Scudder
Balanced
Fund
Semiannual Report
June 30, 1999
No-Load Funds
A fund that seeks a balance of growth and income, as well as long-term
preservation of capital, from a diversified portfolio of equity and fixed-income
securities.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Balanced Fund
- --------------------------------------------------------------------------------
Date of Inception: 1/04/93 Total Net Assets as Ticker Symbol: SCBAX
of 6/30/99: $523.7 million
- --------------------------------------------------------------------------------
o Scudder Balanced Fund returned 5.00% for the six months ended June 30,
compared to the 6.75% return of its unmanaged benchmark, which is a blend of the
S&P 500 Index (60%) and the Lehman Brothers Aggregate Bond Index (40%).
o The Fund is ranked in the top quartile of comparable funds for the one-,
three-, and five-year periods, according to Lipper Analytical Services, Inc.^1
o Management allocated 59% to equities and 39% to fixed income securities, a
proportion that remained relatively stable over six-month period.
Table of Contents
3 Letter from the Fund's President 17 Financial Statements
4 Performance Update 20 Financial Highlights
5 Portfolio Summary 21 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
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. For the period ended June 30, 1999, Scudder Balanced
Fund's Lipper ranking was 108 out of 429 comparable funds for the one-year
period, 72 out of 303 funds for the three-year period, and 39 out of 182 for
the five-year period. Past performance is not indicative of future results.
2 - Scudder Balanced Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
The first half of 1999 was a time of significant transition in the global
financial markets. Signs of stronger growth in the U.S. and the beginnings of a
recovery in Japan and the emerging markets prompted investors to begin adjusting
to an environment where inflation, rather than deflation, loomed as the most
significant threat to global economic stability. With the possibility of higher
interest rates on the horizon for the first time in almost a year, bond prices
weakened substantially and sectors of the stock market that had underperformed
for several quarters, such as cyclicals and small companies, came to life.
Volatility once again became a critical factor in market performance as
investors struggled to assess the changing economic environment.
We believe that investments such as the Scudder Balanced Fund can provide a
degree of comfort in such an environment. The Fund's balanced approach of
investing in high-quality growth stocks and investment grade bonds has worked
well, providing solid gains with less volatility than a pure equity investment.
We believe that this Fund continues to be a sensible core portfolio holding for
investors who a have a long-term time horizon and prefer a lower level of
exposure to the sharp movements of the financial markets. For information on the
Fund's strategy and the recent market environment, please see the Portfolio
Management Discussion on page 6.
For those of you who are interested in new Scudder products, we are pleased
to introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of providing long-term outperformance compared
to their benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Thank you for your continued investment in Scudder Balanced Fund. If you
have any questions about your investment, please call Scudder Investor
Information at 1-800-SCUDDER or visit our Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Balanced Fund
3 - Scudder Balanced Fund
<PAGE>
Performance Update as of June 30, 1999
-------------------------------------------
Fund Index Comparisons
-------------------------------------------
Total Return
--------------------------------------------
Period
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------------
Scudder Balanced Fund
--------------------------------------------
1 Year $ 11,283 12.83% 12.83%
5 Year $ 22,751 127.51% 17.87%
Life of
Fund* $ 22,385 123.85% 13.22%
--------------------------------------------
S&P 500 Index (60%) and LBAB Index (40%)
--------------------------------------------
1 Year $ 11,521 15.21% 15.21%
5 Year $ 24,598 145.98% 19.71%
Life of
Fund* $ 25,764 157.64% 15.90%
--------------------------------------------
* The Fund commenced operation on January
4, 1993. Index comparisons begin
January 31, 1993.
-------------------------------------------
Growth of a $10,000 Investment
-------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
S&P 500 Index Scudder Balanced Fund LBAB Index
'93 10399 10000 10489
'94 10546 9823 10351
'95 13293 11705 11650
'96 16749 13584 12234
'97 22564 16286 13232
'98 29370 19806 14626
'99 36056 22348 15084
Yearly periods ended June 30
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. The Lehman Brothers Aggregate Bond (LBAB) Index is an
unmanaged 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
- ------------------------------------------
Yearly Periods Ended June 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1993* 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 11.82 $ 11.49 $ 13.33 $ 14.74 $ 16.51 $ 18.71 $ 19.74
- ------------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .05 $ .28 $ .32 $ .32 $ .09 $ .47 $ .33
- ------------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ -- $ .37 $ -- $ .76 $ .95
- ------------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) -1.07 -.54 19.16 16.05 19.90 21.61 12.83
- ------------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 4.30 .49 20.72 19.02 23.64 22.21 15.21
- ------------------------------------------------------------------------------------------------------------------------------
</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. If the Adviser had not temporarily capped expenses,
the average annual total return for the Fund for the one year, five year, and
life of Fund periods would have been lower.
