Scudder
High Yield
Bond Fund
Semiannual Report
August 31, 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 (logo)
<PAGE>
In Brief
o For the six-month period ended August 31, 1997, Scudder High Yield Bond Fund
provided a total return of 6.10%. This compares favorably with the 5.69% return
of the Merrill Lynch High Yield Master Index. On August 31, the Fund posted a
9.35% 30-day SEC yield.
o High yield bond prices continued their rise, as demand from individual and
mutual fund investors exceeded a record supply of bonds.
o During the most recent semiannual period, we took profits in the oil and gas
sector and increased our positions in less economically sensitive sectors
including cable and telecommunications.
Table of Contents
3 Letter from the Fund's President 15 Financial Statements
4 Performance Update 18 Financial Highlights
5 Portfolio Summary 19 Notes to Financial Statements
6 Portfolio Management Discussion 24 Officers and Trustees
9 Glossary of Investment Terms 25 Investment Products and Services
10 Investment Portfolio 26 Scudder Solutions
2 - Scudder High Yield Bond Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We would like to welcome the many new investors who have joined Scudder
High Yield Bond Fund over the past six months. The Fund has grown by 75% since
our last shareholder report, to $128 million in assets. The Fund's 30-day SEC
yield was an attractive 9.35% as of August 31.
As detailed in the portfolio management discussion beginning on page 6,
economic conditions for high yield bonds continue to be favorable: The U.S.
economy has continued to post moderate growth and low inflation, and a record
level of high yield bond supply has been met with heavy investor demand,
especially from mutual fund shareholders. Scudder High Yield Bond Fund has
performed well during this latest six-month period, earning a 6.10% total
return. We are enthusiastic about the improving credit environment for many high
yield bonds as well as the future prospects for the Fund. Given the admittedly
heated market environment, however, we'd like to remind you of the Fund's
cautious approach. Our portfolio management and research team performs careful
credit analysis on every bond considered for the Fund's portfolio, assessing
risks as well as opportunities.
For those of you interested in hearing about new products from Scudder, we
would like to take this opportunity to tell you about a recent addition to our
family of funds -- Scudder International Growth and Income Fund. The Fund
employs a yield-oriented approach to international investing and 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 to
international investing may appreciate the Fund's emphasis on the dividend
paying stocks of well-established companies outside the United States. For a
complete listing of Scudder's mutual fund offerings, see page 25.
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 August 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
8/31/97 $10,000 Cumulative Annual
- ------------------------------------------
SCUDDER HIGH YIELD BOND FUND
TICKER SYMBOL: SHBDX
- ------------------------------------------
1 Year $11,719 17.19% 17.19%
Life of Fund* $12,013 20.13% 16.93%
- ------------------------------------------
MERRILL LYNCH HIGH YIELD MASTER INDEX
- ------------------------------------------
1 Year $11,486 14.86% 14.86%
Life of Fund* $11,684 16.84% 14.23%
- ------------------------------------------
*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
8/96 $10,246
10/96 $10,536
12/96 $10,941
2/97 $11,318
4/97 $11,203
6/97 $11,663
8/97 $12,008
MERRILL LUNCH HIGH YIELD MASTER INDEX
Year Amount
- ----------------------
6/96* $10,000
8/96 $10,175
10/96 $10,510
12/96 $10,805
2/97 $11,040
4/97 $11,042
6/97 $11,436
8/97 $11,684
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 August 31
1996* 1997
----------------------
NET ASSET VALUE... $ 12.12 $ 12.91
INCOME DIVIDENDS.. $ .18 $ 1.17
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .03
FUND TOTAL
RETURN (%)........ 2.51 17.19
INDEX TOTAL
RETURN (%)........ 1.72 14.86
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 August 31, 1997
- -----------------------------
ASSET ALLOCATION
- -----------------------------
Corporate Bonds 86%
Preferred Stocks 6%
U.S. Government &
Agencies 5%
Cash Equivalents 2%
Foreign Bonds --
U.S. $ Denominated 1%
- -----------------------------
100%
=============================
We have recently been allowing the
Fund's cash and short-term Treasury
position to build up slightly in
anticipation of opportunities to
purchase new issues and add to
existing issues at more attractive
prices in the near future.
