Scudder
High Yield Bond Fund
Annual Report
February 28, 1997
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund seeking a high level of
current income and, secondarily, capital appreciation through investment
primarily in below investment-grade domestic debt securities.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
13 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
20 Report of Independent Accountants
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
In Brief
o For the abbreviated annual period beginning with the Fund's June 28, 1996,
inception and ending February 28, 1997, Scudder High Yield Bond Fund provided a
total return of 13.23%. This compares favorably with the 10.49% return of the
Merrill Lynch High Yield Master Index.
o On February 28, 1997, the Fund posted a 9.21% 30-day SEC yield. This yield
represented a sizeable advantage over yields of U.S. Treasury bonds of
comparable maturity, though this yield advantage has narrowed since the Fund's
inception.
o High yield bond prices generally rose as continued demand from individuals
and mutual funds, as well as increased interest from institutions such as
pension funds and insurance companies, helped absorb a record supply of bonds.
o During the period, the Fund focused on issues from corporations in
industries such as oil and gas, basic manufacturing, and consumer nondurables,
and underweighted cyclical industries likely to be adversely affected by any
weakness in the economy going forward.
2 - Scudder High Yield Bond Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We welcome those who have joined us as investors in Scudder High Yield Bond
Fund, and are pleased to present the Fund's first annual report, covering the
abbreviated fiscal year which began on June 28, 1996. The Fund has experienced
healthy investor interest, with assets exceeding $73 million at the close of the
period. The Fund's 30-day SEC yield was an attractive 9.21% as of February 28.
This report covers a period that in many ways was favorable for high yield
bonds -- featuring moderate economic growth, low inflation, and strong demand
from non-traditional high yield investors as well as perennial market
participants. During the period, the Fund posted an impressive 13.23% total
return. We continue to be excited by the improving credit environment for
today's high yield issues in contrast with the more speculative 1980s, and are
encouraged that investor awareness of this market evolution seems to be on the
rise. Please read the portfolio management discussion beginning on page 6 for
additional details.
For those of you interested in other offerings from Scudder, last fall we
introduced Scudder Pathway Series, an innovative new product. Pathway Series is
a collection of four distinct portfolios -- Conservative, Growth, Balanced, and
International -- that offers flexibility, diversification, and simplicity. Each
portfolio invests in a diverse mix of Scudder funds, and each is geared toward
people with different investment goals and risk tolerances -- a team of
Scudder's investment professionals makes allocation decisions accordingly. For
more information on Pathway and other Scudder Fund products and services, please
turn to page 22 or visit Scudder's Web site at funds.scudder.com.
Thank you for your interest and investment in Scudder High Yield Bond Fund.
If you have questions about the Fund, please contact a Scudder Investor
Information representative at 1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder High Yield Bond Fund
3 - Scudder High Yield Bond Fund
<PAGE>
PERFORMANCE UPDATE as of February 28, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
2/28/97 $10,000 Cumulative Annual
- ------------------------------------------
Scudder High Yield Bond Fund
- ------------------------------------------
Life of Fund* $11,323 13.23% --
- ------------------------------------------
MERRILL LYNCH HIGH YIELD MASTER INDEX
- ------------------------------------------
Life of Fund* $11,049 10.49% --
- ------------------------------------------
*The Fund commenced operation on June 28, 1996.
Index comparisons begin June 30, 1996.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
SCUDDER HIGH YIELD BOND FUND
Year Amount
- ----------------------
6/96* $10,000
7/96 $ 9,999
8/96 $10,246
9/96 $10,452
10/96 $10,536
11/96 $10,790
12/96 $10,941
1/97 $11,115
2/97 $11,318
MERRILL LUNCH HIGH YIELD MASTER INDEX
Year Amount
- ----------------------
6/96* $10,000
7/96 $10,063
8/96 $10,164
9/96 $10,385
10/96 $10,498
11/96 $10,707
12/96 $10,793
1/97 $11,877
2/97 $11,049
The Merrill Lynch High Yield Master Index is an unmanaged index broadly
reflective of below-investment grade corporate bonds. Index returns assume
reinvested dividends and, unlike Fund returns, do not reflect any fees or
expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIOD ENDED February 28
1997*
-----------
NET ASSET VALUE... $ 12.77
INCOME DIVIDENDS.. $ .76
CAPITAL GAINS
DISTRIBUTIONS..... $ .01
FUND TOTAL
RETURN (%)........ 13.23
INDEX TOTAL
RETURN (%)........ 10.49
Performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Total return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return for the life of Fund
period would have been lower.
