SCUDDER
INVESTMENTS (SM)
[LOGO]
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BOND/DOMESTIC
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Scudder Corporate
Bond Fund
Fund #308
Semiannual Report
July 31, 2000
For investors seeking a high level of current income through investment
primarily in investment-grade corporate debt securities.
A no-load fund with no commissions to buy, sell, or
exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
13 Investment Portfolio
17 Financial Statements
20 Financial Highlights
21 Notes to Financial Statements
26 Shareholder Meeting Results
27 Officers and Trustees
28 Investment Products and Services
30 Account Management Resources
2
<PAGE>
Scudder Corporate Bond Fund
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ticker symbol SCCBX fund number 308
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Date of Inception: o Corporate bond funds provided positive absolute returns
8/31/98 during the six months ended July 31, 2000, but the
combination of rising short-term interest rates,
Total Net Assets as disruptions in the Treasury sector, and investors'
of 7/31/00: concerns over credit quality caused the sector to
$39 million underperform Treasury issues.
o In an unstable environment, the fund benefited from a
focus on liquid, higher-quality issues. Management has
also found opportunities in the telecommunications,
media, and energy sectors.
o As of the close of the period, the fund's net
annualized 30-day SEC yield stood at 7.35%.
3
<PAGE>
Letter from the Fund's President
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Dear Shareholders,
During the second half of the 1990s, the strong performance of the U.S.
stock market dimmed the attractiveness of bonds' steady returns. As investors
watched the Nasdaq index surpass new milestones on what seemed to be a monthly
basis, the temptation to jump into technology stocks was sometimes irresistible.
But as the events of 2000 demonstrated, bonds still hold an important place in
investors' portfolios. In a period in which stocks experienced significant
volatility and actually lost ground (as measured by the S&P 500 Index), most
diversified bond portfolios produced positive returns. More notably, bonds also
provided added stability to the portfolios of investors who maintained a
diversified approach during the stock market's winter rally.
We believe that the lesson of this year is that no matter what is taking place
in the financial markets, it is essential for investors to stay focused on their
goals, and ensure that their investments are appropriately suited for their
needs. Unless you plan to devote your energies to investing every day, we think
that you will benefit from taking a long-term approach that includes exposure to
several asset classes. This includes domestic and international stocks,
small-caps, fixed income, and money market funds. As a shareholder of Scudder
Corporate Bond Fund, you already hold
4
<PAGE>
an important element of a diversified portfolio. The fund's management team
seeks to provide attractive monthly income by investing in a diversified
portfolio of corporate issues of varying maturities. This approach helped the
fund to beat the average return of funds in its category (as calculated by
Lipper Analytical Services)^1 for the twelve-month period ended July 31. For
more information on where the fund's portfolio managers have found opportunities
in the bond market, please turn to the Portfolio Management Discussion beginning
on page 9.
Thank you for your continued investment in Scudder Corporate Bond Fund. For
current information on the fund or your account, visit our Web site at
www.scudder.com. There you'll find a wealth of information, including fund
performance, the most recent news on Scudder products and services, and the
opportunity to perform account transactions. You can also speak with the one of
our representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Linda C. Coughlin
Linda C. Coughlin
President
Scudder Corporate Bond Fund
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends and
capital gains. For the period ended July 31, 2000 Scudder Corporate Bond Fund's
Lipper ranking was 52 out of 138 funds for the one-year period. Past performance
is no guarantee of future results.
5
<PAGE>
Performance Update
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July 31, 2000
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Lehman Brothers Corporate
Scudder Corporate Bond Fund Intermediate Bond Index*
10000 10000
10178 10217
10553 10423
10472 10382
10252 10224
10337 10403
10340 10347
10487 10459
10767 10787
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 7/31/2000 $10,000 Cumulative Annual
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Scudder Corporate Bond Fund
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1 year $ 10,503 5.03% 5.03%
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Life of Fund** $ 10,767 7.67% 3.93%
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Lehman Brothers Corporate Intermediate Bond Index*
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1 year $ 10,550 5.50% 5.50%
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Life of Fund** $ 10,787 7.87% 4.03%
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* The Lehman Brothers Corporate Intermediate Bond Index is a subset of the
companies in the Lehman Brothers Corporate Bond Index with maturities of
less than 10 years, calculated on a total return basis. Index returns
assume reinvested dividends and, unlike Fund returns, do not reflect any
fees or expenses.