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 17%
Media 10%
Service Industries 9%
Consumer Discretionary 9%
Communications 9%
Energy 8%
Consumer Staples 7%
Financial 6%
Metals & Minerals 5%
Other 20%
- -----------------------------
100%
=============================
Strong performers over the most
recent semiannual period included
holdings in the basic industrials,
oil and gas, and cable sectors.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------
QUALITY
- -----------------------------
Cash Equivalents 2%
U.S. Government
Obligations 5%
BB 20%
B 70%
CCC 1%
Not Rated 2%
- -----------------------------
100%
=============================
Weighted Average Quality: B
The Fund continues to focus on
select B-rated credits, which
typically carry a yield advantage
over BB-rated bonds.
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 7%
1 - 5 years 22%
5 - 8 years 44%
8 years or greater 27%
- -----------------------------
100%
- -----------------------------
Weighted average effective
maturity: 6.54 years
A range of maturities is
represented in the Fund's
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 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
- -------------------------------------------------------------------------------
5 - Scudder High Yield Bond Fund
<PAGE>
Portfolio Management Discussion
We are pleased to present an interview with Scudder High Yield Bond Fund's Lead
Portfolio Manager, Kelly D. Babson. Kelly has managed the Fund since it began
operations on June 28, 1996.
Q: How has Scudder High Yield Bond Fund performed over the past six months?
Kelly Babson: For the six months ended August 31, 1997, Scudder High Yield Bond
Fund's total return was 6.10%. For the same period, the high yield bond market
returned 5.69% as measured by the unmanaged Merrill Lynch High Yield Master
Index. Over the 12 months ended August 31, the Fund's total return was 17.19%,
compared with the Index's return of 14.86%. On August 31, the Fund offered a
9.35% 30-day SEC yield.
Q: To what do you attribute the Fund's good performance?
KB: We've identified some opportunities for capital appreciation in the
portfolio to help generate those total returns. Some of these individual
securities are still in the portfolio, and some positions have been traded out
completely. We've also had some sectors in the portfolio that have had strong
performance over the semiannual period such as basic industrials, energy, and
communications.
Q: Can you give some specific examples of strongly performing issues?
KB: One example is Allied Waste, a new high yield bond issue that we thought
offered real value relative to other companies with comparable credit
characteristics. We believed -- and this is proving to be true so far -- that
the company's cost reduction initiatives would pay off as the waste management
industry consolidates. This is a good example of how important it is to identify
early an improving credit in a consolidating industry.
We've also experienced success in the cable sector during the last six months.
Adelphia Communications is a highly leveraged cable operator that was out of
favor eight months ago, but one that we purchased because of its strong assets,
solid franchise, and willingness to reduce debt through non-core asset sales and
price increases in existing markets. The success of the company's strategy has
been reflected in the rising price of the security.
Q: For newcomers to the Fund, can you summarize your investment philosophy?
KB: In everything we do, our strategy is to create income and to provide a high,
competitive total return for the Fund. Our management process is very
"bottom-up," featuring a focus on securities selection backed up by credit
research, and moderate emphasis on sector allocation decisions. We avoid
securities that we don't think have longer-term potential and sell any bonds
purchased for the portfolio where credit trends have declined from what we
expected initially. On an ongoing basis, we work to ensure that what we do own
in the portfolio continues to meet our goals for the Fund.
Q: How do you evaluate new credits?
KB: Our evaluation process includes meeting with company management, examining
financial statements (historical and projected), looking at the universe of a
company's competitors within that industry, assessing the risks and
opportunities within the specific market, and judging how well positioned they
are to meet their goals.
6 - Scudder High Yield Bond Fund
<PAGE>
Q: How has the U.S. economic environment affected the high yield market?
KB: The economic environment continues to be very positive for high yield bonds
- -- moderate to somewhat strong growth, and low inflation. In terms of the
volatility in the bond and equity markets, we've had some interesting times more
recently. But the high yield market has held up quite well. It has tended to
underperform the higher quality segments of the bond market during periods of
fixed-income strength, but significantly outperform in downturns. And, somewhat
surprisingly, the high yield market has not been negatively affected by recent
volatility in the stock market.
Q: Why do you think that is?
KB: We attribute this to technical factors supporting the high yield market.
There continues to be strong demand for high yield bonds -- mutual fund inflows
continue to be strong, and though you wouldn't traditionally think of the
purchasing of high yield bonds as a "flight to quality," high yield bonds are
apparently being perceived by the marketplace as an incremental step towards
quality relative to stocks. At the same time, we've had very heavy supply in the
high yield market -- through the end of August, we've nearly reached 1996's
total volume. So there's been a tremendous amount of "paper" that's hit the
market, but a real appetite for it at the same time.