4 - Scudder Balanced Fund
<PAGE>
Portfolio Summary as of June 30, 1999
- ---------------------------
Diversification
- ---------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stocks 59%
Fixed Income Holdings 39%
Cash Equivalents 2%
------------------------------
100%
------------------------------
The Fund's combination of high-quality stocks and investment grade bonds
helped mitigate volatility during the period.
- ---------------------------------
Fixed Income Holdings
(Excludes 2% Cash Equivs.)
- ---------------------------------
Type
-------------------------------
U.S. Government and
Treasury Obligations 56%
Corporate Bonds 28%
Asset-Backed Securities 5%
U.S. Government Agency
Pass-Thrus 4%
Government National
Mortgage Association 3%
Collateralized Mortgage
Obligations 3%
Foreign Bonds -- U.S.
$ Denominated 1%
-------------------------------
100%
-------------------------------
Quality
-------------------------------
U.S. Government and
Agencies 50%
AAA 22%
AA 6%
A 13%
BBB 9%
-------------------------------
100%
-------------------------------
Weighted Average Quality:
AA
A neutral portfolio duration and AA average quality was a positive in a
difficult environment for bonds.
- ------------------------------------
Equity Holdings
- ------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Technology 17%
Health 16%
Consumer Discretionary 16%
Consumer Staples 11%
Durables 9%
Manufacturing 9%
Media 8%
Financial 6%
Service Industries 5%
Communications 3%
----------------------------------
100%
----------------------------------
Holdings in the media and technology sectors contributed positively to
performance.
Five Largest Equity Holdings
----------------------------
1. Microsoft Corp.
Developer of computer
software
2. Cisco Systems, Inc.
Manufacturer of
computer network
products
3. General Electric Co.
Producer of
electrical equipment
4. Lucent Technologies Inc.
Developer of communication
software and products
5. Home Depot, Inc.
Building materials
and home improvement
stores
For more complete details about the Fund's Investment Portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Balanced Fund
<PAGE>
Portfolio Management Discussion
In the following interview, portfolio managers Valerie F. Malter, George Fraise,
and Stephen A. Wohler discuss the recent market environment and the strategy of
Scudder Balanced Fund in the six-month period ended June 30, 1999.
Q: Stocks generally performed well during the period, but bonds lost ground.
What conditions brought about this disparity?
A: Market performance in the first six months of the year was driven by
investors' changing perceptions of the health of the global economy. When the
year began, the financial markets were still evaluating the impact of the
recessionary environment in Japan and the developing countries. The consensus
view was that weakness overseas would ultimately slow the U.S. economy, and
possibly act as a catalyst for global deflation. In order to gain protection
against this eventuality, investors flocked to large-cap growth stocks whose
earnings were believed to be bulletproof in any economic environment. Bonds
posted mixed performance in the early part of the year, primarily because the
overwhelmingly negative sentiment that had driven their yields to record lows
(and their prices to new highs) in the second half of 1998 began to recede. As
fear dissipated from the market, yields gradually returned to levels that better
reflected economic fundamentals.
By the second quarter, it was becoming increasingly apparent that a slowdown was
not in the cards. In fact, both the U.S. and Asian economies were demonstrating
renewed strength, fueling concerns that inflation would not be far behind.
Equity investors rotated out of large-cap growth stocks to those that would
benefit from stronger growth, namely value stocks and smaller companies. In the
bond market, prices sank as investors priced in an interest rate hike by the
Federal Reserve. The yield on the 30-year U.S. Treasury bond, which stood at
5.095% on December 31, 1998, climbed to a high of 6.16% by June 24, 1999.
Corporate bonds also suffered during the sell-off, as record levels of issuance
brought new supply into the market at the same time as the fear of higher rates
was sapping demand. The period ended with the Fed raising rates by a
quarter-point to 5% and adopting a "neutral" bias toward future rate moves, an
action which immediately took pressure off the markets.
Q: How did the Fund perform in this environment?
A: For the six months ended June 30, the Fund returned 5.00%, compared with the
6.75% return of its unmanaged benchmark, which is a blend of the S&P 500 Index
(60%) and the Lehman Brothers Aggregate Bond Index (40%). Over time, the Fund
has performed well relative to its peers, finishing in the top quartile of
comparable funds for the one-, three-, and five-year periods, according to
Lipper Analytical Services.
Q: What were the primary contributors to performance within the equity portion
of the portfolio?
A: Our focus on high-quality growth stocks proved to be a negative factor early
in the second quarter, but it contributed positively to performance over the
full period. The Fund's holdings in the media sector once again provided
outstanding returns, as they have over the past several quarters. Omnicom,
Infinity Broadcasting, Outdoor Systems, and Univision were all top performers.
The Fund's
6 - Scudder Balanced Fund
<PAGE>
position in tech stocks also continued to make major contributions to
performance. Names we cited in the last report -- Linear Technology, Sun
Microsystems, Lucent Technologies, and Cisco Systems -- once again posted strong
gains, as did more recent additions such as Motorola and QUALCOMM. Retail stocks
also produced stellar returns in the first quarter -- most notably Costco,
Dayton Hudson, and Wal-Mart -- but gave up ground once the specter of higher
rates cast doubt on the sustainability of domestic consumption.
