Scudder
Income Fund
Semiannual Report
June 30, 1997
Pure No-Load(TM) Funds
Seeks a high level of income consistent with the prudent investment of capital.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
8 Investment Portfolio
11 Financial Statements
14 Financial Highlights
15 Notes to Financial Statements
20 Officers and Trustees
21 Investment Products and Services
22 Scudder Solutions
In Brief
o For the six-month period ended June 30, 1997, Scudder Income Fund returned
2.86%, resulting in a ranking in the top 37% (45th) of 123 Corporate Debt
A-Rated funds tracked by Lipper Analytical Services, Inc.
o With an uncertain outlook for interest rates, your Fund's management team
maintained a neutral duration distribution with an emphasis on short- and
long-term maturities, known as a barbelled approach.
o Mortgage and high yield sectors were strong performers during this period,
and the Fund benefited from significant exposure in both areas.
2 - SCUDDER INCOME FUND
<PAGE>
Letter From the Fund's President
Dear Shareholders,
Bonds traded in a narrow range as interest rates rose and then declined
modestly over the semiannual reporting period. Through June 30, 1997, your Fund
surpassed the average return of 123 corporate debt A-rated bond funds for not
only the six-month period, but also the 1-, 3-, 5-, and 10-year periods
according to Lipper Analytical Services, Inc. We are pleased with this
performance, which reflects your Fund's careful portfolio management and
consistent, long-term approach. A complete discussion of your Fund's activities
begins on page 6.
While the U.S. stock market has garnered a lot of attention for its
outstanding performance over the last few years, we think investors are
beginning to consider adding to their fixed income holdings in view of the ever
rising valuations for many stocks. In this environment, fixed income securities
appear to be an attractively valued asset class. Further, bonds are an important
component to an investment portfolio, providing income, relative price
stability, and diversification. Given the strong performance of the U.S. stock
market, we encourage you to review your portfolio holdings to ensure that your
asset allocations between bonds and stocks is in keeping with your investment
objectives. By reviewing your holdings now, you will be best positioned to meet
your long-term goals.
To keep you abreast of developments with the Scudder Family of Funds, we
would like to take this opportunity to tell you about a newcomer to Scudder's
equity mutual fund lineup: Scudder International Growth and Income Fund. The
Fund employs a yield-oriented approach to international investing and seeks
long-term growth of capital plus current income. Investors who desire
international exposure but who wish to take a conservative approach may
appreciate the Fund's emphasis on the dividend-paying stocks of well-established
companies listed on foreign exchanges. For a complete listing of Scudder's
mutual fund offerings, see page 21.
Thank you for your continued investment in Scudder Income Fund. If you have
any questions about your investment, please call Scudder Investor Relations at
1-800-225-2470 or visit our Internet Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Income Fund
3 - SCUDDER INCOME FUND
<PAGE>
PERFORMANCE UPDATE as of June 30, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/97 $10,000 Cumulative Annual
- ---------------------------------------
SCUDDER INCOME FUND
- ---------------------------------------
1 Year $ 10,803 8.03% 8.03%
5 Year $ 14,212 42.12% 7.28%
10 Year $ 22,922 129.22% 8.65%
- ---------------------------------------
LB AGGREGATE BOND INDEX
- ---------------------------------------
1 Year $ 10,816 8.16% 8.16%
5 Year $ 14,102 41.02% 7.11%
10 Year $ 23,276 132.76% 8.81%
- -----------------------------------------------------------------
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:
Yearly periods ended June 30
SCUDDER INCOME FUND
Year Amount
- ----------------------
'87 $10,000
'88 $10,618
'89 $11,953
'90 $12,776
'91 $14,094
'92 $16,128
'93 $18,279
'94 $17,948
'95 $20,139
'96 $21,219
'97 $22,922
LB AGGREGATE BOND INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $10,804
'89 $12,124
'90 $13,074
'91 $14,471
'92 $16,505
'93 $18,451
'94 $18,208
'95 $20,494
'96 $21,520
'97 $23,276
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is a market value-
weighted measure of treasury issues, agency issues, corporate bond issues and
mortgage securities. Index returns assume reinvestment of 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 periods Ended June 30
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
NET ASSET VALUE... $ 12.71 $ 13.13 $ 12.95 $ 13.14 $ 13.79 $ 14.27 $ 12.73 $ 13.43 $ 13.19 $ 13.31
INCOME DIVIDENDS.. $ .82 $ 1.08 $ 1.04 $ 1.02 $ .91 $ .91 $ .84 $ .78 $ .86 $ .80
CAPITAL GAINS AND
PAID-IN CAPITAL
DISTRIBUTIONS..... $ - $ - $ - $ .06 $ .27 $ .35 $ .51 $ - $ .09 $ .10
FUND TOTAL
RETURN (%)........ 6.18 12.32 7.13 10.32 14.43 13.33 -1.81 12.21 5.36 8.03
INDEX TOTAL
RETURN (%)........ 8.04 12.21 7.84 10.69 14.05 11.79 -1.31 12.55 5.02 8.16
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased.