IN THE PRINTED DOCUMENT, A LINE CHART APPEARS HERE;
CHART TITLE:
Yield "Spreads" Narrow to Near Historic Levels
Yield Differential of B-rated Corporates vs.
U.S. Treasury Bonds of Comparable Maturity
CHART DATA:
Yield Differential
(Basis Points)
-----------------------------------
8/87 398
-----------------------------------
12/87 537
-----------------------------------
514
-----------------------------------
481
-----------------------------------
487
-----------------------------------
12/88 478
-----------------------------------
474
-----------------------------------
556
-----------------------------------
645
-----------------------------------
12/89 815
-----------------------------------
769
-----------------------------------
767
-----------------------------------
811
-----------------------------------
12/90 1086
-----------------------------------
761
-----------------------------------
729
-----------------------------------
591
-----------------------------------
12/91 579
-----------------------------------
455
-----------------------------------
461
-----------------------------------
478
-----------------------------------
12/92 498
-----------------------------------
447
----------------------------------
405
-----------------------------------
452
-----------------------------------
12/93 439
-----------------------------------
367
-----------------------------------
413
-----------------------------------
424
-----------------------------------
12/94 400
-----------------------------------
433
-----------------------------------
482
-----------------------------------
454
-----------------------------------
12/95 515
-----------------------------------
435
-----------------------------------
384
-----------------------------------
380
-----------------------------------
12/96 417
-----------------------------------
325
-----------------------------------
336
-----------------------------------
8/97 311
-----------------------------------
Source: Lehman Brothers High Yield Research
Q: Where you do think yields are headed?
KB: As a marker of where the high yield market stands and where it could go from
here, the difference (or "spread") between yields of high yield bonds and those
of Treasury bonds of similar maturity is something we look at constantly. At the
end of August that difference had shrunk to near historic levels, meaning it
didn't appear that -- for the time being -- the average yield of high yield
bonds could go much lower (or prices higher). That said, two factors supporting
high yield bond prices are a strong stock market that has enabled many high
yield issuers to retire debt through debt-for-equity swaps -- taking supply out
of the market -- and a very low default rate for the high yield universe. I
think there will be opportunities to add to existing issues or to add new issues
at better prices going forward. I'm currently allowing our cash and short-term
Treasury position to build up somewhat in anticipation of that.
7 - Scudder High Yield Bond Fund
<PAGE>
Q: Has your overall strategy changed significantly during the past six months?
KB: No, it really hasn't. We adjusted our sector weightings somewhat. We reduced
our weighting in oil and gas, but continue to be modestly overweighted there. I
still think the oil and gas industry is a good fundamental story considering its
continuing consolidation plus an overall lack of capacity in oil drilling and
oil services. This sector experienced such tremendous performance in the first
part of this year that we decided to take some profits.
In financial services, we reduced our overall exposure to match the market
weighting. We continue to increase basic industry exposure to selected names.
We've added more to the cable and telecommunications areas as well. Purchasing
cable bonds is much more of a defensive strategy because that sector is not
particularly economically sensitive -- cable is not so much a growth industry as
one that posts strong cash flow and should continue to do so. Telecommunications
is a combination of an anti-cyclical and a growth story. It's also considered
fairly defensive, but at the same time the market for telecommunications
equipment and services has very strong growth potential.
Q: What is your outlook for the high yield market over the coming months?
KB: The economic environment for high yield bonds remains favorable. We have
come a long way over the past 12 months. I'm cautious about our ability to
achieve similar gains in the near future, although I don't believe that prices
will fall and yields increase dramatically any time soon. We continue to be
somewhat concerned about high valuations in the equity market and how a downturn
in stocks would impact our market. But with the economy as strong as it is, it's
difficult to mount an argument that equities or high yield bonds will experience
a major correction in the near future. In general, high yield bonds should
produce returns in line with their coupon yields over the next several months.
We continue to be optimistic about the prospects for the high yield market and
will continue to pursue the Fund's objectives of high current yield and capital
appreciation for our shareholders.
8 - Scudder High Yield Bond Fund
<PAGE>
Glossary of Investment Terms
COUPON The interest rate on a bond the issuer (in the case
of high yield bonds, a corporation) promises to pay
to the holder of the bond until maturity, expressed
as an annual percentage of face value. As an
example, a bond with a 10% coupon will pay $100 on
$1,000 of the face amount each year.
