UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number 811-2743
SCUDDER STRATEGIC INCOME FUND
-----------------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
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John Millette, Vice President and Secretary
Scudder Strategic Income Fund
222 South Riverside Plaza
Chicago, Illinois 60606
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(Name and Address of Agent for Service)
Date of fiscal year end: 10/31
Date of reporting period: 4/30/03
ITEM 1. REPORT TO STOCKHOLDERS
[Scudder Investments logo]
| ||
Semiannual Report to Shareholders | ||
April 30, 2003 | ||
Contents |
<Click Here> Performance Summary <Click Here> Portfolio Management Review <Click Here> Portfolio Summary <Click Here> Investment Portfolio <Click Here> Financial Statements <Click Here> Financial Highlights <Click Here> Notes to Financial Statements <Click Here> Investment Products <Click Here> Account Management Resources <Click Here> Privacy Statement | ||
Scudder Strategic Income Fund | Nasdaq Symbol | CUSIP Number |
| Class A | KSTAX | 81123J-100 |
| Class B | KSTBX | 81123J-209 |
| Class C | KSTCX | 81123J-308 |
Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company.
This report must be preceded or accompanied by a prospectus.
Please see the fund's prospectus for more complete information, including a complete description of the fund's investment policies. To obtain a prospectus, download one from scudder.com, talk to your financial representative or call Shareholder Services at (800) 621-1048. The prospectus contains more complete information, including management fees and expenses. Please read it carefully before you invest or send money.
Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal.
Average Annual Total Returns (Unadjusted for Sales Charge) | |||||
Scudder Strategic Income Fund | 6-Month* | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | 13.33% | 9.54% | 5.33% | 2.54% | 5.95% |
| Class B | 12.61% | 8.40% | 4.30% | 1.53% | 4.92%(a) |
| Class C | 12.89% | 8.82% | 4.64% | 1.83% | 5.17%(a) |
| Lehman Brothers Government/Corporate Bond Index+ | 5.52% | 12.43% | 10.65% | 7.77% | 7.33% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
* Total returns shown for periods less than one year are not annualized.Net Asset Value and Distribution Information | |||
Class A | Class B | Class C | |
| Net Asset Value: 4/30/03 | $ 4.46 | $ 4.45 | $ 4.49 |
| 10/31/02 | $ 4.08 | $ 4.08 | $ 4.11 |
| Distribution Information: Six Months: Income Dividends | $ .15 | $ .14 | $ .14 |
| April Income Dividend | $ .0255 | $ .0225 | $ .0233 |
| SEC 30-day Equivalent Yield++ | 5.71% | 5.17% | 5.29% |
| Current Annualized Distribution Rate (based on Net Asset Value)++ | 6.86% | 6.07% | 6.23% |
++ Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value on April 30, 2003. Distribution rate simply measures the level of dividends and is not a complete measure of performance. The SEC yield is net investment income per share earned over the month ended April 30, 2003, shown as an annualized percentage of the net asset value on that date. The SEC yield is computed in accordance with a standardized method prescribed by the Securities and Exchange Commission. Yields and distribution rates are historical and will fluctuate.
Class A Lipper Rankings - Multi-Sector Income Funds Category | ||||
Period | Rank | Number of Funds Tracked | Percentile Ranking | |
| 1-Year | 79 | of | 113 | 70 |
| 3-Year | 74 | of | 104 | 71 |
| 5-Year | 71 | of | 84 | 84 |
| 10-Year | 13 | of | 27 | 47 |
Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.
Source: Lipper Inc.
Growth of an Assumed $10,000 Investment(b) (Adjusted for Sales Charge) |
[] Scudder Strategic Income Fund - Class A [] Lehman Brothers Government/Corporate Bond Index+ |
 |
Yearly periods ended April 30 |
Comparative Results (Adjusted for Sales Charge) | |||||
Scudder Strategic Income Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Class A(c) | Growth of $10,000 | $10,461 | $11,160 | $10,827 | $17,022 |
| Average annual total return | 4.61% | 3.73% | 1.60% | 5.46% | |
Class B(c) | Growth of $10,000 | $10,540 | $11,165 | $10,714 | $16,165(a) |
| Average annual total return | 5.40% | 3.74% | 1.39% | 4.92%(a) | |
Class C(c) | Growth of $10,000 | $10,773 | $11,345 | $10,841 | $16,388(a) |
| Average annual total return | 7.73% | 4.29% | 1.63% | 5.06%(a) | |
| Lehman Brothers Government/ Corporate Bond Index+ | Growth of $10,000 | $11,243 | $13,547 | $14,535 | $20,290 |
| Average annual total return | 12.43% | 10.65% | 7.77% | 7.33% | |
The growth of $10,000 is cumulative.
a Returns shown for Class B and C shares for the periods prior to their inception on May 31, 1994 are derived from the historical performance of Class A shares of the Scudder Strategic Income Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of each specific class. The difference in expenses will affect performance.
b The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 4.50%. This results in a net initial investment of $9,550.
c Returns shown for Class A, B and C shares have been adjusted to reflect the current applicable sales charges of each specific class. Returns for Class A reflect the current maximum initial sales charges of 4.50%. Class B share performance is adjusted for the applicable contingent deferred sales charge ("CDSC"), which is 4% within the first year after purchase, declining to 0% after six years. Returns for Class C shares reflect an initial sales charge of 1%. Redemptions on Class C shares within one year of purchase may be subject to a CDSC of 1%. The difference in expenses will affect performance.
+ The Lehman Brothers Government/Corporate Bond Index is an unmanaged index comprising intermediate- and long-term government and investment-grade corporate debt securities. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
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. Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share classes.
Investments in funds involve risk. Some funds have more risk than others. These include funds that allow exposure to or otherwise concentrate investments in certain sectors, geographic regions, security types, market capitalization or foreign securities (e.g., political or economic instability, which can be accentuated in emerging market countries). Please read this fund's prospectus for specific details regarding its investments and risk profile.
Please call (800) 621-1048 for the fund's most up-to-date performance. On the Web, go to scudder.com.
In the following interview, Jan C. Faller, portfolio manager of Scudder Strategic Income Fund, discusses market conditions and the fund's investment strategy during the six-month period ended April 30, 2003.
Q: How did the fund perform over the six months ended April 30, 2003?
A: The fund posted strong absolute and relative results in the period, outperforming its benchmark and average peer in the Lipper Multi-Sector Income Funds category.1 Specifically, the fund's Class A shares (unadjusted for sales charges) provided a total return of 13.33% over the past six months, compared with a 5.52% return of its benchmark, the unhedged Lehman Brothers Government/Corporate Index, a group of investment-grade bonds that vary in maturity and quality. The fund's results also outpaced the 11.89% return of the average fund in the Lipper Multi-Sector Income Funds category.
1 The Lipper Multi-Sector Income Funds category includes funds that that seek current income by allocating assets among several different fixed-income securities sectors (with no more than 65% in any one sector except for defensive purposes), including US Government and foreign governments, with a significant portion of assets in securities rated below investment grade.Q: How would you characterize the market environment for the fund for the period?
A: At a time when interest rates around the world changed very little, both emerging-market and high-yield debt provided strong returns. The high-yield market benefited from the fact that investors saw it as an opportunity to earn higher yields than they could get from Treasury securities or investment-grade corporate bonds. Also, investors came to believe that prices of high-yield debt had been depressed to the point that it had become a good value. And, as people became concerned that interest rates might rise, they did not want to be in Treasuries, whose prices would decline if rates rose. This gave them another reason to consider the high-yield market. We have seen some evidence of this attitude in the past several months as mutual fund companies have reported relatively large inflows into high-yield funds.
In emerging markets, the biggest story - and, by far, the best performer - was Brazil. At the beginning of the period, the country elected a new president, Luiz Inacio Lula da Silva. Since then, the new government has pleasantly surprised investors with its political appointments and statements relating to economic stimulus and debt management. As a result, prices of Brazilian debt rose substantially, while other emerging markets rallied in sympathy with Brazil.
Another driver of performance was the euro, which gained about 13% over the dollar in the period. Basically, the euro has benefited from the fact that US economic growth has remained sluggish, making the dollar less attractive as a "flight-to-quality" investment. Also, the European Central Bank has not lowered short-term interest rates as dramatically as the US Federal Reserve Board, so investors can get higher returns from fixed-income securities priced in euros.
Q: What impact has your exposure to these markets had on the fund's performance?
A: The fund's high-yield exposure ranged from 35% to 45% of assets, and its emerging-market allocation ranged from 15% to 32% of assets. The fund's relatively large positions in both of these markets contributed to performance. High yield aided returns, as investors sought out the higher yields offered by such securities. In emerging markets, Brazil helped performance the most. Our allocation there was larger than that of the index, so it made an important positive contribution. We also had some exposure to Argentina. Last year, the Argentine economy was so weak that it seemed as if it could only improve. In fact, we finally did begin to see some signs of stability, and our position in Argentina worked in our favor. Meanwhile, the fund's exposure to the euro, which ranged from 5% to 13% of assets, helped it participate in the growing strength of that currency.
Q: Would you elaborate on the fund's high-yield exposure?
A: We have started to reduce our high-yield exposure slightly. However, we are carefully monitoring the economic situation in the United States. A return to moderate economic growth would lead us to keep the fund's high-yield allocation about where it is. On the other hand, if the economy continues to look weak and we don't get a post-Iraq war boost, and if money does not flow into this sector as fast as it has been, we would want to be a little more defensive regarding our high-yield exposure.
Q: What is your view of emerging-market securities?
A: We believe prices of emerging-markets securities have risen to the point where they are at, or close to, fair value. So, we may reduce our exposure there. For now, though, we believe the environment for most of the markets in this sector is relatively positive. Two exceptions are Venezuela and Turkey. Venezuela continues to experience political turmoil and sharply reduced oil exports. Turkey's refusal to allow US troops to use the country as a staging area prior to the war with Iraq resulted in an aid package from the International Monetary Fund that was much smaller than investors expected. However, we think both of these are isolated situations and expect them to have almost no impact on other emerging markets.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The manager's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Portfolio Composition | 4/30/03 | 10/31/02 |
| High-Yield Corporate Bonds | 39% | 35% |
| Emerging Market Bonds | 29% | 23% |
| Foreign Currency Bonds | 19% | 26% |
| US Treasury Obligations | 11% | 9% |
| Cash Equivalents | 1% | 2% |
| Other | 1% | 5% |
| 100% | 100% | |
Quality | 4/30/03 | 10/31/02 |
| AAA* | 22% | 19% |
| AA | 11% | 15% |
| BBB | 7% | 12% |
| BB | 21% | 16% |
| B | 31% | 27% |
| CCC and CC | 8% | 5% |
| Below CC | - | 6% |
| 100% | 100% | |
* Includes cash equivalents
Interest Rate Sensitivity | 4/30/03 | 10/31/02 |
| Average maturity | 7.8 years | 7.4 years |
| Average duration | 5.5 years | 4.5 years |
Portfolio composition, quality and interest rate sensitivity are subject to change.
For more complete details about the fund's investment portfolio, see page 10. A quarterly Fund Summary and Portfolio Holdings are available upon request.