4 - Scudder High Yield Bond Fund
<PAGE>
PORTFOLIO SUMMARY as of February 28, 1997
- -----------------------------
ASSET ALLOCATION
- -----------------------------
Corporate Bonds 89%
Cash Equivalents 4%
Foreign Bonds --
U.S. $ Denominated 3%
Convertible Preferred
Stocks 2%
Preferred Stocks 2%
- -----------------------------
100%
=============================
In the current environment,
the Fund has sought to build
a portfolio of debt issuers
that we believe have a positive
fundamental credit outlook.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------
DIVERSIFICATION (Excluding
Cash Equivalents)
- -----------------------------
Manufacturing 18%
Consumer Discretionary 12%
Financial 11%
Consumer Staples 10%
Energy 10%
Metals & Minerals 9%
Media 6%
Communications 6%
Service Industries 5%
Other 13%
- -----------------------------
100%
=============================
The Fund's focus on credit
analysis has led to significant
positions in the manufacturing
and consumer discretionary
sectors.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------
QUALITY
- -----------------------------
Cash Equivalents 4%
BBB 1%
BB 19%
B 69%
Not Rated 7%
- -----------------------------
100%
=============================
Weighted Average Quality: B
During the Fund's abbreviated
fiscal year, we focused primarily
on select B-rated credits, which
typically carry a yeild advantage
over BB-rated bonds, and which
during this period outperformed
them.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------
EFFECTIVE MATURITY
- -----------------------------
Less than 1 year 9%
1 - 5 years 56%
5 - 8 years 22%
8 years or greater 13%
- -----------------------------
100%
- -----------------------------
Weighted average effective
maturity: 5.35 years
A range of maturities is
represented in the portfolio.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's Investment Portfolio, see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
- -------------------------------------------------------------------------------
5 - Scudder High Yield Bond Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For the abbreviated annual period beginning with the Fund's June 28, 1996,
inception and ending February 28,1997, Scudder High Yield Bond Fund provided a
total return of 13.23%. For the same eight-month period, the high yield bond
market returned 10.49% as measured by the unmanaged Merrill Lynch High Yield
Master Index. On February 28, the Fund provided a 9.21% 30-day SEC yield.
Economy Favors High Yield
A favorable environment for high yield bonds has prevailed since the Fund
started operations at the end of June 1996. High yield bonds as a group tend to
respond to many of the same factors that influence stocks, and the prices of
both asset classes have benefited from the current environment of solid economic
growth and low inflation. Economic growth has helped create a positive credit
outlook for many issuers of lower-rated debt, while at the same time a benign
rate of inflation has made real (inflation-adjusted) yields on these issues all
the more attractive. In addition, the refinancing and retirement of high yield
debt by companies in exchange for equity has shrunk supply and tended to bid up
high yield bond prices during this period.
Overall supply and demand factors have also been favorable: Though the issuance
of high yield bonds increased in 1996 and during the first two months of 1997,
supply was outstripped by demand from individuals and mutual funds, as well as
from non-traditional high yield investors such as pension funds, insurance
companies, and some "crossover" institutional investors who wished to diversify
their stock market holdings and increase the income component of their
portfolios.
As we noted in our last report, these favorable economic and market conditions
continue to be reflected in higher prices and a narrowing of the yield advantage
provided by lower-rated corporates versus U.S. Treasury issues of comparable
maturity. For example, the yield advantage provided by a typical 10-year B-rated
corporate bond fell from nearly 500 basis points (five percentage points) at the
start of 1996 to 325 basis points (three and one-quarter percentage points) by
the end of February 1997.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Rising Prices Continue to Narrow the Yield Advantage
Yield Differential of B-rated Corporates vs.