4 - SCUDDER INCOME FUND
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Corporate Bonds 40%
U.S. Gov't Agency Pass-thrus 17%
Commercial Paper 12%
U.S. Treasury Obligations 11%
Asset Backed Securities 10%
Repurchase Agreements 7%
Foreign Bonds -
U.S. $ Denominated 3%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
High yield corporate bonds were
the best performing sector during
the period and our new position in
this area was a significant
contributor to Fund performance.
- ---------------------------------------------------------------------------
QUALITY
- ---------------------------------------------------------------------------
AAA* 54%
A 11%
BBB 17%
BB 8%
B 9%
NR 1%
- --------------------------------------
100%
- --------------------------------------
Weighted average quality: AA
*Category includes cash equivalents
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The portfolio's high quality
emphasis was maintained
throughout the period.
- ---------------------------------------------------------------------------
EFFECTIVE MATURITY
- ---------------------------------------------------------------------------
Less than 1 year 24%
1 - 5 years 18%
5 - 8 years 8%
8 - 15 years 27%
Greater than 15 years 23%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 9.85 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Management maintained a
neutral portfolio duration of 4.6
years
For more complete details about the Fund's investment portfolio,
see page 8. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - SCUDDER INCOME FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
A combination of solid economic growth with low inflation provided an overall
favorable environment for bond investors for the semiannual period ended June
30, 1997. In this environment, Scudder Income Fund provided a total return of
2.86% for the six months. This performance was in keeping with the 3.09% return
of the unmanaged Lehman Brothers Aggregate Bond Index, a widely followed,
broadly diversified index. The Fund's total return represents an increase in its
net asset value from $13.15 on December 31, 1996 to $13.31 on June 30, 1997, as
well as per-share income distributions totaling $.20, and capital gain
distributions of $.01 per share.
Market Overview
Bonds provided positive total returns as they traded in a narrow range over the
six-month period. The path of the benchmark 30-year U.S. Treasury bond yield
took the appearance of a mountain top, with yields rising modestly during the
first three months of 1997 and retreating during the second three months. The
30-year Treasury started 1997 with a yield of 6.64%, rose to 7.10% on March 31,
and ended the period at 6.78% (see chart).
In the first quarter of 1997, reports of unusually strong economic growth
spurred increased concerns about accelerating inflation. On March 25 the Federal
Reserve (the Fed) raised a key rate -- the Fed funds rate -- by a quarter of a
point from 5.25% to 5.50%. In response, bond yields rose and prices declined
slightly for the first quarter. Yields reversed in the second quarter, as
several inflation measures showed no acceleration and economic growth appeared
to be moderating from its torrid pace in the first quarter. In addition, the Fed
left short-term rates unchanged at two subsequent meetings, causing yields to
retreat and bond prices to rally.