Principal Amount ($)(c) | Value ($) | |
Corporate Bonds 37.7% | ||
| Consumer Discretionary 11.1% | ||
| Adelphia Communications Corp., 7.75%, 1/15/2009* | 250,000 | 122,500 |
| Advantica Restaurant Co.: | ||
11.25%, 1/15/2008 | 220,216 | 173,971 |
12.75%, 9/30/2007 | 60,000 | 62,400 |
| American Achieve Corp., 11.625%, 1/1/2007 | 550,000 | 594,000 |
| American Lawyer Media, Inc., Series B, 9.75%, 12/15/2007 | 670,000 | 542,700 |
| Ameristar Casino, Inc., 10.75%, 2/15/2009 | 735,000 | 823,200 |
| Avondale Mills, Inc., 10.25%, 5/1/2006 | 870,000 | 879,788 |
| Boca Resorts, Inc., 9.875%, 4/15/2009 | 1,715,000 | 1,809,325 |
| Boyd Gaming Corp., 7.75%, 12/15/2012 | 50,000 | 51,875 |
| Buffets, Inc., 11.25%, 7/15/2010 | 500,000 | 490,000 |
| Cendant Corp., 7.125%, 3/15/2015 | 195,000 | 215,013 |
| Central Garden & Pet Co., 9.125%, 2/1/2013 | 190,000 | 203,300 |
| Charter Communications Holdings LLC: | ||
8.25%, 4/1/2007 | 170,000 | 113,050 |
8.625%, 4/1/2009 | 350,000 | 230,125 |
Step-up Coupon, 0% to 5/15/2006, 11.75 to 5/15/2011 | 635,000 | 285,750 |
Step-up Coupon, 0% to 1/15/2007, 12.125% to 1/15/2012 | 240,000 | 96,000 |
Step-up Coupon, 0% to 1/15/2006, 13.5% to 1/15/2011 | 315,000 | 141,750 |
| Choctaw Resort Development Enterprises, 9.25%, 4/1/2009 | 645,000 | 690,150 |
| Chumash Casino & Resort Enterprise, 9.0%, 7/15/2010 | 400,000 | 428,000 |
| Cinemark USA, Inc.: | ||
8.5%, 8/1/2008 | 630,000 | 655,200 |
9.0%, 2/1/2013 | 275,000 | 299,063 |
9.0%, 2/1/2013 | 390,000 | 421,200 |
Series D, 9.625%, 8/1/2008 | 535,000 | 542,356 |
| Circus & Eldorado, 10.125%, 3/1/2012 | 700,000 | 673,750 |
| CKE Restaurants, Inc., 9.125%, 5/1/2009 | 545,000 | 506,850 |
| Clear Channel Communication, Inc., 8.0%, 11/1/2008 | 555,000 | 635,475 |
| CSC Holdings, Inc., 7.875%, 12/15/2007 | 425,000 | 447,313 |
| DIMON, Inc.: | ||
8.875%, 6/1/2006 | 390,000 | 397,800 |
Series B, 9.625%, 10/15/2011 | 1,010,000 | 1,100,900 |
| EchoStar Communications Corp., 9.375%, 2/1/2009 | 1,010,000 | 1,089,538 |
| Eldorado Resorts LLC, 10.5%, 8/15/2006 | 1,010,000 | 1,021,363 |
| Farmers Exchange Capital: | ||
7.05%, 7/15/2028 | 50,000 | 38,736 |
7.2%, 7/15/2048 | 195,000 | 142,779 |
| Finlay Fine Jewelry Corp., 8.375%, 5/1/2008 | 745,000 | 759,900 |
| Gap, Inc., 5.625%, 5/1/2003 | 50,000 | 50,000 |
| Guitar Center Management, 11.0%, 7/1/2006 | 735,000 | 751,538 |
| Hard Rock Hotel, Inc., 9.25%, 4/1/2005 | 50,000 | 51,063 |
| Herbst Gaming, Inc., 10.75%, 9/1/2008 | 1,100,000 | 1,207,250 |
| Hilton Hotels Corp., 7.625%, 12/1/2012 | 505,000 | 537,825 |
| Hines Horticulture, Inc., Series B, 12.75%, 10/15/2005 | 1,433,000 | 1,490,320 |
| Imperial Home Decor Group, Inc., Series B, 11.0% 3/15/2008* | 720,000 | 72 |
| Insight Communications Co., Inc., Step-up Coupon, 0% to 2/15/2006, 12.25% to 2/15/2011 | 275,000 | 216,563 |
| Interep National Radio Sales, Inc., 10.0%, 7/1/2008 | 960,000 | 729,600 |
| International Game Technology, 8.375%, 5/15/2009 | 885,000 | 1,055,883 |
| Intrawest Corp., 10.5%, 2/1/2010 | 435,000 | 471,975 |
| Jacobs Entertainment Co., 11.875%, 2/1/2009 | 500,000 | 522,500 |
| K-III Communications Corp., 8.5%, 2/1/2006 | 150,000 | 150,375 |
| Kellwood Co., 7.625%, 10/15/2017 | 185,000 | 175,750 |
| Kindercare Learning Centers, Inc., 9.5%, 2/15/2009 | 1,015,000 | 999,775 |
| Krystal, Inc., 10.25%, 10/1/2007 | 390,000 | 360,750 |
| Levi Strauss & Co., 12.25%, 12/15/2012 | 645,000 | 535,350 |
| MGM Mirage, Inc., 9.75%, 6/1/2007 | 805,000 | 901,600 |
| MTR Gaming Group, 9.75%, 4/1/2010 | 170,000 | 176,800 |
| National Vision, Inc., 12.0%, 3/30/2009 | 1,604,069 | 872,212 |
| Old Evangeline Downs, 13.0%, 3/1/2010 | 265,000 | 267,650 |
| Park Place Entertainment Corp.: | ||
7.0%, 4/15/2013 | 215,000 | 220,375 |
8.875%, 9/15/2008 | 50,000 | 54,000 |
9.375%, 2/15/2007 | 1,100,000 | 1,196,250 |
| Petro Stopping Centers, 10.5%, 2/1/2007 | 1,525,000 | 1,517,375 |
| Phillips Van-Heusen Corp., 8.125%, 5/1/2013 | 80,000 | 80,000 |
| PRIMEDIA, Inc.: | ||
7.625%, 4/1/2008 | 250,000 | 253,750 |
8.875%, 5/15/2011 | 515,000 | 551,050 |
| Remington Arms Co., 10.5%, 2/1/2011 | 245,000 | 264,600 |
| Remington Product Co., LLC, Series D, 11.0%, 5/15/2006 | 240,000 | 244,800 |
| Renaissance Media Group, 10.0%, 4/15/2008 | 910,000 | 855,400 |
| Rent-A-Center, Inc., 11.0%, 8/15/2008 | 495,000 | 530,888 |
| Restaurant Co., Step-up Coupon, 0% to 5/15/2003, 11.25% to 5/15/2008 | 804,910 | 620,787 |
| Rite Aid Corp.: | ||
6.125%, 12/15/2008 | 260,000 | 232,700 |
6.875%, 8/15/2013 | 480,000 | 415,200 |
| Rogers Cablesystems Ltd., 10.0%, 3/15/2005 | 170,000 | 182,325 |
| Salton, Inc., 12.25%, 4/15/2008 | 565,000 | 587,600 |
| Samsonite Corp., 10.75%, 6/15/2008 | 1,335,000 | 1,261,575 |
| Schuler Homes, Inc.: | ||
9.375%, 7/15/2009 | 430,000 | 469,775 |
10.5%, 7/15/2011 | 770,000 | 858,550 |
| Scientific Games Corp., 12.5%, 8/15/2010 | 318,000 | 356,160 |
| Sealy Mattress Co., 9.875%, 12/15/2007 | 125,000 | 128,750 |
| Service Corp. International, 7.7%, 4/15/2009 | 1,045,000 | 1,055,450 |
| Sinclair Broadcast Group: | ||
8.0%, 3/15/2012 | 455,000 | 480,025 |
8.75%, 12/15/2011 | 95,000 | 103,075 |
| Six Flags, Inc.: | ||
8.875%, 2/1/2010 | 195,000 | 195,000 |
9.75%, 4/15/2013 | 1,135,000 | 1,183,238 |
| Sonic Automotive, Inc., 11.0%, 8/1/2008 | 845,000 | 897,813 |
| Starwood Hotels Resorts: | ||
7.375%, 5/1/2007 | 120,000 | 125,400 |
7.875%, 5/1/2012 | 275,000 | 287,719 |
| Tenneco Automotive, Inc., 11.625%, 10/15/2009 | 245,000 | 216,825 |
| Town Sports International, 9.625%, 4/15/2011 | 135,000 | 141,750 |
| Transwestern Publishing, Series F, 9.625%, 11/15/2007 | 1,020,000 | 1,072,275 |
| TRW Automotive, Inc., 11.0%, 2/15/2013 | 50,000 | 54,750 |
| Turning Stone Casino Entertainment, 9.125%, 12/15/2010 | 200,000 | 210,500 |
| Unisys Corp., 6.875%, 3/15/2010 | 180,000 | 189,900 |
| Venetian Casino Resort LLC, 11.0%, 6/15/2010 | 770,000 | 845,075 |
| Wheeling Island Gaming, Inc., 10.125%, 12/15/2009 | 755,000 | 762,550 |
| Wynn Las Vegas Corp., 12.0%, 11/1/2010 | 50,000 | 54,125 |
| XM Satellite Radio, Inc., Step-up Coupon, 0% to 12/31/2005, 14.0% to 12/31/2009 | 165,000 | 116,531 |
47,083,882 | ||
| Consumer Staples 1.5% | ||
| Agrilink Foods, Inc., 11.875%, 11/1/2008 | 1,205,000 | 1,304,391 |
| Burns, Philp & Co., Ltd., 9.75%, 7/15/2012 | 535,000 | 535,000 |
| Doane Pet Care Co., 9.75%, 5/15/2007 | 90,000 | 85,500 |
| Dole Foods Co., 8.875%, 3/15/2011 | 225,000 | 244,688 |
| Elizabeth Arden, Inc., Series B, 11.75%, 2/1/2011 | 815,000 | 896,500 |
| Jafra Cosmetics International, Inc., 11.75%, 5/1/2008 | 1,200,000 | 1,254,000 |
| La Petite Academy, Inc., 10.0%, 5/15/2008 | 805,000 | 470,925 |
| Michael Foods, Inc., Series B, 11.75%, 4/1/2011 | 175,000 | 199,500 |
| Stater Brothers Holdings, Inc., 10.75%, 8/15/2006 | 1,025,000 | 1,089,063 |
| Swift & Co., 10.125%, 10/1/2009 | 305,000 | 312,625 |
6,392,192 | ||
| Energy 4.1% | ||
| ANR Pipeline Co., 8.875%, 3/15/2010 | 170,000 | 187,850 |
| Avista Corp., 9.75%, 6/1/2008 | 1,835,000 | 2,036,850 |
| Chesapeake Energy Corp.: | ||
7.5%, 9/15/2013 | 295,000 | 313,438 |
8.125%, 4/1/2011 | 140,000 | 151,200 |
| Citgo Petroleum Corp., 11.375%, 2/1/2011 | 1,390,000 | 1,549,850 |
| Coastal Corp., 6.5%, 6/1/2008 | 130,000 | 111,800 |
| Continental Resources, Inc., 10.25%, 8/1/2008 | 1,005,000 | 994,950 |