U.S. Treasury Bonds of Comparable Maturity
LINE CHART DATA:
Yield Differential
(Basis Points)
2/87 - 2/97
0 498
1 440
2 398
3 537
4 514
5 481
6 487
7 478
8 474
9 556
10 645
11 815
12 769
13 767
14 811
15 1086
16 761
17 729
18 591
19 579
20 455
21 461
22 478
23 498
24 447
25 405
26 452
27 439
28 367
29 413
30 424
31 400
32 433
33 482
34 454
35 515
36 435
37 384
38 380
39 417
40 325
Source: Lehman Brothers High Yield Research
6 - Scudder High Yield Bond Fund
<PAGE>
Benefiting from Credit Upgrades
In this environment, we have sought to build a portfolio of debt issuers that we
believe have a positive fundamental credit outlook. Our goal is not merely to
avoid defaults on securities held by the Fund, but also to identify companies
that are candidates for receiving a credit upgrade from the major rating
agencies. The upgrading of an issuer's credit rating is frequently accompanied
by an increase in the prices of its outstanding debt issues. This boost can
occur when a B-rated issue is upgraded to "BB" or when a BB-rated issue becomes
investment grade (bonds rated "BBB" and above are considered investment grade).
Since Scudder High Yield Bond Fund's inception, six fund holdings have received
credit upgrades, while only one holding has been downgraded. Additionally, in
investing the Fund's assets during its initial fiscal year, we have focused
primarily on select B-rated credits, which typically carry a yield advantage
over BB-rated bonds, and which during this period outperformed them.
Our focus in managing the Fund is on individual security selection; however, our
fundamental analysis has led us to focus the portfolio on issuers in such
industries as oil and gas, basic manufacturing, consumer nondurables, consumer
cyclicals, and finance. The portfolio is currently underweighted in several
cyclical industries such as retailing, containers, and packaging that we believe
are most vulnerable to any weakening in the economy that may occur going
forward. We have also limited our exposure to several industries facing
difficult operating environments, including gaming, media, and cable.
At the close of its fiscal year, Fund assets had grown to over $73 million and
the Fund was invested in 76 high yield corporate issues. During the Fund's first
few months it carried a relatively high cash and U.S. Treasury position as we
worked to invest the significant flows of new money coming in from investors.
The Fund's cash position was a modest 4.5% by the end of February.
Continuing Slow Growth/Low Inflation?
The outlook for the high yield corporate bond market remains positive. While
spreads versus Treasuries have moved toward the narrow end of their historical
range, they continue to be attractive for income-oriented investors. Moreover,
there is room for modest additional spread narrowing -- and increases in high
yield prices. We believe the environment of moderate economic growth and low
inflation that has been so favorable for the high yield market may continue for
some time. If it does, we anticipate additional credit upgrades within the
Fund's portfolio. But with this optimism, we must also sound a cautionary note:
Given the current level of the stock market, there is always the risk of a
correction in equities that would spark a "flight to quality" and negatively
impact high yield market sentiment. This is by no means inevitable, however,
given a continued positive backdrop of benign inflation and solid corporate cash
flow and earnings growth.
7 - Scudder High Yield Bond Fund
<PAGE>
In its first eight months of operation, Scudder High Yield Bond Fund has
provided competitive returns while assembling a portfolio based on thorough
credit analysis. We will continue to seek high income and capital appreciation
from a carefully selected portfolio of lower-rated corporate bonds. The Fund
remains suitable for investors willing to assume a measure of extra risk in
pursuit of higher income, or for investors seeking to add an additional element
of diversification to a well-rounded investment portfolio.
Sincerely,
Your Portfolio Management Team
/s/Kelly D. Babson /s/Christopher L. Gootkind
Kelly D. Babson Christopher L. Gootkind
/S/Stephen A. Wohler
Stephen A. Wohler
Scudder High Yield Bond Fund:
A Team Approach to Investing
Scudder High Yield Bond Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Kelly D. Babson, Lead Portfolio Manager, is a portfolio manager in Scudder's
Global Bond Group, with 15 years experience in fixed-income investing including
ten years of high yield portfolio management prior to joining Scudder.
