This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Short Term Bond Fund
Annual Report
December 31, 1994
* Seeks to provide a high level of income consistent with a high degree of
principal stability.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
21 Financial Statements
24 Financial Highlights
25 Notes to Financial Statements
31 Report of Independent Accountants
32 Tax Information
33 Officers and Trustees
34 Investment Products and Services
35 How to Contact Scudder
HIGHLIGHTS
* The Fund experienced above-average price volatility throughout the
year, stemming primarily from the rise in interest rates and,
secondarily, the devaluation of the Mexican peso.
* Scudder Short Term Bond Fund provided a 7.70% 30-day net annualized
yield on December 31, 1994, up from 5.65% a year earlier.
* During the year, the Fund incurred currency-related losses that,
according to U.S. tax law, must be treated as offsets to ordinary
income. As a result, 14.89% of the Fund's 1994 income payments will be
considered nontaxable distributions of capital.
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The United States Federal Reserve raised interest rates six times
during 1994 in an effort to bring economic growth down to a more
sustainable level. Investors generally underestimated the scope and speed
with which interest rates rose and sent prices lower on a broad range of
fixed-income securities, resulting in the worst bond market in more than 60
years.
The rise in interest rates poses a challenge for income funds: to
provide shareholders with the higher income now available from bonds while
protecting against price erosion. Although we believe the worst is over, it
is possible interest rates may rise somewhat further in 1995. However, in
the year ahead, we believe a combination of factors, including the Federal
Reserve's tightening efforts, will keep the economy and inflation on a
moderate course, which should ease the upward pressure on rates. These
developments ultimately should be reflected in more favorable financial
markets, and we expect investors to begin focusing on positive long-term
fundamentals rather than short-term uncertainties.
Additional increases in interest rates may, of course, cause periods
of difficult adjustment for fixed-income markets. At times like these, it
is more important than ever to have a sound investment plan that can
weather market storms. The past year has demonstrated that virtually all
financial instruments, whether conservative or aggressive, are susceptible
to disappointing performance. Experience tells us that over the long term,
investors who have participated in the stock and bond markets have faired
much better than those who have chosen to protect their savings above all
else.
If you have questions about your Fund or your investments, please
contact a Scudder Investor Relations representative at 1-800-225-2470. Page
35 provides more information on how to contact Scudder. Thank you for
choosing Scudder Short Term Bond Fund to help meet your investment needs.
Sincerely
/s/Daniel Pierce
Daniel Pierce
President
Scudder Short Term Bond Fund
<PAGE>
Scudder Short Term Bond Fund
Performance Update as of December 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Short Term Bond Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 9,713 -2.87% -2.87%
5 Year $13,924 39.24% 6.84%
10 Year* $23,574 135.74% 8.95%
Salomon Brothers Inc. Broad Investment
Grade Bond Index (1-3 years)
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,060 .60% .60%
5 Year $13,877 38.77% 6.77%
10 Year $21,808 118.08% 8.10%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended December 31
Scudder Short Term Bond Fund
Year Amount
- ----------------------
84 10000
85 12091
86 13863
87 14060
88 14946
89 16931
90 18605
91 21280
92 22436
93 24271
94 23574
Salomon Brothers Inc. Broad Investment
Grade Bond Index (1-3 years)
Year Amount
- ----------------------
84 10000
85 11402
86 12595
87 13315
88 14167
89 15716
90 17239
91 19281
92 20524
93 21679
94 21808
Salomon Brothers Inc. Broad Investment Grade Bond Index (1-3 years)
is composed of Treasury, Government Sponsored Agency, and Corporate
securities with maturities of one to three years. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended December 31
- ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
-------------------------------------------------------------------------------------
Net Asset Value... $11.35 $11.92 $11.23 $11.19 $11.71 $11.72 $12.25 $11.93 $12.01 $10.91
Income Dividends.. $ .96 $ .81 $ .74 $ .73 $ .83 $ 1.09 $ 1.08 $ .96 .80 .76
Capital Gains
Distributions..... $ -- $ .21 $ .11 $ -- $ .09 $ -- $ -- $ -- .07 --
Fund Total
Return (%)........ 20.30 14.70 1.40 6.10 13.20 9.88 14.38 5.43 8.18 -2.87
Index Total
Return (%)........ 14.02 10.46 5.72 6.40 10.93 9.70 11.85 6.44 5.63 .60
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
Returns may be higher due to the Adviser's maintenance of the Fund's expenses.
See Financial Highlights on page 24.
*The Fund, with its current name and investment objective, commenced operations
on July 3, 1989. Performance figures include the performance of its predecessor,
the General 1994 Portfolio of Scudder Target Fund. Since adopting its current
objectives, the cumulative and average annual returns are 46.80% and 7.34%,
respectively.