| Edison Mission Energy, 7.73%, 6/15/2009 | 1,490,000 | 1,251,600 |
| El Paso Corp., 7.375%, 12/15/2012 | 200,000 | 169,000 |
| Frontier Escrow Corp., 8.0%, 4/15/2013 | 255,000 | 263,925 |
| Key Energy Services, Inc., 14.0%, 1/15/2009 | 175,000 | 197,750 |
| Lone Star Technologies, Series B, 9.0%, 6/1/2011 | 65,000 | 67,275 |
| Nevada Power Co., 10.875%, 10/15/2009 | 175,000 | 193,375 |
| Newpark Resources, Inc., 8.625%, 12/15/2007 | 535,000 | 536,338 |
| On Semiconductor Corp., 12.0%, 5/15/2008 | 155,000 | 147,250 |
| Panhandle Eastern Pipe Line: | ||
7.2%, 8/15/2024 | 265,000 | 274,275 |
7.95%, 3/15/2023 | 320,000 | 331,200 |
| Parker & Parsley, 8.25%, 8/15/2007 | 240,000 | 273,060 |
| Parker Drilling Co., Series B, 10.125%, 11/15/2009 | 790,000 | 843,325 |
| Pemex Project Funding Master Trust, 7.375%, 12/15/2014 | 2,000,000 | 2,170,000 |
| Pen Holdings, Inc., Series B, 9.875%, 6/15/2008* | 335,000 | 33,500 |
| Pioneer Natural Resources Co.: | ||
6.5%, 1/15/2008 | 475,000 | 516,057 |
7.5%, 4/15/2012 | 255,000 | 289,521 |
| Southern Natural Gas, 8.875%, 3/15/2010 | 210,000 | 232,050 |
| Stone Energy Corp., 8.75%, 9/15/2007 | 495,000 | 511,706 |
| Transocean, Inc., 9.5%, 12/15/2008 | 250,000 | 317,307 |
| Trico Marine Services, 8.875%, 5/15/2012 | 620,000 | 542,500 |
| Westar Energy, Inc., 7.875%, 5/1/2007 | 705,000 | 775,500 |
| Westport Resources Corp.: | ||
8.25%, 11/1/2011 | 95,000 | 103,550 |
8.25%, 11/1/2011 | 1,005,000 | 1,095,450 |
| Williams Co., Inc.: 7.125%, 9/1/2011 | 60,000 | 56,700 |
8.75%, 3/15/2032 | 155,000 | 151,125 |
| Williams Holdings of Delaware, Inc., 6.5%, 12/1/2008 | 270,000 | 251,100 |
| XTO Energy, Inc., 6.25%, 4/15/2013 | 255,000 | 265,838 |
17,206,215 | ||
| Financials 5.5% | ||
| Ahold Finance USA, Inc., 6.25%, 5/1/2009 | 755,000 | 619,100 |
| Americredit Corp.: | ||
9.25%, 5/1/2009 | 285,000 | 246,525 |
9.875%, 4/15/2006 | 330,000 | 295,350 |
| Avecia Group PLC, 11.0%, 7/1/2009 | 185,000 | 168,350 |
| Capstar Hotel Co., 8.75%, 8/15/2007 | 180,000 | 134,100 |
| Corrections Corp. of America, 9.875%, 5/1/2009 | 595,000 | 648,550 |
| Farmers Insurance Exchange, 8.625%, 5/1/2024 | 130,000 | 114,400 |
| FRD Acquisition Co., Series B, 12.5%, 7/15/2004* | 230,000 | 0 |
| Global Exchange Services, 10.286%, 7/15/2008 | 630,000 | 598,500 |
| JP Morgan, 8.75%, 11/15/2007 | 14,700,000 | 15,857,625 |
| LaBranche & Co., Inc., 12.0%, 3/2/2007 | 975,000 | 1,067,625 |
| Meristar Hospitality Corp., 9.0%, 1/15/2008 | 105,000 | 99,750 |
| PCA LLC/ PCA Finance Corp., 11.875%, 8/1/2009 | 245,000 | 258,475 |
| PEI Holdings, Inc., 11.0%, 3/15/2010 | 455,000 | 482,300 |
| Qwest Capital Funding, Inc.: | ||
5.875%, 8/3/2004 | 355,000 | 333,700 |
7.0%, 8/3/2009 | 80,000 | 66,200 |
| R.H. Donnelly Finance Corp., 10.875%, 12/15/2012 | 400,000 | 463,000 |
| TCI Communication Finance, 9.65%, 3/31/2027 | 80,000 | 89,013 |
| Tech Olympic USA, Inc., 10.375%, 7/1/2012 | 265,000 | 272,950 |
| Trump Holdings & Funding, 11.625%, 3/15/2010 | 175,000 | 167,563 |
| Universal City Development, 11.75%, 4/1/2010 | 780,000 | 840,450 |
| Xerox Credit Corp., 7.0%, 6/9/2003 | 370,000 | 370,000 |
23,193,526 | ||
| Health Care 0.9% | ||
| Ameripath, Inc., 10.5%, 4/1/2013 | 220,000 | 233,200 |
| Amerisourcebergen Corp., 7.25%, 11/15/2012 | 330,000 | 349,800 |
| HEALTHSOUTH Corp., 7.625%, 6/1/2012 | 920,000 | 586,500 |
| HMP Equity Holdings Corp., Zero Coupon, 5/15/2008 | 410,000 | 194,484 |
| Magellan Health Services, Inc., 9.375%, 11/15/2007* | 395,000 | 355,500 |
| Mariner Post-Acute Network, Inc., Series B, 10.5%, 8/1/2006 | 875,000 | 877,188 |
| Radiologix, Inc., 10.5%, 12/15/2008 | 285,000 | 242,250 |
| Sybron Dental Specialties, Inc., 8.125%, 6/15/2012 | 175,000 | 181,125 |
| Tenet Healthcare Corp.: | ||
6.375%, 12/1/2011 | 355,000 | 337,250 |
7.375%, 2/1/2013 | 365,000 | 360,438 |
| Vanguard Health Systems, Inc., 9.75%, 8/1/2011 | 195,000 | 196,950 |
3,914,685 | ||
| Industrials 6.3% | ||
| Allied Waste North America, Inc.: | ||
7.875%, 4/15/2013 | 640,000 | 665,600 |
9.25%, 9/1/2012 | 685,000 | 750,075 |
Series B, 10.0%, 8/1/2009 | 1,675,000 | 1,790,156 |
| Ami Semiconductor, Inc., 10.75%, 2/1/2013 | 205,000 | 222,425 |
| AutoNation, Inc., 9.0%, 8/1/2008 | 765,000 | 833,850 |
| Buckeye Technologies, Inc., 8.25%, 12/15/2005 | 400,000 | 394,000 |
| Chukchansi Economic Development Authority, 14.5%, 6/15/2009 | 215,000 | 223,869 |
| Collins & Aikman Floor Cover, Series B, 9.75%, 2/15/2010 | 135,000 | 136,181 |
| Collins & Aikman Products: | ||
10.75%, 12/31/2011 | 355,000 | 363,875 |
11.5%, 4/15/2006 | 760,000 | 710,600 |
| Congoleum Corp., 8.625%, 8/1/2008 | 445,000 | 255,875 |
| CP Ships Ltd., 10.375%, 7/15/2012 | 155,000 | 167,788 |
| Dana Corp.: | ||
7.0%, 3/1/2029 | 460,000 | 388,700 |
10.125%, 3/15/2010 | 805,000 | 901,600 |
| Day International Group, Inc.: | ||
9.5%, 3/15/2008 | 50,000 | 44,500 |
11.125%, 6/1/2005 | 700,000 | 707,000 |
| DeCrane Aircraft Holdings, Inc., Series B, 12.0%, 9/30/2008 | 1,045,000 | 470,250 |
| Delta Air Lines, Inc.: | ||
7.7%, 12/15/2005 | 100,000 | 78,250 |
7.9%, 12/15/2009 | 310,000 | 215,450 |
| Eagle-Picher Industries, Inc., 9.375%, 3/1/2008 | 460,000 | 407,100 |
| Equistar Chemicals LP: | ||
8.75%, 2/15/2009 | 2,895,000 | 2,866,050 |
10.125%, 9/1/2008 | 335,000 | 351,750 |
| Flowserve Corp., 12.25%, 8/15/2010 | 237,000 | 267,810 |
| Fort James Corp., 6.875%, 9/15/2007 | 610,000 | 616,100 |
| Golden State Petroleum Transportation, 8.04%, 2/1/2019 | 280,000 | 259,602 |
| Goodyear Tire & Rubber Co., 7.857%, 8/15/2011 | 195,000 | 146,250 |
| Grove Holdings LLC, Step-up Coupon, 0% to 5/1/2003, 11.625% to 5/1/2009* | 270,000 | 27 |
| Grove Investors, Inc., 14.5%, 5/1/2010* | 996,744 | 0 |
| GS Technologies: | ||
12.0%, 9/1/2004* | 300,819 | 16,545 |
12.25%, 10/1/2005* | 1,260,000 | 69,300 |
| Hayes Lemmerz International, Inc., 11.875%, 6/15/2006* | 1,080,000 | 540,000 |
| Hercules, Inc., 11.125%, 11/15/2007 | 1,157,000 | 1,307,410 |
| Hornbeck Offshore Services, Inc., 10.625%, 8/1/2008 | 150,000 | 162,000 |
| ISP Chemco, Inc., Series B, 10.25%, 7/1/2011 | 1,020,000 | 1,111,800 |
| JLG Industries, Inc., 8.25%, 5/1/2008 | 55,000 | 55,000 |
| Kansas City Southern: | ||
7.5%, 6/15/2009 | 150,000 | 155,250 |
9.5%, 10/1/2008 | 645,000 | 712,725 |
| Meritage Corp., 9.75%, 6/1/2011 | 260,000 | 284,050 |
| Metaldyne Corp., 11.0%, 6/15/2012 | 365,000 | 317,550 |
| Millennium America, Inc.: | ||
7.0%, 11/15/2006 | 1,050,000 | 1,065,750 |
7.625%, 11/15/2026 | 195,000 | 182,325 |
9.25%, 6/15/2008 | 1,015,000 | 1,116,500 |
| Motors and Gears, Inc., 10.75%, 11/15/2006 | 250,000 | 218,750 |
| Overseas Shipholding Group, 8.75%, 12/1/2013 | 210,000 | 215,978 |
| Plainwell, Inc., Series B, 11.0%, 3/1/2008* | 2,200,000 | 11,000 |
| Republic Engineered Products LLC, 10.0%, 8/16/2009* | 523,294 | 130,824 |
| Resolution Performance Products LLC, 13.5%, 11/15/2010 | 1,625,000 | 1,742,813 |
| Tech Olympic USA, Inc., 10.375%, 7/1/2012 | 105,000 | 108,150 |
| Terex Corp., Series B, 10.375%, 4/1/2011 | 235,000 | 260,850 |
| The Brickman Group Ltd., 11.75%, 12/15/2009 | 345,000 | 386,400 |
| United Rentals, Inc., Series B, 8.8%, 8/15/2008 | 995,000 | 935,300 |
| Xerox Corp.: | ||
5.5%, 11/15/2003 | 705,000 | 712,050 |
9.75%, 1/15/2009 | 660,000 | 749,100 |
26,802,153 | ||
| Information Technology 0.6% | ||
| Lucent Technologies, Inc.: | ||