Q: What sectors detracted from performance?
A: Underperforming sectors included consumer staples, health care, and
financials. We had disappointments in some insurance companies in which we had a
high level of confidence, and have since replaced them with faster growers such
as Fannie Mae and Morgan Stanley. Pharmaceutical stocks came under pressure as a
result of some visible product disappointments, lofty valuations, and renewed
fears of regulatory changes. In the second quarter, Pfizer was down 17%, Eli
Lilly dropped 14%, SmithKline Beecham lost 8%, and Merck fell 6%.
Q: What is your view on the market's move away from "quality" in the second
quarter?
A: We feel that it will be only a short-term event. It is worth noting that this
same phenomenon occurred in the first quarter of 1998, only to reverse in the
following quarter. We do not believe that the outperformance of lower quality
companies with weaker fundamentals is sustainable, and we actually saw the
beginnings of this reversal in the month of June. Even when our style is out of
favor, we remain committed to a strategy of investing in the highest quality
companies with the strongest fundamental trends.
Q: Within the fixed income component, what was your strategy during the period?
A: We have emphasized corporate issues over the past three years, and we intend
to do so in the future. However, significant inflows of new assets during the
first half of the year prompted us to park cash in Treasuries while we looked
for opportunities in other sectors. That said, we continue to believe that the
yield levels of corporates are attractive relative to Treasuries. Although the
Fund's holdings in corporate issues helped performance in the first quarter, our
belief that the combination of excessive supply and the looming Fed rate hike
would exact a toll on the sector prompted us to reduce our position as the year
progressed. This tactical decision affected performance positively by reducing
the impact of the second quarter weakness in corporates. Feeling that the slump
had played itself out by mid-June, we elected to once again begin prospecting
for value in corporate issues as the period drew to a close.
We continue to favor bonds in sectors that tend to have steady cash flows, such
as consumer nondurables, media, and telecommunications, over those in more
cyclical industries. Although this strategy worked well in 1998, some of the
higher quality names lost ground once the economy began to pick up steam, which
parallels events in the stock market. The weaker performance in these sectors
was mitigated somewhat when higher oil prices sparked a rally in the Fund's
holdings in the energy sector.
7 - Scudder Balanced Fund
<PAGE>
Over the course of the reporting period, we gradually reduced duration (interest
rate sensitivity) to a level in line with that of the Fund's benchmark, a
strategy that helped mitigate the poor performance of the bond market. This was
accomplished by selling longer maturity bonds and reinvesting the proceeds into
issues with maturities of three- to five-years, which we felt offered a better
tradeoff of risk and return in light of the flattening yield curve. We intend to
keep duration neutral until such time as we see signs of a slowing in the
economy, or we get a clearer indication from the Fed as to what its next move
might be.
Q: What is your outlook for the remainder of the year?
A: We are cautiously optimistic on the outlook for both stocks and bonds. While
the combination of steady growth and low inflation should provide support for
financial assets, valuations in the U.S. stock market are stretched, the economy
remains vulnerable to inflation fears, and Y2K is approaching. In an environment
that is likely to be marked by further volatility, we will continue to invest in
companies that are positioned to produce steady earnings growth, and we will use
a value-oriented approach to unearth opportunities in the bond market,
particularly among corporate issues. We believe that an investment strategy that
focuses on quality in both the stock and bond markets will produce superior
results over time.
8 - Scudder Balanced Fund
<PAGE>
Glossary of Investment Terms
CONSUMER NONDURABLES Products bought by consumers that are
expected to last less than three years, such
as food and drugs. Sales of nondurables
generally tend to be less sensitive to
economic fluctuations.
CONSUMER STAPLES Products purchased by consumers on a regular
basis, such as food, beverages, alcohol, and
tobacco. In the aggregate, sales of consumer
staples tend to be steady and less sensitive
to economic fluctuations.
DEFLATION A decline in the prices of goods and
services. The opposite of inflation,
deflation usually has a negative effect on
output and employment.
DURATION A measure of bond price volatility. Duration
can be defined as the approximate percentage
change in price for a 100 basis point (one
single percentage point) change in market
interest rate levels. A duration of 5, for
example, means that the price of a bond
should rise by approximately 5% for a one
percentage point fall in interest rates, and
fall by 5% for a one percentage point rise
in interest rates.
GROWTH STOCK Stock of a company that has displayed above
average earnings growth and is expected to
continue to increase profits faster than the
overall market. Stocks of such companies
usually trade at higher valuations and
experience more price volatility than the
market as a whole. Distinct from value
stock.
VALUE STOCK A company whose stock price does not fully
reflect its intrinsic value, as indicated by
price/earnings ratio, price/book value
ratio, dividend yield, or some other
valuation measure, relative to its industry
or the market overall. Value stocks tend to
display less price volatility and may carry
higher dividend yields. Distinct from growth
stock.
