UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number 811-7347
ADVISOR FUNDS II
--------------------
(Exact Name of Registrant as Specified in Charter)
One South Street, Baltimore, Maryland 21202
--------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (410) 895-5000
--------------
Daniel O. Hirsch, Esq.
One South Street
Baltimore, Maryland 21202
-----------------------------------------
(Name and Address of Agent for Service)
Date of fiscal year end: 12/31
Date of reporting period: 6/30/03
ITEM 1. REPORT TO STOCKHOLDERS
[Scudder Investments logo]
Scudder
US Bond Index Fund
|
| |
| Semiannual Report to Shareholders |
| June 30, 2003 |
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. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. The prospectus contains more complete information, including a description of the risks of investing in the fund, 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.
Performance Summary June 30, 2003 |
|
Average Annual Total Returns* |
Scudder US Bond Index Fund | 6-Month* | 1-Year | 3-Year | 5-Year | Life of Fund** |
Premier Class
| 3.79% | 10.09% | 9.90% | 7.36% | 7.91% |
Lehman Brothers Aggregate Bond Index+
| 3.93%
| 10.40%
| 10.08%
| 7.55%
| 8.04%
|
Sources: Lipper Inc. and Deutsche Asset Management, Inc.
*Total returns shown for periods less than one year are not annualized.
Net Asset Value and Distribution Information |
| Premier Class |
Net Asset Value:
6/30/03
| $ 10.76 |
12/31/02
| $ 10.60 |
Distribution Information:
Six Months:
Income Dividends
| $ .22 |
Capital Gains
| $ .02 |
June Income Dividend
| .0330 |
SEC 30-day Yield++
| 2.93% |
Current Annualized Distribution Rate++
| 3.68% |
++ Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value on June 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 June 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. The SEC yield would have been 2.53% had certain expenses not been reduced.Premier Class Lipper Rankings* - Intermediate Investment Grade Debt Funds Category |
Period | Rank | | Number of Funds Tracked | Percentile Ranking |
1-Year
| 193 | of | 396 | 49 |
3-Year
| 63 | of | 282 | 23 |
5-Year
| 32 | of | 213 | 15 |
Rankings are historical and do not guarantee future results. Rankings are based on total returns with distributions reinvested.
Source: Lipper Inc.
Growth of an Assumed $5,000,000 Investment* |
[] Scudder US Bond Index Fund - Premier Class [] Lehman Brothers Aggregate Bond Index+
|
 |
Yearly periods ended June 30 |
Comparative Results* |
Scudder US Bond Index Fund | 1-Year | 3-Year | 5-Year | Life of Fund** |
Premier Class | Growth of $5,000,000
| $5,504,500 | $6,636,500 | $7,130,000 | $7,894,500 |
Average annual total return
| 10.09% | 9.90% | 7.36% | 7.91% |
Lehman Brothers Aggregate Bond Index+
| Growth of $5,000,000
| $5,520,000 | $6,669,500 | $7,193,500 | $7,951,500 |
Average annual total return
| 10.40% | 10.08% | 7.55% | 8.04% |
The growth of $5,000,000 is cumulative.
Notes to Performance Summary |
* Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.** The Fund commenced operations on June 30, 1997. Index comparisons begin June 30, 1997.+ Lehman Brothers Aggregate Bond Index is an unmanaged index representing domestic taxable investment grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with an average maturity of one year or more. 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.
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.
Portfolio Management Review |
|
In the following interview, on behalf of the portfolio management team, Portfolio Manager Louis R. D'Arienzo discusses Scudder US Bond Index Fund's market environment and performance during the six-month period ended June 30, 2003.
Q: How did Scudder US Bond Index Fund perform over the first half of 2003?
A: Scudder US Bond Index Fund tracked its benchmark, the Lehman Brothers Aggregate Bond Index, for the six months ended June 30, 2003. The fund produced a return of 3.79% (Premier Class shares) for the semiannual period, as compared with 3.93% for the benchmark. The fund underperformed the average peer in the Lipper Intermediate Investment Grade Debt Funds category semiannual return of 4.31%.1 The broad-based Lehman Brothers Aggregate Bond Index is a group of domestic taxable investment-grade bonds that is not available for direct investment.
1 The Lipper Intermediate Investment Grade Debt Funds category includes funds that invest at least 65% of their assets in investment grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to 10 years. It is not possible to invest directly in an index or category.Q: What were the primary factors affecting the US bond markets during the past six months?
A: During the first half of 2003, the US bond markets continued their overall solid returns of recent years. The Lehman Brothers Aggregate Bond Index produced a 3.93% return for the six months ended June 30, 2003. For the semiannual period, yields on two-year Treasury notes declined from 1.60% to 1.31%, five-year Treasury yields fell from 2.73% to 2.42%, 10-year Treasury yields declined from 3.82% to 3.51%, and 30-year Treasury bond yields decreased from 4.78% to 4.56%. The yield curve remained relatively steep, though essentially unchanged in yield spread between the two-year and 30-year Treasuries, widening just 0.07% during the first half of 2003.
During the first quarter 2003, continued US economic sluggishness, the fight against terrorism at home and abroad, equity market weakness and volatility, and the impending and then actual engagement of Iraq's military by coalition forces continued to support the ongoing strength of the US fixed-income markets. At its March 2003 meeting, the Federal Reserve Board stated that it would not currently take a stance on monetary policy given "the unusually large uncertainties clouding the geopolitical situation in the short run and their apparent effects on economic decision making."
During the second quarter 2003, economic indicators were more mixed, suggesting a modest level of improvement in growth since the end of active military operations in Iraq at the end of April. The economy, however, continued to face powerful drags as it struggled to unwind the excesses of the 1990s boom. Households were still trying to save more, and businesses remained reluctant to invest or hire aggressively until the outlook for demand improves. On the other hand, consumer confidence bounced back a bit, consumer spending stabilized and capital outlays continued to slowly improve. On June 25, 2003, in a conservative move, the Federal Reserve Board cut the targeted federal funds rate by 0.25% to 1.00%, stating that it was in an effort to "add further support for an economy which it expects to improve over time." After 13 consecutive interest rate cuts by the Federal Reserve Board since the start of 2001, short-term rates are currently at the lowest levels they have been in more than four decades.
Q: Which sectors within the Lehman Brothers Aggregate Bond Index were the best and worst performers?
A: Overall, on a duration-adjusted basis2, the spread sectors in the Lehman Brothers Aggregate Bond Index outperformed US Treasury securities for the six months ended June 30, 2003.
2 Duration is a measure of bond price volatility. Duration can be defined as the approximate percentage change in price for a 100-basis point (one single percentage point) change in market interest rate levels. A duration of 1.25, for example, means that the price of a bond or bond portfolio should rise by approximately 1.25% for a one-percentage point drop in interest rates and that it should fall by 1.25% for a one-percentage point rise in interest rates.Corporate bonds led the way for the semiannual period. They rebounded from previous poor performance as last year's headlines about corporate earnings quality, accounting integrity concerns, ratings downgrades and high-profile bankruptcies moved off the front page and the market shifted its focus to geopolitical concerns.
Commercial mortgage-backed securities outperformed duration-adjusted Treasuries by 1.59% for the same time frame. This was followed by asset-backed securities, which earned an excess return over duration-adjusted Treasuries of 1.26% for the six months, with the manufactured housing segment the greatest contributing segment overall. Against the backdrop of lower interest rates, mortgage-backed securities outperformed duration-adjusted Treasuries by 0.46% year-to-date.
Q: What investment strategies do you intend to pursue in the fund?
A: As an index fund, we seek to replicate as closely as possible (before deduction of expenses) the investment performance of the Lehman Brothers Aggregate Bond Index. Thus, we neither evaluate short-term fluctuations in the fund's performance nor manage according to a given outlook for the bond markets or the economy in general. Still, we will continue to monitor economic conditions and how they affect the financial markets, as we seek to closely track the performance of the broad US bond market.
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 management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Portfolio Summary June 30, 2003 |
|
Asset Allocation | 6/30/03 | 12/31/02 |
Corporate Bonds
| 22%
| 25%
|
US Government Agency Pass-Thrus
| 21%
| 22%
|
Cash Equivalents, net
| 18%
| 15%
|
US Treasury Obligations
| 18%
| 12%
|
US Agency Obligations
| 10%
| 11%
|
Foreign Bonds - US$ Denominated
| 4%
| 5%
|
Government National Mortgage Association
| 4%
| 5%
|
Collateralized Mortgage Obligations
| 2%
| 3%
|
Asset Backed
| 1%
| 2%
|
| 100%
| 100%
|
Corporate Bond Diversification (Excludes Cash Equivalents) | 6/30/03 | 12/31/02 |
Financials
| 46%
| 42%
|
Consumer Discretionary
| 9%
| 9%
|
Utilities
| 8%
| 9%
|
Industrials
| 8%
| 9%
|
Consumer Staples
| 7%
| 10%
|
Energy
| 7%
| 6%
|
Telecommunication Services
| 5%
| 4%
|
Information Technology
| 4%
| 5%
|
Materials
| 4%
| 4%
|
Health Care
| 2%
| 2%
|
| 100%
| 100%
|
Quality | 6/30/03 | 12/31/02 |
US Government and Agencies
| 63%
| 57%
|
AAA
| 11%
| 11%
|
AA
| 5%
| 4%
|
A
| 12%
| 16%
|
BBB
| 9%
| 12%
|
| 100%
| 100%
|
Effective Maturity | 6/30/03 | 12/31/02 |
Under 1 year
| 7%
| 6%
|
1 < 5 years
| 54%
| 43%
|
5 < 10 years
| 25%
| 26%
|
10 < 15 years
| 2%
| 14%
|
15 years or greater
| 12%
| 11%
|
| 100%
| 100%
|
Weighted average effective maturity: 6.35 years and 7.10 years, respectively.