The level of economic growth is an important influence on the bond markets. Its
effect on bonds is counterintuitive: too strong growth can spark higher
inflation rates, causing yields to rise and prices to decline; too slow growth
can raise the prospect of a recession, causing yields to decline and bond prices
to rise. The current environment is unusual in that we have very strong growth,
but record low inflation. Much of this is attributed to global competition, an
inability of companies to raise prices, productivity increases from technology,
and cost savings from corporate restructurings.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Attractive Real Yields
June 1991 through June 1997
LINE CHART DATA:
--------------------------------------------------------
Consumer Price Index 30-Year U.S. Treasury
Year-Over-Year Bond Yield
--------------------------------------------------------
6/91 4.7 8.406
------------------------------------------------------
3.4 7.809
------------------------------------------------------
3.1 7.401
------------------------------------------------------
3.2 7.958
------------------------------------------------------
3.1 7.780
------------------------------------------------------
3 7.381
------------------------------------------------------
2.9 7.396
------------------------------------------------------
3.1 6.926
------------------------------------------------------
3 6.672
------------------------------------------------------
2.7 6.025
------------------------------------------------------
2.7 6.348
------------------------------------------------------
2.5 7.092
------------------------------------------------------
2.5 7.608
------------------------------------------------------
3 7.817
------------------------------------------------------
2.7 7.881
------------------------------------------------------
2.9 7.431
------------------------------------------------------
3 6.617
------------------------------------------------------
2.5 6.501
------------------------------------------------------
2.5 5.948
------------------------------------------------------
2.8 6.667
------------------------------------------------------
2.8 6.871
------------------------------------------------------
3 6.923
------------------------------------------------------
3.3 6.641
------------------------------------------------------
2.8 7.095
------------------------------------------------------ (At the June 1997 data
6/97 2.3 6.785 points, pointers just
------------------------------------------------------ outside the chart
Real yields -- the current yield minus the inflation indicated a 4.5% net
rate -- are near historical highs. With an average yield resulting from
yield on 30-year Treasuries of 6.785% as of June 30 the difference between
and inflation running at 2.3% for the month of June, the two 6/97 data
the net or real yield to investors is about 4.5% -- points.)
significantly above the historical norm of about 2%.
Thus, investors are receiving relatively attractive
income net of inflation, even though quoted yields are
low.
6 - SCUDDER INCOME FUND
<PAGE>
Portfolio Strategy
During the six-month period we managed the portfolio actively, seeking to
capitalize on shifts in relative valuation among the Treasury, mortgage, and
corporate bond sectors. While portfolio's duration was essentially neutral in
this environment, we focused on sector allocations. The portfolio's duration was
4.6 years as of the end of the period, nearly identical to the 4.5 year duration
for the unmanaged Lehman Brothers Aggregate Bond Index. During the first
quarter, we de-emphasized mortgage securities, which typically have intermediate
term (3-5 year) average effective maturities, and increased our "barbelled"
maturity strategy by adding to holdings at the short and long ends of the
maturity spectrum. The barbelled strategy helped performance during the first
quarter, but held back performance somewhat during the second quarter.
Mortgage securities and high yield bonds provided very good performance for most
of the period. However, mortgages became "rich" in our opinion as many investors
flocked to them for their attractive yields. We reduced our holdings of
mortgages from 26% to 17% of assets over the six months and added to our
position in short-term securities and holdings of high yield bonds.
The investment grade corporate bond sector provided returns that were in line
with the performance of the broad market indices for the six-month period. We
reduced our holdings in this sector in favor of selected high yield corporate
bonds -- the best performing U.S. bond market sector. High yield bonds benefited
from the strong economy and solid demand from yield-seeking investors. These
bonds typically offer investors some of the highest yields, reduced exposure to
changes in interest rates, and diversification.
