $ (1,221,233)
Class B
 (21,239) (452,837) (19,570) (309,042)
Class C
 (69,997) (1,480,214) (26,322) (416,546)
Investment Class
 (340,175) (7,222,225) (561,094) (9,441,743)
Institutional Class
(616,056) (13,007,443) (1,726,837) (29,160,223)

$ (27,051,405)

$ (40,548,787)

Net increase (decrease)
Class A
 555,356 $ 11,733,083 506,491 $ 8,059,000
Class B
 82,319 1,687,418 156,910 2,509,348
Class C
 416,118 8,578,371 242,982 3,903,976
Investment Class
 39,913 884,180 117,778 1,907,337
Institutional Class
104,914 2,329,850 476,549 5,595,622

$ 25,212,902

$ 21,975,283


F. Regulatory Matters and Litigation

Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. We are unable to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisers. Publicity about mutual fund practices arising from these industry wide inquiries serve as the general basis of a number of private lawsuits against the Scudder Funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, Deutsche Asset Management ("DeAM") and its affiliates, certain individuals, including in some cases Fund Trustees/Directors, and other parties. DeAM has undertaken to bear all liabilities and expenses incurred by the Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding fund valuation, market timing, revenue sharing or other subjects of the pending inquiries. Based on currently available information, DeAM believes the likelihood that the pending lawsuits will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect its ability to perform under its investment management agreements with the Scudder funds.


Account Management Resources


For shareholders of Classes A, B, C, Investment and Institutional Classes

Automated Information Lines

ScudderACCESS (800) 972-3060

Personalized account information, information on other Scudder funds and services via touchtone telephone and for Classes A, B, and C only, the ability to exchange or redeem shares.

Web Site

scudder.com

View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more.

For More Information

(800) 621-1048

To speak with a Scudder service representative.

Written Correspondence

Scudder Investments

PO Box 219356
Kansas City, MO 64121-9356

Proxy Voting

A description of the fund's policies and procedures for voting proxies for portfolio securities can be found on our Web site - scudder.com (type "proxy voting" in the search field) - or on the SEC's Web site - www.sec.gov. To obtain a written copy without charge, call us toll free at (800) 621-1048.

Principal Underwriter

If you have questions, comments or complaints, contact:

Scudder Distributors, Inc.

222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148

For shareholders of Class R

Automated Information Lines

Scudder Flex Plan Access (800) 532-8411

24-hour access to your retirement plan account.

Web Site

scudder.com

Click "Retirement Plans" to reallocate assets, process transactions and review your funds through our secure online account access.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more.

For More Information

(800) 543-5776

To speak with a Scudder service representative.

Written Correspondence

Scudder Retirement Services

222 South Riverside Plaza
Chicago, IL 60606-5806

Proxy Voting

A description of the fund's policies and procedures for voting proxies for portfolio securities can be found on our Web site - scudder.com (type "proxy voting" in the search field) - or on the SEC's Web site - www.sec.gov. To obtain a written copy without charge, call us toll free at (800) 543-5776.

Principal Underwriter

If you have questions, comments or complaints, contact:

Scudder Distributors, Inc.

222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148

Scudder Mid Cap Fund

Scudder Small Cap Fund

Scudder Micro Cap Fund

Class A

Nasdaq Symbol

SMCAX

SSDAX

SMFAX

CUSIP Number

81111R 882

81111R 791

81116P 634

Class B

Nasdaq Symbol

SMCBX

SSDBX

SMFBX

CUSIP Number

81111R 874

81111R 783

81116P 626

Class C

Nasdaq Symbol

SMCCX

SSDCX

SMFCX

CUSIP Number

81111R 866

81111R 775

81116P 618

Class R*

Nasdaq Symbol

SMCRX

SSDRX

N/A

CUSIP Number

81111R 726

81111R 718

N/A

Investment Class

Nasdaq Symbol

BTCAX

BTSCX

MMFSX

CUSIP Number

81111R 841

81111R 767

81116P 584

Institutional Class

Nasdaq Symbol

BTEAX

N/A

MGMCX

CUSIP Number

81111R 858

N/A

81116P 592


* Scudder Mid Cap Fund Class R shares commenced operations on July 1, 2003. Scudder Small Cap Fund Class R shares commenced operations on October 1, 2003.