5.5%, 11/15/2008 | 1,800,000 | 1,525,500 |
6.45%, 3/15/2029 | 70,000 | 51,450 |
| Riverwood International Corp., 10.875%, 4/1/2008 | 1,200,000 | 1,239,000 |
2,815,950 | ||
| Materials 3.3% | ||
| ARCO Chemical Co.: | ||
9.8%, 2/1/2020 | 915,000 | 869,250 |
10.25%, 11/1/2010 | 310,000 | 319,300 |
| Caraustar Industries, Inc., 9.875%, 4/1/2011 | 620,000 | 635,500 |
| Cascades, Inc., 7.25%, 2/15/2013 | 480,000 | 506,400 |
| Crown Cork & Seal, 8.0%, 4/15/2023 | 245,000 | 183,750 |
| Dan River, Inc.: | ||
10.125%, 12/15/2003 | 145,000 | 145,363 |
12.75%, 4/15/2009 | 335,000 | 326,625 |
| Dayton Superior Corp., 13.0%, 6/15/2009 | 410,000 | 348,500 |
| Dex Media East LLC: | ||
9.875%, 11/15/2009 | 425,000 | 486,625 |
12.125%, 11/15/2012 | 925,000 | 1,100,750 |
| Dimac Corp., 12.5%, 10/1/2008* | 1,980,000 | 19,800 |
| Equistar Chemical/ Funding Corp., 10.625%, 5/1/2011 | 205,000 | 216,788 |
| Fibermark, Inc., 10.75%, 4/15/2011 | 830,000 | 838,300 |
| Foamex LP, 10.75%, 4/1/2009 | 505,000 | 353,500 |
| Fonda Group, 9.5%, 3/1/2007 | 555,000 | 277,500 |
| Georgia-Pacific Corp.: | ||
7.5%, 5/15/2006 | 265,000 | 264,338 |
8.875%, 2/1/2010 | 675,000 | 727,313 |
8.875%, 5/15/2031 | 690,000 | 627,900 |
9.375%, 2/1/2013 | 410,000 | 451,000 |
Debenture, 7.7%, 6/15/2015 | 865,000 | 778,500 |
| Hexcel Corp., 9.75%, 1/15/2009 | 245,000 | 241,325 |
| Louisiana Pacific Corp., 10.875%, 11/15/2008 | 335,000 | 375,200 |
| Lyondell Chemical Co.: | ||
9.5%, 12/15/2008 | 180,000 | 183,600 |
10.875%, 5/1/2009 | 85,000 | 85,425 |
| MMI Products, Inc., Series B, 11.25%, 4/15/2007 | 790,000 | 592,500 |
| Owens-Brockway Glass Container: | ||
7.75%, 5/15/2011 | 275,000 | 285,313 |
8.25%, 5/15/2013 | 390,000 | 400,238 |
| Owens-Illinois, Inc.: | ||
7.5%, 5/15/2010 | 215,000 | 209,625 |
7.85%, 5/15/2004 | 160,000 | 167,200 |
| Phelps Dodge Corp., 8.75%, 6/1/2011 | 245,000 | 276,556 |
| Pliant Corp., 13.0%, 6/1/2010 | 210,000 | 194,250 |
| Polyone Corp., 10.625%, 5/15/2010 | 70,000 | 70,000 |
| Sweetheart Cup Co., Inc., 12.0%, 7/15/2004 | 305,000 | 263,825 |
| Toll Corp.: | ||
7.75%, 9/15/2007 | 50,000 | 51,625 |
8.0%, 5/1/2009 | 50,000 | 52,625 |
8.25%, 2/1/2011 | 600,000 | 646,500 |
| US Can Corp., Series B, 12.375%, 10/1/2010 | 435,000 | 304,500 |
13,877,309 | ||
| Telecommunication Services 3.1% | ||
| Alamosa Delaware, Inc., 13.625%, 8/15/2011 | 55,000 | 37,400 |
| Alamosa Holdings, Inc., Step-up Coupon, 0% to 2/15/2005, 12.875% to 2/15/2010 | 50,000 | 22,000 |
| American Tower Escrow, Zero Coupon, 8/1/2008 | 460,000 | 322,000 |
| American Tower Corp., 9.375%, 2/1/2009 | 525,000 | 519,750 |
| Avaya, Inc., 11.125%, 4/1/2009 | 1,130,000 | 1,248,650 |
| Century Communications Corp.: | ||
8.75%, 10/1/2007* | 160,000 | 74,400 |
8.875%, 1/15/2007* | 510,000 | 237,150 |
| Crown Castle International Corp.: | ||
9.375%, 8/1/2011 | 310,000 | 304,575 |
10.625%, 11/15/2007 | 695,000 | 717,588 |
| DirecTV Holdings, 8.375%, 3/15/2013 | 490,000 | 548,800 |
| Level 3 Communications, Inc., 11.0%, 3/15/2008 | 270,000 | 224,100 |
| Nextel Communications, Inc.: | ||
9.375%, 11/15/2009 | 330,000 | 356,400 |
9.5%, 2/1/2011 | 1,355,000 | 1,480,338 |
| Nextel Partners, Inc.: | ||
11.0%, 3/15/2010 | 90,000 | 94,950 |
Step-up Coupon, 0% to 2/1/2004, 14.0% to 2/1/2009 | 580,000 | 588,700 |
| Nortel Networks Corp., 7.4%, 6/15/2006 | 525,000 | 511,875 |
| Qwest Corp., 5.625%, 11/15/2008 | 1,985,000 | 1,846,050 |
| Qwest Services Corp.: | ||
13.5%, 12/15/2010 | 1,095,000 | 1,215,450 |
14.0%, 12/15/2014 | 224,000 | 255,360 |
| Shaw Communications, Inc., 8.25%, 4/11/2010 | 530,000 | 573,725 |
| Sprint Capital Corp.: | ||
6.125%, 11/15/2008 | 165,000 | 168,300 |
6.375%, 5/1/2009 | 145,000 | 147,900 |
8.375%, 3/15/2012 | 875,000 | 973,438 |
| Teligent, Inc., Series B, 11.5%, 3/1/2008* | 740,000 | 74 |
| Triton PCS, Inc., Step-up Coupon, 0% to 5/1/2003, 11.0% to 5/1/2008 | 175,000 | 175,438 |
| US West Communication, Inc., 7.25%, 9/15/2025 | 530,000 | 477,000 |
13,121,411 | ||
| Utilities 1.3% | ||
| Calpine Corp., 8.5%, 2/15/2011 | 1,095,000 | 799,350 |
| CMS Energy Corp.: | ||
7.5%, 1/15/2009 | 960,000 | 926,400 |
8.5%, 4/15/2011 | 1,675,000 | 1,666,625 |
8.9%, 7/15/2008 | 215,000 | 216,075 |
| Sonat, Inc., 7.625%, 7/15/2011 | 175,000 | 152,250 |
| Southwest Gas Corp., 8.375%, 2/15/2011 | 150,000 | 174,275 |
| TNP Enterprises, Inc., Series B, 10.25%, 4/1/2010 | 540,000 | 548,100 |
| Western Resources, Inc., 9.75%, 5/1/2007 | 905,000 | 998,894 |
5,481,969 | ||
| Total Corporate Bonds (Cost $162,639,171) | 159,889,292 | |
Foreign Bonds - US$ Denominated 27.9% | ||
| Ainsworth Lumber, 12.5%, 7/15/2007 | 130,000 | 143,000 |
| Antenna TV SA, 9.0%, 8/1/2007 | 225,000 | 191,250 |
| Bluewater Finance Ltd.: | ||
10.25%, 2/15/2012 | 480,000 | 492,000 |
10.25%, 2/15/2012 | 155,000 | 158,875 |
| British Sky Broadcasting PLC: | ||
6.875%, 2/23/2009 | 280,000 | 303,100 |
8.2%, 7/15/2009 | 995,000 | 1,134,300 |
| Burns, Philp & Co., Ltd., 10.75%, 2/15/2011 | 185,000 | 198,875 |
| Central Bank of Dominican Republic, 9.5%, 9/27/2006 | 700,000 | 740,250 |
| Central European Media Enterprises Ltd., 9.375%, 8/15/2004 | 490,000 | 477,750 |
| Conproca SA de CV, 12.0%, 6/16/2010 | 295,000 | 377,600 |
| Corp Durango SA, 13.75%, 7/15/2009* | 425,000 | 195,500 |
| Crown Euro Holdings SA, 10.875%, 3/1/2013 | 625,000 | 673,438 |
| Disco SA, 9.875%, 5/15/2008 | 135,000 | 94,500 |
| Esprit Telecom Group PLC: | ||
10.875%, 6/15/2008* | 800,000 | 80 |
11.5%, 12/15/2007* | 2,345,000 | 235 |
| Euramax International PLC, 11.25%, 10/1/2006 | 690,000 | 721,050 |
| Fage Dairy Industry SA, 9.0%, 2/1/2007 | 370,000 | 359,363 |
| Federative Republic of Brazil: | ||
8.0%, 4/15/2014 | 2,001,041 | 1,763,418 |
8.875%, 4/15/2024 | 1,800,000 | 1,335,960 |
10.0%, 1/16/2007 | 1,100,000 | 1,077,340 |
10.125%, 5/15/2027 | 3,800,000 | 3,116,000 |
11.0%, 8/17/2040 | 1,000,000 | 872,500 |
11.0%, 8/17/2040 | 500,000 | 436,250 |
Floating Rate Bond, LIBOR plus .875%, 2.204%, 4/15/2009 | 3,670,588 | 3,064,941 |
Floating Rate Bond, LIBOR plus .875%, 2.204%, 4/15/2012 | 3,600,000 | 2,668,500 |
| Gazprom OAO, 9.625%, 3/1/2013 | 890,000 | 947,850 |
| Government of Ukraine, 11.0%, 3/15/2007 | 1,067,738 | 1,193,197 |
| Grupo Elektra SA de CV, 12.0%, 4/1/2008 | 380,000 | 372,400 |
| Innova S de R.L., 12.875%, 4/1/2007* | 695,000 | 682,838 |
| Ivory Coast, 2.0%, 3/29/2018* | 4,460,000 | 702,450 |
| LeGrand SA, 8.5%, 2/15/2025 | 265,000 | 255,725 |
| Luscar Coal Ltd., 9.75%, 10/15/2011 | 70,000 | 79,100 |
| Millicom International Cellular SA, 13.5%, 6/1/2006 | 610,000 | 478,850 |
| Ministry Finance Russia, Series V, 3.0%, 5/14/2008 | 1,100,000 | 970,750 |
| Nortel Networks Ltd., 6.125%, 2/15/2006 | 730,000 | 707,188 |
| Ocean Rig Norway AS, 10.25%, 6/1/2008 | 445,000 | 400,500 |
| Petroleum Geo-Services ASA, 7.125%, 3/30/2028 | 400,000 | 178,000 |
| Petronas Capital Ltd.: | ||
7.0%, 5/22/2012 | 2,100,000 | 2,331,000 |
7.875%, 5/22/2022 | 1,900,000 | 2,092,478 |
| PTC International Finance BV, 10.75%, 7/1/2007 | 215,000 | 225,750 |
| PTC International Finance II SA, 11.25%, 12/1/2009 | 205,000 | 228,575 |
| Republic of Argentina: | ||
9.75%, 9/19/2027* | 3,000,000 | 840,405 |
11.375%, 3/15/2010* | 3,150,000 | 921,375 |
11.375%, 3/15/2010* | 3,500,000 | 1,023,750 |
11.75%, 4/7/2009* | 5,640,000 | 1,551,000 |
11.75%, 6/15/2015* | 3,230,000 | 953,499 |