The high yield bond market has matured substantially over the last 10 years, and
has become an established, liquid market. We concentrated on adding legitimate,
established companies with viable operations that we believe have the potential
for credit quality upgrades. We carefully evaluate the quality of each bond,
giving consideration to the issuer's financial condition and ability to make
interest payments. At the end of the period, the Fund held 17% of assets in the
high yield sector and maintained its high quality AA average quality rating for
the portfolio.
Outlook
As we look forward to the remainder of 1997, we see few visible signs of concern
for bond investors. Leading economic indicators supply little evidence to
suggest that inflation will accelerate anytime soon -- the chief concern for
bond investors. While we expect market volatility may continue in the near term,
our long-term outlook is for slower growth with benign inflation. In this
environment, we believe your Fund should continue to provide attractive income,
relative stability, and diversification -- important components of a
well-balanced investment portfolio.
Sincerely,
Your Portfolio Management Team
/s/William M. Hutchinson /s/Stephen A. Wohler
William M. Hutchinson Stephen A. Wohler
7 - SCUDDER INCOME FUND
<PAGE>
Investment Portfolio as of June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 7.2%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/97 at 5.9%,
to be repurchased at $42,897,029 on 7/1/97, collateralized by a $39,902,000 ------------
U.S. Treasury Bond, 7.875%, 8/15/01 (Cost $42,890,000) ................................ 42,890,000 42,890,000
------------
Commercial Paper 12.1%
- ------------------------------------------------------------------------------------------------------------------------------
Dresdner US Finance Inc. Discount Note, 7/2/97 .......................................... 25,000,000 24,996,139
PacifiCorp Discount Note, 7/9/97 ........................................................ 20,000,000 19,975,467
Ford Motor Credit Co. Discount Note, 7/9/97 ............................................. 25,000,000 24,969,333
Pierce Leahy Corp, 9.125%, 7/03/97 ...................................................... 2,000,000 2,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $71,940,939) 71,940,939
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Treasury Obligations 10.3%
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Treasury Bill, 5.5%, 9/30/97 ...................................................... 23,000,000 23,003,680
U. S. Treasury Note, 6.875%, 7/31/99 .................................................... 13,000,000 13,188,890
U. S. Treasury Note, 5.875%, 11/15/99 ................................................... 22,000,000 21,858,980
U.S. Treasury Separate Trading Registered Interest and Principal,
Principal Only, 11/15/18 .............................................................. 13,000,000 2,972,190
- ------------------------------------------------------------------------------------------------------------------------------
Total U. S. Treasury Obligations (Cost $61,796,545) 61,023,740
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Government Agency Pass-thrus 16.9%
- ------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 8%, 12/1/09 ...................................... 15,349,255 15,786,248
Federal National Mortgage Association, 7%, with various maturities to 8/1/26 ............ 61,423,757 60,272,061
Government National Mortgage Association Pass-thru, 10%, 2/15/25 ........................ 13,166,766 14,471,988
Government National Mortgage Association Pass-thru, 8.5%, 10/15/25 ...................... 9,783,742 10,171,961
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Pass-thrus (Cost $99,820,017) 100,702,258
- ------------------------------------------------------------------------------------------------------------------------------
Foreign Bonds - U. S.$ Denominated 3.1%
- ------------------------------------------------------------------------------------------------------------------------------
Fage Dairy Industry SA, 9%, 2/1/07 ...................................................... 14,000,000 13,335,000
State Development Institute of Hungary, 10.5%, 8/31/00 .................................. 4,425,000 4,833,914
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Bonds - U. S.$ Denominated (Cost $18,421,400) 18,168,914
- ------------------------------------------------------------------------------------------------------------------------------
Asset Backed 9.5%
- ------------------------------------------------------------------------------------------------------------------------------
Automobile Receivables 1.7%
Premier Auto Trust Asset Backed Certificate Series 1996-3 A4, 6.75%, 11/6/00 ............ 10,000,000 10,078,100
-----------
Credit Card Receivables 4.0%
Advanta Corp. Series 1997-1 A4, 7.65%, 7/25/07 .......................................... 8,000,000 8,107,500
