N-CSR 1 ssc.htm ANNUAL REPORT Scudder Investments 

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

                                   FORM N-CSR

Investment Company Act file number 811-43

                                INVESTMENT TRUST
                             ----------------------
               (Exact Name of Registrant as Specified in Charter)

                 Two International Place, Boston, MA 02110-4103
                 ----------------------------------------------
               (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:       9/30/04



ITEM 1.  REPORT TO STOCKHOLDERS

[Scudder Investments logo]


Scudder Small Company
Stock Fund

Annual Report to Shareholders

September 30, 2004


Contents


<Click Here> Performance Summary

<Click Here> Information About Your Fund's Expenses

<Click Here> Portfolio Management Review

<Click Here> Portfolio Summary

<Click Here> Investment Portfolio

<Click Here> Financial Statements

<Click Here> Financial Highlights

<Click Here> Notes to Financial Statements

<Click Here> Report of Independent Registered Public Accounting Firm

<Click Here> Tax Information

<Click Here> Trustees and Officers

<Click Here> Account Management Resources


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 the fund. Please read the prospectus carefully before you invest.

Investments in mutual funds involve risk. Some funds have more risk than others. This fund is subject to stock market risk. Stocks of small-sized companies involve greater risk as they often have limited product lines, markets, or financial resources and may be sensitive to erratic and abrupt market movements more so than securities of larger, more-established companies. Please read this fund's prospectus for specific information 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.


Performance Summary September 30, 2004


Classes A, B and C

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.

Returns during the 5-year and Life of Fund periods shown for Class A and C shares and for all periods shown for Class B shares reflect a contractual fee and/or expense waiver. Without this waiver, returns would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption 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 their inception on June 25, 2001 are derived from the historical performance of Class AARP shares of the Scudder Small Company Stock Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of each specific class. Any difference in expenses will affect performance.

Average Annual Total Returns (Unadjusted for Sales Charge) as of 9/30/04

Scudder Small Company Stock Fund

1-Year

3-Year

5-Year

Life of Fund*

Class A

19.45%

16.86%

7.36%

7.17%

Class B

18.47%

15.88%

6.47%

6.29%

Class C

18.51%

15.91%

6.50%

6.32%

Russell 2000 Index+
 18.77%
 13.71%
 7.41%
 7.26%

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

* The Fund commenced operations on February 1, 1997. Index returns begin on January 31, 1997.


Net Asset Value and Distribution Information

Class A

Class B

Class C

Net Asset Value:
9/30/04
 $ 24.87 $ 24.20 $ 24.21
9/30/03
 $ 21.43 $ 21.03 $ 21.04
Distribution Information:
Twelve Months Capital Gains

Short Term

$ .39 $ .39 $ .39

Long Term

$ .31 $ .31 $ .31

Class A Lipper Rankings - Small-Cap Core Funds Category as of 9/30/04

Period

Rank

Number of Funds Tracked

Percentile Ranking

1-Year

303

of

541

56

3-Year

91

of

434

21


Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable. Rankings are for Class A shares; other share classes may vary.



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

[] Scudder Small Company Stock Fund - Class A

[] Russell 2000 Index+
ssc_g10k2B0

Yearly periods ended September 30


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 initial investment of $9,425.

Comparative Results (Adjusted for Maximum Sales Charge) as of 9/30/04

Scudder Small Company Stock Fund

1-Year

3-Year

5-Year

Life of Fund*

Class A

Growth of $10,000

$11,258

$15,041

$13,444

$16,027

Average annual total return

12.58%

14.58%

6.10%

6.35%

Class B

Growth of $10,000

$11,547

$15,361

$13,582

$15,967

Average annual total return

15.47%

15.38%

6.31%

6.29%

Class C

Growth of $10,000

$11,851

$15,574

$13,699

$15,997

Average annual total return

18.51%

15.91%

6.50%

6.32%

Russell 2000 Index+
Growth of $10,000

$11,877

$14,705

$14,296

$17,111

Average annual total return

18.77%

13.71%

7.41%

7.26%


The growth of $10,000 is cumulative.

* The Fund commenced operations on February 1, 1997. Index returns begin on January 31, 1997.
+ The Russell 2000 Index is an unmanaged capitalization-weighted measure of approximately 2,000 small US stocks. 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.


Class AARP and Class S

Class AARP has been created especially for members of AARP.

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 aarp.scudder.com (Class AARP) or myScudder.com (Class S) for the product's most recent month-end performance.

Returns and rankings during the 5-year and Life of Fund periods shown reflect a contractual fee and/or expense waiver. Without this waiver, 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 redemption of fund shares. Returns and rankings may differ by share class.

Returns shown for Class S shares for the periods prior to its inception on July 17, 2000 are derived from the historical performance of Class AARP of the Scudder Small Company Stock Fund during such periods and have assumed the same expense structure during such periods. Any difference in expenses will affect performance.

Average Annual Total Returns as of 9/30/04

Scudder Small Company Stock Fund

1-Year

3-Year

5-Year

Life of Fund*

Class AARP

19.70%

17.15%

7.64%

7.46%

Class S

19.80%

17.19%

7.66%

7.47%

Russell 2000 Index+
 18.77%
 13.71%
 7.41%
 7.26%

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

* The Fund commenced operations on February 1, 1997. Index returns begin on January 31, 1997.

Net Asset Value and Distribution Information


Class AARP

Class S

Net Asset Value:
9/30/04
 $ 25.09 $ 25.10
9/30/03
 $ 21.57 $ 21.56
Distribution Information:
Twelve Months Capital Gains

Short Term

$ .39 $ .39

Long Term

$ .31 $ .31



Class AARP Lipper Rankings - Small-Cap Core Funds Category as of 9/30/04

Period

Rank

Number of Funds Tracked

Percentile Ranking

1-Year

294

of

541

55

3-Year

81

of

434

19

5-Year

226

of

309

73


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

Growth of an Assumed $10,000 Investment

[] Scudder Small Company Stock Fund - Class AARP

[] Russell 2000 Index+
ssc_g10k2A0

Yearly periods ended September 30


Comparative Results as of 9/30/04

Scudder Small Company Stock Fund

1-Year

3-Year

5-Year

Life of Fund*

Class AARP

Growth of $10,000

$11,970

$16,077

$14,449

$17,352

Average annual total return

19.70%

17.15%

7.64%

7.46%

Class S

Growth of $10,000

$11,980

$16,093

$14,463

$17,369

Average annual total return

19.80%

17.19%

7.66%

7.47%

Russell 2000 Index+
Growth of $10,000

$11,877

$14,705

$14,296

$17,111

Average annual total return

18.77%

13.71%

7.41%

7.26%


The growth of $10,000 is cumulative.

* The Fund commenced operations on February 1, 1997. Index returns begin on January 31, 1997.
+ The Russell 2000 Index is an unmanaged capitalization-weighted measure of approximately 2,000 small US stocks. 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.

Information About Your Fund's Expenses


As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following table is intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, Class B limited these expenses; had it not done so, expenses would have been higher. The table is based on an investment of $1,000 made at the beginning of the six-month period ended September 30, 2004.

The table illustrates your Fund's expenses in two ways:

• Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.

• Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.

Expenses and Value of a $1,000 Investment
for the six months ended September 30, 2004

Actual Fund Return

Class A

Class B

Class C

Class AARP

Class S

Beginning Account Value 4/1/04
 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value 9/30/04
 $ 970.30 $ 966.40 $ 966.90 $ 971.70 $ 972.10
Expenses Paid per $1,000*
 $ 7.59 $ 11.62 $ 11.48 $ 6.33 $ 5.89
Hypothetical 5% Fund Return

Class A

Class B

Class C

Class AARP

Class S

Beginning Account Value 4/1/04
 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value 9/30/04
 $ 1,017.36 $ 1,013.25 $ 1,013.40 $ 1,018.64 $ 1,019.10
Expenses Paid per $1,000*
 $ 7.77 $ 11.90 $ 11.75 $ 6.49 $ 6.03

* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios

Class A

Class B

Class C

Class AARP

Class S

Scudder Small Company Stock Fund+

1.54%

2.36%

2.33%

1.28%

1.19%


+ The expense ratio reflects a change to expenses within the most recent six-month period. Effective April 1, 2004, the Fund directly bears the cost of those expenses formerly covered under an Administrative Agreement. See Note C in Notes to Financial Statements.

For more information, please refer to the Fund's prospectuses.


Portfolio Management Review


Scudder Small Company Stock Fund: A Team Approach to Investing

Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for Scudder Small Company Stock Fund. DeIM and its predecessors have more than 80 years of experience managing mutual funds and DeIM provides a full range of investment advisory services to institutional and retail clients. DeIM is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.

Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.

DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.

Portfolio Management Team

Janet Campagna

Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.

• Joined Deutsche Asset Management in 1999 and the fund in 2003.

• Head of global and tactical asset allocation.

• Investment strategist and manager of the asset allocation strategies group for Barclays Global Investors from 1994 to 1999.

• Over 16 years of investment industry experience.

• Master's degree in Social Science from California Institute of Technology.

• Ph.D in Political Science from University of California at Irvine.

Robert Wang

Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.

• Joined Deutsche Asset Management in 1995 as portfolio manager for asset allocation after 13 years of experience of trading fixed income and derivative securities at J.P. Morgan.

• Senior portfolio manager for Multi Asset Class Quantitative Strategies: New York.

• Joined the fund in 2003.