12.375%, 2/21/2012* | 650,000 | 196,625 |
Series BGL4, 11%, 10/9/2006* | 800,000 | 228,000 |
Series BGL5, 11.375%, 1/30/2017* | 700,000 | 208,017 |
| Republic of Bulgaria: | ||
8.25%, 1/15/2015 | 7,580,000 | 8,538,870 |
8.25%, 1/15/2015 | 160,000 | 180,000 |
| Republic of Colombia: | ||
7.625%, 2/15/2007 | 700,000 | 714,000 |
8.625%, 4/1/2008 | 1,500,000 | 1,582,500 |
9.75%, 4/9/2011 | 1,475,880 | 1,645,606 |
10.5%, 7/9/2010 | 1,200,000 | 1,347,000 |
| Republic of Ecuador, Step-up Coupon, 6.0% to 8/15/2003, 7.0% to 8/15/2004 | 3,210,000 | 1,998,225 |
| Republic of El Salvador: | ||
8.25%, 4/10/2032 | 1,730,000 | 1,770,399 |
8.25%, 4/10/2032 | 1,300,000 | 1,303,250 |
| Republic of Panama, 8.875%, 9/30/2027 | 2,700,000 | 2,808,000 |
| Republic of Peru, 9.875%, 2/6/2015 | 2,100,000 | 2,357,250 |
| Republic of Philippines: | ||
9.5%, 10/21/2024 | 750,000 | 830,625 |
10.625%, 3/16/2025 | 900,000 | 972,000 |
| Republic of Turkey: | ||
11.5%, 1/23/2012 | 220,000 | 217,800 |
11.875%, 1/15/2030 | 4,550,000 | 4,629,625 |
12.375%, 6/15/2009 | 1,600,000 | 1,682,000 |
| Republic of Venezuela, 9.25%, 9/15/2027 | 5,760,000 | 3,761,280 |
| Royal Caribbean Cruises Ltd.: | ||
6.75%, 3/15/2008 | 120,000 | 114,000 |
7.25%, 3/15/2018 | 450,000 | 389,250 |
8.75%, 2/2/2011 | 790,000 | 801,850 |
| Russian Federation: | ||
11.0%, 7/24/2018 | 400,000 | 536,000 |
Step-up Coupon, 5.0% to 3/31/2007, 7.5% to 3/31/2030 | 5,920,000 | 5,328,000 |
| Russian Ministry of Finance, Series VI, 3.0%, 5/14/2006 | 5,000,000 | 4,805,000 |
| Stagecoach Holdings PLC, 8.625%, 11/15/2009 | 1,310,000 | 1,333,742 |
| State of Qatar, 9.75%, 6/15/2030 | 1,600,000 | 2,132,000 |
| Stena AB: | ||
8.75%, 6/15/2007 | 155,000 | 159,844 |
9.625%, 12/1/2012 | 620,000 | 682,000 |
| Stone Container Corp., 11.5%, 8/15/2006 | 670,000 | 716,900 |
| Telus Corp., 8.0%, 6/1/2011 | 1,130,000 | 1,276,900 |
| Tembec Industries, Inc.: 8.5%, 2/1/2011 | 115,000 | 119,600 |
8.625%, 6/30/2009 | 440,000 | 457,600 |
| TFM SA de CV: | ||
10.25%, 6/15/2007 | 1,585,000 | 1,569,150 |
12.5%, 6/15/2012 | 505,000 | 530,250 |
11.75%, 6/15/2009 | 50,000 | 51,250 |
| Tyco International Group SA: | ||
5.8%, 8/1/2006 | 2,810,000 | 2,767,850 |
6.125%, 11/1/2008 | 2,300,000 | 2,259,750 |
6.125%, 1/15/2009 | 1,610,000 | 1,581,825 |
6.375%, 10/15/2011 | 1,080,000 | 1,063,800 |
6.75%, 2/15/2011 | 80,000 | 80,000 |
| United Mexican States: | ||
4.625%, 10/8/2008 | 1,450,000 | 1,470,300 |
6.375%, 1/16/2013 | 1,040,000 | 1,089,400 |
7.5%, 4/8/2033 | 1,050,000 | 1,094,625 |
9.875%, 2/1/2010 | 1,700,000 | 2,165,800 |
Series MTN, 8.3%, 8/15/2031 | 190,000 | 212,566 |
Series XW, 10.375%, 2/17/2009 | 4,800,000 | 6,192,000 |
| Vicap SA, 11.375%, 5/15/2007 | 1,300,000 | 1,101,750 |
| Vivendi Universal, 9.25%, 4/15/2010 | 970,000 | 1,088,825 |
| Yell Finance BV, Step-up Coupon, 0% to 8/1/2006, 13.5% to 8/1/2011 | 310,000 | 247,225 |
| Total Foreign Bonds - US$ Denominated (Cost $111,778,187) | 118,122,879 | |
Foreign Bonds - Non US$ Denominated 18.6% | ||
| Banque Cent de Tunisie, 6.25%, 2/20/2013 EUR | 2,500,000 | 2,850,264 |
| Barry Callebaut Svcs NV, 9.25%, 3/15/2010 EUR | 155,000 | 184,513 |
| Federal Republic of Germany, 6.0%, 7/4/2007 EUR | 15,748,662 | 19,567,579 |
| Ivory Coast, 2.0%, 3/29/2018* EUR | 2,271,490 | 403,060 |
| Kingdom of Spain, 6.0%, 1/31/2008 EUR | 16,000,000 | 20,015,783 |
| Pemex Project Funding Master Trust, 6.625%, 4/4/2010 EUR | 640,000 | 749,340 |
| Prosieben Media AG, 11.25%, 7/31/2009 EUR | 195,000 | 227,770 |
| Province of Ontario, 1.875%, 1/25/2010 JPY | 875,000,000 | 8,096,923 |
| Republic of Argentina: | ||
10.5%, 11/29/2049* EUR | 270,985 | 77,238 |
Series FEB, 8.0%, 2/26/2008* EUR | 1,360,000 | 425,639 |
EURIBOR plus .51%, 7.628%, 12/22/2004* EUR | 1,500,000 | 344,008 |
| Republic of Italy, 10.5%, 4/28/2014 GBP | 7,450,000 | 17,628,687 |
| Republic of Romania, 8.5%, 5/8/2012 EUR | 2,520,000 | 3,196,990 |
| Romania, 10.625%, 6/27/2008 EUR | 550,000 | 739,867 |
| Ukraine Government, 10.0%, 3/15/2007 EUR | 1,261,872 | 1,523,295 |
| United Mexican States, 7.5%, 3/8/2010 EUR | 2,390,000 | 2,986,962 |
| Total Foreign Bonds - Non US$ Denominated (Cost $75,143,142) | 79,017,918 | |
US Treasury Obligations 10.6% | ||
| US Treasury Bond: | ||
5.375%, 2/15/2031 | 1,570,000 | 1,713,140 |
6.25%, 8/15/2023 | 8,600,000 | 10,185,625 |
7.25%, 5/15/2016 | 3,000,000 | 3,868,710 |
12.0%, 8/15/2013 | 2,880,000 | 4,151,699 |
| US Treasury Note: | ||
4.0%, 11/15/2012 | 2,600,000 | 2,633,210 |
4.75%, 11/15/2008 | 3,000,000 | 3,262,149 |
4.75%, 11/15/2008 | 7,000,000 | 7,767,263 |
6.125%, 8/15/2007 | 3,300,000 | 3,774,761 |
12.75%, 11/15/2010 (d) | 6,100,000 | 7,729,603 |
| Total US Treasury Obligations (Cost $44,255,250) | 45,086,160 | |
| Value ($) | |
Common Stocks 0.2% | ||
| AMF Bowling Worldwide, Inc.* | 6,839 | 153,878 |
| FRD Acquisition Co.* | 4,239 | 6,782 |
| ICG Communications, Inc.* | 12,908 | 73,253 |
| ICG Communications, Inc.* | 4,026 | 40 |
| IMPSAT Fiber Networks, Inc.* | 30,640 | 35,236 |
| MEDIQ, Inc.* | 2,486 | 10,797 |
| Metal Management, Inc.* | 73,053 | 628,256 |
| National Vision, Inc.* | 107,355 | 32,207 |
| The Manitowoc Co., Inc. | 2,039 | 37,925 |
| XO Communications, Inc.* | 2,188 | 12,997 |
| Total Common Stocks (Cost $9,381,447) | 991,371 | |
Warrants 0.0% | ||
| AMF Bowling Worldwide, Inc.* | 16,093 | 58,739 |
| DeCrane Aircraft Holdings, Inc.* | 2,740 | 27 |
| Destia Communications, Inc.* | 1,425 | 0 |
| Empire Gas Corp.* | 2,208 | 0 |
| ICG Communications, Inc.* | 2,092 | 139 |
| KMC Telecom Holdings, Inc.* | 2,100 | 0 |
| Mariner Health Care, Inc.* | 2,781 | 21 |
| McLeodUSA, Inc.* | 6,036 | 1,147 |
| Republic Technologies International LLC* | 2,780 | 28 |
| Waxman Industries, Inc.* | 222,607 | 2,226 |
| Total Warrants (Cost $4,487,224) | 62,327 | |
Preferred Stocks 0.2% | ||
| Sinclair Capital | 8,070 | 851,385 |
| TNP Enterprises, Inc.* | 744 | 61,339 |
| Total Preferred Stocks (Cost $863,255) | 912,724 | |
Convertible Preferred Stocks 0.1% | ||
| Hercules Trust II | 285 | 186,331 |
| Lucent Technologies, Inc. | 175 | 167,125 |
| World Access, Inc. "D"* | 933 | 0 |
| Total Convertible Preferred Stocks (Cost $1,721,100) | 353,456 | |
Principal Amount ($)(c) | Value ($) | |
Convertible Bonds 0.4% | ||
| Avaya, Inc., Zero Coupon, 10/31/2021 | 740,000 | 358,012 |
| Aether Systems, 6.0%, 3/22/2005 | 180,000 | 158,400 |
| Charming Shoppers, Inc., 4.75%, 6/1/2012 | 50,000 | 43,875 |
| DIMON, Inc., 6.25%, 3/31/2007 | 465,000 | 427,800 |
| Nortel Networks Corp., 4.25%, 9/1/2008 | 370,000 | 311,725 |
| Park Drilling Co., 5.5%, 8/1/2004 | 345,000 | 323,438 |
| Total Convertible Bonds (Cost $1,446,433) | 1,623,250 | |
Purchased Options 0.0% | ||
| Japanese Yen Call, 6/23/2003 (Cost $122,400) JPY | 2,004,000,000 | 18,534 |
| Value ($) | |
Other 0.1% | ||
| SpinCycle, Inc.* | 105,025 | 341,331 |
| SpinCycle, Inc. "F"* | 737 | 40 |
| Total Other (Cost $256,680) | 341,371 | |
| Value ($) | |
Cash Equivalents 1.2% | ||
| Scudder Cash Management QP Trust, 1.32% (b) (Cost $5,222,976) | 5,222,976 | 5,222,976 |
% of Net Assets | Value ($) | |
| Total Investment Portfolio (Cost $417,317,265) (a) | 97.0 | 411,642,258 |
| Other Assets and Liabilities, Net | 3.0 | 12,498,069 |
| Net Assets | 100.0 | 424,140,327 |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal on interest or has filed for bankruptcy.