WEIGHTING (over/under) Refers to the allocation of assets --
usually in terms of sectors, industries, or
countries -- within a portfolio relative to
the portfolio's benchmark index or
investment universe.
YIELD CURVE A graph showing the term structure of
interest rates by plotting the yields of all
bonds of the same quality with maturities
ranging from the shortest to the longest
available. The resulting curve shows the
relationship between short-, intermediate-,
and long-term interest rates.
(Sources: Scudder Kemper Investments, Inc., Barron's Dictionary of Finance and
Investment Terms)
9 - Scudder Balanced Fund
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio as of June 30, 1999 (Unaudited)
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------
Repurchase Agreements 1.6%
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 6/30/1999
at 4.75%, to be repurchased at $8,585,133 on 7/1/1999, collateralized by a ----------
$8,205,000 U.S. Treasury Note, 8.75%, 8/15/2000 (Cost $8,584,000) ............ 8,584,000 8,584,000
----------
U.S. Treasury Obligations 21.8%
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Note, 5.875%, 11/30/2001 ......................................... 8,000,000 8,050,000
U.S. Treasury Note, 5.625%, 12/31/2002 ......................................... 15,500,000 15,483,105
U.S. Treasury Note, 5.5%, 5/31/2003 ............................................ 15,250,000 15,133,185
U.S. Treasury Note, 4.25%, 11/15/2003 .......................................... 8,000,000 7,553,760
U.S. Treasury Note, 7.25%, 8/15/2004 ........................................... 20,000,000 21,275,000
U.S. Treasury Bond, 9.375%, 2/15/2006 .......................................... 2,500,000 2,962,900
U.S. Treasury Note, 6.5%, 10/15/2006 ........................................... 12,000,000 12,390,000
U.S. Treasury Note, 3.875%, 1/15/2009 .......................................... 2,000,000 2,036,755
U.S. Treasury Bond, 7.25%, 5/15/2016 ........................................... 21,750,000 23,921,520
U.S. Treasury Bond, 6.25%, 8/15/2023 ........................................... 3,000,000 3,014,070
U.S. Treasury Bond, 3.676%, 4/15/2028 .......................................... 1,750,000 1,696,840
- ------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agencies (Cost $116,923,223) 113,517,135
- ------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 1.2%
- ------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-thru, 9.5%, 8/15/2019 ............ 3,661 3,931
Government National Mortgage Association Pass-thru, 7.0% with various
maturities to 3/1/2029 ....................................................... 6,484,123 6,396,976
- ------------------------------------------------------------------------------------------------------------
Total Government National Mortgage Association (Cost $6,574,211) 6,400,907
- ------------------------------------------------------------------------------------------------------------
U.S. Government Agency Pass-thrus 2.2%
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.75%, 7/15/2003 ............................. 3,000,000 2,962,020
Federal Home Loan Mortgage Corp., 8.0% with various maturities to 4/1/2008 ..... 690,485 703,874
Federal National Mortgage Association, 8.0% with various maturities to 12/1/2012 1,479,414 1,520,441
Federal National Mortgage Association, 6.5% with various maturities to 3/1/2028 6,314,639 6,105,615
- ------------------------------------------------------------------------------------------------------------
Total U. S. Government Agency Pass-thrus (Cost $11,568,964) 11,291,950
- ------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 1.1%
- ------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Series 1997-A7, 7.25%, 11/25/2027 ............ 3,939,958 3,927,646
Residential Asset Securitization Trust, Series 1997-A6, 7.25%, 9/25/2012 ....... 1,541,000 1,544,853
- ------------------------------------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations (Cost $5,570,801) 5,472,499
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Balanced Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------
Foreign Bonds -- U.S.$ Denominated 0.4%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Norsk Hydro ASA, 7.75%, 6/15/2023 ............................................. 1,000,000 997,250
Saga Petroleum, 7.25%, 9/23/2027 .............................................. 1,000,000 934,340
- -------------------------------------------------------------------------------------------------------
Total Foreign Bonds -- U.S.$ Denominated (Cost $2,076,980) 1,931,590
- -------------------------------------------------------------------------------------------------------
Asset Backed Securities 1.9%
- -------------------------------------------------------------------------------------------------------