** The Fund commenced operations on August 31, 1998.
6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE SCUDDER
CORPORATE BOND FUND TOTAL RETURN (%) AND LEHMAN BROTHERS CORPORATE INTERMEDIATE
INDEX TOTAL RETURN (%)
BAR CHART DATA:
Yearly periods ended July 31
1999** 2000
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Fund Total
Return (%) 2.52 5.03
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Index Total
Return (%) 2.24 5.50
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Net Asset Value ($) 11.49 11.23
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Income
Dividends ($) .77 .81
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Capital Gains
Distributions ($) .05 --
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* The Lehman Brothers Corporate Intermediate Bond Index is a subset of the
companies in the Lehman Brothers Corporate Bond Index with maturities of
less than 10 years, calculated on a total return basis. Index returns
assume reinvested dividends and, unlike Fund returns, do not reflect any
fees or expenses.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, total returns for the Fund would have been
lower.
** The Fund commenced operations on August 31, 1998.
7
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Portfolio Summary
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July 31, 2000
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Diversification
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Management took
advantage of the fund's
ability to diversify to
reduce its weighting in
corporates, a sector
that underperformed
during the period.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Corporate Bonds 55%
Cash Equivalents 14%
U.S. Government Agency
Pass-Thrus 14%
U.S. Treasury Obligations 13%
Foreign Bonds --
U.S.$ Denominated 3%
Asset Backed 1%
------------------------------------
100%
------------------------------------
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Quality
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The fund's position in
government issues
increased from 28% of
net assets as of
January 31, 2000.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
U.S. Government Agencies &
Treasury Obligations 41%
AAA* 3%
AA 9%
A 16%
BBB 18%
BB 8%
B 5%
------------------------------------
100%
------------------------------------
* Category includes cash
equivalents
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Effective Maturity
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Management reduced the
fund's weighting in
intermediate-term bonds,
in favor of shorter-term
issues and those with
maturities of ten years
or more.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Less than 1 year 14%
1 < 5 years 23%
5 < 8 years 20%
8 < 10 years 27%
Greater than 10 years 16%
------------------------------------
100%
------------------------------------
* Weighted average effective
maturity: 8.9 years
For more complete details about the Fund's investment portfolio, see page 13. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
<PAGE>
Portfolio Management Discussion
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July 31, 2000
In the following interview, portfolio manager Robert S. Cessine discusses
Scudder Corporate Bond Fund's strategy and the market environment in the
six-month period ended July 31, 2000.
Q: Corporate bonds provided spotty returns during the early stages of the
reporting period. What factors are influencing the sector's performance?
A: The inversion of the Treasury curve proved to be a negative for the relative
performance of non-government issues, at the same time short-term interest rates
were rising and market participants' concerns over credit quality dampened the
sector's returns on an absolute basis. In general, shorter-duration corporate
bonds (or those with less interest rate sensitivity) beat longer-duration
corporates; high quality bonds outperformed those of lesser quality; and liquid
issues bested non-liquid issues. The fund was positioned to take advantage of
these disparities, which proved helpful to performance.
The most important cause for corporates' underperformance in relation to
government issues was the disruption of the Treasury yield curve. Long-term
government bonds were boosted by the Treasury's buyback program, which is
designed to reduce outstanding debt by curtailing issuance and taking existing
bonds off investors' hands. Seeing the potential for a significant reduction in
supply, investors moved into longer-term issues (where the Treasury was focusing
its buyback efforts), driving up prices and sending yields plummeting. At the
same time, however, shorter-term bonds across all sectors were experiencing the
pressure associated with the Federal Reserve's interest rate increases. At the
start of 2000, the Federal Funds rate stood at 5.50%. But the combination of
continued strong growth, a shrinking pool of available workers, rising energy
prices, and a roaring stock market compelled the Fed to take aggressive action
to slow growth to a more manageable pace. Consequently, interest rates were
boosted by a quarter-point on February 2 and March 21, and by a half-point on
May 16. These rate hikes exerted pressure on shorter-term bonds over most of
9
<PAGE>
the period, causing what is known as an "inverted yield curve." Ordinarily,
long-term bonds carry higher yields than short-term issues in order to
compensate investors for tying up their money over a longer period. In a state
of inversion, however, shorter-term bonds carry higher yields than longer-term
issues. This dynamic proved harmful to the corporate sector because as the
yields on longer Treasuries fell, inverting the yield curve, corporate yields
did not follow suit. This caused corporate issues to underperform relative to
Treasuries.