Asset allocation, diversification, quality and effective maturity are subject to change.
For more complete details about the fund's investment portfolio, see page 18. A quarterly Fund Summary and Portfolio Holdings are available upon request.
Statement of Assets and Liabilities as of June 30, 2003 (Unaudited) |
Assets
|
Investment in the US Bond Index Portfolio
| $ 150,810,307 |
Total assets
| 150,810,307 |
Liabilities
|
Dividends payable
| 91,167 |
Other accrued expenses and payables
| 67,251 |
Total liabilities
| 158,418 |
Net assets, at value
| $ 150,651,889 |
Net Assets
|
Net assets consist of:
Undistributed net investment income
| 42,470 |
Net unrealized appreciation (depreciation) on investment securities
| 7,935,348 |
Accumulated net realized gain (loss)
| 750,829 |
Paid-in capital
| 141,923,242 |
Net assets, at value
| $ 150,651,889 |
Net Asset Value
|
Net Asset Value, offering and redemption price per share ($150,651,889 / 14,006,478 shares of capital stock outstanding, $.001 par value, unlimited number of shares authorized)
| $ 10.76 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2003 (Unaudited) |
Investment Income
|
Net investment income allocated from US Bond Index Portfolio:
| |
Interest
| $ 2,875,939 |
Less allocated expensesa
| (66,385) |
Net investment income allocated from US Bond Index Portfolio
| 2,809,554 |
Expenses:
Administrator service fee
| 132,470 |
Auditing fees
| 7,827 |
Legal fees
| 12,609 |
Trustees' fees and expenses
| 3,588 |
Reports to shareholders
| 23,118 |
Registration fee
| 20,872 |
Other
| 1,885 |
Total expenses, before expense reductions
| 202,369 |
Expense reductions
| (169,199) |
Total expenses, after expense reductions
| 33,170 |
Net investment income
| 2,776,384 |
Realized and Unrealized Gain (Loss) on Investment Transactions
|
Net realized gain (loss) from investment
| 787,002 |
Net unrealized appreciation (depreciation) during the period on investment
| 1,699,406 |
Net gain (loss) on investment transactions
| 2,486,408 |
Net increase (decrease) in net assets resulting from operations
| $ 5,262,792 |
a For the six months ended June 30, 2003, the Advisor to the US Bond Index Portfolio waived fees in the amount of $77,470, which was allocated to the Fund.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 June 30, 2003 (Unaudited) | Year Ended December 31, 2002 |
Operations:
Net investment income
| $ 2,776,384 | $ 5,356,748 |
Net realized gain (loss) on investment transactions
| 787,002 | 2,043,601 |
Net unrealized appreciation (depreciation) on investment transactions during the period
| 1,699,406 | 3,222,430 |
Net increase (decrease) in net assets resulting from operations
| 5,262,792 | 10,622,779 |
Distributions to shareholders from:
Net investment income
| (2,733,914) | (5,335,897) |
Net realized gains
| (192,729) | (2,914,291) |
Total distributions
| (2,926,643) | (8,250,188) |
Fund share transactions:
Proceeds from shares sold
| 73,653,221 | 26,831,348 |
Reinvestment of distributions
| 2,659,334 | 7,785,906 |
Cost of shares redeemed
| (28,473,782) | (46,822,307) |
Net increase (decrease) in net assets from Fund share transactions
| 47,838,773 | (12,205,053) |
Increase (decrease) in net assets
| 50,174,922 | (9,832,462) |
Net assets at beginning of period
| 100,476,967 | 110,309,429 |
Net assets at end of period (including undistributed net investment income of $42,470 at June 30, 2003)
| $ 150,651,889 | $ 100,476,967 |
The accompanying notes are an integral part of the financial statements.
Years Ended December 31, | 2003a | 2002 | 2001 | 2000 | 1999 | 1998 |
Selected Per Share Data
|
Net asset value, beginning of period
| $ 10.60 | $ 10.42 | $ 10.24 | $ 9.76 | $ 10.47 | $ 10.29 |
Income (loss) from investment operations:
Net investment income
| .22b | .52b | .59 | .62 | .57 | .59 |
Net realized and unrealized gain (loss) on investment transactions
| .18 | .50 | .23 | .48 | (.70) | .29 |
Total from investment operations | .40 | 1.02 | .82 | 1.10 | (.13) | .88 |
Less distributions from:
Net investment income
| (.22) | (.52) | (.59) | (.62) | (.58) | (.61) |
Net realized gains on investment transactions
| (.02) | (.32) | (.05) | - | - | (.09) |
Total distributions | (.24) | (.84) | (.64) | (.62) | (.58) | (.70) |
Net asset value, end of period
| $ 10.76 | $ 10.60 | $ 10.42 | $ 10.24 | $ 9.76 | $ 10.47 |
Total Return (%)c
| 3.79** | 10.04 | 8.19 | 11.72 | (1.30) | 8.78 |
Ratios to Average Net Assets and Supplemental Data
|
Net assets, end of period ($ millions)
| 151 | 100 | 110 | 116 | 93 | 40 |
Ratio of expenses before expense reductions, including expenses of the US Bond Index Portfolio (%)
| .41* | .52 | .53 | .57 | .56 | .90 |
Ratio of expenses after expense reductions, including expenses of the US Bond Index Portfolio (%)
| .15* | .15 | .15 | .15 | .15 | .15 |
Ratio of net investment income (%)
| 4.19* | 4.94 | 5.68 | 6.33 | 5.79 | 5.70 |
a For the six months ended June 30, 2003 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Notes to Financial Statements (Unaudited) |
|
A. Significant Accounting Policies
US Bond Index Fund - Premier Class ("Scudder US Bond Index Fund" or the "Fund"), a diversified series of the Scudder Advisor Funds II, formerly BT Advisor Funds (the "Trust"), is registered under the Investment Company Act of 1940, as amended, (the "1940 Act"), as an open- end management investment company organized as a Massachusetts business trust.
The Fund seeks to achieve its investment objective by investing substantially all of its assets in the US Bond Index Portfolio (the "Portfolio"), a diversified, open-end management investment company advised by Deutsche Asset Management, Inc. Details concerning the Portfolio's investment objective and policies and the risk factors associated with the Portfolio's investments are described in the prospectus and statement of additional information.
On June 30, 2003, the Fund owned approximately 100% of the US Bond Index Portfolio. The financial statements of the Portfolio, including the Investment Portfolio, are contained elsewhere in this report and should be read in conjunction with the Fund's financial statements.
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. The Fund determines the valuation of its investment in the Portfolio by multiplying its proportionate ownership of the Portfolio by the total value of the Portfolio's net assets.
The Portfolio's policies for determining the value of its net assets are discussed in the Portfolio's Financial Statements, which accompany this report.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
Distribution of Income and Gains. All of the net investment income is declared as a daily dividend and distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States 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.
The net unrealized appreciation/depreciation of the Fund's investment in the Portfolio consists of an allocated portion of the Portfolio's appreciation/depreciation. Please refer to the Portfolio's financial statements for a breakdown of the appreciation/depreciation from investments.
At December 31, 2002, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income*
| $ 189,251 |
Undistributed net long-term capital gains
| $ - |
Capital loss carryforwards
| $ - |
In addition, the tax character of distributions paid to shareholders by the Fund are summarized as follows:
| Year ended December 31, |
| 2002 | 2001 |
Distributions from ordinary income*
| $ 7,463,792 | $ 6,388,977 |
Distributions from long-term capital gains
| $ 786,396 | $ 541,396 |
* 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. The Fund receives a daily allocation of the Portfolio's net investment income and net realized and unrealized gains and losses in proportion to its investment in the Portfolio. Expenses directly attributed to a fund are charged to that Fund, while expenses which are attributable to the Trust are allocated among the funds in the Trust on the basis of relative net assets.
B. Related Parties
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 Asset Management, Inc. ("DeAM, Inc." or the "Advisor") is the Advisor for the Portfolio and Investment Company Capital Corp. ("ICCC" or the "Administrator") is the Administrator for the Fund, both wholly owned subsidiaries of Deutsche Bank AG.
Administrator Service Fee. For its services as Administrator, ICCC receives a fee (the "Administrator Service Fee") of 0.20% of the Fund's average daily net assets, computed and accrued daily and payable monthly.
For the six months ended June 30, 2003, the Advisor and Administrator contractually agreed to waive its fees and reimburse expenses of the Fund to the extent necessary to maintain the annualized expenses at 0.15% including expenses allocated from the Portfolio. Accordingly, for the six months ended June 30, 2003, the Administrator Service Fee was $132,470, all of which was waived. In addition, under this arrangement the Advisor and Administrator reimbursed the Fund in the amount of $36,729.
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.
C. Share Transactions
The following table summarizes share and dollar activity in the fund:
| Six Months Ended June 30, 2003 | Year Ended December 31, 2002 |
| Shares | Dollars | Shares | Dollars |
Shares sold
|
Premier Class
| 6,943,298 | $ 73,653,221 | 2,553,645 | $ 26,831,348 |
Shares issued to shareholders in reinvestment of distributions
|
Premier Class
| 248,806 | $ 2,659,334 | 737,225 | $ 7,785,906 |
Shares redeemed
|
Premier Class
| (2,663,633) | $ (28,473,782) | (4,402,927) | $ (46,822,307) |
Net increase (decrease)
|
Premier Class
| 4,528,471 | $ 47,838,773 | (1,112,057) | (12,205,053) |
D. Concentration of Ownership
From time to time the Fund may have a concentration of several shareholders holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Fund. At June 30, 2003, there were three shareholders who held 25%, 14% and 12% of the outstanding shares of the Fund.
