SCUDDER PORTFOLIO TRUST
Scudder Balanced Fund
Scudder Income Fund
Supplement to Statement of Additional Information
Dated May 1, 1996
The following sentence is inserted after the third sentence of the first
paragraph under "Investments" on page one and before the last sentence of the
last paragraph on page 2:
The Fund may purchase securities of real estate investment trusts ("REITs")
and certain mortgage-backed securities.
The following paragraph is inserted before the paragraph entitled
"Mortgage-Backed Securities and Mortgage Pass-Through Securities" on page 4:
Real Estate Investment Trusts. The Funds may invest in REITs. REITs are
sometimes informally characterized as equity REITs, mortgage REITs and
hybrid REITs. Investment in REITs may subject a Fund to risks associated
with the direct ownership of real estate, such as decreases in real estate
values, overbuilding, increased competition and other risks related to
local or general economic conditions, increases in operating costs and
property taxes, changes in zoning laws, casualty or condemnation losses,
possible environmental liabilities, regulatory limitations on rent and
fluctuations in rental income. Equity REITs generally experience these
risks directly through fee or leasehold interests, whereas mortgage REITs
generally experience these risks indirectly through mortgage interests,
unless the mortgage REIT forecloses on the underlying real estate. Changes
in interest rates may also affect the value of a Fund's investment in
REITs. For instance, during periods of declining interest rates, certain
mortgage REITs may hold mortgages that the mortgagors elect to prepay,
which prepayment may diminish the yield on securities issued by those
REITs.
Certain REITs have relatively small market capitalization, which may
tend to increase the volatility of the market price of their securities.
Furthermore, REITs are dependent upon specialized management skills, have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. REITs are also
subject to heavy cash flow dependency, defaults by borrowers and the
possibility of failing to qualify for tax-free pass-through of income under
the Internal Revenue Code of 1986, as amended and to maintain exemption
from the registration requirements of the 1940 Act. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his or her
proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REITs. In addition, REITs depend generally on their
ability to generate cash flow to make distributions to shareholders.
March 31, 1997