Sears Credit Account Master Trust, Series 1995-4, 6.25%, 1/15/03 ........................ 15,500,000 15,528,985
-----------
23,636,485
-----------
Home Equity Loans 0.1%
Fleet Financial Home Equity Trust Series 1991-2A, 6.7%, 10/15/06 ........................ 422,201 423,982
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - SCUDDER INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Manufactured Housing Receivables 3.7%
Green Tree Financial Corp. Series 1995-1 B2, 9.2%, 6/15/25 .............................. 8,071,000 8,735,912
Green Tree Financial Corp. Series 1997-1 B2, 7.76%, 3/15/28 ............................. 4,250,000 4,185,918
Merrill Lynch Mortgage Investors Inc., "B", Series 1991-D, 9.85%, 7/15/11 ............... 8,500,000 8,970,135
-----------
21,891,965
- ------------------------------------------------------------------------------------------------------------------------------
Total Asset Backed (Cost $54,737,865) 56,030,532
- ------------------------------------------------------------------------------------------------------------------------------
Corporate Bonds 40.3%
- ------------------------------------------------------------------------------------------------------------------------------
Communications 0.3%
L-3 Communications Corp., 10.375%, 5/1/07 ............................................... 1,900,000 2,014,000
-----------
Consumer Discretionary 0.2%
Specialty Retail Co., 8.5%, 7/15/05 ..................................................... 800,000 798,000
Specialty Retail Co., 9%, 7/15/07 ....................................................... 250,000 248,750
-----------
1,046,750
-----------
Consumer Staples 0.8%
Borden Inc., 7.875%, 2/15/23 ............................................................ 5,000,000 4,541,450
-----------
Durables 5.6%
Ford Motor Credit Co., 6.25%, 2/26/98 ................................................... 5,000,000 5,007,050
Northrop Grumman Corp., 7.875%, 3/1/26 .................................................. 15,000,000 15,190,050
Tracor, Inc., 8.5%, 3/1/07 .............................................................. 13,000,000 13,000,000
-----------
33,197,100
-----------
Energy 3.3%
Barrett Resources Corp., 7.55%, 2/1/07 .................................................. 5,500,000 5,711,406
Chesapeake Energy Corp. "B", 8.5%, 3/15/12 .............................................. 4,500,000 4,245,750
Lomak Petroleum, Inc., 8.75%, 1/15/07 ................................................... 10,000,000 9,850,000
-----------
19,807,156
-----------
Financial 14.7%
American Health Properties, Inc. (REIT), 7.5%, 1/15/07 .................................. 3,000,000 3,004,620
Bank United Financial Corp., 10.25%, 12/31/26 ........................................... 4,500,000 4,455,000
ERP Operating L.P. Note, 7.57%, 8/15/26 ................................................. 2,200,000 2,264,350
First Union Capital II, 7.85%, 1/1/27 ................................................... 15,000,000 14,659,050
Ford Motor Credit Co. Global Note, 5.625%, 12/15/98 ..................................... 10,000,000 9,915,400
Highwoods/Forsyth L.P., 7%, 12/1/06 ..................................................... 12,000,000 11,633,160
People's Heritage Bank, 9.06%, 2/1/27 ................................................... 6,750,000 6,977,813
Security Capital Industrial Trust, 7.81%, 2/1/15 ........................................ 4,500,000 4,676,906
Spieker Properties, Inc., 7.875%, 12/1/16 ............................................... 5,000,000 4,840,150
Susa Partnership L.P., 8.2%, 6/1/17 ..................................................... 10,000,000 10,256,100
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - SCUDDER INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
US West Capital Funding Inc., 7.9%, 1/1/27 .............................................. 15,000,000 15,153,000
-----------
87,835,549
-----------
Health 0.5%
Tenet Healthcare Corp., 8.625%, 1/15/07 ................................................. 3,000,000 3,060,000
-----------
Manufacturing 0.7%
Synthetic Industries, Inc., 9.25%, 2/15/07 .............................................. 4,000,000 4,060,000
-----------
Media 6.5%
Outdoor Systems, Inc., 8.875%, 6/15/07 .................................................. 5,000,000 4,875,000
Tele-Communications, Inc., 8%, 8/1/05 ................................................... 11,000,000 11,175,780
Time Warner Inc., 9.125%, 1/15/13 ....................................................... 12,000,000 13,268,640
Viacom Inc., 6.75%, 1/15/03 ............................................................. 10,000,000 9,616,000
-----------
38,935,420
-----------
Technology 4.6%
Amphenol Corp., 9.875%, 5/15/07 ......................................................... 3,000,000 3,094,500
Fairchild Semiconductor Inc., 10.125%, 3/15/07 .......................................... 4,700,000 4,958,500
International Business Machines Corp., 7%, 10/30/45 ..................................... 15,000,000 13,935,150