Investment Portfolio as of June 30, 2003 (Unaudited) | |
|
| Principal
Amount ($) | Value ($) |
|
|
Corporate Bonds 23.6% |
Consumer Discretionary 2.4%
|
Albertson's, Inc.:
|
|
|
7.25%, 5/1/2013 | 25,000
| 29,260
|
7.5%, 2/15/2011 | 50,000
| 58,413
|
AOL Time Warner, Inc.:
|
|
|
6.125%, 4/15/2006 | 50,000
| 54,672
|
6.875%, 5/1/2012 | 100,000
| 114,162
|
7.7%, 5/1/2032 | 25,000
| 29,186
|
Comcast Cable Communications:
|
|
|
6.2%, 11/15/2008 | 100,000
| 112,606
|
6.875%, 6/15/2009 | 60,000
| 69,368
|
Comcast Corp., 5.85%, 1/15/2010
| 25,000
| 27,507
|
Cox Communications, Inc., 7.875%, 8/15/2009
| 50,000
| 61,386
|
DaimlerChrysler NA Holding Corp.:
|
|
|
7.2%, 9/1/2009 | 150,000
| 170,503
|
8.0%, 6/15/2010 | 150,000
| 176,623
|
Delphi Auto Systems Corp., 6.125%, 5/1/2004
| 5,000
| 5,117
|
Federated Department Stores, Inc., 7.45%, 7/15/2017
| 300,000
| 367,996
|
Ford Motor Co.:
|
|
|
6.625%, 10/1/2028 | 75,000
| 62,408
|
8.875%, 1/15/2022 | 200,000
| 205,228
|
Fred Meyer, Inc., 7.45%, 3/1/2008
| 50,000
| 58,259
|
Gannett Co., Inc., 6.375%, 4/1/2012
| 50,000
| 58,565
|
General Motors Corp., 8.25%, 7/15/2023
| 50,000
| 49,969
|
Gillette Co., 2.5%, 6/1/2008
| 50,000
| 49,610
|
Home Depot, Inc., 5.375%, 4/1/2006
| 25,000
| 27,279
|
Liberty Media Corp., 5.7%, 5/15/2013
| 70,000
| 71,156
|
News America Holdings, Inc., 9.25%, 2/1/2013
| 100,000
| 133,536
|
Northwest Airlines Corp., 8.072%, 10/1/2019
| 23,069
| 25,116
|
Sears Roebuck Acceptance Corp., 6.75%, 8/15/2011
| 25,000
| 28,217
|
Sears, Roebuck and Co., 8.3%, 10/26/2004
| 300,000
| 316,631
|
Target Corp., 5.875%, 3/1/2012
| 200,000
| 226,013
|
TCI Communications, Inc., 7.125%, 2/15/2028
| 100,000
| 110,241
|
Time Warner Entertainment Co. LP, 7.25%, 9/1/2008
| 100,000
| 117,948
|
Time Warner, Inc.:
|
|
|
6.625%, 5/15/2029 | 10,000
| 10,311
|
6.95%, 1/15/2028 | 30,000
| 32,117
|
Viacom, Inc.:
|
|
|
7.7%, 7/30/2010 | 200,000
| 247,580
|
7.75%, 6/1/2005 | 30,000
| 33,412
|
Wal-Mart Stores, Inc.:
|
|
|
4.375%, 7/12/2007 | 20,000
| 21,432
|
6.875%, 8/10/2009 | 260,000
| 312,925
|
Walt Disney Co.:
|
|
|
6.2%, 6/20/2014 | 75,000
| 83,944
|
6.75%, 3/30/2006 | 100,000
| 111,359
|
| 3,670,055 |
Consumer Staples 1.8%
|
Archer-Daniels-Midland Co., 6.75%, 12/15/2027
| 25,000
| 29,173
|
Campbell Soup Co.:
|
|
|
4.75%, 10/1/2003 | 250,000
| 252,067
|
5.5%, 3/15/2007 | 20,000
| 22,043
|
Coca-Cola Co., 5.75%, 3/15/2011
| 25,000
| 28,446
|
Coca-Cola Enterprises, Inc., 8.5%, 2/1/2022
| 500,000
| 678,889
|
Conagra Foods, Inc.:
|
|
|
7.125%, 10/1/2026 | 100,000
| 121,021
|
7.5%, 9/15/2005 | 25,000
| 27,879
|
Coors Brewing Co., 6.375%, 5/15/2012
| 10,000
| 11,476
|
General Mills, Inc.:
|
|
|
5.125%, 2/15/2007 | 10,000
| 10,893
|
6.0%, 2/15/2012 | 50,000
| 56,448
|
H.J. Heinz Co., 6.625%, 7/15/2011
| 25,000
| 29,470
|
H.J. Heinz Finance Co., 6.0%, 3/15/2012
| 25,000
| 28,484
|
Kellogg Co.:
|
|
|
6.0%, 4/1/2006 | 200,000
| 220,484
|
6.6%, 4/1/2011 | 50,000
| 58,636
|
Kraft Foods, Inc.:
|
|
|
5.25%, 6/1/2007 | 20,000
| 21,674
|
5.625%, 11/1/2011 | 50,000
| 54,484
|
6.25%, 6/1/2012 | 40,000
| 45,247
|
Kroger Co.:
|
|
|
7.5%, 4/1/2031 | 50,000
| 59,302
|
7.8%, 8/15/2007 | 50,000
| 57,903
|
McDonald's Corp., 8.875%, 4/1/2011
| 300,000
| 384,886
|
Nabisco, Inc., 6.375%, 2/1/2005
| 75,000
| 79,496
|
Philip Morris Co., Inc., 6.375%, 2/1/2006
| 50,000
| 52,954
|
Safeway, Inc.:
|
|
|
6.5%, 11/15/2008 | 90,000
| 102,060
|
6.5%, 3/1/2011 | 80,000
| 89,300
|
Unilever Capital Corp.:
|
|
|
6.875%, 11/1/2005 | 50,000
| 55,811
|
7.125%, 11/1/2010 | 50,000
| 60,579
|
Wendy's International, 6.25%, 11/15/2011
| 20,000
| 22,745
|
| 2,661,850 |
Energy 1.9%
|
Alabama Power Co.:
5.5%, 10/15/2017 | 100,000
| 109,449
|
5.7%, 2/15/2033 | 50,000
| 52,201
|
Amerada Hess Corp., 7.875%, 10/1/2029
| 75,000
| 91,282
|
Amoco Co., 6.5%, 8/1/2007
| 250,000
| 286,756
|
Anadarko Petroleum Corp., 7.5%, 10/15/2026
| 60,000
| 73,641
|
Arizona Public Service, 7.625%, 8/1/2005
| 100,000
| 110,970
|
Burlington Resources, Inc., 7.375%, 3/1/2029
| 50,000
| 60,671
|
ChevronTexaco Capital Co., 6.625%, 10/1/2004
| 100,000
| 105,875
|
Conoco Funding Co., 6.35%, 10/15/2011
| 200,000
| 233,615
|
Conoco, Inc.:
|
|
|
5.9%, 4/15/2004 | 100,000
| 103,439
|
6.35%, 4/15/2009 | 140,000
| 163,637
|
Devon Financing Corp., 6.875%, 9/30/2011
| 100,000
| 117,303
|
Duke Capital Corp., 7.5%, 10/1/2009
| 150,000
| 171,607
|
Exelon Generation Co. LLC, 6.95%, 6/15/2011
| 25,000
| 29,001
|
FirstEnergy Corp., Series B, 6.45%, 11/15/2011
| 175,000
| 192,038
|
Kinder Morgan Energy Partners LP, 6.75%, 3/15/2011
| 60,000
| 69,770
|
Lasmo USA, Inc., 7.5%, 6/30/2006
| 100,000
| 115,358
|
Marathon Oil Corp., 5.375%, 6/1/2007
| 50,000
| 54,724
|
MidAmerican Energy Holdings Co.,
3.5%, 5/15/2008 | 75,000
| 75,403
|
5.875%, 10/1/2012 | 25,000
| 27,418
|
Occidental Petroleum Corp., 7.375%, 11/15/2008
| 100,000
| 118,185
|
Pemex Project Funding Master Trust:
|
|
|
7.375%, 12/15/2014 | 100,000
| 109,500
|
7.875%, 2/1/2009 | 50,000
| 57,125
|
9.125%, 10/13/2010 | 150,000
| 181,500
|
Phillips Petroleum Co., 8.75%, 5/25/2010
| 50,000
| 65,077
|
PPL Energy Supply LLC, 6.4%, 11/1/2011
| 25,000
| 27,754
|
Tosco Corp., 7.625%, 5/15/2006
| 50,000
| 56,713
|
Transocean Sedco Forex, Inc., 6.625%, 4/15/2011
| 50,000
| 57,922
|
Valero Energy Corp., 6.125%, 4/15/2007
| 25,000
| 27,492
|
| 2,945,426 |
Financials 9.6%
|
ABN Amro Bank NV, 7.125%, 6/18/2007
| 540,000
| 629,138
|
Allstate Corp., 7.2%, 12/1/2009
| 100,000
| 121,163
|
American Express Co., 6.875%, 11/1/2005
| 50,000
| 55,727
|
American Express Credit Corp., 3.0%, 5/16/2008
| 50,000
| 50,345
|
American General Finance Corp.:
|
|
|
5.75%, 3/15/2007 | 75,000
| 83,100
|
7.25%, 5/15/2005 | 225,000
| 247,545
|
American International Group, Inc.:
|
|
|
2.875%, 5/15/2008 | 50,000
| 49,782
|
4.25%, 5/15/2013 | 100,000
| 99,796
|
Avalonbay Communities, 6.125%, 11/1/2012
| 30,000
| 33,203
|
AXA Financial, Inc., 7.75%, 8/1/2010
| 100,000
| 121,816
|
Bank of America Corp.:
|
|
|
4.875%, 1/15/2013 | 200,000
| 210,981
|
5.125%, 11/15/2014 | 100,000
| 106,604
|
5.875%, 2/15/2009 | 50,000
| 56,870
|
6.5%, 3/15/2006 | 100,000
| 111,458
|
7.125%, 5/12/2005 | 200,000
| 220,387
|
7.125%, 5/1/2006 | 200,000
| 226,882
|
Bank of New York Co., Inc.:
|
|
|
5.2%, 7/1/2007 | 25,000
| 27,451
|
7.3%, 12/1/2009 | 65,000
| 78,601
|
Bank One Corp.:
|
|
|
5.5%, 3/26/2007 | 20,000
| 22,152
|
6.5%, 2/1/2006 | 50,000
| 55,505
|
7.625%, 8/1/2005 | 100,000
| 112,051
|
7.875%, 8/1/2010 | 50,000
| 62,345
|
Bear Stearns Co., Inc.:
|
|
|
4.0%, 1/31/2008 | 150,000
| 156,905