In the following interview, Lead Portfolio Managers Janet Campagna and Robert Wang address the economy, the management team's approach and the resulting performance of Scudder Small Company Stock Fund for the one-year period October 1, 2003 through September 30, 2004.

Q: How would you characterize the market environment during the period?

A: Political and economic concerns weighed heavily on investors, resulting in pronounced market volatility. The period began with reports of robust corporate earnings and a pickup in the economy that sent stock markets higher. After having climbed briskly for several quarters, the market reversed in March of 2004. Sluggish employment growth, renewed terrorism fears and early indications of a closer-than-expected presidential campaign challenged investor sentiment and led to the first significant decline in the US stock market in more than a year.

The stock market continued to seesaw throughout the second and third quarters as good news about corporate earnings was offset by geopolitical tensions and rising energy prices.

Investors continued to favor small-capitalization stocks over their larger counterparts. The Russell 2000 Index (generally used to gauge performance of small-cap stocks) gained 18.77%, while the Standard & Poor's 500 index (generally used to measure performance of the broader large-capitalization stock market) grew 13.87%, for the one year ended September 30, 2004.1 Among small-cap stocks, value stocks (stocks that, for one reason or another, have fallen out of favor with investors, resulting in prices below what might be considered fair value given the fundamental quality and earnings potential of the issuing companies) dramatically outperformed growth stocks (stocks whose earnings are expected to grow at a rate exceeding the market average). The Russell 2000 Value Index gained 25.66% versus the Russell 2000 Growth Index, which was up 11.92% also for the period.2

1 Russell 2000 Index is an unmanaged capitalization-weighted measure of approximately 2,000 small US stocks. Index returns assume reinvestment of dividends, and unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.
Standard & Poor's 500 index is an unmanaged group of stocks generally representative of the US stock market. Index returns represent the reinvestment of all distributions. It is not possible to invest directly in an index.

Q: How did the fund perform during the period?

A: Scudder Small Company Stock Fund Class A shares rose 19.45% (unadjusted for sales charges which, if included, would have reduced returns). This fund provides other share classes. The fund outpaced the 18.77% total return of its benchmark, the Russell 2000 Index, but trailed the 20.52% average total return of its peers in the Small-Cap Core Funds category, as tracked by Lipper Inc.3 (Please see pages 3 through 7 for more performance of other share classes and more complete performance information.)


2 Russell 2000 Value Index measures the performance of small companies with lower price-to-book ratios and lower forecasted growth values than the overall market. Index returns assume reinvestment of all distributions and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.
Russell 2000 Growth Index measures the performance of small companies with a greater-than-average growth orientation as compared with the overall market. Index returns assume reinvestment of all distributions and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.
3 The Lipper Small-Cap Core Funds category is a group of mutual funds that typically invest at least 75% of their assets in small-cap companies. Small-cap core funds have more latitude in the companies in which they invest.

We are pleased overall with the fund's strong positive results during the period, especially as compared to the benchmark - our primary measure of performance. The investment team's objective is to deliver returns that consistently exceed the benchmark while mitigating risk to the extent possible. The investment team's goal is to accomplish this mainly through stock selection.

Looking analytically at performance during the period, we see that virtually all the fund's gains relative to the benchmark were due to adept stock selection. Many of the stocks in which the fund was overweight (holding a proportionately greater share of assets relative to the benchmark) outperformed the average return of their industry peer groups. Conversely, many of the stocks in which the fund was underweight (holding a proportionately smaller share of assets relative to the benchmark) did not keep pace with the average return of their industry peers. Further, not owning some of the poorest-performing names held by the benchmark index also aided fund performance. We believe this was achieved by the management team's disciplined approach to seeking small-cap companies with strong fundamentals (growth, revenues, earnings, capital structure, etc.), good quality earnings and continued above-average growth prospects relative to their industry peers.

Because of the fund's generally more conservative risk management strategy as compared to many of its competitors, we tend to use peer comparisons as a secondary measure of performance. While we are somewhat disappointed that the fund slightly underperformed its peers during the period, we are satisfied with its longer-term track record. Among its peers in the Small-Cap Core Funds category, the fund's Class A shares ranked 303 out of 541 funds for the period and 91 out of 434 funds for the three years ended September 30, 2004, according to Lipper Inc.

Q: Before we discuss specific performance attributes, will you remind us of how the team selects stock?

A: Stock selection is the cornerstone of our investment process. We have developed a proprietary model that enables us to analyze a broad universe of stocks in an effort to find those that we believe will outperform their industry peers over time. In the case of Scudder Small Company Stock Fund, our universe includes those stocks that comprise the fund's benchmark - the Russell 2000 Index, which tracks 2,000 small US stocks.

We begin by sorting these stocks into 24 clearly defined industry groups to facilitate "apples to apples" comparisons. Next we compare the stocks based on current and historical data, including valuation, a measure of how expensive a stock is; earnings growth and growth potential; and market sentiment, which is indicated by such data as volume of shares traded and fluctuations in stock price. Our model synthesizes all this information and produces a ranking of stocks with the greatest potential to outperform and, likewise, underperform their industry peers. It also creates an "optimal" portfolio, suggesting stocks to be added to or dropped from the fund as well as changes in the proportions of individual stocks held. We carefully analyze our model's suggestions, double-checking data and seeking additional information that may be pertinent. This step-by-step approach leads to a portfolio comprised of roughly 300 to 325 stocks, which is rebalanced twice each month.

By using this model, we are able to analyze a far greater number of stocks than can most traditional active portfolio managers, who rely primarily on their own talent and experience as well as the analytical skills of research professionals to assess each stock. Our approach, we believe, provides the best way to reduce risk by choosing stocks that are attractively valued in an objective, consistent and repeatable manner.

Q: Which stocks contributed most to fund performance during the period?

A: Among individual stocks, three names stand out:

• Southwestern Energy Co. is an integrated energy company primarily engaged in the exploration and production of natural gas. Rising energy prices and increased production volumes resulted in surging company revenues. Further, the company recently has worked to further increase gas and oil supplies. Analysts during the period lauded the move, driving the stock price higher.

• Range Resources Corp. is engaged in the exploration, development and acquisition of oil and gas properties, primarily in the Southwestern, Gulf Coast and Appalachian regions. The company saw its cash flows reach a nine-year high during the period. In addition, to increase their production capacity the company acquired Great Lakes Energy Partners LLC. The move was considered positive in light of rising energy costs.

• R & G Financial Corp. is a chartered financial holding company that owns and operates R-G Premier Bank of Puerto Rico and R & G Mortgage. The company operates more than 30 bank branches and the second-largest mortgage financing company in the Commonwealth of Puerto Rico. The stock made great strides based on heavy real estate demand and little property supply as well as new construction activity. Also benefiting the company was the recent growth of Puerto Rico's tourist business, as US travelers seek alternative vacation destinations closer to home. Analyst estimates for the stock continue to trend higher. During the period the company announced a 30% increase in its quarterly dividend.

Q: Which stocks detracted from performance?

A: The three stocks that were most disappointing during the period were:

• The Pep Boys - Manny, Moe & Jack distributes automotive parts and accessories and offers auto maintenance and other services. Falling auto-service revenues and economic weakness led to earnings shortfalls. We sold the stock from the portfolio in late September.

• Payless Shoesource Inc. is a retail provider of footwear for men, women and children. The company during the period was forced to close more than 700 stores in an effort to cut costs due to declining same store sales and overall profitability. The fund no longer holds this stock.

• FileNet Corporation develops, markets, sells and supports software platforms and frameworks to help organizations effectively manage their business contacts and information vital to operations. Sales revenue fell short of forecasts after a number of deals failed to close as expected. FileNet remains attractive relative to its peers, and we continue to hold the stock.

Q: Do you have any closing comments for shareholders?

A: The market's renewed focus on both quality and value during the period was particularly beneficial to the fund. We are pleased with the fund's performance and its current positioning. We will continue to utilize a balanced approach to stock selection to help us pinpoint timely market opportunities in the small-cap core category.

As always, we thank our shareholders for their continued support. We look forward to continuing to work together with them to achieve their long-term financial goals.

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.


Portfolio Summary September 30, 2004


Asset Allocation

9/30/04

9/30/03


Common Stocks
 97%
 96%
Cash Equivalents
 3%
 4%

100%
 100%

Sector Diversification (Excludes Cash Equivalents)

9/30/04

9/30/03


Financials
21%
 21%
Information Technology
17%
 21%
Consumer Discretionary
15%
 16%
Industrials
14%
 16%
Health Care
14%
 13%
Energy
7%
 4%
Materials
7%
 4%
Consumer Staples
2%
 1%
Utilities
2%
 2%
Telecommunication Services
1%
 2%

100%
 100%

Asset allocation and sector diversification are subject to change.



Ten Largest Equity Holdings at September 30, 2004 (8.3% of Portfolio)

1. Southwestern Energy Co.
Distributor of natural gas and oil

.9%

2. Energen Corp.
Producer and distributor of natural gas

.9%

3. Houston Exploration Co.
Explorer and developer of natural gas and oil properties

.9%

4. R & G Financial Corp. "B"
Operator of a holding company for banks

.8%

5. American Greetings Corp. "A"
Provider of household fixtures

.8%

6. Corn Products International, Inc.
Producer of sweeteners and starches

.8%

7. East West Bancorp. Inc.
Provider of commercial banking services

.8%

8. Denbury Resources, Inc.
Developer, operator and explorer of oil and gas properties

.8%

9. Cimarex Energy Co.
Producer of crude oil & natural gas

.8%

10. Tredegar Crop.
Manufactures plastic films and aluminum extrusions

.8%


Portfolio holdings are subject to change.