Manufacturing 0.3%
PBG Equipment Trust Series 1A, 6.27%, 1/20/2012 ............................... 1,567,751 1,552,496
-----------
Automobile Receivables 0.6%
First Security Auto Owner Trust, 6%, 10/15/2003 ............................... 2,000,000 1,997,500
Premier Auto Trust Asset Backed Certificate, Series 1996-3 A4, 6.75%, 11/6/2000 842,873 846,295
-----------
2,843,795
-----------
Credit Card Receivables 0.8%
Citibank Credit Card Master Trust I, 5.5%, 2/15/2006 .......................... 2,000,000 1,921,860
MBNA Master Credit Card Trust, 5.8%, 12/15/2005 ............................... 1,500,000 1,466,250
Proffitt's, Inc. Credit Card Master Trust, 6%, 9/15/2004 ...................... 1,000,000 995,313
-----------
4,383,423
-----------
Home Equity Loans 0.2%
First Plus Home Loan Trust, Series 1998, 6.25%, 11/10/2016 .................... 1,000,000 987,188
- -------------------------------------------------------------------------------------------------------
Total Asset Backed (Cost $9,899,442) 9,766,902
- -------------------------------------------------------------------------------------------------------
Corporate Bonds 11.2%
- -------------------------------------------------------------------------------------------------------
Consumer Staples 0.8%
Bass America Inc., 6.625%, 3/1/2003 ........................................... 1,500,000 1,497,015
Kellogg Co., 5.75%, 2/2/2001 .................................................. 1,000,000 995,500
PepsiCo, Inc., 5.625%, 2/17/2009 .............................................. 1,500,000 1,384,335
-----------
3,876,850
-----------
Communications 1.6%
AT&T Corp., 6%, 3/15/2009 ..................................................... 2,000,000 1,879,580
Lucent Technologies Inc., 6.9%, 7/15/2001 ..................................... 1,250,000 1,271,100
Sprint Capital Corp., 6.125%, 11/15/2008 ...................................... 1,500,000 1,384,335
Sprint Capital Corp., 6.375%, 5/1/2009 ........................................ 2,000,000 1,900,000
WorldCom, Inc., 6.4%, 8/15/2005 ............................................... 2,000,000 1,956,600
-----------
8,391,615
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Balanced Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Financial 3.1%
Associates Corp. of North America, 6.625%, 5/15/2001 .... 500,000 504,115
Boeing Capital Corp., Medium Term Note, 6.75%, 12/23/2003 1,000,000 1,012,370
Capital One Bank, Medium Term Note, 5.95%, 2/15/2001 .... 1,000,000 991,000
First Union Corp., 8.125%, 6/24/2002 .................... 1,000,000 1,047,100
First USA Bank, 5.85%, 2/22/2001 ........................ 1,000,000 995,910
Fleet Financial Group, 6.875%, 1/15/2028 ................ 1,000,000 915,940
Ford Motor Credit Co., 6.125%, 4/28/2003 ................ 2,500,000 2,463,550
General Electric Capital Corp., 6.02%, 5/4/2001 ......... 1,000,000 996,250
Home Savings of America, 6%, 11/1/2000 .................. 1,000,000 997,110
Merrill Lynch & Co., Inc., 6%, 2/17/2009 ................ 1,500,000 1,385,700
Prudential Insurance Co., 6.375%, 7/23/2006 ............. 1,000,000 974,360
Southern National Corp., 7.05%, 5/23/2003 ............... 1,000,000 1,007,710
Wachovia Corp., 6.7%, 6/21/2004 ......................... 3,000,000 3,001,020
-----------
16,292,135
-----------
Media 0.6%
News America Holdings Inc., 9.25%, 2/1/2013 ............. 1,000,000 1,124,130
TCI Communications, Inc., 8%, 8/1/2005 .................. 1,000,000 1,051,910
Time Warner Inc., 9.125%, 1/15/2013 ..................... 1,000,000 1,132,060
-----------
3,308,100
-----------
Durables 0.2%
Martin Marietta Corp., 6.5%, 4/15/2003 .................. 1,000,000 987,540
-----------
Manufacturing 1.0%
Fort James Corp., 6.625%, 9/15/2004 ..................... 1,000,000 998,820
TRW, Inc., 6.625%, 6/1/2004 ............................. 2,000,000 1,957,040
Tyco International Group, 6.125%, 1/15/2009 ............. 2,500,000 2,328,600
-----------
5,284,460
-----------
Technology 1.0%
IBM Corp., 5.1%, 11/10/2003 ............................. 1,500,000 1,431,300
Raytheon Co., 6%, 12/15/2010 ............................ 2,500,000 2,286,600
Xerox Corp., 5.5%, 11/15/2003 ........................... 1,500,000 1,428,990
-----------
5,146,890
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Balanced Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- --------------------------------------------------------------------------------
<S> <C> <C>
Energy 2.0%
Anadarko Petroleum Corp., 5.875%, 10/15/2003 ......... 1,500,000 1,441,620
Atlantic Richfield Co., 5.55%, 4/15/2003 ............. 2,000,000 1,940,000
Conoco Inc., 5.9%, 4/15/2004 ......................... 2,500,000 2,439,450
Louisiana Land and Exploration Co., 7.65%, 12/1/2023 . 1,250,000 1,238,400
Occidental Petroleum Corp., 8.45%, 2/15/2029 ......... 2,500,000 2,616,100