(a) The cost for federal income tax purposes was $421,066,066. At April 30, 2003, net unrealized depreciation for all securities based on tax cost was $9,423,808. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $24,052,215 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $33,476,023.
(b) Scudder Cash Management QP Trust is also managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Principal amount in US dollars unless otherwise noted.
(d) At April 30, 2003, this security has been pledged to cover, in whole or in part, initial margin requirements for open futures contracts.
At April 30, 2003, open futures contracts sold short were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation (Depreciation) ($) |
| 10 Year TSE Japan Bond | 6/11/2003 | 14 | 16,989,924 | 16,903,351 | (86,573) |
| Total net unrealized depreciation | (86,573) | ||||
At April 30, 2003, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation (Depreciation) ($) |
| Euro Bund | 6/6/2003 | 102 | 13,055,406 | 13,088,412 | 33,006 |
| Liffe Gilt | 6/26/2003 | 47 | 8,958,553 | 9,025,785 | 67,232 |
| 10 Year US Treasury Note | 6/19/2003 | 497 | 56,766,801 | 57,217,125 | 450,324 |
| Total net unrealized appreciation | 550,562 | ||||
Currency Abbreviation | |
| EUR | Euro |
| GBP | Great British Pound |
| JPY | Japanese Yen |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of April 30, 2003 (Unaudited) | |
| Assets | |
| Investments in securities, at value (cost $417,317,265) | $ 411,642,258 |
| Foreign currency, at value (cost $1,262,532) | 1,270,279 |
| Receivable for investments sold | 7,409,883 |
| Interest receivable | 9,042,499 |
| Receivable for Fund shares sold | 1,545,314 |
| Receivable for daily variation margin on open futures contracts | 322,239 |
| Unrealized appreciation on forward foreign currency exchange contracts | 813,780 |
| Total assets | 432,046,252 |
| Liabilities | |
| Payable for investments purchased | 5,882,882 |
| Payable for Fund shares redeemed | 449,022 |
| Unrealized depreciation on forward foreign currency exchange contracts | 1,137,902 |
| Accrued management fee | 187,122 |
| Other accrued expenses and payables | 248,997 |
| Total liabilities | 7,905,925 |
| Net assets, at value | $ 424,140,327 |
| Net Assets | |
| Net assets consist of: Accumulated distributions in excess of net investment income | (1,135,495) |
| Net unrealized appreciation (depreciation) on: Investments | (5,675,007) |
| Futures | 463,989 |
| Foreign currency related transactions | (221,582) |
| Accumulated net realized gain (loss) | (148,328,509) |
| Paid-in capital | 579,036,931 |
| Net assets, at value | $ 424,140,327 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of April 30, 2003 (Unaudited) (continued) | |
| Net Asset Value | |
| Class A Net Asset Value and redemption price per share ($325,439,930 / 73,012,259 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 4.46 |
| Maximum offering price per share (100 / 95.5 of $4.46) | $ 4.67 |
| Class B Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($80,530,008 / 18,084,942 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 4.45 |
| Class C Net Asset Value and redemption price (subject to contingent deferred sales charge) per share ($18,170,389 / 4,051,105 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 4.49 |
| Maximum offering price per share (100 / 99 of $4.49) | $ 4.54 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended April 30, 2003 (Unaudited) | |
| Investment Income | |
| Income: Dividends | $ 55,547 |
| Interest | 15,270,993 |
| Total Income | 15,326,540 |
| Expenses: Management fee | 1,151,769 |
| Administrative fee | 668,546 |
| Distribution service fees | 784,023 |
| Trustees' fees and expenses | 12,746 |
| Other | 11,936 |
| Total expenses, before expense reductions | 2,629,020 |
| Expense reductions | (1,587) |
| Total expenses, after expense reductions | 2,627,433 |
| Net investment income | 12,699,107 |
| Realized and Unrealized Gain (Loss) on Investment Transactions | |
| Net realized gain (loss) from: Investments | (28,283,750) |
| Futures | 957,489 |
| Foreign currency related transactions | (4,213,501) |
| (31,539,762) | |
| Net unrealized appreciation (depreciation) during the period on: Investments | 68,884,831 |
| Futures | 328,740 |
| Foreign currency related transactions | 174,140 |
| 69,387,711 | |
| Net gain (loss) on investment transactions | 37,847,949 |
| Net increase (decrease) in net assets resulting from operations | $ 50,547,056 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | ||
| Increase (Decrease) in Net Assets | Six Months Ended April 30, 2003 (Unaudited) | Year Ended October 31, 2002 |
| Operations: Net investment income | $ 12,699,107 | $ 31,010,043 |
| Net realized gain (loss) on investment transactions | (31,539,762) | (43,851,097) |
| Net unrealized appreciation (depreciation) on investment transactions during the period | 69,387,711 | 23,605,577 |
| Net increase (decrease) in net assets resulting from operations | 50,547,056 | 10,764,523 |
| Distributions to shareholders from: Net investment income: Class A | (11,208,584) | (18,225,848) |
| Class B | (2,569,640) | (4,862,479) |
| Class C | (539,730) | (881,248) |
| Tax return of capital: Class A | - | (8,400,195) |
| Class B | - | (2,241,091) |
| Class C | - | (406,163) |
| Fund share transactions: Proceeds from shares sold | 52,211,031 | 92,735,397 |
| Reinvestment of distributions | 9,330,132 | 22,451,133 |
| Cost of shares redeemed | (70,590,870) | (132,594,464) |
| Net increase (decrease) in net assets from Fund share transactions | (9,049,707) | (17,407,934) |
| Increase (decrease) in net assets | 27,179,395 | (41,660,435) |
| Net assets at beginning of period | 396,960,932 | 438,621,367 |
| Net assets at end of period (including accumulated distributions in excess of net investment income and undistributed net investment income of $1,135,495 and $483,352, respectively) | $ 424,140,327 | $ 396,960,932 |
The accompanying notes are an integral part of the financial statements.
Class A | ||||||
Years Ended October 31, | 2003a | 2002b | 2001 | 2000 | 1999 | 1998 |
| Selected Per Share Data | ||||||
| Net asset value, beginning of period | $ 4.08 | $ 4.33 | $ 4.57 | $ 5.26 | $ 5.60 | $ 5.96 |
| Income (loss) from investment operations: Net investment income (loss)c | .14 | .32 | .39 | .48 | .49 | .44 |
| Net realized and unrealized gain (loss) on investment transactions | .39 | (.21) | (.20) | (.72) | (.35) | (.35) |
Total from investment operations | .53 | .11 | .19 | (.24) | .14 | .09 |
| Less distributions from: Net investment income | (.15) | (.25) | (.34) | (.34) | (.48) | (.45) |
| Tax return of capital | - | (.11) | (.09) | (.11) | - | - |
Total distributions | (.15) | (.36) | (.43) | (.45) | (.48) | (.45) |
| Net asset value, end of period | $ 4.46 | $ 4.08 | $ 4.33 | $ 4.57 | $ 5.26 | $ 5.60 |
| Total Return (%)d | 13.33** | 2.38 | 4.47 | (4.91) | 2.43 | 1.28 |
| Ratios to Average Net Assets and Supplemental Data | ||||||
| Net assets, end of period ($ millions) | 325 | 300 | 322 | 359 | 492 | 550 |
| Ratio of expenses before expense reductions (%) | 1.11* | 1.12 | 1.21e | 1.10 | 1.11 | 1.04 |
| Ratio of expenses after expense reductions (%) | 1.11* | 1.12 | 1.19e | 1.09 | 1.10 | 1.04 |
| Ratio of net investment income (loss) (%) | 6.95* | 7.54 | 8.78 | 9.55 | 8.80 | 7.36 |
| Portfolio turnover rate (%) | 152* | 86 | 124 | 37 | 92 | 751 |
| a For the six months ended April 30, 2003 (Unaudited). b As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of these changes for the year ended October 31, 2002 was to decrease net investment income by $.02, increase net realized and unrealized gain (loss) per share by $.02, and decrease the ratio of net investment income to average net assets from 8.04% to 7.54%. Per share data and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. c Based on average shares outstanding during the period. d Total return does not reflect the effect of any sales charges. e The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 1.18% and 1.18%, respectively. * Annualized ** Not annualized | ||||||
Class B | ||||||
Years Ended October 31, | 2003a | 2002b | 2001 | 2000 | 1999 | 1998 |
| Selected Per Share Data | ||||||
| Net asset value, beginning of period | $ 4.08 | $ 4.33 | $ 4.57 | $ 5.26 | $ 5.59 | $ 5.96 |
| Income (loss) from investment operations: Net investment income (loss)c | .12 | .29 | .35 | .43 | .43 | .38 |
| Net realized and unrealized gain (loss) on investment transactions | .39 | (.21) | (.21) | (.72) | (.34) | (.36) |
Total from investment operations | .51 | .08 | .14 | (.29) | (.09) | .02 |
| Less distributions from: Net investment income | (.14) | (.23) | (.30) | (.30) | (.42) | (.39) |
| Tax return of capital | - | (.10) | (.08) | (.10) | - | - |
Total distributions | (.14) | (.33) | (.38) | (.40) | (.42) | (.39) |
| Net asset value, end of period | $ 4.45 | $ 4.08 | $ 4.33 | $ 4.57 | $ 5.26 | $ 5.59 |
| Total Return (%)d | 12.61** | 1.77 | 3.20 | (5.85) | 1.57 | .12 |
| Ratios to Average Net Assets and Supplemental Data | ||||||
| Net assets, end of period ($ millions) | 81 | 82 | 100 | 119 | 198 | 271 |
| Ratio of expenses before expense reductions (%) | 1.93* | 1.94 | 2.22e | 2.11 | 2.06 | 2.01 |
| Ratio of expenses after expense reductions (%) | 1.93* | 1.94 | 2.22e | 2.10 | 2.05 | 2.01 |
| Ratio of net investment income (loss) (%) | 6.13* | 6.73 | 7.75 | 8.50 | 7.85 | 6.39 |
| Portfolio turnover rate (%) | 152* | 86 | 124 | 37 | 92 | 751 |
| a For the six months ended April 30, 2003 (Unaudited). b As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of these changes for the year ended October 31, 2002 was to decrease net investment income by $.02, increase net realized and unrealized gain (loss) per share by $.02, and decrease the ratio of net investment income to average net assets from 7.23% to 6.73%. Per share data and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. c Based on average shares outstanding during the period. d Total return does not reflect the effect of any sales charges. e The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 2.19% and 2.19%, respectively. * Annualized ** Not annualized | ||||||
Class C | ||||||
Years Ended October 31, | 2003a | 2002b | 2001 | 2000 | 1999 | 1998 |
| Selected Per Share Data | ||||||
| Net asset value, beginning of period | $ 4.11 | $ 4.36 | $ 4.60 | $ 5.29 | $ 5.62 | $ 5.99 |
| Income (loss) from investment operations: Net investment income (loss)c | .12 | .29 | .37 | .45 | .45 | .39 |
| Net realized and unrealized gain (loss) on investment transactions | .40 | (.20) | (.21) | (.72) | (.34) | (.36) |
Total from investment operations | .52 | .09 | .16 | (.27) | .11 | .03 |
| Less distributions from: Net investment income | (.14) | (.23) | (.31) | (.32) | (.44) | (.40) |
| Tax return of capital | - | (.11) | (.09) | (.10) | - | - |
Total distributions | (.14) | (.34) | (.40) | (.42) | (.44) | (.40) |
| Net asset value, end of period | $ 4.49 | $ 4.11 | $ 4.36 | $ 4.60 | $ 5.29 | $ 5.62 |
| Total Return (%)d | 12.89** | 2.00 | 3.55 | (5.51) | 1.78 | .28 |
| Ratios to Average Net Assets and Supplemental Data | ||||||
| Net assets, end of period ($ millions) | 18 | 15 | 16 | 19 | 30 | 30 |
| Ratio of expenses before expense reductions (%) | 1.75* | 1.76 | 1.87e | 1.76 | 1.87 | 1.84 |
| Ratio of expenses after expense reductions (%) | 1.75* | 1.76 | 1.84e | 1.75 | 1.85 | 1.84 |