For more complete details about the Fund's investment portfolio, see page 20. 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.

Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.


Investment Portfolio as of September 30, 2004




Shares

Value ($)



Common Stocks 97.1%

Consumer Discretionary 14.6%
Auto Components 1.6%
Cooper Tire & Rubber Co.
50,400
 1,016,568
Hayes Lemmerz International, Inc.*
25,100
 255,016
Midas, Inc.*
21,400
 346,680
Stoneridge, Inc.*
22,900
 322,890
Tenneco Automotive, Inc.*
43,200
 565,920

2,507,074

Automobiles 0.5%
Monaco Coach Corp.
34,300

742,595

Hotels Restaurants & Leisure 2.9%
Alliance Gaming Corp.*
26,000
 391,560
California Pizza Kitchen, Inc.*
22,900
 500,365
CEC Entertainment, Inc.*
26,150
 961,012
CKE Restaurants, Inc.*
61,800
 682,890
Dave & Buster's, Inc.*
13,700
 260,026
Jack in the Box, Inc.*
35,400
 1,123,242
Multimedia Games, Inc.*
38,700
 599,850

4,518,945

Household Durables 1.2%
American Greetings Corp. "A"
50,200
 1,261,024
Blyth, Inc.
7,100
 219,390
WCI Communities, Inc.*
18,000
 419,400

1,899,814

Internet & Catalog Retail 1.2%
Coldwater Creek, Inc.*
31,750
 662,623
drugstore.com, Inc.*
26,100
 89,262
J. Jill Group, Inc.*
38,000
 754,300
Priceline.com, Inc.*
16,000
 354,720

1,860,905

Leisure Equipment & Products 0.3%
Arctic Cat, Inc.
5,600
 145,320
Escalade, Inc.
12,500
 173,625
RC2 Corp.*
5,300
 174,370

493,315

Media 2.0%
Journal Communications, Inc. "A"
12,600
 221,004
LodgeNet Entertainment Corp.*
7,600
 100,320
R.H. Donnelly Corp.*
21,500
 1,061,240
Salem Communications Corp. "A"*
1,800
 45,576
Scholastic Corp.*
34,200
 1,056,438
Thomas Nelson, Inc.
28,900
 564,995

3,049,573

Multiline Retail 0.2%
Stage Stores, Inc.*
10,900

372,998

Specialty Retail 3.7%
Aaron Rents, Inc.
40,775
 887,264
Aeropostale, Inc.*
35,000
 917,000
Charlotte Russe Holding, Inc.*
48,900
 561,372
Haverty Furniture Companies, Inc.
38,800
 680,552
Select Comfort Corp.*
60,700
 1,104,740
Stein Mart, Inc.*
51,600
 785,352
The Children's Place Retail Stores, Inc.*
29,900
 714,909
The Gymboree Corp.*
10,700
 154,080

5,805,269

Textiles, Apparel & Luxury Goods 1.0%
Brown Shoe Co., Inc.
5,500
 137,830
Guess?, Inc.*
38,400
 683,904
Skechers U.S.A., Inc. "A"*
44,400
 644,688

1,466,422

Consumer Staples 2.2%
Beverages 0.3%
Boston Beer Co., Inc. "A"*
7,900
 199,080
Peet's Coffee & Tea, Inc.*
9,300
 217,527

416,607

Food Products 1.4%
Corn Products International, Inc.
26,400
 1,217,040
J & J Snack Foods Corp.*
13,100
 561,728
Smart & Final, Inc.*
21,200
 355,312

2,134,080

Household Products 0.3%
Hooker Furniture Corp.
4,900
 135,387
Rayovac Corp.*
12,000
 316,200

451,587

Personal Products 0.2%
Nutraceutical International Corp.*
26,800

377,612

Energy 7.0%
Energy Equipment & Services 0.1%
Maverick Tube Corp.*
7,600

234,156

Oil & Gas 6.9%
Callon Petroleum Co.*
39,800
 504,664
Cimarex Energy Co.*
33,800
 1,180,972
Comstock Resources, Inc.*
16,200
 338,904
Denbury Resources, Inc.*
47,200
 1,198,880
Energy Partners Ltd.*
60,700
 988,196
Giant Industries, Inc.*
38,700
 940,410
Houston Exploration Co.*
22,400
 1,329,440
Magnum Hunter Resources, Inc.*
14,900
 171,946
Range Resources Corp.
26,800
 468,732
Southwestern Energy Co.*
33,800
 1,419,262
Spinnaker Exploration Co.*
7,700
 269,808
Tesoro Petroleum Corp.*
29,500
 871,135
Vintage Petroleum, Inc.
50,200
 1,007,514

10,689,863

Financials 20.1%
Banks 9.9%
AMCORE Finanical, Inc.
12,400
 351,912
Bank of the Ozarks, Inc.
19,800
 588,654
BankUnited Financial Corp. "A"*
8,300
 241,945
Cathay Bancorp, Inc.
14,000
 520,660
City Holding Co.
7,700
 253,253
Community Bank System, Inc.
7,600
 190,988
Corus Bankshares, Inc.
2,600
 112,138
Downey Financial Corp.
20,200
 1,110,192
East West Bancorp, Inc.
35,800
 1,202,522
Euronet Worldwide, Inc.*
17,700
 331,344
Fidelity Bancshares, Inc.
5,400
 200,826
First Charter Corp.
1,600
 38,672
First Financial Bankshares, Inc.
2,300
 92,368
First Midwest Bancorp, Inc.
7,000
 241,920
First Republic Bank
22,400
 1,030,400
Flagstar Bancorp., Inc.
3,200
 68,096
Greater Bay Bancorp.
14,200
 408,250
Hancock Holding Co.
9,100
 289,289
Hanmi Financial Corp.
10,100
 305,020
IBERIABANK Corp.
6,400
 369,408
NetBank, Inc.
30,000
 300,300
New Century Financial Corp.*
15,500
 933,410
OceanFirst Financial Corp.
5,000
 121,300
Old National Bancorp.
4,000
 99,360
Oriental Finance Group, Inc.
9,900
 267,894
Pacific Capital Bancorp
10,533
 311,566
PFF Bancorp., Inc.
16,200
 619,974
Prosperity Bancshares, Inc.
6,000
 160,320
Provident Bankshares Corp.
6,700
 224,785
R & G Financial Corp. "B"
32,850
 1,269,653
Republic Bancorp., Inc.
11,703
 180,226
Seacoast Banking Corp. of Florida
7,080
 151,229
Silicon Valley Bancshares*
12,300
 457,191
Southwest Bancorporation of Texas, Inc.
4,542
 91,476
Sterling Financial Corp.*
5,060
 178,314
Texas Regional Bancshares, Inc. "A"
12,773
 397,097
UMB Financial Corp.
5,000
 238,350
WesBanco, Inc.
5,700
 165,756
Westamerica Bancorporation
3,300
 181,137
Wintrust Financial Corp.
11,350
 650,128
WSFS Financial Corp.
9,400
 470,000

15,417,323

Consumer Finance 0.5%
Cash America International, Inc.
31,600

772,936

Diversified Financial Services 1.9%
Accredited Home Lenders Holding Co.*
22,400
 862,848
Education Lending Group, Inc.*
10,900
 161,102
FirstFed Financial Corp.*
23,600
 1,153,568
Metris Companies, Inc.*
34,700
 339,366
Walter Industries, Inc.
29,000
 464,580

2,981,464

Insurance 1.6%
Philadelphia Consolidated Holding Corp.*
17,200
 948,064
Stewart Information Services Corp.
5,700
 224,580
The Midland Co.
4,600
 125,810
UICI
29,600
 969,104
Zenith National Insurance Corp.
7,400
 313,094

2,580,652

Real Estate 6.2%
Alexandria Real Estate Equities, Inc, (REIT)
6,200
 407,464
Anthracite Capital, Inc. (REIT)
9,200
 102,304
Brandywine Realty Trust (REIT)
17,500
 498,400
Capital Automotive (REIT)
9,900
 309,573
Capstead Mortgage Corp. (REIT)
10,600
 131,970
CarrAmerica Realty Corp. (REIT)
17,400
 568,980
Colonial Properties Trust (REIT)
2,500
 100,550
Commercial Net Lease Realty (REIT)
10,900
 198,598
Cousins Properties, Inc. (REIT)
7,700
 264,187
Essex Property Trust, Inc. (REIT)
6,500
 467,025
First Industrial Realty Trust, Inc. (REIT)
4,400
 162,360
Glimcher Realty Trust (REIT)
5,900
 143,370
Heritage Property Investment Trust (REIT)
7,600
 221,692
Highwoods Properties, Inc. (REIT)
18,000
 442,980
Home Properties, Inc. (REIT)
12,300
 486,588
Kilroy Realty Corp. (REIT)
10,300
 391,709
Kramont Realty Trust (REIT)
12,300
 228,780
LNR Property Corp.
6,400
 396,224
Manufactured Home Communities, Inc. (REIT)
7,100
 236,004
Nationwide Health Properties, Inc. (REIT)
19,200
 398,400
Pennsylvania Real Estate Investment Trust (REIT)
5,300
 204,898
Prentiss Properties Trust (REIT)
15,500
 558,000
PS Business Parks, Inc. (REIT)
2,900
 115,565
RAIT Investment Trust (REIT)
3,100
 84,785
Realty Income Corp. (REIT)
5,500
 247,665
Redwood Trust, Inc. (REIT)
3,400
 212,228
Sovran Self Storage, Inc. (REIT)
9,200
 360,456
Summit Properties, Inc. (REIT)
16,500
 446,325
Sun Communities, Inc. (REIT)
6,800
 266,492
Tanger Factory Outlet Centers, Inc. (REIT)
5,500
 246,290
Taubman Centers, Inc. (REIT)
18,900
 488,187
Washington Real Estate Investment Trust (REIT)
9,100
 275,730