Petroleum Geo-Services ASA, 6.625%, 3/30/2008 ........ 1,000,000 941,330
-----------
10,616,900
-----------
Transportation 0.3%
Continental Airlines Inc., 6.795%, 8/2/2018 .......... 1,500,000 1,432,500
-----------
Utilities 0.6%
PacifiCorp Australia LLC, 6.15%, 1/15/2008 ........... 2,000,000 1,904,020
Public Service Co. of Colorado, 6%, 4/15/2003 ........ 1,000,000 982,360
-----------
2,886,380
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $60,271,097) 58,223,370
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
Common Stocks 58.6%
- --------------------------------------------------------------------------------
Consumer Discretionary 9.3%
Department & Chain Stores 7.2%
Consolidated Stores Corp.* ........................... 215,900 5,829,300
Costco Companies, Inc.* .............................. 55,700 4,459,481
Dayton Hudson Corp. .................................. 67,400 4,381,000
Gap Inc. ............................................. 78,450 3,951,919
Home Depot, Inc. ..................................... 173,400 11,173,463
Wal-Mart Stores Inc. ................................. 153,500 7,406,375
-----------
37,201,538
-----------
Recreational Products 1.2%
Electronic Arts Inc.* ................................ 64,800 3,515,400
Hasbro, Inc. ......................................... 100,600 2,810,513
-----------
6,325,913
-----------
Restaurants 0.9%
McDonald's Corp. ..................................... 111,400 4,602,213
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Balanced Fund
<PAGE>
Market
Shares Value ($)
- ------------------------------------------------------------
Consumer Staples 6.4%
Alcohol & Tobacco 0.7%
Philip Morris Companies, Inc. .... 93,500 3,757,531
-----------
Food & Beverage 2.5%
Coca-Cola Co., Inc. .............. 96,300 6,018,750
Kroger Co.* ...................... 140,200 3,916,838
PepsiCo Inc. ..................... 79,700 3,083,387
-----------
13,018,975
-----------
Package Goods/Cosmetics 3.2%
Colgate-Palmolive Co. ............ 55,400 5,470,750
Estee Lauder Companies "A" ....... 106,000 5,313,250
Procter & Gamble Co. ............. 63,200 5,640,600
-----------
16,424,600
-----------
Health 9.7%
Health Industry Services 0.5%
IMS Health Inc. .................. 80,900 2,528,125
-----------
Medical Supply & Specialty 1.6%
Medtronic Inc. ................... 104,729 8,155,771
-----------
Pharmaceuticals 7.6%
Eli Lilly & Co. .................. 66,238 4,744,297
Johnson & Johnson ................ 38,700 3,792,600
Merck & Co., Inc. ................ 105,000 7,770,000
Pfizer, Inc. ..................... 94,500 10,371,375
Schering-Plough Corp. ............ 70,100 3,715,300
SmithKline Beecham PLC (ADR) ..... 64,700 4,274,244
Warner-Lambert Co. ............... 69,600 4,828,500
-----------
39,496,316
-----------
Communications 1.7%
Telephone/Communications
Frontier Corp. ................... 60,500 3,569,500
MCI WorldCom, Inc.* .............. 62,800 5,416,500
-----------
8,986,000
-----------
Financial 3.3%
Insurance 1.3%
American International Group, Inc. 57,988 6,788,162
-----------
The accompanying notes are an integral part of the financial statements.
14 - Scudder Balanced Fund
<PAGE>
Market
Shares Value ($)
- ------------------------------------------------------------------
Other Financial Companies 2.0%
Federal Home Loan Mortgage Corp. ....... 51,500 2,987,000
Federal National Mortgage Association .. 62,500 4,273,438
Morgan Stanley, Dean Witter Discover Co. 32,700 3,351,750
-----------
10,612,188
-----------
Media 4.4%
Advertising 1.2%
Omnicom Group, Inc. .................... 60,100 4,808,000
Outdoor Systems, Inc.* ................. 48,262 1,761,563
-----------
6,569,563
-----------
Broadcasting & Entertainment 2.6%
Clear Channel Communications, Inc.* .... 98,800 6,811,025
Infinity Broadcasting Corp.* ........... 102,600 3,052,350
Univision Communication Inc.* .......... 54,000 3,564,000
-----------
13,427,375
-----------
Cable Television 0.6%
AT&T Corp -- Liberty Media Group* ...... 82,600 3,035,550
-----------
Service Industries 2.8%
EDP Services 1.5%
America Online Inc.* ................... 69,800 7,712,900
-----------
Investment 0.7%
Charles Schwab Corp. ................... 34,600 3,801,675
-----------
Miscellaneous Commercial Services 0.6%
Galileo International, Inc. ............ 53,800 2,874,938
-----------
Durables 2.9%
Telecommunications Equipment
Lucent Technologies Inc. ............... 169,800 11,450,888
Nokia AB Oy "A" (ADR) .................. 39,100 3,580,094
-----------
15,030,982
-----------
Manufacturing 5.3%
Diversified Manufacturing 4.7%
General Electric Co. ................... 115,400 13,040,200
Textron, Inc. .......................... 70,300 5,786,569
Tyco International Ltd. ................ 60,100 5,694,475
-----------
24,521,244
-----------
The accompanying notes are an integral part of the financial statements.