Portfolio Summary as of December 31, 1994
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Asset-Backed Securities 25%
Collateralized Mortgage
Obligations 23% While the Fund invests in a wide
Corporate Bonds 19% variety of securities, all but 2%
U.S. Gov't Guaranteed are now denominated in U.S. dollars.
Mortgages 11%
Indexed Securities 9%
Commercial Paper 5%
Foreign Bonds -
U.S. $ Denominated 5%
Foreign Bonds -
Non U.S. $ Denominated 2%
Other 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
U.S. Gov't & Agencies 27%
AAA* 34% Historically, the Fund has maintained
AA 9% a high-quality portfolio with better
A 17% than 80% of Fund holdings rated A
BBB 13% or above.
----
100%
====
Weighted average quality: AA+
*Category includes cash equivalents
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Under 1 year 27%
1 < 5 years 63% The Fund's effective maturity was
5 < 8 years 8% reduced during the year, reflecting
8 years or greater 2% a challenging environment for fixed-
---- income investments.
100%
====
Weighted average effective maturity: 1.1 years*
*Includes Eurodollar Futures sold short
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's Investment Portfolio, see page 10.
A monthly Investment Portfolio Summary is available upon request.
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
This past year was without question the most turbulent 12-month period
experienced by Scudder Short Term Bond Fund. Higher interest rates, which
rose faster and further than we anticipated, and to a lesser extent the
devaluation of the Mexican peso were the predominant causes of price
declines in the Fund's securities.
The Fund's net asset value per share fell 9%, from $12.01 on December
31, 1993, to $10.91 on December 31, 1994. However, rising global interest
rates paved the way for increased income distributions throughout the year,
which helped offset the price decline somewhat. The combination of price
change and distributions resulted in a total return of -2.87% for the year.
The Fund's 30-day net annualized yield stood at 7.70% on December 31, 1994,
up from 5.65% a year earlier and well above the 6.17% average yield of
short-term investment-grade debt funds tracked by Lipper Analytical
Services. Lipper is an independent analyst of investment performance.
Strong Economy and Rising Interest Rates Hinder Bond Market
Price declines in the world's bond markets began to accelerate in
February 1994, when the United States Federal Reserve initiated the first
in a series of interest-rate hikes intended to head off a rise in
inflation. At the time, inflation, as measured by the consumer price index,
was only 2.4%. But troubling signs abounded, including stronger growth in
gross domestic product (6.37% annualized in the fourth quarter of 1993),
factories running at near full capacity, a weaker dollar, and higher prices
of many raw materials.
The Fed's repeated rate hikes failed to ease fears of rising
inflation, however, and bond prices continued to fall throughout the spring
and into summer. The selloff in bonds was exacerbated by the unwinding of
leverage, which had sprung up in a multitude of forms in the early 1990s.
Record numbers of institutional and individual investors had been taking
advantage of low prevailing rates of interest on short-term debt to
leverage their investments in the United States and abroad. But when rates
reversed direction in the United States, overextended investors were forced
to sell their holdings, compounding price declines. Declines in the value
of many derivative securities complicated the situation when buyers for
these instruments all but disappeared.
By year end, the bond market had suffered its worst year in recorded
history, dating back to 1926, with interest rates increasing dramatically
across the entire range of fixed-income securities.
Portfolio Strategy Review
Scudder Short Term Bond Fund's investment goal is to provide a higher
level of income than money market funds and more price stability than is
typically found in intermediate and longer-maturity bonds. To achieve this
goal, we actively manage a diverse collection of high-quality bonds, while
keeping the Fund's effective maturity under three years.
However, 1994 was a year of unpleasant surprises, including the
persistent increase in global interest rates and the Mexican peso crisis.
Early in the year, in keeping with our view that interest rates would rise,
we reduced the Fund's effective maturity from three to two years.
Generally, securities that take less time to mature are less sensitive to
changes in interest rates. Clearly, however, we underestimated the scope of
the Fed's interest-rate increases. Given a benign outlook for inflation and
economic growth, both domestic and global, we lengthened the Fund's
effective maturity to two and a half years in the spring, which added a
modicum of interest-rate sensitivity. When in the autumn it became apparent
that interest rates were continuing to rise, we reduced the effective
maturity to one year.
We continued to invest in high-quality securities throughout the year,
in keeping with the Fund's objective of limiting credit risk. The Fund's
largest holdings included collateralized mortgage obligations (CMOs) of
comparatively short maturities, asset backed securities, and U.S. corporate
bonds. Also in keeping with our emphasis on price preservation, we
eliminated many of the Fund's most interest-rate-sensitive investments,
including indexed securities based on the movements of European and
Japanese interest rates. Virtually all of the portfolio's higher-coupon
mortgage-backed securities were sold during the year and replaced with
five-year balloon mortgage-backed securities, so called because their
underlying mortgages are repaid in five years. Further, we increased our
holdings in asset-backed securities to 25% from 18% at the start of the
year. Asset-backeds are a form of debt security, collateralized with pools
of assets such as credit cards and automobile and home equity loans. These
securities have several protections against default and are generally
accorded AAA ratings from public rating agencies.