9,663,779

Health Care 13.3%
Biotechnology 1.3%
Albany Molecular Research, Inc.*
36,200
 347,520
deCODE Genetics, Inc.*
22,300
 167,919
Kos Pharmaceuticals, Inc.*
17,700
 630,297
Serologicals Corp.*
25,700
 599,581
Third Wave Technologies*
28,100
 193,328

1,938,645

Health Care Equipment & Supplies 3.2%
Align Technology, Inc.*
34,500
 527,160
American Medical Systems Holdings, Inc.*
10,400
 377,208
Haemonetics Corp.*
16,400
 538,576
Hologic, Inc.*
2,800
 53,956
Immucor, Inc.*
27,000
 668,250
Integra LifeSciences Holdings Corp.*
19,800
 635,778
Mentor Corp.
8,000
 269,440
Sola International, Inc.*
9,700
 184,785
Ventana Medical Systems, Inc.*
19,400
 978,536
Wright Medical Group, Inc.*
28,600
 718,432

4,952,121

Health Care Providers & Services 5.4%
Allscripts Heathcare Solutions, Inc.*
71,700
 645,300
Amedisys, Inc.*
29,300
 877,535
America Service Group, Inc.*
15,300
 627,912
Apria Healthcare Group, Inc.*
37,900
 1,032,775
Cerner Corp.*
17,700
 765,702
First Horizon Pharmaceutical Corp.*
22,100
 442,221
Kindred Healthcare, Inc.*
26,300
 641,720
Lifeline Systems, Inc.*
4,900
 119,658
Option Care, Inc.
39,600
 612,612
PDI, Inc.*
17,400
 469,626
RehabCare Group, Inc.*
26,600
 612,598
Res-Care, Inc.*
30,500
 361,425
SFBC International, Inc.*
10,900
 286,779
Sierra Health Services, Inc.*
4,400
 210,892
United Surgical Partners International, Inc.*
21,200
 728,220

8,434,975

Pharmaceuticals 3.4%
Alpharma, Inc. "A"
44,600
 815,734
Bentley Pharmaceuticals, Inc.*
27,000
 285,930
Bone Care International, Inc.*
20,300
 493,290
Bradley Pharmaceutical, Inc.*
12,200
 248,270
Impax Laboratories, Inc.*
32,400
 497,664
Noven Pharmaceuticals, Inc.*
26,000
 541,840
Perrigo Co.
51,500
 1,058,325
Salix Pharmaceuticals Ltd.*
27,400
 589,648
Valeant Pharmaceuticals International
34,000
 820,080

5,350,781

Industrials 14.5%
Aerospace & Defense 1.0%
Moog, Inc. "A"*
16,100
 584,430
Orbital Sciences Corp.*
49,300
 563,006
Teledyne Technologies, Inc.*
16,700
 418,168

1,565,604

Airlines 1.2%
Continental Airlines, Inc. "B"*
63,300
 539,316
ExpressJet Holdings, Inc.*
87,500
 875,875
Frontier Airlines, Inc.*
55,300
 424,704

1,839,895

Building Products 1.1%
Griffon Corp.*
31,800
 670,980
Jacuzzi Brands, Inc.*
16,600
 154,380
NCI Building Systems, Inc.*
28,600
 912,340

1,737,700

Commercial Services & Supplies 5.5%
Administaff, Inc.*
26,300
 307,710
Brady Corp. "A"
6,000
 292,620
Casella Waste Systems, Inc.*
36,900
 436,896
Coinstar, Inc.*
35,700
 831,810
Consolidated Graphics, Inc.*
20,700
 867,330
CoStar Group, Inc.*
5,900
 290,221
DiamondCluster International, Inc.*
38,900
 474,580
Imagistics International, Inc.*
20,200
 678,720
infoUSA, Inc.*
300
 2,673
NCO Group, Inc.*
20,400
 549,780
Stewart Enterprises, Inc. "A"*
105,000
 729,750
Strayer Education, Inc.
9,000
 1,035,090
TeleTech Holdings, Inc.*
53,800
 507,872
The Advisory Board Co.
9,800
 329,280
United Rentals, Inc.*
44,200
 702,338
Ventiv Health, Inc.*
29,600
 501,720

8,538,390

Construction & Engineering 0.6%
Dycom Industries, Inc.*
33,000

936,870

Electrical Equipment 0.8%
Genlyte Group, Inc.*
10,800
 695,412
Vicor Corp.
48,900
 494,379

1,189,791

Industrial Conglomerates 1.1%
ESCO Technologies, Inc.*
2,600
 176,176
Matthews International Corp. "A"
9,400
 318,472
Tredegar Corp.
64,200
 1,168,440

1,663,088

Machinery 1.7%
Actuant Corp. "A"*
3,600
 148,356
Astec Industries, Inc.*
5,000
 95,600
Flowserve Corp.*
30,500
 737,490
Kennametal, Inc.
11,600
 523,740
The Manitowoc Co., Inc.
29,600
 1,049,616
Wabash National Corp.*
5,100
 140,097

2,694,899

Marine 0.3%
Kirby Corp.*
12,200

489,830

Road & Rail 0.8%
Covenant Transport, Inc. "A"*
5,000
 96,600
Dollar Thrifty Automotive Group, Inc.*
27,600
 671,508
Old Dominion Freight Line, Inc.*
11,100
 319,791
SCS Transportation, Inc.*
5,100
 96,594

1,184,493

Trading Companies & Distributors 0.4%
Aviall, Inc.*
7,300
 148,920
Brightpoint, Inc.*
26,700
 459,240

608,160

Information Technology 16.0%
Communications Equipment 1.8%
Aspect Communications Corp.*
49,000
 486,570
C-COR.net Corp.*
58,800
 496,860
Ditech Communications Corp.*
28,500
 638,115
F5 Networks, Inc.*
13,800
 420,348
InterDigital Communication Corp.*
37,600
 613,632
ViaSat, Inc.*
8,900
 178,890

2,834,415

Computers & Peripherals 0.8%
Covansys Corp.*
10,400
 120,016
Dot Hill Systems Corp.*
83,700
 671,274
SBS Technologies, Inc.*
34,900
 425,780

1,217,070

Electronic Equipment & Instruments 3.6%
BEI Technologies, Inc. "B"
24,800
 679,520
Checkpoint Systems, Inc.*
15,900
 247,563
Cognex Corp.
27,400
 717,880
Coherenet, Inc.*
14,600
 378,724
Digimarc Corp.*
48,500
 438,440
Global Imaging Systems, Inc.*
24,200
 752,136
Littlefuse, Inc.*
26,100
 901,233
MTS Systems Corp.
29,700
 631,125
Rofin-Sinar Technologies, Inc.*
24,200
 710,996
Zygo Corp.*
10,100
 102,313

5,559,930

Internet Software & Services 0.9%
Digital Insight Corp.*
10,400
 141,752
EarthLink, Inc.*
23,700
 244,110
eSPEED, INC.*
11,400
 112,062
j2 Global Communications, Inc.*
13,700
 432,783
Openwave Systems, Inc.*
22,600
 199,332
Watchguard Technologies, Inc.*
4,500
 21,060
WebEx Communications, Inc.*
15,300
 333,846

1,484,945

IT Consulting & Services 0.6%
Intrado, Inc.*
47,700
 482,247
Websense, Inc.*
12,700
 529,209

1,011,456

Semiconductors & Semiconductor Equipment 3.8%
ADE Corp.*
25,500
 434,392
Cirrus Logic, Inc.*
83,100
 396,387
Diodes, Inc.*
15,100
 388,976
Integrated Device Technology, Inc.*
61,200
 583,236
LTX Corp.*
28,800
 155,808
Micrel, Inc.*
58,700
 611,067
Microsemi Corp.*
52,500
 740,250
Pixelworks, Inc.*
56,300
 563,563
PLX Technology, Inc.*
57,934
 417,704
RF Micro Devices, Inc.*
74,300
 471,062
Silicon Image, Inc.*
47,400
 599,136
Siliconix, Inc.*
4,300
 154,069
Standard Microsystems Corp.*
24,700
 432,497

5,948,147

Software 4.5%
ANSYS, Inc.*
14,500
 721,085
Aspen Technology, Inc.*
64,500
 450,855
E.Piphany*
17,600
 70,928
eResearchTechnology, Inc.*
34,500
 459,885
FactSet Research Systems, Inc.
6,700
 322,940
FileNet Corp.*
22,000
 384,120
Hyperion Solutions Corp.*
21,600
 734,184
MICROS Systems, Inc.*
16,700
 836,169
MRO Software, Inc.*
11,900
 119,000
Progress Software Corp.*
11,400
 226,860
Quest Software, Inc.*
13,900
 154,568
RSA Security, Inc.*
21,800
 420,740
Sonic Solutions*
36,300
 592,416
SS&C Technologies, Inc.
32,350
 631,795
Transaction Systems Architects, Inc. "A"*
21,700
 403,295
Verity, Inc.*
22,700
 292,376
Wind River Systems, Inc.*
11,600
 141,520