15 - Scudder Balanced Fund
<PAGE>
Market
Shares Value ($)
- ------------------------------------------------------------------------
Industrial Specialty 0.6%
QUALCOMM Inc.* ............................. 22,300 3,200,050
-----------
Technology 12.8%
Computer Software 2.8%
Microsoft Corp.* ........................... 161,400 14,556,263
-----------
Diverse Electronic Products 1.3%
Applied Materials, Inc.* ................... 51,900 3,834,113
Motorola Inc. .............................. 32,800 3,107,800
-----------
6,941,913
-----------
EDP Peripherals 0.9%
EMC Corp.* ................................. 80,700 4,438,500
-----------
Electronic Data Processing 2.5%
International Business Machines Corp. ...... 48,200 6,229,850
Sun Microsystems, Inc.* .................... 96,000 6,612,000
-----------
12,841,850
-----------
Office/Plant Automation 2.6%
Cisco Systems, Inc.* ....................... 213,550 13,773,975
-----------
Semiconductors 2.7%
Intel Corp. ................................ 179,700 10,692,150
Linear Technology Corp. .................... 50,000 3,362,500
-----------
14,054,650
- --------------------------------------------------------------------------
Total Common Stocks (Cost $227,928,313) 304,678,760
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $449,397,031) (a) 519,867,113
- --------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $449,743,171. At June 30,
1999, net unrealized appreciation for all securities based on tax cost was
$70,123,942. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $78,824,784 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$8,700,842.
The accompanying notes are an integral part of the financial statements.
16 - Scudder Balanced Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Assets
- -------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $449,397,031) .......... $519,867,113
Cash ........................................................... 149
Receivable for investments sold ................................ 4,939,307
Dividends and interest receivable .............................. 2,714,483
Receivable for Fund shares sold ................................ 1,374,233
Other assets ................................................... 1,913
------------
Total assets ................................................... 528,897,198
Liabilities
- -------------------------------------------------------------------------------------------------
Payable for investments purchased .............................. 3,079,985
Payable for Fund shares redeemed ............................... 1,596,049
Accrued management fee ......................................... 289,752
Other payables and accrued expenses ............................ 249,035
------------
Total liabilities .............................................. 5,214,821
- -------------------------------------------------------------------------------------------------
Net assets, at market $523,682,377
- -------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................ 207,289
Net unrealized appreciation (depreciation) on investments ...... 70,470,082
Accumulated net realized gain (loss) ........................... 585,048
Paid-in capital ................................................ 452,419,958
- -------------------------------------------------------------------------------------------------
Net assets, at market $523,682,377
- -------------------------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($523,682,377 / 26,534,731 outstanding shares of beneficial -----------
interest, $.01 par value, unlimited number of shares authorized) $ 19.74
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Balanced Fund
<PAGE>
Statement of Operations
six months ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest ...................................................... $ 5,563,942
Dividends (net of foreign taxes withheld of $2,721) ........... 630,027
-----------
6,193,969
Expenses:
Management fee ................................................ 1,440,119
Services to shareholders ...................................... 1,007,543
Custodian and accounting fees ................................. 56,924
Trustees' fees and expenses ................................... 23,140
Reports to shareholders ....................................... 42,780
Auditing ...................................................... 19,046
Registration fees ............................................. 21,538
Legal ......................................................... 8,366
Other ......................................................... 3,763
-----------
2,623,219
- -----------------------------------------------------------------------------------------------
Net investment income 3,570,750
- -----------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... 1,196,575
Net unrealized appreciation (depreciation) during the period on
investments ................................................. 11,789,650
- -----------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 12,986,225
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $16,556,975
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Balanced Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets
Six Months
Ended June 30, Year Ended
1999 December 31,
(Unaudited) 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 3,570,750 $ 3,928,148
Net realized gain (loss) from investment transactions ............... 1,196,575 11,308,836
Net unrealized appreciation (depreciation) on investment transactions
during the period ................................................... 11,789,650 24,853,873
------------- -------------
Net increase (decrease) in net assets resulting from operations ..... 16,556,975 40,090,857
------------- -------------
Distributions to shareholders:
From net investment income .......................................... (3,363,461) (4,059,339)
------------- -------------
From net realized gains ............................................. (267,261) (12,314,730)
------------- -------------
Fund share transactions:
Proceeds from shares sold ........................................... 330,182,722 132,016,807
Net asset value of shares issued to shareholders in reinvestment of
distributions .................................................... 3,555,047 16,026,652
Cost of shares redeemed ............................................. (86,887,538) (66,566,262)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions .. 246,850,231 81,477,197
------------- -------------
Increase (decrease) in net assets ................................... 259,776,484 105,193,985
Net assets at beginning of period ................................... 263,905,893 158,711,908
Net assets at end of period (including undistributed net investment ------------- -------------
income of $207,289 and $0, respectively) ......................... $ 523,682,377 $ 263,905,893
Other Information ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................... 13,918,098 9,416,710
------------- -------------
Shares sold ......................................................... 16,935,577 7,309,381
Shares issued to shareholders in reinvestment of distributions ...... 182,985 870,324