|
6.15%, 3/2/2004 | 40,000
| 41,266
|
6.625%, 1/15/2004 | 100,000
| 102,877
|
6.625%, 10/1/2004 | 50,000
| 53,273
|
Boeing Capital Corp.:
|
|
|
5.75%, 2/15/2007 | 100,000
| 109,221
|
6.1%, 3/1/2011 | 110,000
| 121,413
|
6.35%, 11/15/2007 | 50,000
| 55,929
|
Boston Properties, Inc., 6.25%, 1/15/2013
| 25,000
| 27,376
|
Charter One Bank Financial, Inc., 6.375%, 5/15/2012
| 10,000
| 11,380
|
Chubb Corp., 6.0%, 11/15/2011
| 10,000
| 11,081
|
Citigroup, Inc.:
|
|
|
5.625%, 8/27/2012 | 200,000
| 220,348
|
6.5%, 2/7/2006 | 75,000
| 81,975
|
6.5%, 1/18/2011 | 150,000
| 175,495
|
6.625%, 6/15/2032 | 50,000
| 57,777
|
6.75%, 12/1/2005 | 150,000
| 167,242
|
7.25%, 10/1/2010 | 50,000
| 60,581
|
8.625%, 2/1/2007 | 200,000
| 241,112
|
Credit Suisse First Boston USA, Inc.:
|
|
|
6.125%, 11/15/2011 | 100,000
| 112,023
|
6.5%, 1/15/2012 | 100,000
| 114,756
|
EOP Operating LP:
|
|
|
7.0%, 7/15/2011 | 100,000
| 116,057
|
7.75%, 11/15/2007 | 45,000
| 52,706
|
First Chicago NBD Corp., 7.125%, 5/15/2007
| 200,000
| 230,630
|
FleetBoston Financial Corp.:
|
|
|
7.25%, 9/15/2005 | 225,000
| 251,098
|
7.375%, 12/1/2009 | 65,000
| 77,997
|
Ford Motor Credit Co.:
|
|
|
6.875%, 2/1/2006 | 50,000
| 53,030
|
7.25%, 10/25/2011 | 275,000
| 282,720
|
7.375%, 10/28/2009 | 300,000
| 314,494
|
7.6%, 8/1/2005 | 100,000
| 107,369
|
Fund American Co., Inc., 5.875%, 5/15/2013
| 50,000
| 52,282
|
General Electric Capital Corp.:
|
|
|
5.0%, 2/15/2007 | 40,000
| 43,467
|
6.0%, 6/15/2012 | 400,000
| 451,507
|
6.75%, 3/15/2032 | 50,000
| 58,478
|
6.875%, 11/15/2010 | 50,000
| 59,772
|
7.5%, 5/15/2005 | 50,000
| 55,481
|
8.25%*, 4/1/2008 | 500,000
| 603,278
|
General Motors Acceptance Corp.:
|
|
|
6.125%, 9/15/2006 | 50,000
| 52,640
|
6.75%, 1/15/2006 | 100,000
| 106,164
|
7.5%, 7/15/2005 | 200,000
| 214,329
|
8.0%, 11/1/2031 | 75,000
| 73,587
|
Goldman Sachs Group, Inc.:
|
|
|
5.25%, 4/1/2013 | 50,000
| 53,313
|
5.5%, 11/15/2014 | 100,000
| 108,570
|
6.65%, 5/15/2009 | 15,000
| 17,624
|
6.875%, 1/15/2011 | 100,000
| 117,995
|
7.35%, 10/1/2009 | 50,000
| 60,842
|
7.625%, 8/17/2005 | 100,000
| 112,690
|
Hartford Financial Services Group, Inc., 7.75%, 6/15/2005
| 50,000
| 55,466
|
Heller Financial, Inc.:
|
|
|
6.0%, 3/19/2004 | 30,000
| 31,012
|
6.375%, 3/15/2006 | 75,000
| 83,647
|
Household Finance Corp.:
|
|
|
6.375%, 10/15/2011 | 50,000
| 56,853
|
6.5%, 1/24/2006 | 50,000
| 55,457
|
6.75%, 5/15/2011 | 25,000
| 29,034
|
7.0%, 5/15/2012 | 100,000
| 118,365
|
8.0%, 7/15/2010 | 150,000
| 186,080
|
International Lease Finance Corp.:
|
|
|
5.625%, 6/1/2007 | 10,000
| 10,875
|
5.7%, 7/3/2006 | 50,000
| 53,983
|
John Deere Capital Corp.:
|
|
|
6.0%, 2/15/2009 | 35,000
| 39,181
|
7.0%, 3/15/2012 | 100,000
| 118,720
|
John Hancock Financial Services, Inc., 5.625%, 12/1/2008
| 25,000
| 27,779
|
JP Morgan Chase & Co.:
|
|
|
6.375%, 4/1/2008 | 100,000
| 115,018
|
6.75%, 2/1/2011 | 100,000
| 117,370
|
7.125%, 6/15/2009 | 300,000
| 357,755
|
KeyCorp, 7.5%, 6/15/2006
| 100,000
| 114,898
|
KFW International Finance, Inc.:
5.25%, 6/28/2006 | 75,000
| 82,494
|
7.0%, 3/1/2013 | 275,000
| 337,331
|
Lehman Brothers Holdings, Inc.:
|
|
|
4.0%, 1/22/2008 | 50,000
| 52,110
|
6.25%, 5/15/2006 | 50,000
| 55,861
|
6.625%, 4/1/2004 | 100,000
| 103,952
|
7.0%, 2/1/2008 | 50,000
| 58,289
|
7.75%, 1/15/2005 | 50,000
| 54,889
|
8.25%, 6/15/2007 | 50,000
| 59,708
|
MBIA, Inc., 9.375%, 2/15/2011
| 125,000
| 162,192
|
Merrill Lynch & Co., Inc., 6.0%, 2/17/2009
| 250,000
| 281,040
|
MetLife, Inc., 6.125%, 12/1/2011
| 25,000
| 28,496
|
Morgan Stanley Dean Witter & Co.:
|
|
|
5.3%, 3/1/2013 | 100,000
| 106,284
|
6.1%, 4/15/2006 | 150,000
| 165,134
|
6.6%, 4/1/2012 | 50,000
| 57,769
|
7.75%, 6/15/2005 | 250,000
| 278,554
|
National Rural Utilities Cooperative Finance Corp., 5.75%, 11/1/2008
| 100,000
| 112,086
|
Nationwide Financial Services, 5.9%, 7/1/2012
| 25,000
| 27,604
|
Nisource Finance Corp., 7.625%, 11/15/2005
| 25,000
| 27,334
|
Pitney Bowes Credit Corp., 8.55%, 9/15/2009
| 100,000
| 125,193
|
PNC Funding Corp., 6.875%, 7/15/2007
| 300,000
| 341,348
|
Prologis Trust, 7.1%, 4/15/2008
| 10,000
| 11,627
|
Sanwa Bank Ltd., 7.4%, 6/15/2011
| 10,000
| 11,213
|
Simon Property Group, 6.35%, 8/28/2012
| 100,000
| 110,802
|
Spieker Properties, Inc., 6.8%, 5/1/2004
| 10,000
| 10,387
|
The St. Paul Co., Inc., 7.875%, 4/15/2005
| 50,000
| 55,019
|
Toyota Motor Credit Corp.:
|
|
|
5.5%, 12/15/2008 | 30,000
| 33,961
|
5.65%, 1/15/2007 | 25,000
| 27,677
|
US Bancorp.:
|
|
|
3.95%, 8/23/2007 | 20,000
| 20,985
|
5.1%, 7/15/2007 | 20,000
| 21,862
|
US Bank National Association, 6.3%, 2/4/2014
| 100,000
| 117,027
|
Verizon Global Funding Corp.:
|
|
|
6.75%, 12/1/2005 | 150,000
| 167,379
|
7.25%, 12/1/2010 | 150,000
| 180,140
|
7.75%, 12/1/2030 | 50,000
| 63,324
|
Wachovia Corp., 7.5%, 7/15/2006
| 100,000
| 115,713
|
Washington Mutual, Inc., 4.375%, 1/15/2008
| 150,000
| 158,738
|
Wells Fargo & Co.:
|
|
|
5.125%, 2/15/2007 | 100,000
| 109,398
|
6.45%, 2/1/2011 | 75,000
| 88,427
|
6.75%, 6/15/2007 | 200,000
| 229,481
|
7.25%, 8/24/2005 | 100,000
| 111,718
|
7.55%, 6/21/2010 | 200,000
| 246,545
|
| 14,413,636 |
Health Care 0.5%
|
Abbott Laboratories, 5.125%, 7/1/2004
| 50,000
| 51,914
|
Aetna, Inc., 7.125%, 8/15/2006
| 50,000
| 56,701
|
Merck & Co, Inc., 6.4%, 3/1/2028
| 500,000
| 591,115
|
UnitedHealth Group, Inc., 4.875%, 4/1/2013
| 25,000
| 26,173
|
Wyeth, 6.25%, 3/15/2006
| 100,000
| 110,883
|
| 836,786 |
Industrials 2.1%
|
Burlington North Santa Fe, 5.9%, 7/1/2012
| 100,000
| 111,515
|
Caterpillar, Inc., 9.0%, 4/15/2006
| 50,000
| 58,893
|
Cendant Corp., 6.25%, 1/15/2008
| 25,000
| 27,665
|
ChevronTexaco Capital Co., 3.5%, 9/17/2007
| 20,000
| 20,784
|
CSX Corp., 7.45%, 5/1/2007
| 115,000
| 133,873
|
Delphi Auto Systems Corp., 6.55%, 6/15/2006
| 50,000
| 53,646
|
Delphi Corp., 7.125%, 5/1/2029
| 5,000
| 5,002
|
Delta Airlines, Inc., Series 02-1, 6.417%, 7/2/2012
| 50,000
| 54,095
|
FedEx Corp., 9.65%, 6/15/2012
| 50,000
| 68,219
|
General Motors Acceptance Corp.:
|
|
|
7.25%, 3/2/2011 | 225,000
| 230,873
|
8.8%, 3/1/2021 | 200,000
| 206,883
|
Honeywell International, Inc.:
|
|
|
6.875%, 10/3/2005 | 50,000
| 55,677
|
7.5%, 3/1/2010 | 25,000
| 30,549
|
ICI Wilmington, Inc., 6.95%, 9/15/2004
| 55,000
| 57,893
|
Lockheed Martin Corp.:
|
|
|
7.25%, 5/15/2006 | 240,000
| 273,322
|
8.2%, 12/1/2009 | 100,000
| 126,462
|
Norfolk Southern Corp.:
|
|
|
6.2%, 4/15/2009 | 50,000
| 56,919
|
7.8%, 5/15/2027 | 100,000
| 125,377
|
Northrop Grumman Corp, 7.125%, 2/15/2011
| 200,000
| 239,584
|
Prologis, 5.5%, 3/1/2013
| 20,000