6,962,736

Materials 6.8%
Aerospace & Defense 0.1%
Applied Signal Technology, Inc.
3,400

108,766

Chemicals 2.4%
Cambrex Corp.
31,200
 684,840
FMC Corp.*
11,400
 553,698
Georgia Gulf Corp.
19,200
 856,128
Macdermid, Inc.
12,200
 353,312
NewMarket Corp.*
11,300
 235,944
Octel Corp.
11,300
 240,012
Terra Industries, Inc.*
83,000
 718,780
W.R. Grace & Co.*
18,800
 177,660

3,820,374

Containers & Packaging 0.9%
Longview Fibre Co.
30,700
 468,175
Silgan Holdings, Inc.
20,600
 953,780

1,421,955

Metals & Mining 2.5%
Carpenter Technology Corp.
20,300
 969,122
Century Aluminum Co.*
31,800
 881,814
Steel Dynamics, Inc.
27,700
 1,069,774
Stillwater Mining Co.*
44,900
 695,950
Titanium Metals Corp.*
9,100
 213,486

3,830,146

Paper & Forest Products 0.9%
Buckeye Technologies, Inc.*
24,000
 267,600
Pope & Talbot, Inc.
46,500
 818,400
Potlatch Corp.
6,700
 313,627

1,399,627

Telecommunication Services 0.9%
Diversified Telecommunication Services 0.6%
Golden Telecom Inc.
10,400
 296,712
Ptek Holdings, Inc.*
72,600
 622,182
Talk America Holdings, Inc.*
13,600
 71,128

990,022

Wireless Telecommunication Services 0.3%
Alamosa Holdings, Inc.*
43,200
 330,048
At Road, Inc.*
9,400
 39,668

369,716

Utilities 1.7%
Gas Utilities 0.3%
South Jersey Industries, Inc.
5,100
 243,525
Southern Union Co.*
12,300
 252,150

495,675

Multi-Utilities 1.4%
Energen Corp.
26,900
 1,386,695
Sierra Pacific Resources*
84,000
 751,800

2,138,495

Total Common Stocks (Cost $138,483,046)

151,155,686



Principal Amount ($)

Value ($)



US Government Backed 0.4%

US Treasury Bill, 1.38%**, 10/21/2004 (Cost $654,498) (b)
655,000

654,498




Shares

Value ($)



Cash Equivalents 2.6%

Scudder Cash Management QP Trust, 1.70% (c) (Cost $3,966,561)
3,966,561

3,966,561



% of Net Assets

Value ($)



Total Investment Portfolio (Cost $143,104,105) (a)
100.1

155,776,745

Other Assets and Liabilities, Net
(0.1)

(144,325)

Net Assets
100.0

155,632,420


* Non-income producing security.
** Annualized yield at the time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $143,083,229. At September 30, 2004, net unrealized appreciation for all securities based on tax cost was $12,693,516. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $18,834,052 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $6,140,536.
(b) At September 30, 2004, this security has been segregated, in whole or in part, to cover initial margin requirements for open futures contracts.
(c) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

At September 30, 2004, open futures contracts purchased were as follows:

Futures

Expiration Date

Contracts

Aggregate Face Value ($)

Value ($)

Unrealized Appreciation/
(Depreciation) ($)

Russell 2000 Index
 12/16/2004 15 4,233,447 4,305,000 71,553


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


Financial Statements


Statement of Assets and Liabilities as of September 30, 2004

Assets
Investments
Investments in securities, at value (cost $139,137,544)
$ 151,810,184
Investment in Scudder Cash Management QP Trust (cost $3,966,561)
3,966,561
Total investments in securities, at value (cost $143,104,105)
 155,776,745
Cash
 10,000
Receivable for Fund shares sold
 139,050
Dividends receivable
 96,452
Interest receivable
 6,554
Receivable for daily variation margin on open futures contracts
 18,750
Total assets
 156,047,551
Liabilities
Payable for Fund shares redeemed
 83,768
Accrued management fee
 96,769
Other accrued expenses and payables
 234,594
Total liabilities
 415,131
Net assets, at value

$ 155,632,420

Net Assets
Net unrealized appreciation (depreciation) on:
Investments
12,672,640
Futures
71,553
Accumulated net realized gain (loss)
 18,502,569
Paid-in capital
 124,385,658
Net assets, at value

$ 155,632,420


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



Statement of Assets and Liabilities as of September 30, 2004 (continued)

Net Asset Value
Class A
Net Asset Value and redemption price per share ($12,923,267 / 519,646 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)

$ 24.87

Maximum offering price per share (100 / 94.25 of $24.87)

$ 26.39

Class B
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($2,544,841 / 105,172 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)

$ 24.20

Class C
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($1,026,841 / 42,412 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)

$ 24.21

Class AARP
Net Asset Value, offering and redemption price per share ($62,599,269 / 2,494,872 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)

$ 25.09

Class S
Net Asset Value, offering and redemption price per share ($76,538,202 / 3,049,129 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)

$ 25.10


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



Statement of Operations for the year ended September 30, 2004

Investment Income
Income:
Dividends (net of foreign taxes withheld of $2,050)
 $ 1,185,476
Interest - Scudder Cash Management QP Trust
 73,478
Interest
 3,987
Total Income
 1,262,941
Expenses:
Management fee
 1,079,479
Administrative fee
 309,038
Services to shareholders
 221,951
Custodian and accounting fees
 72,867
Distribution service fees
 63,937
Auditing
 28,548
Legal
 15,935
Trustees' fees and expenses
 5,511
Reports to shareholders
 26,048
Registration fees
 8,358
Other
 2,438
Total expenses before expense reductions
 1,834,110
Expense reductions
 (1,753)
Total expenses after expense reductions
 1,832,357
Net investment income (loss)

(569,416)

Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) from:
Investments
 22,318,877
Futures
 (339,228)

21,979,649

Net unrealized appreciation (depreciation) during the period on:
Investments
 (612,103)
Futures
 215,517

(396,586)

Net gain (loss) on investment transactions

21,583,063

Net increase (decrease) in net assets resulting from operations

$ 21,013,647


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



Statement of Changes in Net Assets

Increase (Decrease) in Net Assets

Years Ended September 30,

2004

2003

Operations:
Net investment income (loss)
 $ (569,416) $ (54,871)
Net realized gain (loss) on investment transactions
 21,979,649 2,009,362
Net unrealized appreciation (depreciation) on investment transactions during the period
 (396,586) 24,154,227
Net increase (decrease) in net assets resulting from operations
 21,013,647 26,108,718
Distributions to shareholders from:
Net realized gains:
Class A
 (201,960) -
Class B
 (69,815) -
Class C
 (37,648) -
Class AARP
 (1,678,419) -
Class S
 (1,770,725) -
Fund share transactions:
Proceeds from shares sold
 72,187,693 25,992,937
Reinvestment of distributions
 3,588,425 -
Cost of shares redeemed
 (46,856,624) (23,722,161)
Net increase (decrease) in net assets from Fund share transactions
 28,919,494 2,270,776
Increase (decrease) in net assets
46,174,574 28,379,494
Net assets at beginning of period
 109,457,846 81,078,352
Net assets at end of period

$ 155,632,420

$ 109,457,846



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


Financial Highlights


Class A

Years Ended September 30,

2004

2003

2002

2001a

Selected Per Share Data
Net asset value, beginning of period

$ 21.43

$ 16.02

$ 16.04

$ 18.50

Income (loss) from investment operations:
Net investment income (loss)b
(.15) (.05) (.08) (.03)
Net realized and unrealized gain (loss) on investment transactions
4.29 5.46 .06 (2.43)

Total from investment operations

4.14 5.41 (.02) (2.46)
Less distributions from:
Net realized gains on investment transactions
(.70) - - -
Net asset value, end of period

$ 24.87

$ 21.43

$ 16.02

$ 16.04

Total Return (%)c
 19.45 33.77 (.12) (13.30)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 13 5 1 .009
Ratio of expenses (%)
 1.50 1.42 1.48 1.48*
Ratio of net investment income (loss) (%)
 (.62) (.25) (.44) (.60)*
Portfolio turnover rate (%)
 186 164 146 48
a For the period from June 25, 2001 (commencement of sales of Class A shares) to September 30, 2001.
b Based on average shares outstanding during the period.
c Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized

Class B

Years Ended September 30,

2004

2003

2002

2001a

Selected Per Share Data
Net asset value, beginning of period

$ 21.03

$ 15.85

$ 16.01

$ 18.50

Income (loss) from investment operations:
Net investment income (loss)b
(.33) (.19) (.22) (.06)
Net realized and unrealized gain (loss) on investment transactions
4.20 5.37 .06 (2.43)

Total from investment operations

3.87 5.18 (.16) (2.49)
Less distributions from:
Net realized gains on investment transactions
(.70) - - -
Net asset value, end of period

$ 24.20

$ 21.03

$ 15.85

$ 16.01

Total Return (%)c
 18.47d 32.68 (1.00) (13.46)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 3 2 .9 .02
Ratio of expenses before expense reduction (%)
 2.32 2.25 2.28 2.28*
Ratio of expenses after expense reduction (%)
 2.31 2.25 2.28 2.28*
Ratio of net investment income (loss) (%)
 (1.43) (1.08) (1.24) (1.40)*
Portfolio turnover rate (%)
 186 164 146 48
a For the period from June 25, 2001 (commencement of sales of Class B shares) to September 30, 2001.
b Based on average shares outstanding during the period.
c Total return does not reflect the effect of any sales charges.
d Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized

Class C

Years Ended September 30,

2004

2003

2002

2001a

Selected Per Share Data
Net asset value, beginning of period

$ 21.04

$ 15.85

$ 16.01

$ 18.50

Income (loss) from investment operations:
Net investment income (loss)b
(.33) (.20) (.22) (.06)
Net realized and unrealized gain (loss) on investment transactions
4.20 5.39 .06 (2.43)

Total from investment operations

3.87 5.19 (.16) (2.49)
Less distributions from:
Net realized gains on investment transactions
(.70) - - -
Net asset value, end of period

$ 24.21

$ 21.04

$ 15.85

$ 16.01

Total Return (%)c
 18.51 32.74 (1.00) (13.46)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 1 .9 .1 .002
Ratio of expenses (%)
 2.28 2.21 2.26 2.25*
Ratio of net investment income (loss) (%)
 (1.40) (1.04) (1.22) (1.37)*
Portfolio turnover rate (%)
 186 164 146 48
a For the period from June 25, 2001 (commencement of sales of Class C shares) to September 30, 2001.
b Based on average shares outstanding during the period.
c Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized

Class AARP

Years Ended September 30,

2004

2003

2002

2001

2000

Selected Per Share Data
Net asset value, beginning of period

$ 21.57

$ 16.09

$ 16.06

$ 18.32

$ 17.89

Income (loss) from investment operations:
Net investment income (loss)a
(.09) (.01) (.03) (.06) (.08)
Net realized and unrealized gain (loss) on investment transactions
4.31 5.49 .06 (2.20) .53

Total from investment operations

4.22 5.48 .03 (2.26) .45
Less distributions from:
Net investment income
- - - - (.02)
Net realized gains on investment transactions
(.70) - - - -
Total distributions
 (.70) - - - (.02)
Net asset value, end of period

$ 25.09

$ 21.57

$ 16.09

$ 16.06

$ 18.32

Total Return (%)
 19.70 34.06 .19 (12.34) 2.41b
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 63 50 37 34 48
Ratio of expenses before expense reductions (%)
 1.25 1.21 1.21 1.23 1.86c
Ratio of expenses after expense reductions (%)
 1.25 1.21 1.21 1.23 1.73c
Ratio of net investment income (loss) (%)
 (.37) (.04) (.17) (.32) (.46)
Portfolio turnover rate (%)
 186 164 146 48 48
a Based on average shares outstanding during the period.
b Total return would have been lower had certain expenses not been reduced.
c The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 1.78% and 1.65%, respectively.

Class S

Years Ended September 30,

2004

2003

2002

2001

2000a

Selected Per Share Data
Net asset value, beginning of period

$ 21.56

$ 16.08

$ 16.05

$ 18.30

$ 18.50

Income (loss) from investment operations:
Net investment income (loss)b
(.08) (.01) (.03) (.06) .00c
Net realized and unrealized gain (loss) on investment transactions
4.32 5.49 .06 (2.19) (.20)

Total from investment operations

4.24 5.48 .03 (2.25) (.20)
Less distributions from:
Net realized gains on investment transactions
(.70) - - - -
Net asset value, end of period

$ 25.10

$ 21.56

$ 16.08

$ 16.05

$ 18.30

Total Return (%)
 19.80 34.08 .19 (12.30) (1.14)**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)
 77 52 41 42 46
Ratio of expenses (%)
 1.20 1.21 1.21 1.23 1.19d*
Ratio of net investment income (loss) (%)
 (.32) (.04) (.17) (.32) (.21)*
Portfolio turnover rate (%)
 186 164 146 48 48
a For the period from July 17, 2000 (commencement of sales of Class S shares) to September 30, 2000.
b Based on average shares outstanding during the period.
c Amount is less than $.005.
d The ratio of operating expenses includes a one-time reduction in reorganization costs from fiscal 2000. The ratio without this reduction was 1.24%.
* Annualized
** Not annualized


Notes to Financial Statements


A. Significant Accounting Policies

Scudder Small Company Stock Fund (the "Fund") is a diversified series of Investment Trust (the "Trust") which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

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 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 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. Shares of Class AARP are designed for members of AARP. Class AARP and S shares are not subject to initial or contingent deferred sales charges.

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 service fees, administrative fees, services to shareholders 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.

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may enter into futures contracts as a hedge against anticipated interest rate, currency or equity market changes, and for duration management, risk management and return enhancement purposes.

Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.

Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.

Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.

Distribution of Income and Gains. Distributions of net investment income, if any, are made 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 net investment losses incurred by the Fund and certain securities sold at 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.

At September 30, 2004, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:

Undistributed ordinary income*
 $ 5,900,814
Undistributed net long-term capital gains
 $ 12,652,431
Capital loss carryforwards
 $ -
Net unrealized appreciation (depreciation) on investments
 $ 12,693,516

In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:


Years Ended September 30,

2004

2003

Distributions from ordinary income*
 $ 2,108,465 $ -
Distributions from long-term capital gains
 $ 1,650,102 $ -

* For tax purposes short-term capital gains distributions are considered ordinary income distributions.

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 valuation calculations. However, for financial reporting purposes, investment transactions are reported on trade date. 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 year ended September 30, 2004, purchases and sales of investment securities (excluding short-term investments) aggregated $286,006,267 and $261,472,854, respectively.

C. Related Parties

Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), an indirect wholly owned subsidiary of Deutsche Bank AG, 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. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 0.75% of the first $500,000,000 of the Fund's average daily net assets, 0.70% of the next $500,000,000 of such net assets and 0.65% of such net assets in excess of $1,000,000,000, computed and accrued daily and payable monthly. Accordingly, for the year ended September 30, 2004, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.75% of the Fund's average daily net assets.

For the year ended September 30, 2004, the Advisor has agreed to reimburse the Fund $1,386 for expenses.

Administrative Fee. Under the Administrative Agreement, the Advisor provided or paid others to provide substantially all of the administrative services required by the Fund (other than those provided by the Advisor under its Management Agreement with the Fund, as described above) such as transfer agent, custody, legal and audit in exchange for the payment by each class of the Fund of an administrative services fee (the "Administrative Fee") of 0.475%, 0.525%, 0.50%, 0.45% and 0.45% of the average daily net assets for Class A, B, C, AARP and S shares, respectively, computed and accrued daily and payable monthly.

The Administrative Agreement between the Advisor and the Fund terminated March 31, 2004 and effective April 1, 2004 the Fund directly bears the cost of those expenses formerly covered under the Administrative Agreement.

For the period October 1, 2003 through March 31, 2004, the Administrative Fee was as follows:

Administrative Fee

Total Aggregated

Class A
 $ 18,173
Class B
 6,486
Class C
 3,325
Class AARP
 135,943
Class S
 145,111

$ 309,038


Effective October 1, 2003 through September 30, 2005, the Advisor has agreed to contractually waive all or a portion of its management fee and/or administrative fee and reimburse or pay certain operating expenses of the Fund to the extent necessary to maintain the operating expenses of each class at 1.50% of average daily net assets (excluding certain expenses such as Rule 12b-1 distribution and/or service fees, trustees and trustee counsel fees, extraordinary expenses, taxes, brokerage, interest and organizational and offering expenses).

In addition to the contractual expense limitation described above, for the period April 1, 2004 through September 30, 2004, the Advisor has agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the Fund to the extent necessary to maintain the operating expenses at 1.34%, 1.36%, 1.36%, 1.34% and 1.34% for Class A, B, C, AARP and S, respectively, of average daily net assets (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, Rule 12b-1 distribution and/or service fees, trustees and trustees' counsel fees and organizational and offering expenses).

Service Provider Fees. Scudder Investments Service Company ("SISC"), an affiliate of the Advisor, is the transfer, dividend-paying and shareholder service agent for Class A, B, and C shares. Scudder Service Corporation ("SSC"), a subsidiary of the Advisor, is the transfer, dividend-paying and shareholder service agent for Class AARP and S shares. Pursuant to a sub-transfer agency agreement among SISC, SSC and DST Systems, Inc. ("DST"), SISC and SCC have delegated certain transfer agent and dividend-paying agent functions to DST. The costs and expenses of such delegation are borne by SISC and SSC, not by the Fund. For the period April 1, 2004 through September 30, 2004, the amounts charged to the Fund by SISC and SSC were as follows:

Services to Shareholders

Total Aggregated

Waived

Unpaid at September 30, 2004

Class A
 $ 23,487 $ - $ 12,311
Class B
 5,355 259 2,612
Class C
 2,230 - 1,081
Class AARP
 99,456 - 49,850
Class S
 77,054 - 39,523

$ 207,582

$ 259

$ 105,377


Scudder Fund Accounting Corporation ("SFAC"), an affiliate of the Advisor, is responsible for computing the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. SFAC has retained State Street Bank and Trust Company to provide certain administrative, fund accounting and record-keeping services to the Fund. For the period April 1, 2004 through September 30, 2004, the amount charged to the Fund by SFAC for accounting services aggregated $57,981, of which all is unpaid at September 30, 2004.