Christopher L. Gootkind, Portfolio Manager, has been involved in credit research
at Scudder since 1986, and is currently head of Corporate Credit Research in
Scudder's Global Bond Group. Mr. Gootkind is a portfolio manager for Scudder
Short Term Bond Fund. Stephen A. Wohler, Portfolio Manager, is currently
Director of Scudder's Global Bond Group, overseeing all of fixed-income
investing for the firm. He is the Active Value Product Leader, as well as a
member of the portfolio management teams for Scudder Income Fund and Scudder
Zero Coupon 2000 Fund.
Your Portfolio Management Team: Kelly D. Babson, Christopher L. Gootkind and
Stephen A. Wohler.
8 - Scudder High Yield Bond Fund
<PAGE>
INVESTMENT PORTFOLIO as of February 28, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT ($) VALUE ($)
- ------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 4.5%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated
2/28/97 at 5.31%, to be repurchased at $3,347,481 on 3/3/97,
collateralized by a $3,335,000 U.S. Treasury Bond, 7.125%, ------------
2/15/23 (Cost $3,346,000) ........................................................... 3,346,000 3,346,000
------------
FOREIGN BONDS - U.S. $ DENOMINATED 3.4%
- ------------------------------------------------------------------------------------------------------------------------
Argentine Republic Global, 11.375%, 1/30/17 ........................................... 750,000 797,250
Fage Dairy Industry SA, 9%, 2/1/07 .................................................... 1,250,000 1,237,500
Sun Media Corp., 9.5%, 2/15/07 ........................................................ 500,000 508,750
- ------------------------------------------------------------------------------------------------------------------------
Foreign Bonds - U.S. $ Denominated Total (Cost $2,470,620) 2,543,500
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 89.1%
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 11.8%
COMPUSA Inc., 9.5%, 6/15/00 ........................................................... 500,000 517,500
Cinemark USA, Inc., 9.625%, 8/1/08 .................................................... 1,000,000 1,030,000
Cole National Group, 9.875%, 12/31/06 ................................................. 1,500,000 1,578,750
Pillowtex Corp., 10%, 11/15/06 ........................................................ 1,000,000 1,057,500
Premier Parks Inc., 9.75%, 1/15/07 .................................................... 1,500,000 1,552,500
Prime Hospitality Corp., 9.25%, 1/15/06 ............................................... 1,000,000 1,032,500
Red Roof Inns, Inc., Senior Note, 9.625%, 12/15/03 .................................... 350,000 353,500
Revlon Consumer Products, Senior Subordinate Note "B", 10.5%, 2/15/03 ................. 1,500,000 1,605,000
------------
8,727,250
------------
CONSUMER STAPLES 8.0%
American Safety Razor Co., Senior Note, Series B, 9.875%, 8/1/05 ...................... 500,000 530,000
Chiquita Brands International Inc., Senior Note, 10.25%, 11/1/06 ...................... 1,250,000 1,337,500
Fort Howard Corp., 9.25%, 3/15/01 ..................................................... 1,500,000 1,560,000
MBW Foods Inc., 9.875%, 2/15/07 ....................................................... 1,125,000 1,147,500
Synthetic Industries, Inc., 9.25%, 2/15/07 ............................................ 250,000 256,250
WestPoint Stevens Inc., Senior Subordinate Debenture, 9.375%, 12/15/05 ................ 1,000,000 1,055,000
------------
5,886,250
------------
HEALTH 1.4%
Genesis Health Ventures, 9.25%, 10/1/06 ............................................... 1,000,000 1,020,000
------------
COMMUNICATIONS 5.2%
Globalstar LP, 11.375%, 2/15/04 ....................................................... 850,000 879,750
MFS Communications Co., Inc., Senior Note, Step-up Coupon, 0% to 1/15/01, 8.875%
to 1/15/06 .......................................................................... 500,000 381,250