CYCLICAL A cyclical security is one whose price tends to rise
when the U.S. economy is expanding and to fall when
the economy is contracting. Examples of cyclical
industries are automobiles, housing, and paper.
NONCYCLICAL securities -- including food, insurance,
and health care companies -- are typically not as
affected by changes in U.S. economic performance.
DEFAULT Occurs when the issuer of a bond fails to make
timely payment of principal and/or interest. In the
event of default, bondholders may make claims
against the assets of the issuing corporation.
DEFAULT RATE refers to the annual percentage of
bonds in a fund that stop making principal and/or
interest payments.
HIGH YIELD BOND A bond that has a rating of BB or less and pays a
high yield to compensate for its greater credit
risk.
SECTOR A similar group of bonds or stocks, usually found in
one industry. Some examples of sectors that could be
found in a high yield bond fund or a stock fund at
any given time include airlines, financial services
companies, and telecommunication providers.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings of every holding in a given fund's
portfolio, net of expenses, assuming each is held to
maturity.
TOTAL RETURN The most common yardstick to measure the performance
of a fund. Total return -- annualized or compound --
is based on a combination of share price changes
plus income and capital gain distributions, if any,
expressed as a percentage gain or loss in value.
YIELD SPREAD The difference in yield between various types of
bonds. A high yield bond's yield is generally
compared to the yield of a Treasury bond of similar
maturity as a valuation yardstick. If yield spreads
are "narrow," for example, it generally means that
high yield bond yields have been declining, and
prices rising.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
9 - Scudder High Yield Bond Fund
<PAGE>
Investment Portfolio as of August 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 2.3%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and Trust Company dated 8/29/97 at
5.45%, to be repurchased at $2,895,752 on 9/2/97, collateralized by a ------------
$2,070,000 U.S. Treasury Bond, 12%, 8/15/13 (Cost $2,894,000) ......................... 2,894,000 2,894,000
------------
U.S. Government & Agencies 4.9%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note, 5.875%, 7/31/99 ..................................................... 4,500,000 4,492,260
U.S. Treasury Note, 5.875%, 8/31/99 ..................................................... 1,750,000 1,747,266
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agencies (Cost $6,239,922) 6,239,526
- ------------------------------------------------------------------------------------------------------------------------------
Foreign Bonds - U.S. $ Denominated 1.1%
- ------------------------------------------------------------------------------------------------------------------------------
Fage Dairy Industry SA, 9%, 2/1/07 ...................................................... 1,250,000 1,206,250
Hermes Europe Railtel BV, 11.5%, 8/15/07 ................................................ 250,000 259,141
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Bonds - U.S.$ Denominated (Cost $1,475,000) 1,465,391
- ------------------------------------------------------------------------------------------------------------------------------
Corporate Bonds 85.6%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 8.7%
Cinemark USA, Inc., 9.625%, 8/1/08 ...................................................... 1,000,000 1,010,000
Cinemark USA, Inc., 9.625%, 8/1/08 ...................................................... 1,000,000 1,015,000
Cole National Group Inc., 9.875%, 12/31/06 .............................................. 2,000,000 2,125,000
COMPUSA Inc., 9.5%, 6/15/00 ............................................................. 500,000 520,000
Pillowtex Corp., 10%, 11/15/06 .......................................................... 1,500,000 1,590,000
Revlon Consumer Products, Senior Subordinate Note "B", 10.5%, 2/15/03 ................... 2,000,000 2,115,000
Signature Resorts, Inc., 9.75%, 10/1/07 ................................................. 2,000,000 1,970,000
Syratech Corp., 11%, 4/15/07 ............................................................ 750,000 802,500
------------
11,147,500
------------
Consumer Staples 7.1%
American Safety Razor Co., Senior Note, 9.875%, 8/1/05 .................................. 500,000 535,000
Aurora Foods, Inc., 9.875%, 2/15/07 ..................................................... 1,000,000 1,015,000
Chiquita Brands International Inc., Senior Note, 10.25%, 11/1/06 ........................ 1,250,000 1,359,375
Dyersburg Corp., 9.75%, 9/1/07 .......................................................... 500,000 503,750
MBW Foods Inc., 9.875%, 2/15/07 ......................................................... 1,125,000 1,141,875
North Atlantic Trading Co., 11%, 6/15/04 ................................................ 1,000,000 1,050,000
Playtex Apparel, Inc., 8.875%, 7/15/04 .................................................. 1,000,000 1,000,000
Sun World International, 11.25%, 4/15/04 ................................................ 1,250,000 1,343,750
TLC Beatrice International Holdings, 11.5%, 10/1/05 ..................................... 1,000,000 1,130,000
------------
9,078,750
------------
</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>
Health 3.6%
Genesis Health Ventures, 9.25%, 10/1/06 ................................................. 2,000,000 2,050,000
ICN Pharmaceuticals, Inc., 9.25%, 8/15/05 ............................................... 1,500,000 1,530,000