Q: After struggling through the early part of the year, corporates rebounded in
June and July. What happened?
A: During the latter part of the reporting period, a series of economic reports
suggested that -- contrary to expectations -- growth in the U.S. was beginning
to slow. Although it remains to be seen whether the initial cooling of the
economy is just a breather or the beginning of a long-term trend, the bond
market reacted positively because the likelihood of aggressive Fed action became
more remote. This notion was reinforced when the Fed opted to leave interest
rates unchanged at its June 28 meeting. The improvement in the interest rate
outlook -- as well as a flattening of the yield curve from its state of extreme
inversion -- helped provide a lift to corporate bonds. In addition, the
technical picture for corporates improved somewhat, as inflows into mutual funds
turned positive and the new issue calendar showed signs of reviving.
Q: How did the fund perform during the reporting period?
A: During the six months ended July 31, 2000, Scudder Corporate Bond returned
4.13% compared to the 4.26% return of its benchmark, the Lehman Brothers
Corporate Intermediate Bond Index. According to Lipper Analytical Services, the
fund also beat the average return of funds in its peer group -- Corporate Debt
Funds BBB Rated -- over both the six-month and
10
<PAGE>
one-year periods ended July 31. As of the close of the period, the fund's net
annualized 30-day SEC yield stood at 7.35%, down from 8.11% on January 31.
Q: How is the portfolio positioned in terms of its sector weightings?
A: We continue to focus on liquid, higher-quality corporate issues. Over a third
of this position is in high-yield debt, with a concentration in stronger credits
that are rated just below investment grade. The benefit of investing in this
area is that we not only receive a favorable trade-off of risk and return, but
the portfolio is exposed to the potential upside that would result from an
issuer being upgraded to an investment grade rating. Overall, however, we have
increased the credit quality of the portfolio since the last report was issued
on January 31. The fund's position in bonds rated B through BBB has declined
from 41% of net assets to 31%. At the same time, the fund's weighting in U.S.
Government agencies and Treasury obligations has increased from 28% of net
assets to 41%. In a period in which bond market disruptions prompted investors
to gravitate to higher-quality issues, the fund's positioning proved beneficial
to performance.
From a sector standpoint, the fund is overweighted in bonds issued by companies
in the telecommunications, media, and energy groups, where we see the
possibility for the most impressive earnings results. The portfolio is also
underweight in utilities and overweight in financials, a combination that proved
beneficial to performance. On the downside, the fund's telecom position offered
more of a mixed performance due to doubts about the earnings outlook for many
companies in the sector.
Q: What has been your target duration during the period?
A: The fund's duration (or interest rate sensitivity) has been neutral to that
of its benchmark -- at a level of approximately 43/4 to 51/4 years -- for the
better part of the past six months. We have achieved this positioning by
concentrating fund holdings in both long- and short-term
11
<PAGE>
bonds at the expense of intermediate-term issues, a positioning known as a
"barbell strategy." This strategy is distinct from the approach we outlined in
the last report, at which time we held a higher weighting in intermediate-term
issues. The basis for this change was that amid a period of yield curve
inversion, we believed that the fund would be better positioned by having
exposure to longer-term issues.
Q: What is your outlook for the bond market from here?
A: Looking ahead, we believe that the bond market will remain on hold for the
near-term until investors gain a better sense of whether the economy is indeed
slowing enough to limit the Fed to -- at most -- one more interest rate hike
between now and the end of the year. We continue to feel that fixed income
investors will remain highly sensitive to short-term stimuli such as economic
reports and comments from the Fed, until there has been a confirmation that the
tightening cycle is indeed over. In addition, investors will be closely watching
the upcoming elections, since an end to the split government (in which Congress
and the White House are controlled by different parties) could put the
sustainability of the budget surplus into question. Despite these short-term
factors, we believe that the investment backdrop will remain supported by sound
economic growth, robust corporate profits, positive sector fundamentals, and
attractive valuations.
Given the unsettled nature of the current market environment, we believe that it
is wise to maintain a high level of diversification among liquid, higher-quality
issues across a wide variety of sectors. We will also continue to use our
extensive research and trading capabilities to capitalize on pricing
exaggerations in the bond market. Finally, we will be alert for opportunities to
diversify the fund's holdings into attractively valued areas outside of the
corporate sector. We feel that this approach will enable the fund to produce
favorable risk-adjusted returns as we move through the second half of the year.