Paging Network, Inc., Senior Subordinate Note, 10.125%, 8/1/07 ........................ 1,000,000 990,000
Sprint Spectrum L.P., Senior Note, 11%, 8/15/06 ....................................... 1,000,000 1,085,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder High Yield Bond Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT ($) VALUE ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Teleport Communications Group Inc., Senior Note, 9.875%, 7/1/06 ....................... 500,000 533,750
------------
3,869,750
------------
FINANCIAL 7.0%
Aames Financial Corp., 9.125%, 11/1/03 ................................................ 1,500,000 1,500,000
Bank United Financial Corp., 10.25%, 12/31/26 ......................................... 1,000,000 1,000,000
First Nationwide Corp., 10.625%, 10/1/03 .............................................. 1,000,000 1,105,000
Imperial Credit Industries Inc., 9.875%, 1/15/07 ...................................... 1,000,000 1,020,000
Olympic Financial Ltd., Senior Note, 13%, 5/1/00 ...................................... 500,000 560,000
------------
5,185,000
------------
MEDIA 5.1%
Adelphia Communications Corp., 9.875%, 3/1/07 ......................................... 1,500,000 1,453,125
American Telecasting Inc., Step-up Coupon, 0% to 8/15/00, 14.5% to 8/15/05 ............ 1,000,000 300,000
Cablevision Systems Corp., Senior Subordinate Debenture, 10.75%, 4/1/04 ............... 250,000 257,500
Cablevision Systems Corp., Senior Subordinate Note, 9.875%, 5/15/06 ................... 750,000 776,250
K-III Communication Corp., 10.625%, 5/1/02 ............................................ 500,000 521,875
Tele-Communications, Inc., Senior Note, 7.25%, 8/1/05 ................................. 500,000 475,470
------------
3,784,220
------------
SERVICE INDUSTRIES 5.1%
Allied Waste North America, 10.25%, 12/1/06 ........................................... 1,000,000 1,070,000
Loomis Fargo & Co., 10%, 1/15/04 ...................................................... 1,000,000 1,023,750
Outsourcing Solutions, 11%, 11/1/06 ................................................... 500,000 536,250
Pierce Leahy Corp., 11.125%, 7/15/06 .................................................. 1,000,000 1,100,000
------------
3,730,000
------------
DURABLES 4.2%
Blue Bird Body Company, 10.75%, 11/15/06 .............................................. 1,500,000 1,605,000
Tracor, Inc., 8.5%, 3/1/07 ............................................................ 1,500,000 1,503,750
------------
3,108,750
------------
MANUFACTURING 17.2%
Aetna Industries, Inc., 11.875%, 10/1/06 .............................................. 1,000,000 1,087,500
CFP Holdings Inc., 11.625%, 1/15/04 ................................................... 100,000 105,875
Celestica International Inc., 10.5%, 12/31/06 ......................................... 1,000,000 1,081,250
Clark Materials Handling Corp., Senior Note, 10.75%, 11/15/06 ......................... 1,325,000 1,394,562
E & S Holdings Corp., 10.375%, 10/1/06 ................................................ 1,000,000 1,055,000
Foamex L.P., Senior Subordinate Debenture, 11.875%, 10/1/04 ........................... 675,000 725,625
GFSI Inc., 9.625%, 3/1/07 ............................................................. 420,000 427,350
ISP Holdings Inc., 9.75%, 2/15/02 ..................................................... 250,000 266,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder High Yield Bond Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT ($) VALUE ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ISP Holdings Inc., 9%, 10/15/03 ....................................................... 500,000 518,750
K&F Industries Inc., Senior Subordinate Note, Series B, 10.375%, 9/1/04 ............... 750,000 800,625
LDM Technologies Inc., 10.75%, 1/15/07 ................................................ 1,000,000 1,047,500
Outdoor Systems Inc., 9.375%, 10/15/06 ................................................ 1,000,000 1,045,000