Vencor, Inc., 8.625%, 7/15/07 ........................................................... 1,000,000 1,000,000
------------
4,580,000
------------
Communications 8.5%
Brooks Fiber Properties, Inc., Step-up Coupon, 0% to 11/1/00, 11.875% to 11/1/06 ........ 2,000,000 1,390,000
Comcast Cellular, 9.5%, 5/1/07 .......................................................... 2,000,000 2,070,000
Globalstar LP, 11.375%, 2/15/04 ......................................................... 1,000,000 997,500
Intermedia Communications, Inc., Step-up Coupon, 0% to 7/15/02, 11.25% to 7/15/06 ....... 1,750,000 1,102,500
L-3 Communications Corp., 10.375%, 5/1/07 ............................................... 250,000 266,875
Paging Network Inc., Senior Subordinate Note, 10.125%, 8/1/07 ........................... 1,500,000 1,530,000
Sprint Spectrum L.P., Senior Note, 11%, 8/15/06 ......................................... 1,000,000 1,110,000
Teleport Communications Group, Inc., Step-up Coupon, 0% to 7/1/05, 11.125% to 7/1/07 ... 2,750,000 2,048,750
WorldCom, Inc., 8.875%, 1/15/06 ......................................................... 368,955 397,844
------------
10,913,469
------------
Financial 3.9%
Aames Financial Corp., 9.125%, 11/1/03 .................................................. 1,500,000 1,515,000
Bank United Capital Trust, 10.25%, 12/31/26 ............................................. 1,000,000 1,012,500
Bay View Capital Corp., 9.125%, 8/15/07 ................................................. 500,000 505,000
Commerce Bancorporation, 11.75%, 6/6/27 ................................................. 957,000 957,000
Delta Financial Corp., 9.5%, 8/1/04 ..................................................... 1,000,000 993,125
------------
4,982,625
------------
Media 5.8%
Adelphia Communications Corp., 9.875%, 3/1/07 ........................................... 1,500,000 1,496,250
Cablevision Systems Corp., Senior Subordinate Note, 9.875%, 5/15/06 ..................... 750,000 798,750
Hollinger International NT, 9.25%, 2/1/06 ............................................... 1,500,000 1,545,000
Outdoor Systems, Inc., 8.875%, 6/15/07 .................................................. 1,000,000 1,020,000
Rogers Communications, Inc., 8.875%, 7/15/07 ............................................ 1,000,000 992,500
Sun Media Corp., 9.5%, 2/15/07 .......................................................... 500,000 515,000
Sun Media Corp., 9.5%, 5/15/07 .......................................................... 1,000,000 1,035,000
------------
7,402,500
------------
Service Industries 8.7%
Allied Waste Industries, Inc., 11.3%, 6/1/07 ............................................ 500,000 337,500
Allied Waste North America, 10.25%, 12/1/06 ............................................. 1,500,000 1,635,000
Borg-Warner Security Corp., 9.625%, 3/15/07 ............................................. 1,275,000 1,300,500
</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>
DecisionOne Corp., 9.75%, 8/1/07 ........................................................ 500,000 513,281
Hydrochem Industrial Service, 10.375%, 8/1/07 ........................................... 1,000,000 1,026,562
Loomis Fargo & Co., 10%, 1/15/04 ........................................................ 1,000,000 1,010,000
Pierce Leahy Corp., 11.125%, 7/15/06 .................................................... 650,000 731,250
Pierce Leahy Corp., 9.125%, 7/15/07 ..................................................... 500,000 516,250
Premier Parks Inc., 9.75%, 1/15/07 ...................................................... 1,500,000 1,578,750
Prime Hospitality Corp., 9.25%, 1/15/06 ................................................. 1,500,000 1,560,000
SC International Services, Inc., 9.25%, 9/1/07 .......................................... 1,000,000 1,005,000
------------
11,214,093
------------
Manufacturing 16.7%
Aetna Industries, Inc., 11.875%, 10/1/06 ................................................ 1,000,000 1,097,500
Amphenol Corp., 9.875%, 5/15/07 ......................................................... 2,000,000 2,082,500
Blue Bird Body Company, 10.75%, 11/15/06 ................................................ 1,500,000 1,582,500
Clark Materials Handling Corp., 10.75%, 11/15/06 ........................................ 2,000,000 2,100,000
HCC Industries, Inc., 10.75%, 5/15/07 ................................................... 1,000,000 1,060,000
ICO Inc., 10.375%, 6/1/07 ............................................................... 1,000,000 1,037,500
ISP Holdings Inc., 9.75%, 2/15/02 ....................................................... 250,000 268,750
ISP Holdings Inc., 9.75%, 10/15/03 ...................................................... 500,000 525,000
K&F Industries Incorporated, 10.375%, 9/1/04 ............................................ 750,000 806,250
LDM Technologies Inc., 10.75%, 1/15/07 .................................................. 1,750,000 1,872,500
Pioneer Americas Acquisition Corp., 9.25%, 6/15/07 ...................................... 1,000,000 991,563
Polymer Group, Inc., 9%, 7/1/07 ......................................................... 1,000,000 1,000,000
Radnor Holdings Corp., 10%, 12/1/03 ..................................................... 1,500,000 1,548,750
Roller Bearing Co. of America, 9.625%, 6/15/07 .......................................... 1,000,000 1,020,000
Sovereign Specialty Chemicals, 9.5%, 8/1/07 ............................................. 1,000,000 1,000,000
Specialty Equipment Co., Senior Subordinate Note, 11.375%, 12/1/03 ...................... 1,750,000 1,898,750
Tracor, Inc., 8.5%, 3/1/07 .............................................................. 1,500,000 1,530,000
------------
21,421,563
------------