Loral Corp., 8.375%, 6/15/24 ............................................................ 5,000,000 5,445,650
-----------
27,433,800
-----------
Transportation 1.9%
Atlantic Express, Inc., 10.75%, 2/1/04 .................................................. 5,000,000 5,200,000
Norfolk Southern Corp., 7.8%, 5/15/27 ................................................... 6,000,000 6,162,600
-----------
11,362,600
-----------
Utilities 1.2%
Houston Light & Power Capital Corp., 8.257%, 2/1/37 ..................................... 6,750,000 7,171,875
- ------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $239,057,386) 240,465,700
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Taxable Municipal Investments 0.6%
- ------------------------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, 7.425%, 2/15/29 (Cost $ 3,500,000) ........... 3,500,000 3,488,976
------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $592,164,152)(a) 594,711,059
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $592,164,152. At June 30,
1997, net unrealized appreciation for all securities based on tax cost was
$2,546,907. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $(4,430,722) and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$6,977,629.
Included in the portfolio are investments in mortgage or asset-backed
securities which are interests in separate pools of mortgages or assets.
Effective maturities of these investments will be shorter than stated
maturities due to prepayments.
The accompanying notes are an integral part of the financial statements.
10 - SCUDDER INCOME FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $592,164,152) ................. $594,711,059
Cash .................................................................. 100,012
Receivable for investments sold ....................................... 7,622,687
Interest receivable ................................................... 8,640,663
Receivable for Fund shares sold ....................................... 1,496,376
Receivable for daily variation margin on closed futures contracts ..... 65,520
Other assets .......................................................... 14,109
----------------
Total assets .......................................................... 612,650,426
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ..................................... 7,837,759
Payable for Fund shares redeemed ...................................... 4,342,709
Accrued management fee ................................................ 305,002
Other payables and accrued expenses ................................... 386,786
----------------
Total liabilities ..................................................... 12,872,256
--------------------------------------------------------------------------------------------
Net assets, at market value $599,778,170
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 9,393,524
Net unrealized appreciation on investments ............................ 2,546,907
Accumulated net realized loss ......................................... (2,686,536)
Paid-in capital ....................................................... 590,524,275
--------------------------------------------------------------------------------------------
Net assets, at market value $599,778,170
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($599,778,170 / 45,069,019 outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized) .... $13.31
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - SCUDDER INCOME FUND
<PAGE>
Statement of Operations
six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Interest .............................................................. $ 21,042,303
-----------------
Expenses:
Management fee ........................................................ 1,791,931
Services to shareholders .............................................. 1,292,336
Custodian and accounting fees ......................................... 76,751
Trustees' fees ........................................................ 19,464
Reports to shareholders ............................................... 66,578
Auditing .............................................................. 22,440
Legal ................................................................. 6,243
Registration fees ..................................................... 34,452
Other ................................................................. 14,872
-----------------
3,325,067
---------------------------------------------------------------------------------------------
Net investment income 17,717,236
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................... (259,077)
Futures ............................................................... 418,380
-----------------
159,303
Net unrealized appreciation (depreciation) during the period
on investments ..................................................... (1,161,165)
---------------------------------------------------------------------------------------------
Net loss on investments (1,001,862)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 16,715,374