Owens-Ill Inc., 9.95%, 10/15/04 ....................................................... 750,000 796,875
Radnor Holdings, 10%, 12/1/03 ......................................................... 1,500,000 1,552,500
Specialty Equipment Co., Senior Subordinate Note, 11.375%, 12/1/03 .................... 750,000 817,500
------------
12,722,162
------------
ENERGY 9.3%
Abraxas Petroleum Corp., 11.5%, 11/1/04 ............................................... 2,000,000 2,170,000
Cliffs Drilling Co., 10.25%, 5/15/03 .................................................. 500,000 536,875
Dawson Production Services, Inc., 9.375%, 2/1/07 ...................................... 400,000 410,000
Flores & Ruck, 9.75%, 10/1/06 ......................................................... 1,000,000 1,077,500
Kelley Oil and Gas Company, 10.375%, 10/15/06 ......................................... 500,000 531,250
MESA Operating Co., 10.625%, 7/1/06 ................................................... 500,000 553,125
Nuevo Energy Co., Senior Subordinate Note, 9.5%, 4/15/06 .............................. 1,500,000 1,582,500
------------
6,861,250
------------
METALS & MINERALS 8.2%
AK Steel Holding Corp., 9.125%, 12/15/06 .............................................. 2,000,000 2,075,000
Kaiser Aluminum and Chemical, 10.875%, 10/15/06 ....................................... 1,000,000 1,080,000
Oregon Steel Mills, Inc., 1st Mortgage, 11%, 6/15/03 .................................. 1,250,000 1,356,250
Renco Metals Inc., Senior Note, 11.5%, 7/1/03 ......................................... 1,000,000 1,052,500
WCI Steel, Inc., 10%, 12/1/04 ......................................................... 500,000 525,000
------------
6,088,750
------------
CONSTRUCTION 2.0%
Schuller International Group, Senior Note, 10.875%, 12/15/04 .......................... 250,000 277,500
Southdown, Inc., Senior Subordinate Note, 10%, 3/1/06 ................................. 250,000 270,000
Triangle Pacific, 10.5%, 8/1/03 ....................................................... 850,000 918,000
------------
1,465,500
------------
TRANSPORTATION 3.2%
Atlantic Express, Inc., 10.75%, 2/1/04 ................................................ 1,250,000 1,293,750
USAir, Inc., Series 93 A3, 10.375%, 3/1/13 ............................................ 1,000,000 1,070,000
------------
2,363,750
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder High Yield Bond Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT ($) VALUE ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 1.4%
Cal Energy Co., Inc., 9.5%, 9/15/06 ................................................... 1,000,000 1,075,000
------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $63,952,247) 65,887,632
- ------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 1.5% SHARES
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL
------------
Criimi Mae, Inc., "B", 10.875% (Cost $857,435) ........................................ 30,000 1,106,250
------------
PREFERRED STOCKS 1.5%
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL
Walden Residential Properties, Inc. (REIT) ............................................ 40,000 1,045,000
Walden Residential Properties, Inc. Warrants (expire 1/1/02) .......................... 40,000 70,000
- ------------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $1,000,000) 1,115,000
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0% (Cost $71,626,302) (a) 73,998,382
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $71,626,302. At February 28,
1997, net unrealized appreciation for all investment securities based on
tax cost was $2,372,080. This consisted of aggregate gross unrealized
appreciation for all investments in which there was an excess of market
value over tax cost of $2,788,784 and aggregate gross unrealized
depreciation for all investment securities in which there was an excess of
tax cost over market value of $416,704.
The accompanying notes are an integral part of the financial statements.