Technology 3.8%
Celestica International Inc., 10.5%, 12/31/06 ........................................... 1,000,000 1,075,000
Fairchild Semiconductor Corp., 10.125%, 3/15/07 ......................................... 1,500,000 1,605,000
Therma-Wave Inc., 10.625%, 5/15/04 ...................................................... 500,000 537,500
Unisys Corp., 11.75%, 10/15/04 .......................................................... 1,500,000 1,657,500
------------
4,875,000
------------
Energy 8.2%
Abraxas Petroleum Corp., 11.5%, 11/1/04 ................................................. 1,000,000 1,100,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder High Yield Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Belden & Blake Energy Co., 9.875%, 6/15/07 .............................................. 1,250,000 1,228,125
Bellwether Exploration Co., 10.875%, 4/1/07 ............................................. 1,500,000 1,616,250
Chesapeake Energy Corp., 7.875%, 3/15/04 ................................................ 1,500,000 1,432,500
Cliffs Drilling Co., 10.25%, 5/15/03 .................................................... 1,250,000 1,337,500
Cliffs Drilling Co., 10.25%, 5/15/03 .................................................... 1,000,000 1,070,000
Dawson Production Services, Inc., 9.375%, 2/1/07 ........................................ 400,000 412,000
Ocean Energy, 9.75%, 10/1/06 ............................................................ 1,000,000 1,057,500
Pride Petroleum Services, Inc., 9.375%, 5/1/07 .......................................... 1,150,000 1,207,500
------------
10,461,375
------------
Metals & Minerals 5.2%
AK Steel Corp., 9.125%, 12/15/06 ........................................................ 2,000,000 2,105,000
Kaiser Aluminum and Chemical, 10.875%, 10/15/06 ......................................... 1,000,000 1,082,500
Oregon Steel Mills, Inc., 1st Mortgage, 11%, 6/15/03 .................................... 1,250,000 1,375,000
Renco Metals Inc., Senior Note, 11.5%, 7/1/03 ........................................... 1,000,000 1,055,000
Wells Aluminum Corp., 10.125%, 6/1/05 ................................................... 1,000,000 1,047,500
------------
6,665,000
------------
Construction 2.5%
Nortek, Inc., 9.875%, 3/1/04 ............................................................ 1,000,000 1,010,000
Nortek, Inc., 9.25%, 3/15/07 ............................................................ 1,000,000 1,003,750
Southdown, Inc., Senior Subordinate Note, 10%, 3/1/06 ................................... 250,000 272,500
Triangle Pacific, 10.5%, 8/3/03 ......................................................... 850,000 907,375
------------
3,193,625
------------
Transportation 2.1%
Atlantic Express, Inc., 10.75%, 2/1/04 .................................................. 1,500,000 1,560,000
US Air, Inc., 10.375%, 3/13/13 .......................................................... 1,000,000 1,110,000
------------
2,670,000
------------
Utilities 0.8%
Cal Energy Co., Inc., 9.5%, 9/15/06 ..................................................... 1,000,000 1,076,510
- ------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $106,787,114) 109,682,010
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stocks 6.1%
- ------------------------------------------------------------------------------------------------------------------------------
Financial 1.6%
Cal Fed Bancorp Inc. Series A ........................................................... 40,000 1,050,000
Walden Residential Properties, Inc. ..................................................... 40,000 1,020,000
Walden Residential Properties, Inc. Warrants* ........................................... 40,000 55,000
------------
2,125,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder High Yield Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media 4.4%
Adelphia Communications Corp. ........................................................... 10,000 1,080,000
Cablevision Systems Corp. ............................................................... 10,000 1,103,750
Chancellor Corporation .................................................................. 15,000 1,710,000
SFX Broadcasting, Inc. .................................................................. 15,000 1,732,500
------------
5,626,250
------------
Communications 0.1%
Globalstar LP, Warrants* ................................................................ 1,000 88,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $7,565,000) 7,839,250
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $124,961,036) (a) 128,120,177
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $124,961,036. At August 31,
1997, net unrealized appreciation for all investment securities based on
tax cost was $3,159,141. This consisted of aggregate gross unrealized
appreciation for all investments in which there was an excess of market
value over tax cost of $3,393,118 and aggregate gross unrealized
depreciation for all investment securities in which there was an excess of
tax cost over market value of $233,977.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
14 - Scudder High Yield Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of August 31, 1997 (Unaudited)
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $124,961,036) .................. $128,120,177
Cash ................................................................... 733
Dividends and interest receivable ...................................... 2,438,820
Receivable on Fund shares sold ......................................... 526,975
Due from Adviser ....................................................... 215,290
Deferred organization expense .......................................... 14,744