Shares redeemed ..................................................... (4,501,929) (3,678,317)
------------- -------------
Net increase (decrease) in Fund shares .............................. 12,616,633 4,501,388
------------- -------------
Shares outstanding at end of period ................................. 26,534,731 13,918,098
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Balanced Fund
<PAGE>
Financial Statements
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, 1999 Years Ended December 31
(Unaudited)(a) 1998(a) 1997(a) 1996(a) 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
Net asset value, beginning of period .......... $ 18.96 $ 16.85 $ 14.60 $ 14.12 $ 11.63 $ 12.23
Income from investment operations: ------------------------------------------------------------------------------
Net investment income ......................... .16 .36 .38 .36 .32 .31
Net realized and unrealized gain (loss) on
investment transactions ..................... .79 3.14 2.91 1.25 2.74 (.60)
------------------------------------------------------------------------------
Total from investment operations .............. .95 3.50 3.29 1.61 3.06 (.29)
Less distributions from: ------------------------------------------------------------------------------
Net investment income ......................... (.15) (.37) (.36) (.34) (.32) (.31)
Net realized gains on investment transactions . (.02) (1.02) (.68) (.79) (.25) --
------------------------------------------------------------------------------
Total distributions ........................... (.17) (1.39) (1.04) (1.13) (.57) (.31)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net asset value, end of period ................ $ 19.74 $ 18.96 $ 16.85 $ 14.60 $ 14.12 $ 11.63
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .............................. 5.00** 21.10(b) 22.78(b) 11.54(b) 26.48(b) (2.39)(b)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........ 524 264 159 110 90 66
Ratio of operating expenses, net to average
daily net assets (%) ........................ 1.28* 1.29 1.02 1.00 1.00 1.00
Ratio of operating expenses before expense
reductions, to average daily net assets (%) . 1.28* 1.34 1.37 1.37 1.40 1.47
Ratio of net investment income to average daily
net assets (%) .............................. 1.74* 1.99 2.32 2.42 2.51 2.66
Portfolio turnover rate (%) ................... 56.3* 74.7 43.2 69.7 103.3 105.4
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
20 - Scudder Balanced Fund
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Balanced Fund (the "Fund") is a diversified series of Scudder Portfolio
Trust (the "Trust") which is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
organized as a Massachusetts business trust.
The Fund'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. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign 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 Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Trust, whose
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. Money market instruments purchased with an original 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 or
sub-custodian bank, 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 is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made quarterly. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions
21 - Scudder Balanced Fund
<PAGE>
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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
All discounts are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the six months ended June 30, 1999, purchases and sales of investment
securities (excluding short-term investments and direct U.S. Government
obligations) aggregated $261,539,274 and $89,334,675, respectively. Purchases
and sales of direct U.S. Government obligations aggregated $106,840,566 and
$26,873,287, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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 .70% of the Fund's
average daily net assets, computed and accrued daily and payable monthly.
Accordingly, for the six months ended June 30, 1999, the fee pursuant to the
agreement amounted to $1,440,119.
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, 1999, the amount charged to the Fund by SSC aggregated
$260,776, of which $44,523 is unpaid at June 30, 1999.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans for the Fund. For the six months ended June 30, 1999, the
amount charged to the Fund by STC aggregated $646,037, of which $145,926 is
unpaid at June 30, 1999.
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, 1999, the amount charged to the Fund by SFAC aggregated $39,580,
of which $6,881 is unpaid at June 30, 1999.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1999, Trustee fees and expenses aggregated $23,140.
22 - Scudder Balanced Fund
<PAGE>
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
23 - Scudder Balanced Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager,
WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll Associates;
Executive Fellow, Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee; Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration,
Northeastern University
Kathryn L. Quirk*
Trustee, Vice President
and Assistant Secretary
Jean C. Tempel
Trustee; Venture Partner,
Venture Capital Group
Kelly D. Babson*
Vice President
William M. Hutchinson*
Vice President
Thomas W. Joseph*
Vice President
Valerie F. Malter*
Vice President
Ann M. McCreary*
Vice President
Stephen A. Wohler*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - Scudder Balanced Fund
smoo<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 --
Prime Reserve Shares*
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 GNMA Fund
Scudder Income Fund
Scudder Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe 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 or classes thereof 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. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. ++Only the International
Shares of the Fund are part of the Scudder Family of Funds. +++ +++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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by Scudder's
insurance agencies, 1-800-225-2470. #These funds, advised by Scudder Kemper
Investments, Inc., are traded on the New York Stock Exchange and, in some cases,
on various other stock exchanges.
25 - Scudder Balanced 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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 previously designated.
Distributions Direct
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
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26 - Scudder Balanced Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
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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 8,000 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
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. 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.
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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27 - Scudder Balanced Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $280 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