| 21,347
|
Raytheon Co., 6.75%, 8/15/2007
| 200,000
| 226,389
|
Republic Services, Inc., 7.125%, 5/15/2009
| 10,000
| 11,833
|
Southwest Airlines Co., 8.0%, 3/1/2005
| 500,000
| 543,375
|
Union Pacific Corp.:
|
|
|
6.4%, 2/1/2006 | 80,000
| 87,802
|
6.65%, 1/15/2011 | 50,000
| 58,114
|
6.79%, 11/9/2007 | 16,000
| 18,315
|
United Technologies Corp.:
|
|
|
6.1%, 5/15/2012 | 50,000
| 57,645
|
7.0%, 9/15/2006 | 50,000
| 57,427
|
7.125%, 11/15/2010 | 50,000
| 60,323
|
Waste Management, Inc.:
|
|
|
6.5%, 11/15/2008 | 50,000
| 57,167
|
7.0%, 7/15/2028 | 50,000
| 57,003
|
| 3,193,971 |
Information Technology 0.9%
|
Citizens Communications, 8.5%, 5/15/2006
| 50,000
| 57,991
|
Compaq Computer Corp., 7.65%, 8/1/2005
| 100,000
| 110,476
|
Hewlett-Packard Co., 5.75%, 12/15/2006
| 20,000
| 22,284
|
International Business Machines Corp.:
|
|
|
4.75%, 11/29/2012 | 100,000
| 105,107
|
6.5%, 1/15/2028 | 100,000
| 115,306
|
Motorola, Inc.:
|
|
|
7.6%, 1/1/2007 | 200,000
| 225,000
|
7.625%, 11/15/2010 | 50,000
| 58,750
|
Scana Corp.:
|
|
|
6.25%, 2/1/2012 | 60,000
| 68,105
|
6.875%, 5/15/2011 | 25,000
| 29,349
|
Tennessee Valley Authority, 7.25%, 7/15/2043
| 500,000
| 528,116
|
| 1,320,484 |
Materials 0.9%
|
Alcoa, Inc.:
|
|
|
6.0%, 1/15/2012 | 25,000
| 28,161
|
7.25%, 8/1/2005 | 100,000
| 111,354
|
7.375%, 8/1/2010 | 100,000
| 121,156
|
Dow Chemical Co., 6.0%, 10/1/2012
| 100,000
| 108,788
|
E.I. du Pont de Nemours and Co., 6.875%, 10/15/2009
| 150,000
| 180,919
|
International Flavors & Fragrance, Inc., 6.45%, 5/15/2006
| 10,000
| 11,165
|
International Paper Co.:
|
|
|
5.85%, 10/30/2012 | 100,000
| 108,989
|
6.75%, 9/1/2011 | 40,000
| 46,265
|
Meadwestvaco Corp., 6.85%, 4/1/2012
| 70,000
| 80,805
|
Potash Corp., 7.125%, 6/15/2007
| 300,000
| 343,060
|
Praxair, Inc., 3.95%, 6/1/2013
| 50,000
| 49,353
|
Weyerhaeuser Co., 6.75%, 3/15/2012
| 150,000
| 170,280
|
| 1,360,295 |
Telecommunication Services 1.5%
|
AT&T Broadband Corp., 8.375%, 3/15/2013
| 90,000
| 112,717
|
AT&T Corp.:
|
|
|
6.0%, 3/15/2009 | 9,000
| 9,630
|
7.3%, 11/15/2011 | 200,000
| 228,622
|
AT&T Wireless Services, Inc.:
|
|
|
7.35%, 3/1/2006 | 25,000
| 28,054
|
7.875%, 3/1/2011 | 200,000
| 236,204
|
8.125%, 5/1/2012 | 35,000
| 42,170
|
BellSouth Capital Funding, 7.75%, 2/15/2010
| 200,000
| 248,071
|
BellSouth Corp., 6.0%, 10/15/2011
| 100,000
| 114,280
|
Cingular Wireless, 6.5%, 12/15/2011
| 75,000
| 86,413
|
Clear Channel Communications, Inc.:
|
|
|
4.4%, 5/15/2011 | 50,000
| 50,163
|
7.25%, 9/15/2003 | 50,000
| 50,501
|
7.65%, 9/15/2010 | 50,000
| 60,170
|
GTE North, Inc.:
|
|
|
5.65%, 11/15/2008 | 100,000
| 112,191
|
6.4%, 2/15/2005 | 100,000
| 106,950
|
SBC Communications, Inc.:
|
|
|
5.875%, 8/15/2012 | 150,000
| 169,102
|
6.25%, 3/15/2011 | 50,000
| 57,353
|
Sprint Capital Corp.:
|
|
|
6.875%, 11/15/2028 | 120,000
| 120,388
|
8.375%, 3/15/2012 | 175,000
| 209,530
|
Verizon New York, Inc., 6.875%, 4/1/2012
| 25,000
| 29,429
|
Verizon Virginia, Inc., 4.625%, 3/15/2013
| 100,000
| 102,710
|
Verizon Wireless, Inc., 5.375%, 12/15/2006
| 50,000
| 54,917
|
| 2,229,565 |
Utilities 2.0%
|
American Electric Power, 6.125%, 5/15/2006
| 45,000
| 49,327
|
Arizona Public Service, 6.5%, 3/1/2012
| 25,000
| 28,584
|
Columbia Energy Group, 7.62%, 11/28/2025
| 25,000
| 27,287
|
Consolidated Natural Gas Corp., 6.625%, 12/1/2008
| 200,000
| 231,859
|
Constellation Energy Group, Inc., 7.0%, 4/1/2012
| 25,000
| 29,121
|
Dominion Resources, Inc.:
|
|
|
7.625%, 7/15/2005 | 75,000
| 83,418
|
8.125%, 6/15/2010 | 90,000
| 111,528
|
DTE Energy Co.:
|
|
|
6.45%, 6/1/2006 | 40,000
| 44,504
|
7.05%, 6/1/2011 | 50,000
| 58,478
|
Duke Energy Field Services, 7.5%, 8/16/2005
| 100,000
| 109,351
|
Exelon Corp., 6.75%, 5/1/2011
| 50,000
| 57,849
|
FPL Group Capital, Inc., 7.625%, 9/15/2006
| 50,000
| 57,767
|
General Electric Co., 5.0%, 2/1/2013
| 100,000
| 105,626
|
Kansas City Power & Light Co., Series B, 6.0%, 3/15/2007
| 25,000
| 27,574
|
KeySpan Corp.:
|
|
|
6.15%, 6/1/2006 | 50,000
| 55,583
|
7.875%, 2/1/2010 | 25,000
| 31,001
|
8.0%, 11/15/2030 | 50,000
| 67,423
|
Kinder Morgan, Inc.:
|
|
|
6.5%, 9/1/2012 | 50,000
| 57,315
|
6.65%, 3/1/2005 | 50,000
| 53,644
|
National Rural Utilities, 8.0%, 3/1/2032
| 100,000
| 128,968
|
Niagara Mohawk Power Corp.:
|
|
|
7.75%, 5/15/2006 | 85,000
| 97,318
|
Series G, 7.75%, 10/1/2008 | 50,000
| 59,904
|
Potomac Electic Power, 6.25%, 10/15/2007
| 100,000
| 112,006
|
PP&L Capital Funding, Inc., 8.375%, 6/15/2007
| 25,000
| 29,509
|
Progress Energy, Inc:
|
|
|
5.85%, 10/30/2008 | 25,000
| 27,609
|
6.75%, 3/1/2006 | 50,000
| 55,568
|
6.85%, 4/15/2012 | 35,000
| 40,279
|
7.1%, 3/1/2011 | 90,000
| 104,698
|
PSE&G Power LLC, 7.75%, 4/15/2011
| 70,000
| 83,524
|
Public Service Co. of Colorado, 4.875%, 3/1/2013
| 75,000
| 77,958
|
Sempra Energy, 7.95%, 3/1/2010
| 25,000
| 30,142
|
South Carolina Electric & Gas, 7.5%, 6/15/2005
| 70,000
| 77,515
|
Virginia Electric and Power Co.:
|
|
|
5.75%, 3/31/2006 | 25,000
| 27,301
|
7.625%, 7/1/2007 | 100,000
| 117,824
|
Wisconsin Electric Power, 7.25%, 8/1/2004
| 500,000
| 529,559
|
Wisconsin Energy Corp., 6.5%, 4/1/2011
| 50,000
| 57,247
|
| 2,944,168 |
Total Corporate Bonds (Cost $32,458,964)
| 35,576,236 |
|
Foreign Bonds - US$ Denominated 5.1% |
Abbey National PLC, 6.69%, 10/17/2005
| 50,000
| 55,379
|
Alberta Energy Co., Ltd., 7.65%, 9/15/2010
| 10,000
| 12,312
|
Alcan, Inc.:
4.5%, 5/15/2013 | 100,000
| 101,668
|
4.875%, 9/15/2012 | 10,000
| 10,495
|
Apache Finance Canada, 7.75%, 12/15/2029
| 25,000
| 33,134
|
AXA, 8.6%, 12/15/2030
| 50,000
| 64,394
|
Barclays Bank PLC, 7.4%, 12/15/2009
| 60,000
| 74,162
|
British Columbia, 5.375%, 10/29/2008
| 50,000
| 56,205
|
British Gas Finance, Inc., 6.625%, 6/1/2018
| 100,000
| 114,315
|
British Telecommunications PLC:
|
|
|
7.875%*, 12/15/2005 | 50,000
| 56,942
|
8.125%, 12/15/2010 | 50,000
| 63,234
|
8.875%*, 12/15/2030 | 70,000
| 95,520
|
Canadian Government:
|
|
|
5.25%, 11/5/2008 | 100,000
| 112,888
|
6.375%, 11/30/2004 | 50,000
| 53,627
|
Canadian National Railways, 4.4%, 3/15/2013
| 50,000
| 50,469
|
Canadian National Resources, 5.45%, 10/1/2012
| 25,000
| 27,113
|
Corp. Andina De Fomento:
|
|
|
5.2%, 5/21/2013 | 25,000
| 25,326
|
6.875%, 3/15/2012 | 10,000
| 11,384
|
Deutsche Ausgleichsbank, 6.5%, 9/15/2004
| 25,000
| 26,554
|
Deutsche Telekom International Finance:
8.25%, 6/15/2005 | 200,000
| 223,026
|
8.5%, 6/15/2010 | 150,000
| 184,257
|
Dow Capital BV, 9.2%, 6/1/2010
| 50,000
| 62,551
|
European Investment Bank:
|
|
|
4.0%, 8/30/2005 | 50,000
| 52,619
|
4.625%, 3/1/2007 | 400,000