Distribution Service Agreement. Under the Distribution Service Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc. ("SDI"), a subsidiary of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of 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 year ended September 30, 2004, the Distribution Fee was as follows:

Distribution Fee

Total Aggregated

Unpaid at September 30, 2004

Class B
 $ 19,045 $ 1,582
Class C
 9,616 607

$ 28,661

$ 2,189


In addition, SDI provides information and administrative services ("Service Fee") to Class A, B and C 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 year ended September 30, 2004, the Service Fee was as follows:

Service Fee

Total Aggregated

Unpaid at September 30, 2004

Effective Rate

Class A
 $ 26,183 $ 2,924

.23%

Class B
 6,046 998

.24%

Class C
 3,047 407

.24%


$ 35,276

$ 4,329


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 year ended September 30, 2004 aggregated $4,011. There were no underwriting commissions paid in connection with the distribution of Class C shares for the year ended September 30, 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 year ended September 30, 2004, the CDSC for Class B and C shares aggregated $5,213 and $1,222, respectively.

Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the Advisor retainer fees plus specified amounts for attended board and committee meetings.

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.

Other Related Parties. AARP through its affiliate, AARP Services, Inc., monitors and oversees the AARP Investment Program from Scudder Investments, but does not act as an investment advisor or recommend specific mutual funds. DeIM has agreed to pay a fee to AARP and/or its affiliates in return for the use of the AARP trademark and services relating to investments by AARP members in AARP Class shares of the Fund. This fee is calculated on a daily basis as a percentage of the combined net assets of the AARP Classes of all funds managed by DeIM. The fee rates, which decrease as the aggregate net assets of the AARP Classes become larger, are as follows: 0.07% for the first $6 billion of net assets, 0.06% for the next $10 billion of such net assets and 0.05% of such net assets thereafter. These amounts are used for the general purposes of AARP and its members.

D. Expense Off-Set Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended September 30, 2004 the Fund's custodian fee was reduced by $108 for custodian credit earned.

E. 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.

F. Share Transactions

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


Year Ended
September 30, 2004

Year Ended
September 30, 2003


Shares

Dollars

Shares

Dollars

Shares sold
Class A
 745,149 $ 18,446,587 162,865 $ 3,080,060
Class B
 57,834 1,376,337 83,403 1,522,469
Class C
 62,358 1,485,393 40,771 757,973
Class AARP
 737,195 18,199,151 470,545 9,188,149
Class S
 1,320,003 32,680,225 611,109 11,444,286

$ 72,187,693

$ 25,992,937

Shares issued to shareholders in reinvestment of distributions
Class A
 8,203 $ 195,311 - $ -
Class B
 2,608 60,805 - -
Class C
 1,605 37,431 - -
Class AARP
 66,485 1,594,331 - -
Class S
 70,943 1,700,547 - -

$ 3,588,425

$ -

Shares redeemed
Class A
 (447,454) $ (10,366,672) (26,933) $ (482,686)
Class B
 (48,737) (1,152,279) (44,628) (788,586)
Class C
 (64,408) (1,516,850) (5,825) (106,572)
Class AARP
 (617,268) (15,138,968) (483,676) (8,726,706)
Class S
 (763,174) (18,681,855) (770,026) (13,617,611)

$ (46,856,624)

$ (23,722,161)

Net increase (decrease)
Class A
 305,898 $ 8,275,226 135,932 $ 2,597,374
Class B
 11,705 284,863 38,775 733,883
Class C
 (445) 5,974 34,946 651,401
Class AARP
 186,412 4,654,514 (13,131) 461,443
Class S
 627,772 15,698,917 (158,917) (2,173,325)

$ 28,919,494

$ 2,270,776


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. It is not possible to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors. Publicity about mutual fund practices arising from these industry-wide inquiries serves 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, the funds' investment advisors and their affiliates, certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each Scudder fund's investment advisor has agreed to indemnify the applicable Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. Based on currently available information, the funds' investment advisors believe 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 their ability to perform under their investment management agreements with the Scudder funds.


Report of Independent Registered Public Accounting Firm


To the Trustees of Investment Trust and the Shareholders of Scudder Small Company Stock Fund:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Scudder Small Company Stock Fund (the "Fund") at September 30, 2004, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

Boston, Massachusetts PricewaterhouseCoopers LLP
November 24, 2004


Tax Information (Unaudited)


The Fund paid distributions of $0.31 per share from net long-term capital gains during its year ended September 30, 2004, of which 100% represents 20% rate gains.

Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $14,900,000 as capital gain dividends for its year ended September 30, 2004, of which 100% represents 20% rate gains.

For corporate shareholders, 23% of the income dividends paid during the Fund's fiscal year ended September 30, 2004, qualified for the dividends received deduction.

For federal income tax purposes, the Fund designates approximately $1,400,000, or the maximum amount allowable under the law, as qualified dividend income.

Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call 1-800-SCUDDER.


Trustees and Officers


The following table presents certain information regarding the Trustees and Officers of the fund as of September 30, 2004. Each individual's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each Trustee is c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. Unless otherwise indicated, the address of each Officer is Two International Place, Boston, Massachusetts 02110. The term of office for each Trustee is until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of a successor, or until such Trustee sooner dies, resigns, retires or is removed as provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Trustee will hold office for an indeterminate period. The Trustees of the Trust may also serve in similar capacities with other funds in the fund complex.

Independent Trustees

Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1
Principal Occupation(s) During Past 5 Years and
Other Directorships Held
Number of Funds in Fund Complex Overseen
Dawn-Marie Driscoll (1946)
Chairman, 2004-present
Trustee, 1987-present
 President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley College; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: CRS Technology (technology service company); Advisory Board, Center for Business Ethics, Bentley College; Board of Governors, Investment Company Institute; former Chairman, ICI Directors Services Committee

48

Henry P. Becton, Jr. (1943)
Trustee, 1990-present
 President, WGBH Educational Foundation. Directorships: Becton Dickinson and Company (medical technology company); The A.H. Belo Company (media company); Concord Academy; Boston Museum of Science; Public Radio International. Former Directorships: American Public Television; New England Aquarium; Mass Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service

48

Keith R. Fox (1954)
Trustee, 1996-present
 Managing Partner, Exeter Capital Partners (private equity funds). Directorships: Facts on File (school and library publisher); Progressive Holding Corporation (kitchen importer and distributor); Cloverleaf Transportation Inc. (trucking); K-Media, Inc. (broadcasting); Natural History, Inc. (magazine publisher); National Association of Small Business Investment Companies (trade association)

48

Louis E. Levy (1932)
Trustee, 2002-present
 Retired. Formerly, Chairman of the Quality Control Inquiry Committee, American Institute of Certified Public Accountants (1992-1998); Partner, KPMG LLP (1958-1990). Directorships: Household International (banking and finance); ISI Family of Funds (registered investment companies; 4 funds overseen)

48

Jean Gleason Stromberg (1943)
Trustee, 1999-present
 Retired. Formerly, Consultant (1997-2001); Director, US General Accounting Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; Service Source, Inc.

48

Jean C. Tempel (1943)
Trustee, 1994-present
 Managing Partner, First Light Capital (venture capital group) (2000-present); formerly, Special Limited Partner, TL Ventures (venture capital fund) (1996-1998); General Partner, TL Ventures (1994-1996); President and Chief Operating Officer, Safeguard Scientifics, Inc. (public technology business incubator company) (1991-1993). Directorships: Sonesta International Hotels, Inc.; Aberdeen Group (technology research); United Way of Mass Bay; The Commonwealth Institute (supports women entrepreneurs). Trusteeships: Connecticut College, Vice Chair of Board, Chair, Finance Committee; Northeastern University, Vice Chair of Finance Committee, Chair, Funds and Endowment Committee

48

Carl W. Vogt (1936)
Trustee, 2002-present
 Senior Partner, Fulbright & Jaworski, L.L.P. (law firm); formerly, President (interim) of Williams College (1999-2000); President, certain funds in the Deutsche Asset Management Family of Funds (formerly, Flag Investors Family of Funds) (registered investment companies) (1999-2000). Directorships: Yellow Corporation (trucking); American Science & Engineering (x-ray detection equipment); ISI Family of Funds (registered investment companies, 4 funds overseen); National Railroad Passenger Corporation (Amtrak); formerly, Chairman and Member, National Transportation Safety Board

48


Officers2

Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1
Principal Occupation(s) During Past 5 Years and
Other Directorships Held
Julian F. Sluyters3 (1960)
President and Chief Executive Officer, 2004-present
 Managing Director, Deutsche Asset Management (since May 2004); President and Chief Executive Officer of The Germany Fund, Inc., The New Germany Fund, Inc., The Central Europe and Russia Fund, Inc., The Brazil Fund, Inc., The Korea Fund, Inc., Scudder Global High Income Fund, Inc. and Scudder New Asia Fund, Inc. (since May 2004); President and Chief Executive Officer, UBS Fund Services (2001-2003); Chief Administrative Officer (1998-2001) and Senior Vice President and Director of Mutual Fund Operations (1991-1998) UBS Global Asset Management
John Millette (1962)
Vice President and Secretary, 1999-present
 Director, Deutsche Asset Management
Kenneth Murphy (1963)
Vice President, 2002-present
 Vice President, Deutsche Asset Management (2000-present); formerly, Director, John Hancock Signature Services (1992-2000)
Paul H. Schubert3 (1963)
Chief Financial Officer, 2004-present
 Managing Director, Deutsche Asset Management (2004-present); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds at UBS Global Asset Management (1994-2004)
Charles A. Rizzo (1957)
Treasurer, 2002-present
 Managing Director, Deutsche Asset Management (April 2004-present); formerly, Director, Deutsche Asset Management (April 2000-March 2004); Vice President and Department Head, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP) (1993-1998)
Lisa Hertz3 (1970)
Assistant Secretary, 2003-present
 Assistant Vice President, Deutsche Asset Management
Daniel O. Hirsch4 (1954)
Assistant Secretary, 2002-present
 Managing Director, Deutsche Asset Management (2002-present) and Director, Deutsche Global Funds Ltd. (2002-present); formerly, Director, Deutsche Asset Management (1999-2002); Principal, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Assistant General Counsel, United States Securities and Exchange Commission (1993-1998)
Caroline Pearson (1962)
Assistant Secretary, 1997-present
 Managing Director, Deutsche Asset Management
Kevin M. Gay (1959)
Assistant Treasurer, 2004-present
 Vice President, Deutsche Asset Management
Salvatore Schiavone (1965)
Assistant Treasurer, 2003-present
 Director, Deutsche Asset Management
Kathleen Sullivan D'Eramo (1957)
Assistant Treasurer, 2003-present
 Director, Deutsche Asset Management