Privacy Statement


This privacy statement is issued by Deutsche Investment Management Americas Inc., Deutsche Asset Management, Inc., Scudder Distributors, Inc., Scudder Investor Services, Inc., Scudder Trust Company and the Scudder Funds.

We never sell customer lists or individual client information. We consider privacy fundamental to our client relationships and adhere to the policies and practices described below to protect current and former clients' information. Internal policies are in place to protect confidentiality, while allowing client needs to be served. Only individuals who need to do so in carrying out their job responsibilities may access client information. We maintain physical, electronic and procedural safeguards that comply with federal standards to protect confidentiality. These safeguards extend to all forms of interaction with us, including the Internet.

In the normal course of business, clients give us nonpublic personal information on applications and other forms, on our websites, and through transactions with us or our affiliates. Examples of the nonpublic personal information collected are name, address, Social Security number and transaction and balance information. To be able to serve our clients, certain of this client information is shared with affiliated and nonaffiliated third party service providers such as transfer agents, custodians, and broker-dealers to assist us in processing transactions and servicing your account with us. In addition, we may disclose all of the information we collect to companies that perform marketing services on our behalf or to other financial institutions with which we have joint marketing agreements. The organizations described above that receive client information may only use it for the purpose designated by the Scudder Companies listed above.

We may also disclose nonpublic personal information about you to other parties as required or permitted by law. For example, we are required or we may provide information to government entities or regulatory bodies in response to requests for information or subpoenas, to private litigants in certain circumstances, to law enforcement authorities, or any time we believe it necessary to protect the firm.

Questions on this policy may be sent to:

Scudder Investments
Attention: Correspondence - Chicago
P.O. Box 219415
Kansas City, MO 64121-9415

August 2003


Notes



Notes


mscap_backcover0 


ITEM 2.         CODE OF ETHICS.

                        Not applicable.

ITEM 3.         AUDIT COMMITTEE FINANCIAL EXPERT.

                        Not applicable.

ITEM 4.         PRINCIPAL ACCOUNTANT FEES AND SERVICES.

                        Not applicable.

ITEM 5.         [RESERVED]

ITEM 6.         [RESERVED]

ITEM 7.         DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
                CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

                        Not applicable.

ITEM 8.         [RESERVED]

ITEM 9.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Nominating and Governance Committee evaluates and nominates Board member
candidates. Fund shareholders may also submit nominees that will be considered
by the Committee when a Board vacancy occurs. Submissions should be mailed to
the attention of the Secretary of the Fund, One South Street, Baltimore, MD
21202.

ITEM 10.        CONTROLS AND PROCEDURES.

(a) The Chief Executive and Financial  Officers  concluded that the Registrant's
Disclosure  Controls and Procedures are effective based on the evaluation of the
Disclosure  Controls  and  Procedures  as of a date within 90 days of the filing
date of this report.

Fund management has previously  identified a significant  deficiency relating to
the  overall  fund  expense  payment and accrual  process.  This matter  relates
primarily to a bill payment  processing  issue.  There was no material impact to
shareholders,  fund net asset  value,  fund  performance  or the accuracy of any
fund's  financial  statements.  Fund  management  discussed this matter with the
Registrant's Audit Committee and auditors,  instituted  additional procedures to
enhance its internal controls and will continue to develop  additional  controls
and redesign work flow to strengthen the overall control environment  associated
with the processing and recording of fund expenses.

(b)  There  have been no  changes  in the  registrant's  internal  control  over
financial  reporting that occurred  during the filing period that has materially
affected,  or is  reasonably  likely  to  materially  affect,  the  registrant's
internal controls over financial reporting.

ITEM 11.        EXHIBITS.

(a)(1)   Certification  pursuant to Rule 30a-2(a) under the  Investment  Company
         Act of 1940 (17 CFR  270.30a-2(a))  is filed  and  attached  hereto  as
         Exhibit 99.CERT.

(b)      Certification  pursuant to Rule 30a-2(b) under the  Investment  Company
         Act of 1940 (17 CFR  270.30a-2(b))  is furnished and attached hereto as
         Exhibit 99.906CERT.