| 434,311
|
France Telecom:
|
|
|
8.7%*, 3/1/2006 | 75,000
| 85,550
|
9.25%*, 3/1/2011 | 75,000
| 94,392
|
10.0%*, 3/1/2031 | 75,000
| 103,780
|
Government of Malaysia, 8.75%, 6/1/2009
| 10,000
| 12,782
|
Hanson Overseas BV, 6.75%, 9/15/2005
| 150,000
| 164,179
|
HSBC Holding PLC, 7.5%, 7/15/2009
| 150,000
| 182,788
|
Hydro-Quebec, Series HY, 8.4%, 1/15/2022
| 100,000
| 139,604
|
Inter-American Development Bank:
|
|
|
6.5%, 10/20/2004 | 100,000
| 106,817
|
6.625%, 3/7/2007 | 300,000
| 348,065
|
Kingdom of Spain, 7.0%, 7/19/2005
| 75,000
| 82,608
|
Kingdom of Sweden, 12.0%, 2/1/2010
| 220,000
| 315,676
|
Koninklijke KPN NV:
|
|
|
8.0%, 10/1/2010 | 25,000
| 30,949
|
8.375%, 10/1/2030 | 50,000
| 64,874
|
Korea Development Bank:
|
|
|
5.25%, 11/16/2006 | 50,000
| 53,665
|
7.125%, 4/22/2004 | 75,000
| 78,092
|
National Australia Bank, Series A, 8.6%, 5/19/2010
| 50,000
| 64,633
|
National Westminster Bank, 7.375%, 10/1/2009
| 50,000
| 61,313
|
Nippon Telegraph & Telephone Corp., 6.0%, 3/25/2008
| 10,000
| 11,453
|
Ontario Electricity Financial Corp., 6.1%, 1/30/2008
| 35,000
| 40,243
|
Province of Manitoba, 5.5%, 10/1/2008
| 200,000
| 225,380
|
Province of Nova Scotia, 5.75%, 2/27/2012
| 50,000
| 57,049
|
Province of Ontario, 4.2%, 6/30/2005
| 125,000
| 131,532
|
Province of Quebec:
|
|
|
5.75%, 2/15/2009 | 50,000
| 56,842
|
7.0%, 1/30/2007 | 200,000
| 232,452
|
7.125%, 2/9/2024 | 500,000
| 627,622
|
Repsol International Finance, 7.45%, 7/15/2005
| 100,000
| 110,034
|
Republic of Chile, 6.875%, 4/28/2009
| 10,000
| 11,505
|
Republic of Finland:
|
|
|
5.875%, 2/27/2006 | 200,000
| 220,976
|
7.875%, 7/28/2004 | 50,000
| 53,600
|
Republic of Italy:
|
|
|
3.625%, 9/14/2007 | 20,000
| 20,970
|
6.0%, 2/22/2011 | 225,000
| 262,560
|
6.875%, 9/27/2023 | 200,000
| 254,028
|
Republic of Korea, 8.875%, 4/15/2008
| 50,000
| 62,355
|
Santander Central Hispano, 7.625%, 9/14/2010
| 50,000
| 61,992
|
Santander Financial Issuances, 7.0%, 4/1/2006
| 20,000
| 22,349
|
Telefonica Europe BV
7.35%, 9/15/2005 | 40,000
| 44,659
|
7.75%, 9/15/2010 | 125,000
| 154,240
|
The International Bank for Reconstruction and Development, 4.375%, 9/28/2006
| 250,000
| 270,230
|
United Mexican States:
|
|
|
6.375%, 1/16/2013 | 250,000
| 265,000
|
8.375%, 1/14/2011 | 50,000
| 59,900
|
8.5%, 2/1/2006 | 25,000
| 28,988
|
8.625%, 3/12/2008 | 40,000
| 47,960
|
9.875%, 1/15/2007 | 100,000
| 123,150
|
9.875%, 2/1/2010 | 190,000
| 243,675
|
Vodafone Group PLC
7.625%, 2/15/2005 | 50,000
| 54,749
|
7.75%, 2/15/2010 | 50,000
| 61,522
|
Total Foreign Bonds - US$ Denominated (Cost $6,897,715)
| 7,808,667 |
|
Asset Backed 1.5% |
Automobile Receivables 0.1%
|
Ford Credit Auto Owner Trust "B", Series 2002-C, 4.22%, 12/15/2006
| 100,000
| 104,852 |
Credit Card Receivables 1.1%
|
American Express Credit Account Master Trust "A", Series 1999-2, 5.95%, 12/15/2006
| 50,000
| 52,063
|
Chase Credit Card Master Trust "A", Series 1999-3, 6.66%, 1/15/2007
| 100,000
| 105,749
|
Chemical Master Credit Card Trust "A", Series 1996-3, 7.09%, 2/15/2009
| 200,000
| 218,801
|
Citibank Credit Card Master Trust I:
|
|
|
"A", Series 1999-2, 5.875%, 3/10/2011 | 100,000
| 114,418
|
"A", Series 1999-7, 6.65%, 11/15/2006 | 250,000
| 268,117
|
Discover Card Master Trust "A", Series 2002-2, 5.15%, 10/15/2009
| 200,000
| 219,137
|
Fleet Credit Card Master Trust II "A", Series 1999-C, 6.9%, 4/16/2007
| 40,000
| 42,075
|
MBNA Credit Card Master Note Trust "A", Series 1999-J, 7.0%, 2/15/2012
| 200,000
| 239,920
|
MBNA Master Credit Card Trust USA:
|
|
|
"A", Series 1999-B, 5.9%, 8/15/2011 | 50,000
| 57,361
|
"A", Series 1999-M, 6.6%, 4/16/2007 | 150,000
| 160,790
|
Prime Credit Card Master Trust "A", Series 2000-1, 6.7%, 10/15/2009
| 100,000
| 109,431
|
| 1,587,862 |
Miscellaneous 0.3%
|
Detroit Edison Securitization "A3", Series 2001-1, 5.875%, 3/1/2010
| 100,000
| 111,715
|
Peco Energy Transition Trust:
|
|
|
"A6", Series 1999-A, 6.05%, 3/1/2009 | 50,000
| 55,688
|
"A7", Series 1999-A, 6.13%, 3/1/2009 | 50,000
| 57,356
|
West Penn Funding LLC "A4", Series 1999-A, 6.98%, 12/26/2008
| 250,000
| 293,176
|
| 517,935 |
Total Asset Backed (Cost $1,995,133)
| 2,210,649 |
|
US Treasury Obligations 20.8% |
US Treasury Bond:
|
|
|
2.875%, 2/15/2008 | 2,500,000
| 2,572,558
|
3.625%, 5/15/2013 | 1,400,000
| 1,410,937
|
5.0%, 2/15/2011 | 320,000
| 359,188
|
5.25%, 11/15/2028 | 3,500,000
| 3,809,943
|
6.0%, 2/15/2026 | 300,000
| 358,606
|
6.25%, 8/15/2023 | 700,000
| 857,445
|
6.875%, 8/15/2025 | 795,000
| 1,047,475
|
7.25%, 8/15/2022 | 565,000
| 765,509
|
7.625%, 11/15/2022 | 90,000
| 126,598
|
7.875%, 2/15/2021 | 300,000
| 428,297
|
8.0%, 11/15/2021 | 1,000,000
| 1,448,711
|
8.75%, 5/15/2020 | 300,000
| 458,965
|
8.75%, 8/15/2020 | 450,000
| 689,115
|
11.25%, 2/15/2015 | 1,150,000
| 1,959,671
|
US Treasury Note:
|
|
|
1.625%, 3/31/2005 | 4,500,000
| 4,530,938
|
3.0%, 11/15/2007 | 1,500,000
| 1,547,226
|
4.0%, 11/15/2012 | 1,325,000
| 1,378,776
|
4.875%, 2/15/2012 | 350,000
| 389,047
|
5.0%, 8/15/2011 | 1,850,000
| 2,075,180
|
6.875%, 5/15/2006 | 4,000,000
| 4,583,908
|
7.25%, 5/15/2004 | 500,000
| 526,934
|
Total US Treasury Obligations (Cost $29,705,644)
| 31,325,027 |
|
US Government Agency Pass-Thrus 11.0% |
Federal Home Loan Mortgage Corp.:
|
|
|
5.0%, 12/1/2017 | 3,000,000
| 3,101,749
|
5.5%, 11/1/2013 | 152,883
| 159,355
|
6.5%, 12/1/2014 | 229,477
| 241,169
|
7.0% with various maturities until 6/1/2027 | 310,837
| 327,405
|
7.5% with various maturities until 10/1/2030 | 185,344
| 197,544
|
Federal National Mortgage Association:
|
|
|
6.0% with various maturities until 7/1/2029 | 3,448,379
| 3,597,516
|
6.5% with various maturities until 1/1/2033 | 4,293,274
| 4,501,807
|
7.0%, 10/1/2015 | 3,262,923
| 3,447,925
|
7.5% with various maturities until 4/1/2028 | 181,825
| 193,962
|
8.0%, 12/1/2021 | 529,197
| 570,364
|
8.5% with various maturities until 8/1/2031 | 174,096
| 187,398
|
Total US Government Agency Pass-Thrus (Cost $16,033,174)
| 16,526,194 |
|
Collateralized Mortgage Obligations 2.0% |
Bear Stearns Commercial Mortgage Securities:
|
|
|
"A2", Series 1999-WF2, 7.08%, 6/15/2009 | 400,000
| 475,041
|
"A1", Series 2000-WF2, 7.11%, 10/15/2032 | 410,954
| 466,542
|
"A2", Series 2000-WF8, 7.78%, 2/15/2032 | 150,000
| 184,190
|
Capco America Securitization Corp., Series 1998-D7, 6.26%, 10/15/2030
| 100,000
| 114,755
|
CS First Boston Mortgage Securities Corp., Series 2001-CF2, 6.24%, 2/15/2034
| 250,000
| 282,367
|
DLJ Commercial Mortgage Corp., "A1B", Series 1998-CG1, 6.41%, 6/10/2031
| 100,000