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - SCUDDER INCOME FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended
1997 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................ $ 17,717,236 $ 34,599,797
Net realized gain from investment transactions ................... 159,303 5,099,598
Net unrealized appreciation (depreciation) on investment
transactions during the period ................................ (1,161,165) (20,219,372)
-------------- ---------------
Net increase in net assets resulting from operations ............. 16,715,374 19,480,023
-------------- ---------------
Distributions to shareholders:
From net investment income ....................................... (8,942,514) (35,051,118)
-------------- ---------------
From net realized gains .......................................... (443,613) (3,898,759)
-------------- ---------------
Fund share transactions:
Proceeds from shares sold ........................................ 146,884,167 167,697,618
Net asset value of shares issued to shareholders in
reinvestment of distributions ................................. 8,282,204 34,318,821
Cost of shares redeemed .......................................... (141,236,950) (182,294,031)
-------------- ---------------
Net increase in net assets from Fund share transactions .......... 13,929,421 19,722,408
-------------- ---------------
Increase (decrease) in net assets ................................ 21,258,668 252,554
Net assets at beginning of period ................................ 578,519,502 578,266,948
Net assets at end of period (including undistributed net --------------- ----------------
investment income of $9,393,524 and $618,802, respectively) ... $599,778,170 $578,519,502
--------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................ 43,994,954 42,499,531
-------------- ---------------
Shares sold ...................................................... 11,168,868 12,592,757
Shares issued to shareholders in reinvestment of
distributions .................................................... 641,461 2,612,478
Shares redeemed .................................................. (10,736,264) (13,709,812)
-------------- ---------------
Net increase in Fund shares ...................................... 1,074,065 1,495,423
--------------- ----------------
Shares outstanding at end of period .............................. 45,069,019 43,994,954
--------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - SCUDDER INCOME FUND
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Years Ended December 31,
1997(a)
(Unaudited) 1996(a) 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning --------------------------------------------------------------------------------------------------------
of period ............... $13.15 $13.61 $12.32 $13.71 $13.48 $13.91 $12.82 $12.89 $12.41 $12.40 $13.41
--------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ..... .40 .80 .83 .84 .90 .95 .93 1.03 1.05 1.07 1.08
Net realized and
unrealized gain (loss)
on investments .......... (.03) (.36) 1.41 (1.45) .77 (.05) 1.22 (.01) .49 .01 (.99)
Total from investment --------------------------------------------------------------------------------------------------------
operations .............. .37 .44 2.24 (.61) 1.67 .90 2.15 1.02 1.54 1.08 .09
--------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.20) (.81) (.86) (.76) (.87) (.93) (.92) (1.03) (1.06) (1.07) (1.10)
From paid-in capital ...... -- -- -- -- -- -- -- (.06)(b) -- -- --
From net realized gains
on investment
transactions ............ (.01) (.09) (.03) -- (.45) (.40) (.14) -- -- -- --
In excess of net realized
gains ................... -- -- (.06) (.02) (.12) -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
Total distributions ....... (.21) (.90) (.95) (.78) (1.44) (1.33) (1.06) (1.09) (1.06) (1.07) (1.10)
--------------------------------------------------------------------------------------------------------
Net asset value, end of --------------------------------------------------------------------------------------------------------
period .................. $13.31 $13.15 $13.61 $12.32 $13.71 $13.48 $13.91 $12.82 $12.89 $12.41 $12.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .......... 2.86** 3.41 18.54 (4.43) 12.58 6.74 17.32 8.32 12.75 8.91 .74
Ratios and Supplemental
Data
Net assets, end of period
($ millions) ............ 600 579 578 463 509 457 403 302 272 245 242
Ratio of operating
expenses to average
daily net assets (%) .... 1.14* .98 .99 .97 .92 .93 .97 .95 .93 .94 .94
Ratio of net investment
income to average daily
net assets (%) .......... 6.08* 6.01 6.35 6.43 6.32 7.05 7.13 8.21 8.23 8.53 8.37
Portfolio turnover rate (%) 90.0* 66.9 128.3 60.3 130.6 121.3 109.6 48.0 63.2 19.6 33.7
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Distribution made (as a result of foreign currency related gains on the
disposition of foreign bonds) in order to avoid the payment of a 4% federal
excise tax under International Revenue Code section 4982.