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio as of July 31, 2000 (Unaudited)
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Principal
Amount ($) Value ($)
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<S> <C> <C>
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Repurchase Agreements 13.7%
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State Street Bank and Trust Company, 6.53%, to be
repurchased at $5,357,972 on 8/1/2000* -----------
(Cost $5,357,000) ........................................ 5,357,000 5,357,000
-----------
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U.S. Treasury Obligations 12.6%
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U.S. Treasury Bond:
6.5%, 2/15/2010 .......................................... 70,000 72,308
6.125%, 8/15/2029 ........................................ 3,600,000 3,705,192
6.25%, 5/15/2030 ......................................... 1,060,000 1,129,229
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Total U.S. Treasury Obligations (Cost $4,672,091) 4,906,729
---------------------------------------------------------------------------------------
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Government National Mortgage Association 2.3%
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Government National Mortgage Association
Pass-thru:
6.5% with various maturities to 2/15/2028 .............. 324,999 308,546
7% with various maturities to 4/15/2029 ................ 300,030 291,639
8% with various maturities to 12/1/2029 ................ 300,030 302,562
---------------------------------------------------------------------------------------
Total Government National Mortgage Association (Cost $905,145) 902,747
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
U.S. Government Agency Pass-Thrus 11.7%
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Federal National Mortgage Association:
6.5% with various maturities to 9/1/2029 ................. 2,759,938 2,608,916
7% with various maturities to 8/1/2029 ................... 1,374,938 1,354,236
7.5% with various maturities to 1/1/2030 ................. 300,000 295,734
8.% with various maturities to 1/1/2030 .................. 300,000 300,984
---------------------------------------------------------------------------------------
Total U.S. Government Agency Pass-Thrus (Cost $4,644,083) 4,559,870
---------------------------------------------------------------------------------------
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Foreign Bonds -- U.S.$ Denominated 3.4%
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PacifiCorp Australia LLC, 6.15%, 1/15/2008 .................. 1,000,000 921,940
Repsol International Finance, 7.45%, 7/15/2005 .............. 400,000 400,112
---------------------------------------------------------------------------------------
Total Foreign Bonds -- U.S.$ Denominated (Cost $1,396,050) 1,322,052
---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
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Asset Backed 1.3%
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Automobile Receivables
First Security Auto Owner Trust, Series 1999-2 A3, ---------
6%, 10/15/2003 (Cost $500,000) ..................... 500,000 496,328
---------
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Corporate Bonds 55.0%
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Consumer Discretionary 3.1%
Federated Department Stores, 8.5%, 6/15/2003 .......... 500,000 500,165
MGM Grand Inc., 9.75%, 6/1/2007 ....................... 175,000 179,813
Park Place Entertainment, Inc., 8.5%, 11/15/2006 ...... 100,000 100,017
Tricon Global Restaurants, 7.65%, 5/15/2008 ........... 450,000 409,622
---------
1,189,617
---------
Consumer Staples 4.7%
Bass North America Inc., 6.625%, 3/1/2003 ............. 500,000 487,025
Safeway Inc., 7.25%, 9/15/2004 ........................ 375,000 369,353
The Great Atlantic & Pacific Tea Co., Inc., 7.7%,
1/15/2004 .......................................... 1,000,000 957,900
---------
1,814,278
---------
Communications 5.5%
Deutsch Telekom, 7.75%, 6/15/2005 ..................... 375,000 376,463
Intermedia Communications, Inc., Series B,
8.875%, 11/1/2007 .................................. 250,000 201,250
Level 3 Communications Inc., 9.125%, 5/1/2008 ......... 250,000 215,000
McLeodUSA Inc., 8.125%, 2/15/2009 ..................... 500,000 448,750