| 114,673
|
First Union National Bank Commercial Mortgage, "A1" Series 1999-C4, 7.184%, 12/15/2031
| 130,050
| 142,607
|
First Union-Lehman Brothers-Bank of America, Series 1998-C2, 6.56%, 11/18/2035
| 100,000
| 115,100
|
LB Commercial Conduit Mortgage Trust:
|
|
|
"A2", Series 1999-C1, 6.78%, 6/15/2031 | 150,000
| 175,576
|
"A1", Series 1999-C2, 7.105%, 10/15/2032 | 130,031
| 143,719
|
LB-UBS Commercial Mortgage Trust:
|
|
|
"A2", Series 2002-C1, 5.969%, 3/15/2026 | 100,000
| 112,083
|
"A2", Series 2001-C2, 6.653%, 11/15/2027 | 100,000
| 117,791
|
Morgan Stanley Capital, Series 1998-WF2, 6.34%, 7/15/2030
| 96,895
| 104,429
|
Morgan Stanley Capital I, Series 1999-LIFE, 7.11%, 4/15/2033
| 100,000
| 119,280
|
Morgan Stanley Dean Witter Capital I, Series 2002-TOP7, 5.98%, 1/15/2039
| 185,000
| 210,440
|
Nomura Asset Securities Corp., Series 1998-D6, 6.59%, 3/15/2030
| 100,000
| 115,535
|
Total Collateralized Mortgage Obligations (Cost $2,618,516)
| 2,994,128 |
|
US Agency Obligations 25.9% |
Federal Farm Credit Bank, 5.58%, 9/11/2003
| 1,000,000
| 1,008,895
|
Federal Home Loan Bank:
|
|
|
4.5%, 11/15/2012 | 1,000,000
| 1,054,497
|
5.125%, 9/15/2003 | 1,000,000
| 1,008,410
|
Federal Home Loan Mortgage Corp.:
|
|
|
3.5%, 9/15/2007 | 1,700,000
| 1,777,216
|
4.5%, 8/15/2004 | 2,500,000
| 2,592,488
|
4.5%, 1/15/2013 | 500,000
| 525,244
|
5.5%, 7/1/2033 | 1,000,000
| 1,031,562
|
6.0%, 7/1/2033 | 1,000,000
| 1,036,562
|
6.25%, 7/15/2004 | 250,000
| 263,198
|
6.25%, 7/15/2032 | 133,000
| 156,491
|
6.5%, 7/1/2033 | 3,000,000
| 3,121,875
|
6.75%, 9/15/2029 | 3,000
| 3,717
|
6.875%, 1/15/2005 | 2,000,000
| 2,169,832
|
Federal National Mortgage Association:
|
|
|
4.375%, 10/15/2006 | 1,600,000
| 1,723,958
|
4.5%, 7/1/2018 | 1,000,000
| 1,020,000
|
4.75%, 11/14/2003 | 1,000,000
| 1,013,856
|
5.0%, 7/1/2018 | 2,500,000
| 2,582,030
|
5.25%, 1/15/2009 | 500,000
| 561,411
|
5.5%, 7/1/2018 | 1,000,000
| 1,038,438
|
5.5%, 7/1/2033 | 5,000,000
| 5,167,190
|
6.0%, 7/1/2033 | 4,750,000
| 4,935,545
|
6.25%, 5/15/2029 | 800,000
| 936,926
|
6.5%, 8/15/2004 | 500,000
| 529,743
|
6.5%, 7/1/2033 | 2,250,000
| 2,346,327
|
6.96%, 4/2/2007 | 500,000
| 585,292
|
7.125%, 1/15/2030 | 50,000
| 64,898
|
7.25%, 5/15/2030 | 650,000
| 856,645
|
Total US Agency Obligations (Cost $38,257,389)
| 39,112,246 |
Government National Mortgage Association 4.3% |
Government National Mortgage Association:
|
|
|
5.5%, 7/1/2033 (b) | 1,000,000
| 1,040,938
|
6.0% with various maturities until 7/1/2033 (b) | 2,107,751
| 2,210,276
|
6.5% with various maturities until 8/20/2032 | 1,063,020
| 1,114,734
|
7.5% with various maturities until 6/15/2032 | 854,649
| 908,350
|
8.0% with various maturities until 3/15/2032 | 962,575
| 1,040,978
|
8.5%, 11/15/2029 | 93,339
| 100,599
|
9.0%, 1/15/2023 | 31,250
| 34,763
|
Total Government National Mortgage Association (Cost $6,247,949)
| 6,450,638 |
|
| Shares | Value ($) |
|
|
Cash Equivalents 20.8% |
Cash Management Fund Institutional, 0.99% (c) (Cost $31,416,890)
| 31,416,890
| 31,416,890 |
| % of Net Assets | Value ($) |
|
|
Total Investment Portfolio (Cost $165,631,374) (a)
| 115.0 | 173,420,675 |
Other Assets and Liabilities, Net
| (15.0) | (22,610,353) |
Net Assets
| 100.0 | 150,810,322 |
* These securities are shown at their current rate as of June 30, 2003.(a) The cost for federal income tax purposes was $165,639,600. At June 30, 2003, net unrealized appreciation for all securities based on tax cost was $7,781,075. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $7,955,080 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $174,005.(b) When issued or forward delivery securities included.(c) Cash Management Fund Institutional, an affiliate, is also managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal Home Loan Mortgage Corp., the Federal National Mortgage Association and the Government National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in the investment portfolio.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of June 30, 2003 (Unaudited) |
Assets
|
Investments in securities, at value (cost $134,214,484)
| $ 142,003,785 |
Investment in Cash Management Fund Institutional (cost $31,416,890)
| 31,416,890 |
Cash
| 327 |
Receivable for investments sold
| 975,779 |
Interest receivable
| 1,505,557 |
Receivable for Fund shares sold
| 101,937 |
Due from Advisor
| 5,810 |
Total assets
| 176,010,085 |
Liabilities
|
Payable for investments purchased
| 23,061,994 |
Payable for when-issued and forward delivery securities
| 2,092,099 |
Other accrued expenses and payables
| 45,670 |
Total liabilities
| 25,199,763 |
Net assets, at value
| $ 150,810,322 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2003 (Unaudited) |
Investment Income
|
Interest
| $ 2,704,813 |
Dividends - Cash Management Fund Institutional
| 171,126 |
Total Income
| 2,875,939 |
Expenses:
Advisory fees
| 75,196 |
Administrator service fee
| 33,192 |
Audit fees
| 14,010 |
Legal
| 371 |
Trustees' fees and expenses
| 1,905 |
Other
| 19,181 |
Total expenses, before expense reductions
| 143,855 |
Expense reductions
| (77,470) |
Total expenses, after expense reductions
| 66,385 |
Net investment income
| 2,809,554 |
Realized and Unrealized Gain (Loss) on Investment Transactions
|
Net realized gain (loss) from investments
| 787,002 |
Net unrealized appreciation (depreciation) during the period on investments
| 1,699,321 |
Net gain (loss) on investment transactions
| 2,486,323 |
Net increase (decrease) in net assets resulting from operations
| $ 5,295,877 |
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 June 30, 2003 (Unaudited) | Year Ended December 31, 2002 |
Operations:
Net investment income
| $ 2,809,554 | $ 5,986,193 |
Net realized gain (loss) on investment transactions
| 787,002 | 2,233,751 |
Net unrealized appreciation (depreciation) on investment transactions during the period
| 1,699,321 | 3,403,360 |
Net increase (decrease) in net assets resulting from operations
| 5,295,877 | 11,623,304 |
Capital transaction in shares of beneficial interest:
Proceeds from capital invested
| 89,761,839 | 17,605,303 |
Value of capital withdrawn
| (43,839,949) | (60,129,225) |
Net increase (decrease) in net assets from capital transactions in shares of beneficial interest
| 45,921,890 | (42,523,922) |
Increase (decrease) in net assets
| 51,217,767 | (30,900,618) |
Net assets at beginning of period
| 99,592,555 | 130,493,173 |
Net assets at end of period
| $ 150,810,322 | $ 99,592,555 |
The accompanying notes are an integral part of the financial statements.