* Annualized
** Not Annualized
14 - SCUDDER INCOME FUND
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Income 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 a
diversified, 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 consistently 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. 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 repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and certain
expenses at the rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on interest and
foreign withholding taxes.
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 an item at a
specified price on a specific date (settlement date). During the six months
ended June 30, 1997, the Fund purchased interest rate futures to manage the
duration of the portfolio and sold interest rate futures to hedge against
declines in the value of portfolio securities.
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 each day,
dependent on 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,
15 - SCUDDER INCOME FUND
<PAGE>
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 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 which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. The Fund
accordingly paid no federal income taxes and no federal income tax provision was
required. In addition, from November 1, 1996 through December 31, 1996, the Fund
incurred approximately $104,000 of net realized capital losses. As permitted by
tax regulations, the Fund intends to elect to defer these losses and treat them
as arising in the fiscal year ending December 31, 1997.
Distribution of Income and Gains. Distributions of net investment income are
made quarterly. 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. 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. These differences primarily
relate to investments in foreign denominated investments and futures. 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.
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 six months ended June 30, 1997, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $197,248,653 and $215,515,738, respectively. Purchases and sales of
U.S. Government obligations aggregated $29,098,256 and $37,458,109,
respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1997 was $959,284,926.
16 - SCUDDER INCOME FUND
<PAGE>
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. ("the Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objectives, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.65% on the first
$200,000,000 of average daily net assets, 0.60% on the next $300,000,000 of such
net assets, and 0.55% of such net assets in excess of $500,000,000, computed and
accrued daily and payable monthly. For the six months ended June 30, 1997, the
fee pursuant to the Agreement amounted to $1,791,931, which was equivalent to an
annual effective rate of 0.61% of the Fund's average daily net assets.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended June 30, 1997, the amount charged to the Fund by SSC aggregated
$392,080, of which $64,352 is unpaid at June 30, 1997.
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 six months ended June 30,
1997, the amount charged to the Fund by STC aggregated $726,761, of which
$120,773 is unpaid at June 30, 1997.
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 six months
ended June 30, 1997, the amount charged to the Fund by SFAC aggregated $47,606,
of which $8,109 is unpaid at June 30, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At June 30, 1997, the Special
Servicing Agreement expense charged to the Fund amounted to $75,031.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually, plus
specified amounts for attended board and committee meetings. For the six months
ended June 30, 1997, Trustees' fees aggregated $19,464.
17 - SCUDDER INCOME FUND
<PAGE>
This Page
intentionally
left blank.
18 - SCUDDER INCOME FUND
<PAGE>
This Page
intentionally
left blank.
19 - SCUDDER INCOME FUND
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
E. Michael Brown*
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; Director, General Partner, TL Ventures
David S. Lee*
Trustee and Vice President
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.
20 - SCUDDER INCOME FUND
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
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 Growth and Income 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, Inc.
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 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 Spain and Portugal 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. *A class of shares of
the Fund. **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.
21 - SCUDDER INCOME FUND
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
22 - SCUDDER INCOME FUND
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
23 - SCUDDER INCOME 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
[LOGO]