1 Length of time served represents the date that each Trustee was first elected to the common board of Trustees which oversees a number of investment companies, including the fund, managed by the Advisor. For the Officers of the fund, the length of time served represents the date that each Officer was first elected to serve as an Officer of any fund overseen by the aforementioned common board of Trustees.
2 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the funds.
3 Address: 345 Park Avenue, New York, New York
4 Address: One South Street, Baltimore, Maryland

The fund's Statement of Additional Information ("SAI") includes additional information about the Trustees. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: 1-800-SCUDDER.


Account Management Resources


For shareholders of Classes A, B and C

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 and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available 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 of the fund's policies and procedures without charge, upon request, 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

Class A

Class B

Class C

Nasdaq Symbol

SZCAX
 SZCBX
 SZCCX

CUSIP Number

460965-585
 460965-577
 460965-569

Fund Number

439
 639
 739



AARP Investment Program Shareholders

Scudder Class S Shareholders

Automated Information Lines

Easy-Access Line

(800) 631-4636

SAIL™

(800) 343-2890

Personalized account information, the ability to exchange or redeem shares, and information on other Scudder funds and services via touchtone telephone.

Web Sites

aarp.scudder.com

myScudder.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) 253-2277

To speak with an AARP Investment Program service representative

(800) SCUDDER

To speak with a Scudder service representative.

Written Correspondence

AARP Investment Program from Scudder Investments

PO Box 219735
Kansas City, MO 64121-9735

Scudder Investments

PO Box 219669
Kansas City, MO 64121-9669

Proxy Voting

A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web sites - aarp.scudder.com or myScudder.com (type "proxy voting" in the search field) - or on the SEC's Web site - www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call your service representative.

Principal Underwriter

If you have questions, comments or complaints, contact:

Scudder Distributors, Inc.

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

Class AARP

Class S

Nasdaq Symbol

ASCSX
 SSLCX

Fund Number

139
 339


Notes



Notes



Notes


ssc_Auto0ssc_backcover0 


ITEM 2.         CODE OF ETHICS.

As of the end of the period,  September 30, 2004, Investment Trust has adopted a
code of  ethics,  as  defined  in  Item 2 of Form  N-CSR,  that  applies  to its
Principal Executive Officer and Principal Financial Officer.

There have been no amendments to, or waivers from, a provision of the code of
ethics during the period covered by this report that would require disclosure
under Item 2.

A copy of the code of ethics is filed as an exhibit to this Form N-CSR.


ITEM 3.         AUDIT COMMITTEE FINANCIAL EXPERT.

The Funds' audit committee is comprised solely of trustees who are "independent"
(as such term has been defined by the Securities and Exchange Commission ("SEC")
in regulations implementing Section 407 of the Sarbanes-Oxley Act (the
"Regulations")). The Funds' Board of Trustees has determined that there are
several "audit committee financial experts" serving on the Funds' audit
committee. The Board has determined that Louis E. Levy, the chair of the Funds'
audit committee, qualifies as an "audit committee financial expert" (as such
term has been defined by the Regulations) based on its review of Mr. Levy's
pertinent experience and education. The SEC has stated that the designation or
identification of a person as an audit committee financial expert pursuant to
this Item 3 of Form N-CSR does not impose on such person any duties, obligations
or liability that are greater than the duties, obligations and liability imposed
on such person as a member of the audit committee and board of directors in the
absence of such designation or identification. In accordance with New York Stock
Exchange requirements, the Board believes that all members of the Funds' audit
committee are financially literate, as such qualification is interpreted by the
Board in its business judgment, and that at least one member of the audit
committee has accounting or related financial management expertise.

ITEM 4.         PRINCIPAL ACCOUNTANT FEES AND SERVICES.


                        SCUDDER SMALL COMPANY STOCK FUND
                      FORM N-CSR DISCLOSURE RE: AUDIT FEES

The following table shows the amount of fees that PricewaterhouseCoopers, LLP
("PWC"), the Fund's auditor, billed to the Fund during the Fund's last two
fiscal years. For engagements with PWC entered into on or after May 6, 2003, the
Audit Committee approved in advance all audit services and non-audit services
that PWC provided to the Fund.

The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).

               Services that the Fund's Auditor Billed to the Fund

--------------------------------------------------------------------------------
 Fiscal Year  Audit Fees                        Tax Fees        All Other
    Ended       Billed       Audit-Related     Billed to      Fees Billed
September 30,  to Fund   Fees Billed to Fund     Fund           to Fund
--------------------------------------------------------------------------------
2004            $50,000         $185            $7,000              $0
--------------------------------------------------------------------------------
2003            $44,800        $1,205           $8,700              $0
--------------------------------------------------------------------------------

The above "Tax Fees" were billed for professional services rendered for tax
compliance and tax return preparation.


           Services that the Fund's Auditor Billed to the Adviser and
                        Affiliated Fund Service Providers

The following table shows the amount of fees billed by PWC to Deutsche
Investment Management Americas, Inc. ("DeIM" or the "Adviser"), and any entity
controlling, controlled by or under common control with DeIM ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two fiscal years.


--------------------------------------------------------------------------------
                  Audit-Related                               All
                 Fees Billed to  Tax Fees Billed to    Other Fees Billed
 Fiscal Year      Adviser and       Adviser and         to Adviser and
    Ended       Affiliated Fund   Affiliated Fund      Affiliated Fund
September 30,  Service Providers Service Providers    Service Providers
--------------------------------------------------------------------------------
2004              $613,907              $0                    $0
--------------------------------------------------------------------------------
2003              $502,457            $50,000                 $0
--------------------------------------------------------------------------------

The "Audit-Related Fees" were billed for services in connection with the
assessment of internal controls, agreed-upon procedures and additional related
procedures.







                               Non-Audit Services

The following table shows the amount of fees that PWC billed during the Fund's
last two fiscal years for non-audit services. For engagements entered into on or
after May 6, 2003, the Audit Committee pre-approved all non-audit services that
PWC provided to the Adviser and any Affiliated Fund Service Provider that
related directly to the Fund's operations and financial reporting. The Audit
Committee requested and received information from PWC about any non-audit
services that PWC rendered during the Fund's last fiscal year to the Adviser and
any Affiliated Fund Service Provider. The Committee considered this information
in evaluating PWC's independence.


--------------------------------------------------------------------------------
                            Total Non-Audit Fees
                           billed to Adviser and       Total
                              Affiliated Fund        Non-Audit
                             Service Providers     Fees billed
                            (engagements related  to Adviser and
                 Total         directly to the     Affiliated Fund
                Non-Audit      operations and     Service Providers
               Fees Billed  financial reporting      (all other        Total
 Fiscal Year     to Fund        of the Fund)        engagements)    of (A), (B)
    Ended
 September 30,      (A)             (B)                   (C)         and (C)
--------------------------------------------------------------------------------
2004              $7,000             $0             $1,356,816       $1,363,816
--------------------------------------------------------------------------------
2003              $8,700          $50,000           $5,674,073       $5,732,773
--------------------------------------------------------------------------------


All other engagement fees were billed for services in connection with risk
management, tax services and process improvement/integration initiatives for
DeIM and other related entities that provide support for the operations of the
fund.

ITEM 5.         AUDIT COMMITTEE OF LISTED REGISTRANTS

                Not Applicable

ITEM 6.         SCHEDULE OF INVESTMENTS

                Not Applicable

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

                Not Applicable

ITEM 8.         PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
                INVESTMENT COMPANY AND AFFILIATED PURCHASERS

                Not Applicable.

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

The Committee on Independent Trustees/Directors selects and nominates
Independent Trustees/Directors. Fund shareholders may also submit nominees that
will be considered by the committee when a Board vacancy occurs. Submissions
should be mailed to: c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL
33910.


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.

(b) There have been no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last half-year (the
registrant's second fiscal half-year in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.

ITEM 11.        EXHIBITS.

(a)(1)   Code of Ethics  pursuant to Item 2 of Form N-CSR is filed and  attached
         hereto as EX-99.CODE ETH.

(a)(2)   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 Small Company Stock Fund


By:                                 /s/Julian Sluyters
                                    ------------------------------
                                    Julian Sluyters
                                    Chief Executive Officer

Date:                               December 6, 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 Company Stock Fund


By:                                 /s/Julian Sluyters
                                    ------------------------------
                                    Julian Sluyters
                                    Chief Executive Officer

Date:                               December 6, 2004
                                    ------------------------------



By:                                 /s/Paul Schubert
                                    ------------------------------
                                    Chief Financial Officer

Date:                               December 6, 2004
                                    ------------------------------