|
Years Ended December 31, | 2003a | 2002 | 2001 | 2000 | 1999 | 1998 |
Ratios to Average Net Assets and Supplemental Data
|
Net assets, end of period ($ millions)
| 151 | 100 | 130 | 130 | 110 | 64 |
Ratio of expenses before expense reductions (%)
| .22* | .25 | .24 | .28 | .22 | .29 |
Ratio of expenses after expense reductions (%)
| .10* | .10 | .10 | .10 | .10 | .10 |
Ratio of net investment income (loss) (%)
| 4.23* | 4.98 | 5.70 | 6.34 | 5.82 | 6.02 |
Portfolio turnover rate (%)
| 200b* | 235b | 232 | 221 | 224 | 82 |
Total Investment Return (%)c
| 3.84** | 10.09 | - | - | - | - |
a For the six months ended June 30, 2003 (Unaudited).
b The portfolio turnover rates including mortgage dollar roll transactions were 238% and 266% for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
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Notes to Financial Statements (Unaudited) |
|
A. Significant Accounting Policies
The US Bond Index Portfolio (the "Portfolio"), a series of the Scudder Investment Portfolios, formerly BT Investment Portfolios (the "Trust"), is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company organized as a New York business trust.
The Portfolio'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 Portfolio 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 Portfolio. 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.
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 investments companies and Cash Management Fund Institutional 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.
Mortgage Dollar Rolls. The Portfolio may enter into mortgage dollar rolls in which the Portfolio sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities on a fixed date. The Portfolio receives compensation as consideration for entering into the commitment to repurchase. The compensation is paid in the form of a lower price for the security upon its repurchase or, alternatively, a fee. Mortgage dollar rolls may be renewed with a new sale and repurchase price and a cash settlement made at each renewal without physical delivery of the securities subject to the contract.
Certain risks may arise upon entering into mortgage dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of such securities may change adversely before the Portfolio is able to repurchase them.
When-Issued/Delayed Delivery Securities. The Portfolio may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Portfolio enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Portfolio until payment takes place. At the time the Portfolio enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The Portfolio is considered a partnership under the Internal Revenue Code. Therefore, no federal income tax provision is necessary.
Other. Investment transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for both tax and financial reporting purposes.
The Portfolio makes a daily allocation of its net investment income and realized and unrealized gains and losses from securities and foreign currency transactions to its investors in proportion to their investment in the Portfolio.
B. Purchases and Sales of Securities
During the six months ended June 30, 2003, purchases and sales of investment securities (excluding short-term investments, mortgage dollar rolls and US Treasury obligations) aggregated $166,175,639 and $138,928,768, respectively. Purchases and sales of US Treasury obligations aggregated $26,435,254 and $12,446,211, respectively. Mortgage dollar rolls aggregated $24,600,469 and $24,670,068, respectively.
C. Related Parties
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 Asset Management, Inc. ("DeAM, Inc." or the "Advisor") is the Advisor for the Portfolio and Investment Company Capital Corp. ("ICCC" or the "Administrator") is the Administrator for the Portfolio, both wholly owned subsidiaries of Deutsche Bank AG.
Investment Advisory Agreement. Under the Investment Advisory Agreement, the Advisor directs the investments of the Portfolio in accordance with its investment objectives, policies and restrictions. The advisory fee payable under the Investment Advisory Agreement is equal to an annual rate of 0.15% of the Portfolio's average daily net assets, computed and accrued daily and payable monthly. Effective April 25, 2003, Northern Trust Investments, N.A. ("NTI") serves as sub-advisor to the Portfolio and is paid by the Advisor for its services. NTI is responsible for the day to day management of the Portfolio. The Portfolio waives a portion of its advisory fees equivalent to the advisory fees charged on assets invested in the affiliated money market fund, Cash Management Fund Institutional.
For the six months ended June 30, 2003, the Advisor and Administrator maintained the annualized expenses of the Portfolio at not more than 0.10% of the Portfolio's average daily net assets. Accordingly, for the six months ended June 30, 2003, the Advisor did not impose any of its advisory fee, pursuant to the Investment Advisory Agreement, aggregating $75,196.
Administrator Service Fee. For its services as Administrator, ICCC receives a fee (the "Administrator Service Fee") of 0.05% of the Portfolio's average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2003, the Administrator Service Fee was $33,192, of which $2,274 was not imposed and $14,109 is unpaid.
Effective May 9, 2003, State Street Bank and Trust Company ("State Street") is the Portfolio's custodian. Prior to May 9, 2003, Deutsche Bank Trust Company Americas, an affiliate of the Advisor and Administrator, served as custodian for the Portfolio.
Trustees' Fees and Expenses. The Portfolio pays each Trustee not affiliated with the Advisor retainer fees plus specific amounts for attended board and committee meetings.
Other. The Portfolio may invest in Cash Management Fund Institutional, an open-end management investment company managed by DeAM, Inc.
D. Line of Credit
Prior to April 11, 2003, the Portfolio and several other affiliated funds (the "Participants") shared in a $200 million revolving credit facility administered by a syndicate of banks for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants were charged an annual commitment fee which was allocated pro-rata based upon net assets among each of the Participants. Interest was calculated at the Federal Funds Rate plus 0.625 percent.
Effective April 11, 2003, the Portfolio entered into a new revolving credit facility administered by J.P. Morgan Chase Bank that provides $1.25 billion of credit coverage. The new revolving credit facility covers the funds and portfolios advised or administered by DeAM, Inc. or its affiliates. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Portfolio may borrow up to a maximum of 33 percent of its net assets under the agreement.
Shareholder Meeting Results |
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A Special Meeting of Shareholders of US Bond Index Portfolio (the "Portfolio"), a series of BT Investment Portfolios (the "Trust"), was held on March 31, 2003. At the meeting, the following matters were voted upon by the shareholders (the resulting votes are presented below):
1. To approve a new investment advisory agreement between the Portfolio and Deutsche Asset Management, Inc. ("DeAM, Inc.").
Affirmative | Against | Abstain |
8,054,694 | 5,240 | 10,446 |
2. To approve a new investment sub-advisory agreement for the Portfolio between DeAM, Inc. and Northern Trust Investments, Inc.
Affirmative | Against | Abstain |
8,058,760 | 1,174 | 10,446 |
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
Communications Fund Scudder Gold & Precious Metals Fund 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 Funds
Scudder Contrarian Fund Scudder-Dreman Financial Services Fund Scudder-Dreman High Return Equity Fund Scudder-Dreman Small Cap Value Fund Scudder Flag Investors Equity
Partners 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 Funds
Scudder 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 Funds
Scudder 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 Funds
Scudder 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 Funds
Scudder 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 Market
A 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 Accounts
Coverdell 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 Europe and Russia Fund, Inc. (formerly 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.
Account Management Resources |
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Automated Information Lines | ScudderACCESS (800) 972-3060 Personalized account information, information on other Scudder funds and services via touchtone telephone and for Classes A, B, and C only, the ability to exchange or redeem shares.
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Web Site | scudder.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more.
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For more information | (800) 621-1048 To speak with a Scudder service representative.
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Written correspondence | Scudder Investments PO Box 219356
Kansas City, MO
64121-9356
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Principal Underwriter | If you have questions, comments or complaints, contact:
Scudder Distributors, Inc. 222 South Riverside Plaza
Chicago, IL 60606
(800) 621-1148
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Nasdaq Symbol | BTUSX
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CUSIP Number | 81111W 204
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Fund Number | 548
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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
ITEM 2. CODE OF ETHICS.
Not currently applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not currently applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not currently applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES 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 June 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.
Form N-CSR Item F
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 U.S. Bond Index Fund
By: /s/Richard T. Hale
---------------------------
Richard T. Hale
Chief Executive Officer
Date: August 19, 2003
---------------------------
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 U.S. Bond Index Fund
By: /s/Richard T. Hale
---------------------------
Richard T. Hale
Chief Executive Officer
Date: August 19, 2003
---------------------------
By: /s/Charles A. Rizzo
---------------------------
Charles A. Rizzo
Chief Financial Officer
Date: August 19, 2003
---------------------------