Nextel Communications, 9.375%, 11/15/2009 ............. 250,000 241,250
Qwest Communications International, 7.5%, 11/1/2008 ... 300,000
292,956
Sprint Capital Corp., 6.125%, 11/15/2008 .............. 425,000 379,185
---------
2,154,854
---------
Financial 15.8%
Bank of America Corp., 7.8%, 2/15/2010 ................ 425,000 424,358
Bank United Capital Trust, Series B, 10.25%, 12/31/2026 250,000
207,500
BankBoston NA, 6.375%, 4/15/2008 ...................... 275,000 252,711
Bell Atlantic Financial Services, 7.6%, 3/15/2007 ..... 300,000 301,743
Capital One Bank, 8.25%, 6/15/2005 .................... 275,000 275,017
Chase Manhattan Corp., 5.75%, 4/15/2004 ............... 750,000 706,883
Firststar Bank, 7.125%, 12/1/2009 ..................... 200,000 192,006
Ford Motor Credit Co., 7.375%, 10/28/2009 ............. 725,000 700,611
General Electric Capital Corp., 7%, 2/3/2003 .......... 425,000 424,894
General Motors Acceptance Corp., 6.15%, 4/5/2007 ...... 150,000 137,352
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 7.8%, 1/28/2010 ......... 425,000 423,253
Merrill Lynch & Co., Inc., 6%, 2/17/2009 ........... 400,000 358,204
National Westminster Bank, 7.375%, 10/1/2009 ....... 200,000 195,216
PNC Funding Corp., 7%, 9/1/2004 .................... 200,000 194,282
Prudential Insurance Co., 6.375%, 7/23/2006 ........ 1,000,000 925,990
Wells Fargo & Company, 7.55%, 6/21/2010 ............ 450,000 448,502
--------------
6,168,522
--------------
Media 10.6%
AMFM, Inc., 8%, 11/1/2008 .......................... 500,000 505,000
British Sky Broadcasting PLC, 6.875%, 2/23/2009 .... 400,000 338,620
Cablevision Systems Corp., 7.875%, 12/15/2007 ...... 475,000 456,000
Charter Communications Holdings LLC, 8.25%, 4/1/2007 500,000 440,000
Liberty Media Group, 7.875%, 7/15/2009 ............. 150,000 146,091
News America Holdings, Inc., 9.25%, 2/1/2013 ....... 500,000 541,965
Outdoor Systems, Inc., 8.875%, 6/15/2007 ........... 250,000 255,000
TCI-Communications, Inc., 8%, 8/1/2005 ............. 1,000,000 1,020,440
Time Warner, Inc., 9.125%, 1/15/2013 ............... 400,000 440,376
--------------
4,143,492
--------------
Durables 1.9%
Daimler-Chrysler NA Holdings, 7.375%, 9/15/2006 .... 500,000 485,870
Lear Corp, 7.96%, 5/15/2005 ........................ 250,000 238,644
--------------
724,514
--------------
Manufacturing 1.1%
International Paper Co., 8.125%, 7/8/2005 .......... 425,000 430,491
--------------
Energy 7.4%
Barrett Resources Corp., 7.55%, 2/1/2007 ........... 300,000 278,400
Conoco, Inc., 6.35%, 4/15/2009 ..................... 425,000 397,150
Duke Energy Corp., 10%, 8/15/2001 .................. 500,000 511,420
Louis Dreyfus Natural Gas Corp., 6.875%, 12/1/2007 . 500,000 451,035
Petroleum Geo-Services, 7.5%, 3/31/2007 ............ 250,000 239,860
Phillips Petroleum, 8.75%, 5/25/2010 ............... 425,000 451,869
Pioneer Natural Resources, 6.5%, 1/15/2008 ......... 100,000 86,438
Pioneer Natural Resources, 9.625%, 4/1/2010 ........ 300,000 312,000
Williams Gas Pipeline Center, 7.375%, 11/15/2006 ... 150,000 146,408
--------------
2,874,580
--------------
Transportation 0.2%
Delta Air Lines, 7.9%, 12/15/2009 .................. 100,000 94,798
--------------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Utilities 4.7%
Alabama Power Co., 7.125%, 8/15/2004 .................... 500,000 494,795
Cleveland Electric Illumination Co., 7.67%, 7/1/2004 .... 600,000
592,230
Detroit Edison Co., 7.5%, 2/1/2005 ...................... 375,000 374,055
Niagara Mohawk Power Corp., 6.625%, 7/1/2005 ............ 400,000 381,788
----------
1,842,868
----------
------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $22,098,182) 21,438,014
------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $39,572,551) (a) 38,982,740
------------------------------------------------------------------------------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $39,572,551. At July 31, 2000,
net unrealized depreciation for all investment securities based on tax cost
was $589,811. This consisted of aggregate gross unrealized appreciation for
all investments in which there was an excess of value over tax cost of
$336,813 and aggregate gross unrealized depreciation for all investment
securities in which there was an excess of tax cost over value of $926,624.
Included in the portfolio are investments in mortgage or asset-backed
securities which are interests in separate pools of mortgages or assets.