12 - Scudder High Yield Bond Fund
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 28, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $71,626,302) (Note A) .. $ 73,998,382
Cash ........................................................... 289
Receivable for investments sold ................................ 102,500
Dividends and interest receivable .............................. 1,538,937
Receivable on Fund shares sold ................................. 586,524
Due from Adviser (Note C) ...................................... 142,035
Deferred organization expense (Note A) ......................... 16,687
----------------
Total assets ................................................... 76,385,354
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .............................. 2,682,095
Payable for Fund shares redeemed ............................... 1,537
Dividends payable .............................................. 127,783
Accrued expenses (Note C) ...................................... 50,845
----------------
Total liabilities .............................................. 2,862,260
--------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $ 73,523,094
--------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investment securities ........... 2,372,080
Accumulated net realized gain .................................. 109,473
Paid-in capital ................................................ 71,041,541
--------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $ 73,523,094
--------------------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price (Note A) per
share ($73,523,094 / 5,759,335 outstanding shares of
beneficial interest, $.01 par value, unlimited number of ----------------
shares authorized) ........................................... $ 12.77
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder High Yield Bond Fund
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 28, 1996 (COMMENCEMENT
OF OPERATIONS) TO FEBRUARY 28, 1997
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------
Income:
Dividends ......................................................... $ 30,454
Interest .......................................................... 2,195,296
----------------
2,225,750
Expenses:
Management fees (Note C) .......................................... 167,590
Services to shareholders (Note C) ................................. 86,501
Custodian and accounting fees (Note C) ............................ 31,651
Trustees' fees and expenses (Note C) .............................. 20,385
Registration fees ................................................. 52,989
Auditing .......................................................... 22,950
Reports to shareholders ........................................... 16,745
Legal ............................................................. 6,861
Amortization of organization expense (Note A) ..................... 2,971
Other ............................................................. 4,370
----------------
Total expenses before reductions .................................. 413,013
Expense reductions (Note C) ....................................... (413,013)
----------------
Expenses, net ..................................................... --
-----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,225,750
-----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain from investment securities ...................... 163,385
Net unrealized appreciation during the period on investments ...... 2,372,080
-----------------------------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 2,535,465
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,761,215
-----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder High Yield Bond Fund
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 28, 1996
(COMMENCEMENT
OF OPERATIONS)
TO FEBRUARY 28,
INCREASE (DECREASE) IN NET ASSETS 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income ............................................. $ 2,225,750
Net realized gain from investment transactions .................... 163,385
Net unrealized appreciation on investment transactions during
the period ...................................................... 2,372,080
----------------
Net increase in net assets resulting from operations .............. 4,761,215
Distributions to shareholders from:
Net investment income ........................................... (2,225,750)
----------------
Net realized gains .............................................. (53,912)
----------------
Fund share transactions:
Proceeds from shares sold ......................................... 73,427,768
Net asset value of shares issued to shareholders in reinvestment
of distributions ................................................ 1,710,360
Cost of shares redeemed ........................................... (4,114,570)
Redemption fees (Note A) .......................................... 16,783
----------------
Net increase in net assets from Fund share transactions ........... 71,040,341
----------------
INCREASE IN NET ASSETS ............................................ 73,521,894
Net assets at beginning of period ................................. 1,200
----------------
NET ASSETS AT END OF PERIOD ....................................... $ 73,523,094
----------------
OTHER INFORMATION
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ......................... 100
----------------
Shares sold ....................................................... 5,951,910
Shares issued to shareholders in reinvestment of distributions .... 136,821
Shares redeemed ................................................... (329,496)
----------------
Net increase in Fund shares ....................................... 5,759,235
----------------
Shares outstanding at end of period ............................... 5,759,335
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder High Yield Bond Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE
28, 1996
(COMMENCEMENT
OF
OPERATIONS)
TO
FEBRUARY 28, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ........................................... $12.00
----------------------------------
Income from investment operations:
Net investment income........................................................... .76
Net realized and unrealized gain on investment transactions .................... .77
----------------------------------
Total from investment operations ............................................... 1.53
----------------------------------
Less distributions from:
Net investment income ........................................................ (.76)
Net realized gains from investment transactions .............................. (.01)
----------------------------------
Total distributions ............................................................ (.77)
----------------------------------
Redemption fees (Note A) ....................................................... .01
----------------------------------
Net asset value, end of period ................................................. $12.77
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (a) ........................................................... 13.23 (b)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ......................................... 74
Ratio of operating expenses, net to average daily net assets (%) ............... 0.00
Ratio of operating expenses before expense reductions, to average
daily net assets (%) ......................................................... 1.75*
Ratio of net investment income to average daily net assets (%) ................. 9.44*
Portfolio turnover rate (%) .................................................... 39.84*
</TABLE>
(a) Total return would have been lower had certain expenses not been reduced.
(b) Total return does not reflect the effect of the 1% redemption fee on shares
held less than one year.
* Annualized
** Not annualized
16 - Scudder High Yield Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder High Yield Bond Fund (the "Fund") is a diversified series of Scudder
Portfolio Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.
Portfolio securities which are traded on U.S. stock exchanges are valued at the
most recent sale price reported on the exchange on which the security is traded
most extensively. If no sale occurred, the security is then valued at the
calculated mean between the most recent bid and asked quotations. If there are
no such bid and asked quotations, the most recent bid quotation is used.