Other assets ........................................................... 838
----------------
Total assets ........................................................... 131,317,577
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 1,747,266
Payable for Fund shares redeemed ....................................... 176,811
Dividends payable ...................................................... 263,232
Other payables and accrued expenses .................................... 133,816
----------------
Total liabilities ...................................................... 2,321,125
--------------------------------------------------------------------------------------------
Net assets, at market value $128,996,452
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investment securities .... 3,159,141
Accumulated net realized gain .......................................... 757,432
Paid-in capital ........................................................ 125,079,879
--------------------------------------------------------------------------------------------
Net assets, at market value $128,996,452
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($128,996,452 / 9,993,311 outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized) ..... $12.91
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder High Yield Bond Fund
<PAGE>
Statement of Operations
six months ended August 31, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................... $ 4,410,478
Dividends .............................................................. 69,910
-----------------
4,480,388
Expenses:
Management fees ........................................................ 336,996
Services to shareholders ............................................... 186,007
Custodian and accounting fees .......................................... 32,324
Trustees' fees and expenses ............................................ 21,356
Registration fees ...................................................... 41,550
Auditing ............................................................... 11,561
Reports to shareholders ................................................ 13,307
Legal .................................................................. 3,894
Amortization of organization expense ................................... 1,943
Other .................................................................. 2,829
-----------------
Total expenses before reductions ....................................... 651,767
Expense reductions ..................................................... (651,767)
-----------------
Expenses, net .......................................................... --
--------------------------------------------------------------------------------------------
Net investment income 4,480,388
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities .................... 795,642
Net unrealized appreciation (depreciation) during the period on
investments .......................................................... 787,061
--------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,582,703
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 6,063,091
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder High Yield Bond Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
Six Months June 28, 1996
Ended (commencement
August 31, of operations)
1997 to February 28,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 4,480,388 $ 2,225,750
Net realized gain (loss) from investment transactions ............... 795,642 163,385
Net unrealized appreciation (depreciation) on investment
transactions during the period .................................... 787,061 2,372,080
----------------- -----------------
Net increase (decrease) in net assets resulting from operations ..... 6,063,091 4,761,215
Distributions to shareholders from:
Net investment income ............................................. (4,480,388) (2,225,750)
----------------- -----------------
Net realized gains ................................................ (147,683) (53,912)
----------------- -----------------
Fund share transactions:
Proceeds from shares sold ........................................... 66,780,613 73,427,768
Net asset value of shares issued to shareholders in reinvestment
of distributions .................................................. 3,411,686 1,710,360
Cost of shares redeemed ............................................. (16,206,127) (4,114,570)
Redemption fees ..................................................... 52,166 16,783
----------------- -----------------
Net increase (decrease) in net assets from Fund share transactions .. 54,038,338 71,040,341
----------------- -----------------
Increase (decrease) in net assets ................................... 55,473,358 73,521,894
Net assets at beginning of period ................................... 73,523,094 1,200
----------------- -----------------
Net assets at end of period ......................................... $128,996,452 $73,523,094
----------------- -----------------
Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................... 5,759,335 100
----------------- -----------------
Shares sold ......................................................... 5,246,525 5,951,910
Shares issued to shareholders in reinvestment of distributions ...... 268,320 136,821
Shares redeemed ..................................................... (1,280,869) (329,496)
----------------- -----------------
Net increase (decrease) in Fund shares .............................. 4,233,976 5,759,235
----------------- -----------------
Shares outstanding at end of period ................................. 9,993,311 5,759,335