| Ratio of net investment income (loss) (%) | 6.30* | 6.90 | 8.13 | 8.87 | 8.05 | 6.56 |
| Portfolio turnover rate (%) | 152* | 86 | 124 | 37 | 92 | 751 |
| a For the six months ended April 30, 2003 (Unaudited). b As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of these changes for the year ended October 31, 2002 was to decrease net investment income by $.02, increase net realized and unrealized gain (loss) per share by $.02, and decrease the ratio of net investment income to average net assets from 7.40% to 6.90%. Per share data and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. c Based on average shares outstanding during the period. d Total return does not reflect the effect of any sales charges. e The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 1.83% and 1.83%, respectively. * Annualized ** Not annualized | ||||||
A. Significant Accounting Policies
Scudder Strategic Income Fund (the ``Fund'') is registered under the Investment Company Act of 1940, as amended (the ``1940 Act''), as an open-end, diversified management investment company organized as a Massachusetts business trust.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors subject to an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Prior to February 3, 2003, Class C shares were offered without an initial sales charge. Class C shares do not convert into another class. Class I shares (none sold through April 30, 2003) are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution service fees, administrative fees and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those 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 on each day the exchange is open for trading. Debt securities are valued by independent pricing services approved by the Trustees of the Fund. If the pricing services are unable to provide valuations, securities are valued at the most recent bid quotation or evaluated price, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes.
Equity securities are valued at the most recent sale price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.
Foreign Currency Translations. The books and records of the Fund are maintained in US dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into US dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into US dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the disposition of forward foreign currency exchange contracts and foreign currencies, and the difference between the amount of net investment income accrued and the US dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gains and losses on investment securities.
Options. An option contract is a contract in which the writer of the option grants the buyer of the option the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. Certain options, including options on indices, will require cash settlement by the Fund if the option is exercised. The Fund may enter into option contracts in order to hedge against potential adverse price movements in the value of portfolio assets; as a temporary substitute for selling selected investments; to lock in the purchase price of a security or currency which it expects to purchase in the near future; as a temporary substitute for purchase of selected investments; and to enhance potential gain.
The liability representing the Fund's obligation under an exchange traded written option or investment in a purchased option is valued at the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices or at the most recent asked price (bid for purchased options) if no bid and asked price are available. Over-the-counter written or purchased options are valued using dealer supplied quotations. Gain or loss is recognized when the option contract expires or is closed.
If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may enter into futures contracts as a hedge against anticipated interest rate, currency or equity market changes, and for duration management, risk management and return enhancement purposes.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The Fund may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. Sales and purchases of forward currency contracts having the same settlement date and broker are offset and any gain (loss) is realized on the date of offset; otherwise, gain (loss) is realized on settlement date. Realized and unrealized gains and losses which represent the difference between the value of a forward currency contract to buy and a forward currency contract to sell are included in net realized and unrealized gain (loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
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 October 31, 2002, the Fund had a net tax basis capital loss carryforward of approximately $112,215,000 which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until October 31, 2003 ($5,576,000), October 31, 2006 ($2,523,000), October 31, 2007 ($18,866,000), October 31, 2008 (25,665,000), October 31, 2009 (20,682,000) and October 31, 2010 ($38,903,000), the respective expiration dates, whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income, if any, are made 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 of America. 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.
At October 31, 2002, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
| Undistributed ordinary income | $ - |
| Undistributed net long-term capital gains | $ - |
| Capital loss carryforwards | $ (112,215,000) |
| Net unrealized appreciation (depreciation) on investments | $ (79,185,854) |
In addition, during the year ended October 31, 2002, the tax character of distributions paid to shareholders by the Fund are summarized as follows:
| Distributions from ordinary income | $ 23,969,575 |
| Distributions from return of capital | $ 11,047,449 |
For tax purposes, short-term capital gains distributions are considered ordinary income distributions.
The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.
Other. 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 net of foreign withholding taxes. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for financial reporting purposes, except when purchased in default.
B. Purchases and Sales of Securities
During the six months ended April 30, 2003, purchases and sales of investment securities (excluding short-term investments) aggregated $296,875,238 and $311,860,033, respectively.
C. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor 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 Advisor provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 0.58% of the first $250,000,000 of the Fund's average daily net assets, 0.55% of the next $750,000,000 of such net assets, 0.53% of the next $1,500,000,000 of such net assets, 0.51% of the next $2,500,000,000 of such net assets, 0.48% of the next $2,500,000,000 of such net assets, 0.46% of the next $2,500,000,000 of such net assets, 0.44% of the next $2,500,000,000 of such net assets and 0.42% of such net assets in excess of $12,500,000,000, computed and accrued daily and payable monthly. Accordingly, for the six months ended April 30, 2003, the fee pursuant to the Management Agreement was equivalent to an annualized effective rate of 0.57% of the Fund's average daily net assets. Deutsche Asset Management Investment Services Ltd. ("DeAMIS"), an affiliate of the Advisor, serves as subadvisor with respect to the investment and reinvestment of assets in the Fund.
Administrative Fee. Under the Administrative Agreement (the "Administrative Agreement"), the Advisor provides or pays others to provide substantially all of the administrative services required by the Fund (other than those provided by the Advisor under its Management Agreement with the Fund, as described above) in exchange for the payment by each class of the Fund of an administrative services fee (the "Administrative Fee") of 0.325%, 0.375% and 0.200% of the average daily net assets for Class A, B and C shares, respectively, computed and accrued daily and payable monthly.
Various third-party service providers, some of which are affiliated with the Advisor, provide certain services to the Fund under the Administrative Agreement. Scudder Investments Service Company, an affiliate of the Advisor, is the transfer, shareholder service and dividend-paying agent for Class A, B and C shares of the Fund. This affiliated entity has in turn entered into various agreements with third party service providers to provide these services. In addition, other service providers not affiliated with the Advisor provide certain services (i.e., custody, legal and audit) to the Fund under the Administrative Agreement. The Advisor pays the service providers for the provision of their services to the Fund and pays other Fund expenses, including insurance, registration, printing, postage and other costs. Certain expenses of the Fund will not be borne by the Advisor under the Administrative Agreement, such as taxes, brokerage, interest and extraordinary expenses, and the fees and expenses of the Independent Trustees (including the fees and expenses of their independent counsel). For the six months ended April 30, 2003, the Administrative Fee was as follows:
Administrative Fee | Total Aggregated | Unpaid at April 30, 2003 |
| Class A | $ 501,805 | $ 89,623 |
| Class B | 150,521 | 26,016 |
| Class C | 16,220 | 2,991 |
$ 668,546 | $ 118,630 |
The Administrative Agreement between the Advisor and the Fund will terminate effective September 30, 2003 and the Fund will directly bear the cost of those expenses formerly covered under the Administrative Agreement. Effective October 1, 2003 through September 30, 2005, the Advisor has agreed to contractually waive all or a portion of its management fee and reimburse or pay certain operating expenses of each class at 1.05% of average daily net assets for Class A, B and C shares, respectively (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, Rule 12b-1 and/or service fees, trustees and trustee counsel fees).
Distribution Service Agreement. Under the Distribution Service Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc. ("SDI"), a subsidiary of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of Class B and C shares. Pursuant to the agreement, SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the six months ended April 30, 2003, the Distribution Fee was as follows:
Distribution Fee | Total Aggregated | Unpaid at April 30, 2003 |
| Class B | $ 300,868 | $ 47,364 |
| Class C | 60,850 | 10,694 |
$ 361,718 | $ 58,058 |
In addition, SDI provides information and administrative services ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. SDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the six months ended April 30, 2003, the Service Fee was as follows:
Service Fee | Total Aggregated | Unpaid at April 30, 2003 | Effective Rate |
| Class A | $ 314,429 | $ 51,640 | .20% |
| Class B | 89,728 | 13,064 | .22% |
| Class C | 18,148 | 2,720 | .22% |
$ 422,305 | $ 67,424 |
Underwriting and Contingent Deferred Sales Charge. SDI is the principal underwriter for Class A, B and C shares. Underwriting commissions paid in connection with the distribution of Class A shares for the six months ended April 30, 2003 aggregated $10,738. Underwriting commissions paid in connection with the distribution of Class C shares for the six months ended April 30, 2003 aggregated $12.