Form N-CSR Item F

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:                         Scudder Mid Cap Fund


By:                                 /s/Richard T. Hale
                                    ---------------------------
                                    Richard T. Hale
                                    Chief Executive Officer

Date:                               May 28, 2004
                                    ---------------------------


Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Registrant:                          Scudder Mid Cap Fund


By:                                 /s/Richard T. Hale
                                    ---------------------------
                                    Richard T. Hale
                                    Chief Executive Officer

Date:                               May 28, 2004
                                    ---------------------------



By:                                 /s/Charles A. Rizzo
                                    ---------------------------
                                    Charles A. Rizzo
                                    Chief Financial Officer

Date:                               May 28, 2004
                                    ---------------------------





                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:                         Scudder Small Cap Fund


By:                                 /s/Richard T. Hale
                                    ---------------------------
                                    Richard T. Hale
                                    Chief Executive Officer

Date:                               May 28, 2004
                                    ---------------------------


Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Registrant:                          Scudder Small Cap Fund


By:                                 /s/Richard T. Hale
                                    ---------------------------
                                    Richard T. Hale
                                    Chief Executive Officer

Date:                               May 28, 2004
                                    ---------------------------



By:                                 /s/Charles A. Rizzo
                                    ---------------------------
                                    Charles A. Rizzo
                                    Chief Financial Officer

Date:                               May 28, 2004
                                    ---------------------------
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M,S82?7:1HU(:*J8HQ9-W$-5.WLK91O`=D33H'.E4"ND0CC[4EIQ194SQ4M`6 MB6AKW<$C/RM:2J:-4)>IY)<@_TR@I(S?Z!@W)\HT\:46A*KZ:G0XN":U M2V6MG@Q?9"7MV:E0Z9RA7-.H%NU!IHL>&XI1K EX-99.CERT 9 cert.txt CERTIFICATION Deutsche Asset Management [LOGO] A Member of the Deutsche Bank Group Chief Executive Officer Form N-CSR Certification under Sarbanes Oxley Act I, Richard T. Hale, certify that: 1. I have reviewed this report, filed on behalf of Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds, on Form N-CSR; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 28, 2004 /s/Richard T. Hale Richard T. Hale Chief Executive Officer Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds Deutsche Asset Management [LOGO] A Member of the Deutsche Bank Group Chief Financial Officer Form N-CSR Certification under Sarbanes Oxley Act I, Charles A. Rizzo, certify that: 1. I have reviewed this report, filed on behalf of Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds, on Form N-CSR; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 28, 2004 /s/Charles A. Rizzo Charles A. Rizzo Chief Financial Officer Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds EX-99.906 10 cert906.txt 906 CERTIFICATION Deutsche Asset Management [LOGO] A Member of the Deutsche Bank Group Chief Executive Officer Section 906 Certification under Sarbanes Oxley Act I, Richard T. Hale, certify that: 1. I have reviewed this report, filed on behalf of Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds, on Form N-CSR; 2. Based on my knowledge and pursuant to 18 U.S.C. ss. 1350, the periodic report on Form N-CSR (the "Report") fully complies with the requirements of ss. 13 (a) or ss. 15 (d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 28, 2004 /s/Richard T. Hale Richard T. Hale Chief Executive Officer Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds Deutsche Asset Management [LOGO] A Member of the Deutsche Bank Group Chief Financial Officer Section 906 Certification under Sarbanes Oxley Act I, Charles A. Rizzo, certify that: 1. I have reviewed this report, filed on behalf of Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds, on Form N-CSR; 2. Based on my knowledge and pursuant to 18 U.S.C. ss. 1350, the periodic report on Form N-CSR (the "Report") fully complies with the requirements of ss. 13 (a) or ss. 15 (d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 28, 2004 /s/Charles A. Rizzo Charles A. Rizzo Chief Financial Officer Scudder Lifecycle Mid Range Fund, Scudder Lifecycle Short Range Fund, Scudder Mid Cap Fund, Scudder Small Cap Fund, Scudder Preservation Plus Income Fund, a series of Scudder Advisor Funds -----END PRIVACY-ENHANCED MESSAGE-----