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder High Yield Bond Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Six Months For the Period
Ended June 28, 1996
August 31, 1997 (commencement of
(Unaudited) operations) to
February 28, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
--------------------------------------
Net asset value, beginning of period ........................................... $12.77 $12.00
--------------------------------------
Income from investment operations:
Net investment income .......................................................... .59 .76
Net realized and unrealized gain on investment transactions .................... .15 .77
--------------------------------------
Total from investment operations ............................................... .74 1.53
--------------------------------------
Less distributions from:
Net investment income ....................................................... (.59) (.76)
Net realized gains from investment transactions ............................. (.02) (.01)
--------------------------------------
Total distributions ............................................................ (.61) (.77)
--------------------------------------
Redemption fees ................................................................ .01 .01
--------------------------------------
Net asset value, end of period ................................................. $12.91 $12.77
--------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) ........................................................... 6.10** 13.23(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......................................... 129 74
Ratio of operating expenses, net to average daily net assets (%) ............... 0.00 0.00
Ratio of operating expenses before expense reductions, to average daily net
assets (%) .................................................................. 1.35* 1.75*
Ratio of net investment income to average daily net assets (%) ................. 9.30* 9.44*
Portfolio turnover rate (%) .................................................... 123.93* 39.84*
</TABLE>
(a) Per share amounts have been calculated using the weighted average shares
outstanding for the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
18 - Scudder High Yield Bond Fund
<PAGE>
Notes to Financial Statements (Unaudited)
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 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 repurchase 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.
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
19 - Scudder High Yield Bond Fund
<PAGE>
(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 six months ended August 31, 1997, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $102,356,902 and $49,954,878, respectively. Purchases and sales of
U.S. Government obligations aggregated $8,010,156 and $7,518,945, 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. In addition, the Adviser has agreed not to impose all or a portion of
its management fee until December 31, 1997 in order to maintain the annualized
expenses of the Fund at not more than 0.0% of average daily net assets. For the
six months ended August 31, 1997, the Adviser did not impose any of its
management fee, which amounted to $336,996. Further, due to the limitations of
such Agreement, the Adviser's reimbursement payable to the Fund for the six
months ended August 31, 1997, amounted to $215,290.
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 August 31, 1997, SSC did not impose any of its fee, which
amounted to $76,281.
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
20 - Scudder High Yield Bond Fund
<PAGE>
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 August 31, 1997, the Special Servicing Agreement expense
charged to the Fund amounted to $80,077.
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 August 31,
1997, STC did not impose any of its fee, which amounted to $3,035.
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 August 31, 1997, SFAC did not impose any of its fee, which amounted to
$20,165.
The Fund pays each of its Trustees not affiliated with the Adviser $2,400
annually, plus specified amounts for attended board and committee meetings. For
the six months ended August 31, 1997, the Trustee's fees and expenses aggregated
$21,356.
21 - Scudder High Yield Bond Fund
<PAGE>
This Page
intentionally
left blank.
22 - Scudder High Yield Bond Fund
<PAGE>
This Page
intentionally
left blank.
23 - 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
E. Michael Brown*
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; Managing Partner,
Technology Equity Partners
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.
24 - 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
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
Scudder S&P 500 Index 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. Certain Scudder funds may not be
available for purchase or exchange. +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.
25 - Scudder High Yield Bond 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
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder High Yield Bond 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
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Additional Information on How to Contact Scudder:
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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
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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.
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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>
27 - 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
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