Effective maturities of these investments may be shorter than stated
maturities due to prepayments.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of July 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Investments in securities, at value (including repurchase
agreements of $5,357,000) (cost $39,572,551) ............ $ 38,982,740
Cash ....................................................... 190
Receivable for investments sold ............................ 383,555
Interest receivable ........................................ 594,293
Receivable for Fund shares sold ............................ 17,804
Due from Adviser ........................................... 196,085
------------
Total assets ............................................... 40,174,667
Liabilities
--------------------------------------------------------------------------------
Payable for investments purchased .......................... 860,619
Dividends payable .......................................... 27,950
Payable for Fund shares redeemed ........................... 30,709
Accrued Trustees' fees and expenses ........................ 30,118
Other accrued expenses and payables ........................ 56,646
------------
Total liabilities .......................................... 1,006,042
--------------------------------------------------------------------------------
Net assets, at value $ 39,168,625
--------------------------------------------------------------------------------
Net Assets
--------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment
income .................................................. (246)
Net unrealized appreciation (depreciation) on investments .. (589,811)
Accumulated net realized gain (loss) ....................... (2,164,063)
Paid-in capital ............................................ 41,922,745
--------------------------------------------------------------------------------
Net assets, at value $ 39,168,625
--------------------------------------------------------------------------------
Net Asset Value
--------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($39,168,625 / 3,489,020 outstanding shares of beneficial
interest, $.01 par value,unlimited number of shares ------------
authorized) ............................................. $ 11.23
------------
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended July 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Interest ...................................................... $ 1,486,997
-----------
Expenses:
Management fee ................................................ 135,051
Services to shareholders ...................................... 192,172
Custodian and accounting fees ................................. 21,526
Auditing ...................................................... 8,437
Legal ......................................................... 3,276
Trustees' fees and expenses ................................... 33,071
Reports to shareholders ....................................... 7,098
Registration fees ............................................. 19,292
Other ......................................................... 3,458
-----------
Total expenses, before expense reductions ..................... 423,381
Expense reductions ............................................ (414,487)
-----------
Total expenses, after expense reductions ...................... 8,894
--------------------------------------------------------------------------------
Net investment income 1,478,103
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... (795,059)
Net unrealized appreciation (depreciation) during the period on
investments ................................................ 981,898
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 186,839
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 1,664,942
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------
Six Months
Ended July 31, Year Ended
2000 January 31,
Increase (Decrease) in Net Assets (Unaudited) 2000
------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................. $ 1,478,103 $ 2,771,356
Net realized gain (loss) on investment transactions (795,059) (1,369,004)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 981,898 (2,191,253)
------------ ------------
Net increase (decrease) in net assets resulting
from operations ................................ 1,664,942 (788,901)
------------ ------------
Distributions to shareholders from:
Net investment income ............................. (1,503,860) (2,770,256)
------------ ------------
Net realized gains ................................ -- (63,549)
------------ ------------
Fund share transactions:
Proceeds from shares sold ......................... 4,562,058 16,709,082
Reinvestment of distributions ..................... 1,326,730 2,511,399
Cost of shares redeemed ........................... (7,080,178) (12,114,708)
------------ ------------
Net increase (decrease) in net assets from Fund ... (1,191,390) 7,105,773
share transactions
------------ ------------
Increase (decrease) in net assets ................. (1,030,308) 3,483,067
Net assets at beginning of period ................. 40,198,933 36,715,866
Net assets at end of period (including accumulated
distributions in excess of net investment
income of $246 and undistributed net investment
income of $25,511) ............................. $ 39,168,625 $ 40,198,933
Other Information
------------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 3,597,134 2,991,753
------------ ------------
Shares sold ....................................... 405,448 1,433,580
Shares issued to shareholders in reinvestment of
distributions .................................. 118,668 217,346
Shares redeemed ................................... (632,230) (1,045,545)
------------ ------------
Net increase (decrease) in Fund shares ............ (108,114) 605,381
Shares outstanding at end of period ............... 3,489,020 3,597,134
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a) 2000(b) 1999(c)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.18 $12.27 $12.00
---------------------------
------------------------------------------------------------------------------------
Income from investment operations:
------------------------------------------------------------------------------------
Net investment income .40 .82 .36
------------------------------------------------------------------------------------
Net realized and unrealized gain on investment
transactions .05 (1.07) .30
---------------------------
------------------------------------------------------------------------------------
Total from investment operations .45 (.25) .66
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.40) (.82) (.36)
------------------------------------------------------------------------------------
Net realized gains on investment transactions -- (.02) (.03)
---------------------------
------------------------------------------------------------------------------------
Total distributions (.40) (.84) (.39)
------------------------------------------------------------------------------------
Net asset value, end of period $11.23 $11.18 $12.27
---------------------------
------------------------------------------------------------------------------------
Total Return (%) (d) 4.13** (2.01) 5.53**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 39 40 37
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.00(e)* 2.04 2.55*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .02(e)* 0.00 0.00*
------------------------------------------------------------------------------------
Ratio of net investment income (%) 7.14* 7.11 6.96*
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 279* 104 97*
------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended July 31, 2000 (Unaudited).