In addition, SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the six months ended April 30, 2003, the CDSC for Class B and C shares aggregated $78,767 and $312, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the six months ended April 30, 2003, SDI received $0.
Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the Advisor retainer fees plus specified amounts for attended board and committee meetings.
Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust. Distributions from the QP Trust to the Fund for the six months ended April 30, 2003, totaled $68,948 and are reflected as interest income on the Statement of Operations.
D. Expense Off-Set Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's custodian expenses. During the six months ended April 30, 2003, pursuant to the Administrative Agreement, the Administrative Fee was reduced by $1,587 for custodian credits earned.
E. Line of Credit
The Fund and several other affiliated funds (the ``Participants'') share in a $1.25 billion revolving credit facility administered by J.P. Morgan Chase 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 at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
F. Investing in High-Yield Securities
Investing in high-yield securities may involve greater risks and considerations not typically associated with investing in US Government bonds and other high quality fixed-income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high-yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid due to the extent that there is no established retail secondary market and because of a decline in the value of such securities.
G. Forward Foreign Currency Commitments
As of April 30, 2003, the Fund had the following open forward foreign currency exchange contracts:
Contracts to Deliver | In Exchange For | Settlement Date | Net Unrealized Appreciation | ||
| USD | 2,025,000 | ARA | 6,297,750 | 6/23/2003 | 166,671 |
| USD | 390,000 | ARA | 1,231,425 | 7/17/2003 | 33,470 |
| USD | 2,415,000 | BRC | 8,705,970 | 6/11/2003 | 498,662 |
| USD | 983,000 | BRC | 3,313,693 | 7/15/2003 | 105,128 |
| USD | 223,621 | EUR | 209,193 | 6/13/2003 | 9,849 |
| Total unrealized appreciation | 813,780 | ||||
Contracts to Deliver | In Exchange For | Settlement Date | Unrealized (Depreciation) | ||
| EUR | 575,913 | USD | 626,169 | 6/13/2003 | (15,467) |
| BRC | 3,470,106 | USD | 1,046,000 | 6/11/2003 | (115,354) |
| EUR | 14,799,270 | USD | 15,953,613 | 7/16/2003 | (545,093) |
| JPY | 958,000,000 | USD | 7,996,661 | 7/16/2003 | (80,216) |
| GBP | 5,020,490 | USD | 7,842,005 | 7/16/2003 | (148,844) |
| EUR | 11,460,000 | USD | 12,537,240 | 7/31/2003 | (232,928) |
| Total unrealized depreciation | (1,137,902) | ||||
Currency Abbreviations | |||
| EUR | Euro | GBP | British Pounds |
| JPY | Japanese Yen | USD | US Dollar |
| BRC | Brazilian Cruzeiros | ARA | Argentine Pesos |
H. Share Transactions
The following table summarizes share and dollar activity in the Fund:
Six Months Ended April 30, 2003 | Year Ended October 31, 2002 | |||
Shares | Dollars | Shares | Dollars | |
| Shares sold | ||||
| Class A | 9,196,403 | $ 38,830,484 | 15,117,756 | $ 64,083,521 |
| Class B | 2,253,364 | 9,518,683 | 5,381,551 | 22,958,095 |
| Class C | 900,914 | 3,861,864 | 1,323,529 | 5,693,781 |
$ 52,211,031 | $ 92,735,397 | |||
| Shares issued to shareholders in reinvestment of distributions | ||||
| Class A | 1,731,293 | $ 7,325,930 | 4,001,069 | $ 17,012,513 |
| Class B | 381,673 | 1,614,014 | 1,057,440 | 4,498,272 |
| Class C | 91,549 | 390,188 | 219,740 | 940,348 |
$ 9,330,132 | $ 22,451,133 | |||
| Shares redeemed | ||||
| Class A | (11,376,657) | $ (48,095,503) | (19,904,717) | $ (84,887,575) |
| Class B | (4,590,610) | (19,455,864) | (9,606,116) | (41,092,484) |
| Class C | (713,359) | (3,039,503) | (1,541,528) | (6,614,405) |
$ (70,590,870) | $ (132,594,464) | |||
| Net increase (decrease) | ||||
| Class A | (448,961) | $ (1,939,089) | (785,892) | $ (3,791,541) |
| Class B | (1,955,573) | (8,323,167) | (3,167,125) | (13,636,117) |
| Class C | 279,104 | 1,212,549 | 1,741 | 19,724 |
$ (9,049,707) | $ (17,407,934) | |||
Scudder Funds |
| Growth Funds Scudder 21st Century Growth Fund Scudder Aggressive Growth Fund Scudder Blue Chip Fund Scudder Capital Growth Fund Scudder Development Fund Scudder Dynamic Growth Fund Scudder Flag Investors Scudder Global Biotechnology Fund Scudder Growth Fund Scudder Health Care Fund Scudder Large Company Growth Fund Scudder Micro Cap Fund Scudder Mid Cap Fund Scudder Small Cap Fund Scudder Strategic Growth Fund Scudder Technology Fund Scudder Technology Innovation Fund Scudder Top 50 US Fund Value FundsScudder Contrarian Fund Scudder-Dreman Financial Services Fund Scudder-Dreman High Return Equity Fund Scudder-Dreman Small Cap Value Fund Scudder Flag Investors Equity Scudder Gold & Precious Metals Fund Scudder Growth and Income Fund Scudder Large Company Value Fund Scudder-RREEF Real Estate Securities Fund Scudder Small Company Stock Fund Scudder Small Company Value Fund Multicategory/Asset Allocation FundsScudder Balanced Fund Scudder Flag Investors Value Builder Fund Scudder Focus Value+Growth Fund Scudder Lifecycle Mid Range Fund Scudder Lifecycle Long Range Fund Scudder Lifecycle Short Range Fund Scudder Pathway Conservative Portfolio Scudder Pathway Growth Portfolio Scudder Pathway Moderate Portfolio Scudder Target 2013 Fund Scudder Total Return Fund International/Global FundsScudder Emerging Markets Growth Fund Scudder Emerging Markets Income Fund Scudder European Equity Fund Scudder Global Fund Scudder Global Bond Fund Scudder Global Discovery Fund Scudder Greater Europe Growth Fund Scudder International Fund Scudder International Equity Fund Scudder International Select Equity Fund Scudder Japanese Equity Fund Scudder Latin America Fund Scudder New Europe Fund Scudder Pacific Opportunities Fund Income FundsScudder Cash Reserves Fund Scudder Fixed Income Fund Scudder GNMA Fund Scudder High Income Plus Fund (formerly Deutsche High Yield Bond Fund) Scudder High Income Fund (formerly Scudder High Yield Fund) Scudder High Income Opportunity Fund (formerly Scudder High Yield Opportunity Fund) Scudder Income Fund Scudder PreservationPlus Fund Scudder PreservationPlus Income Fund Scudder Short Duration Fund (formerly Scudder Short-Term Fixed Income Fund) Scudder Short-Term Bond Fund Scudder Strategic Income Fund Scudder U.S. Government Securities Fund |
Scudder Funds (continued) |
| Tax-Free Income Funds Scudder California Tax-Free Income Fund Scudder Florida Tax-Free Income Fund Scudder High Yield Tax-Free Fund Scudder Managed Municipal Bond Fund Scudder Massachusetts Tax-Free Fund Scudder Medium-Term Tax-Free Fund Scudder Municipal Bond Fund Scudder New York Tax-Free Income Fund Scudder Short-Term Municipal Bond Fund Index-Related FundsScudder EAFE ® Equity Index Fund Scudder Equity 500 Index Fund Scudder S&P 500 Index Fund Scudder S&P 500 Stock Fund Scudder Select 500 Fund Scudder US Bond Index Fund Money MarketA large number of money market funds are available through Scudder Investments. |
Retirement Programs and Education Accounts |
| Retirement Programs Traditional IRA Roth IRA SEP-IRA Inherited IRA Keogh Plan 401(k), 403(b) Plans Variable Annuities Education AccountsCoverdell Education Savings Account UGMA/UTMA IRA for Minors |
Closed-End Funds |
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 High Income Trust Scudder Intermediate Government Trust Scudder Multi-Market Income Trust Scudder Municipal Income Trust Scudder RREEF Real Estate Fund, Inc. Scudder Strategic Income Trust Scudder Strategic Municipal Income Trust The Central European Equity Fund, Inc. The Germany Fund, Inc. The New Germany Fund, Inc. The SMALLCap Fund, Inc. |
Not all funds are available in all share classes.
Scudder open-end 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.
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 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.
Legal Counsel | Vedder, Price, Kaufman & Kammholz222 North LaSalle Street |
Shareholder Service Agent | Scudder Investments Service CompanyP.O. Box 219151 |
Custodian and Transfer Agent | State Street Bank and Trust Company225 Franklin Street |
Independent Auditors | Ernst & Young LLP200 Clarendon Street |
Principal Underwriter | If you have questions, comments or complaints, contact: Scudder Distributors, Inc.222 South Riverside Plaza |
This privacy statement is issued by Scudder Distributors, Inc., Scudder Financial Services, Inc., Scudder Investor Services, Inc., Scudder Trust Company and the Scudder Funds.
We consider privacy fundamental to our client relationships and adhere to the policies and practices described below to protect current and former clients' information.
We never sell customer lists or individual client information. Internal policies are in place to protect confidentiality, while allowing client needs to be served. Only individuals who need to do so in carrying out their job responsibilities may access client information. We maintain physical, electronic and procedural safeguards that comply with federal standards to protect confidentiality. These safeguards extend to all forms of interaction with us, including the Internet.
In the normal course of business, clients give us nonpublic personal information on applications and other forms, on our Web sites, and through transactions with us or our affiliates. To be able to serve our clients, information is shared with affiliates and other companies. Specifically, we disclose client information to parties that perform various services for us, such as transfer agents, custodians, and broker-dealers. Limited information also may be shared with affiliates, with companies with which we have joint marketing agreements, or with other parties as required by law. Any organization receiving client information may only use it for the purpose designated by the entities listed above.
Questions on this policy may be sent to:
Scudder Investments
Attention: Correspondence - Chicago
P.O. Box 219415
Kansas City, MO 64121-9415
July 2002
Notes |
Notes |
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIERS AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Chief Executive and Financial Officers concluded that the
Registrant's Disclosure Controls and Procedures are effective based on the
evaluation of the Disclosure Controls and Procedures as of a date within 90 days
of the filing date of this report.
(b) During the six month period ended April 30, 2003, management identified
an issue related to a different registrant within the Scudder fund complex.
Management discussed the issue with the Registrant's Audit Committee and
auditors and instituted additional procedures to enhance its internal controls
over financial reporting.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Scudder Strategic Income Fund
By: /s/Richard T. Hale
-----------------------------------
Richard T. Hale
Chief Executive Officer
Date: 6/30/03
-----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Registrant: Scudder Strategic Income Fund
By: /s/Richard T. Hale
-----------------------------------
Richard T. Hale
Chief Executive Officer
Date: 6/30/03
-----------------------------------
By: /s/Charles A. Rizzo
-----------------------------------
Charles A. Rizzo
Chief Financial Officer
Date: 6/30/03
-----------------------------------