Securities quoted on the National Association of Securities Dealers Automatic
Quotation ("NASDAQ") System, for which there have been sales, are valued at the
most recent sale price reported on such system. If there are no such sales, the
value is the high or "inside" bid quotation. Securities which are not quoted on
the NASDAQ System but are traded in another over-the-counter market are valued
at the most recent sale price on such market. If no sale occurred, the security
is then valued at the calculated mean between the most recent bid and asked
quotations. If there are no such bid and asked quotations, the most recent bid
quotation shall be used.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code 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.
REDEMPTION FEES. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 1% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is accounted for as an addition to paid-in
capital.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
declared daily and distributed monthly. During any particular year 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. An additional distribution may be made to
the extent necessary to avoid the payment of a four percent federal excise tax.
17 - Scudder High Yield Bond Fund
<PAGE>
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
OTHER. Investment security transactions are accounted for on a trade-date basis.
Distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. All original issue discounts are
accreted for both tax and financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
For the period June 28, 1996 (commencement of operations) to February 28, 1997,
purchases and sales of investment securities (excluding short-term investments
and U.S. Government obligations) aggregated $74,715,079 and $6,627,001,
respectively. Purchases and sales of U.S. Government obligations aggregated
$2,508,135 and $2,534,141, respectively.
C. RELATED PARTIES
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 0.70% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. In
addition, the Adviser has agreed not to impose all or a portion of its
management fee until June 30, 1997 in order to maintain the annualized expenses
of the Fund at not more than 0.0% of average daily net assets. For the period
June 28, 1996 (commencement of operations) to February 28, 1997, the Adviser did
not impose any of its management fee, which amounted to $167,590. Further, due
to the limitations of such Agreement, the Adviser's reimbursement payable to the
Fund for the period June 28, 1996 (commencement of operations) to February 28,
1997, amounted to $142,035.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period June 28, 1996 (commencement of operations) to February 28, 1997, SSC did
not impose any of its fee, which amounted to $65,932.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the period June 28, 1996
(commencement of operations) to February 28, 1997, STC did not impose any of its
fee, which amounted to $1,488.
18 - Scudder High Yield Bond Fund
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the period June
28, 1996 (commencement of operations) to February 28, 1997, SFAC did not impose
any of its fee, which amounted to $25,168.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually, plus specified amounts for attended board and committee meetings. For
the period June 28, 1996 (commencement of operations) to February 28, 1997, the
Trustees did not impose a portion of their fee amounting to $10,800, and the fee
imposed amounted to $9,585.
19 - Scudder High Yield Bond Fund
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF SCUDDER PORTFOLIO TRUST AND THE SHAREHOLDERS OF SCUDDER HIGH
YIELD BOND FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
High Yield Bond Fund, including the investment portfolio, as of February 28,
1997, and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period June 28, 1996 (commencement
of operations) to February 28, 1997. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of February 28, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder High Yield Bond Fund as of February 28, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period June 28, 1996 (commencement of operations) to February 28, 1997, in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
April 3, 1997
20 - Scudder High Yield Bond Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dudley H. Ladd*
Trustee
David S. Lee*
Vice President and Trustee
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration,
Northeastern University, College of Business Administration
Jean C. Tempel
Trustee; General Partner, TL Ventures
Kelly D. Babson*
Vice President
Jerard K. Hartman*
Vice President
William M. Hutchinson*
Vice President
Thomas W. Joseph*
Vice President
Valerie F. Malter*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
*Scudder, Stevens & Clark, Inc.
21 - Scudder High Yield Bond Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *Not available in all
states. +++ +++A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder's insurance
agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark,
Inc., are traded on various stock exchanges.
22 - Scudder High Yield Bond Fund
<PAGE>
How to Contact Scudder
Account Service and Information
- --------------------------------------------------------------------------------
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- --------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal CounselSM -- A Managed Fund Portfolio Program
- --------------------------------------------------------------------------------
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to
- --------------------------------------------------------------------------------
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center
- --------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the Scudder
Funds Centers. Check for a Funds Center near you--they can be found in the
following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.
23 - Scudder High Yield Bond Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