(b) For the year ended January 31, 2000.
(c) For the period August 31, 1998 (commencement of operations) to January 31,
1999.
(d) Total returns would have been lower had expenses not been reduced.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.96% and
0.00%, respectively.
* Annualized
** Not annualized
20
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Corporate Bond 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 and is organized as a Massachusetts business trust.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the use of
management estimates. The policies described below are followed consistently by
the Fund in the preparation of its financial statements.
Security Valuation. Portfolio debt securities purchased with an original
maturity greater than sixty days are valued by pricing agents approved by the
officers of the Fund, 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.
At January 31, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $425,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until January 31,
2008, the expiration date, whichever occurs first.
In addition, from November 1, 1999 through January 31, 2000, the Fund incurred
approximately $909,000 of net capital realized losses. As permitted
21
<PAGE>
by tax regulations, the Fund intends to elect to defer these losses and treat
them as arising in the fiscal year ending January 31, 2001.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. 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 accounting principles generally accepted in the United
States. As a result, net investment income (loss) and net realized gain (loss)
on investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. 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
During the six months ended July 31, 2000, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $26,706,842 and $27,591,058, respectively. Purchases and sales of
U.S. Government obligations aggregated $24,596,734 and $28,602,402,
respectively.
C. Related Parties
Under the Investment 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 objective 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
22
<PAGE>
an annual rate of 0.65%. The Adviser and certain of its subsidiaries agreed to
reimburse or not to impose, respectively, all of their fees payable by the Fund
until April 30, 2000 in order to maintain the annualized expenses of the Fund at
not more than 0.00% of average daily net assets. Effective May 1, 2000, expenses
are capped, by contract, at 1.25% through April 30, 2001. Additionally, the
Adviser has agreed to cap expenses voluntarily at 0.00% through July 31, 2000.
For the six months ended July 31, 2000 the Adviser did not impose any portion of
its management fee amounting to $135,051. Further, the Fund's reimbursement due
from the Adviser for the six months ended July 31, 2000 amounted to $187,193.
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 July 31, 2000, SSC did not impose any of its fees amounting to
$12,697.
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 July 31,
2000, STC did not incur any fees.
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 July 31, 2000, SFAC did not impose any of its fees amounting to $18,750.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
such 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. For the six months ended July 31, 2000, the
Special Servicing Agreement expense charged to the Fund amounted to $175,812.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer divided equally among the series of the Trust, plus specified amounts
23
<PAGE>
for attended board and committee meetings. For the six months ended July 31,
2000, the Trustees' fees and expenses of the Fund not imposed aggregated
$15,287. In addition, a one-time fee of $17,784 was accrued for payment to those
Directors not affiliated with the Adviser who are not standing for re-election,
under the reorganization discussed in Note F. Inasmuch as the Adviser will also
benefit from administrative efficiencies of a consolidated Board, the Adviser
has agreed to bear $8,892 of such costs.
D. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. For the six months ended July 31, 2000,
the Fund's custodian and transfer agent fees were reduced by $232 and $708,
respectively, under these arrangements.
E. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
revolving credit facility with Chase Manhattan Bank 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 based upon net assets, 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.
F. Plan of Reorganization
On February 7, 2000 the Trustees of the Fund approved an Agreement and Plan of
Reorganization (the "Reorganization") between the Fund and the Scudder Income
Fund, pursuant to which Scudder Income Fund would acquire all or substantially
all of the assets and liabilities of the Fund in exchange for redesignated
shares ("Class S") of the Scudder Income Fund. The proposed transaction is part
of Scudder Kemper's initiative to restructure and streamline the management and
operations of the funds it advises. The Reorganization can be consummated only
if, among other things, it is approved by a majority vote of the shareholders of
the Fund. A special meeting of the shareholders of the Fund was held on July 13,
2000, and the Reorganization was approved.
As a result of the Reorganization, each shareholder of the Scudder Corporate
Bond Fund will become a shareholder of the Class S shares of the Scudder Income
Fund and would hold, immediately after the closing of the
24
<PAGE>
Reorganization (the "Closing"), that number of full and fractional voting shares
of the Class S shares of the Scudder Income Fund having an aggregate net asset
value equal to the aggregate net asset value of such shareholder's shares held
in the Fund as of the close of business on the business day preceding the
Closing. The Closing is expected to take place during the fourth quarter of
2000, subject to receipt of required regulatory approval.
25
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholder s (the "Meeting") of Scudder Corporate Bond
Fund (the "fund") was held on July 13, 2000, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To elect Trustees of the fund.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 3,199,848 8,809
Linda C. Coughlin 3,199,917 8,739
Dawn-Marie Driscoll 3,199,917 8,739
Edgar R. Fiedler 3,199,917 8,739
Keith R. Fox 3,199,917 8,739
Joan E. Spero 3,199,917 8,739
Jean Gleason Stromberg 3,199,917 8,739
Jean C. Tempel 3,199,917 8,739
Steven Zaleznick 3,199,917 8,739
--------------------------------------------------------------------------------
2. To approve an Agreement and Plan of Reorganization for the fund whereby all
or substantially all of the assets and liabilities of the fund would be
acquired by Scudder Income Fund in exchange for shares of Class S of
Scudder Income Fund.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
3,085,644 15,256 8,609 99,147
--------------------------------------------------------------------------------
3. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the current fiscal year.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
3,207,414 167 1,076 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
26
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin*
o President and Trustee
Henry P. Becton, Jr.
o Trustee; President, WGBH
Educational Foundation
Dawn-Marie Driscoll
o Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics, Bentley
College
Edgar R. Fiedler
o Trustee; Senior Fellow and
Economic Counsellor, The
Conference Board, Inc.
Keith R. Fox
o Trustee; General Partner,
The Exeter Group of Funds
Joan E. Spero
o Trustee; President, The Doris
Duke Charitable Foundation
Jean Gleason Stromberg
o Trustee; Consultant
Jean C. Tempel
o Trustee; Managing Director,
First Light Capital, LLC
Steven Zaleznick
o Trustee; President and
Chief Executive Officer,
AARP Services, Inc.
Thomas V. Bruns*
o Vice President
Robert S. Cessine*
o Vice President
William F. Glavin*
o Vice President
James E. Masur*
o Vice President
Gary A. Langbaum*
o Vice President
Ann M. McCreary*
o Vice President
Harry E. Resis*
o Vice President
Howard S. Schneider*
o Vice President
John Millette*
o Vice President and Secretary
Kathryn L. Quirk*
o Vice President and Assistant Secretary
John R. Hebble*
o Treasurer
Brenda Lyons*
o Assistant Treasurer
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
27
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series-- Scudder Value Fund
Prime Reserve Shares Scudder Small Company Value Fund
Premium Shares
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Choice Series
Scudder Health Care Fund
U.S. Growth and Income Scudder Technology Fund
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
28
<PAGE>
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
29
<PAGE>
Account Management Resources
--------------------------------------------------------------------------------
For shareholders of Scudder funds including those in the AARP Investment Program
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly
to regularly purchase fund shares and "dollar cost
average" -- buy more shares when the fund's price is
lower and fewer when it's higher, which can reduce
your average purchase price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to
purchase shares -- use distributions from one Scudder
fund to purchase shares in another, automatically
(accounts with identical registrations or the same
social security or tax identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of
your transactions is electronically debited from a
previously designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government
checks -- invested in up to four Scudder funds at one
time.
* 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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.scudder.com
Personal Investment Organizer: Offering account
information and transactions, interactive worksheets,
prospectuses and applications for all 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.
30
<PAGE>
--------------------------------------------------------------------------------
Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after each distribution is paid.
programs
QuickSell
Provides speedy access to your money by
electronically crediting your redemption proceeds to
the bank account you previously designated.
For more Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 2291
Boston, Massachusetts
02107-2291
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 2540
Boston, Massachusetts
02208-2540
31
<PAGE>
About the Fund's Adviser
SCUDDER
INVESTMENTS (SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 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 over 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.