Our research work at Scudder has long followed Mexico, and we were
generally impressed with the years of financial reform in that country.
Over the past four years, we used high-yielding short-term Mexican Treasury
bills as productive although limited investments for the Fund. Along with
many others, we had several reasons to support our belief that a
devaluation of the peso would be avoided at almost any cost, given the
importance of a stable currency to Mexico's economic health and social
stability. Even so, due to the uncertain political environment in Mexico
prior to the summer elections, we let our short-term, peso-denominated
Mexican holdings mature. Encouraged by the results of the elections,
however, we rebuilt our position in short-term Mexican Treasury and agency
bills to approximately 6% of the portfolio in early December. Then, on
December 20, 1994, the Mexican government broke its implicit promise not to
devalue the peso. In the final three weeks of 1994, the Mexican peso
declined nearly 40%, inflicting losses to the Fund. In fact, almost a third
of this year's decline in net asset value is directly related to losses in
the Fund's Mexican holdings. Because we no longer viewed Mexican securities
as investment grade, we subsequently reduced through maturity and sale our
Mexican peso-denominated holdings to 2.5% of the portfolio by year end. By
the end of January 1995, all Mexican investments were sold or had matured.
Outlook for 1995
It is possible that the Federal Reserve will continue its tightening
efforts in the first half of 1995 if the economy continues to show signs of
solid growth. We believe the Fed's repeated action to increase short-term
interest rates will eventually reduce the pace of U.S. economic growth as
well as allay investors' fears about inflation. As 1995's interest-rate
environment unfolds, we intend to adjust the Fund's effective maturity
accordingly, extending maturity within the Fund's 0- to 3-year range if we
see evidence of interest-rate stability or decline, while maintaining high
standards of quality and diversification.
Scudder Short Term Bond Fund has consistently provided significantly
more income than shorter-term investments or even U.S. Treasuries of
comparable maturity. Moreover, shareholders who did not sell Fund shares
during the year have participated in the Fund's rising income stream
against a backdrop of low relative inflation. As always, we are committed
to meeting the needs of investors seeking high current income with more
price stability than that provided by intermediate-term and longer-term
bonds.
Sincerely,
Your Portfolio Management Team
/s/Thomas M. Poor /s/Scott E. Dolan
Thomas M. Poor Scott E. Dolan
/s/Christopher L. Gootkind
Christopher L. Gootkind
Scudder Short Term Bond Fund:
A Team Approach to Investing
Scudder Short Term Bond Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund. They are supported by
Scudder's large staff of economists, research analysts, traders, and other
investment specialists who work in our offices across the United States and
abroad. We believe our team approach benefits Scudder Short Term Bond Fund
investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Since Scudder Short Term Bond Fund was introduced in 1989, Lead
Portfolio Manager Thomas M. Poor has had responsibility for the Fund's
day-to-day operation. Tom, who joined Scudder in 1970, sets the Fund's
general investment strategies. Christopher L. Gootkind, Portfolio Manager,
also has been a member of the Fund's team since its inception. Chris, who
has worked in the investment industry since 1981 and at Scudder since 1986,
has responsibility for the Fund's bank, finance, and asset-backed
securities. Scott E. Dolan, Portfolio Manager, joined Scudder in 1989 and
the Fund's portfolio management team in 1993. Scott has five years of
experience in the investment industry and is responsible for implementing
investment strategy.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
INVESTMENT PORTFOLIO as of December 31, 1994
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5.3% COMMERCIAL PAPER
------------------------------------------------------------------------
43,000,000 Associates Corp. of North America,
5.87%, 1/3/95 . . . . . . . . . . . . . . . 43,000,000
30,000,000 Ford Motor Credit Co., 5.6%, 1/3/95 . . . . 30,000,000
40,100,000 Household Finance Corp., 5.9%, 1/6/95 . . . . 40,067,140
-----------
TOTAL COMMERCIAL PAPER (Cost $113,067,140). . 113,067,140
-----------
10.8% U.S. GOV'T GUARANTEED MORTGAGES
------------------------------------------------------------------------
61,247 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 3/31/99 . . . . . . . . 55,926
161,531 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 4/1/99 . . . . . . . . 147,498
5,149,934 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 6/1/97 . . . . . . . . 4,702,507
4,788,245 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 8/1/99 . . . . . . . . 4,372,242
457,234 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 12/1/98 . . . . . . . . 417,510
423,748 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 3/1/99 . . . . . . . . 386,933
148,545 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 4/1/99 . . . . . . . . 135,639
179,467 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 4/1/99 . . . . . . . . 163,875
7,313,807 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 5/1/99 . . . . . . . . 6,678,383
1,165,928 Federal Home Loan Mortgage Corp.,
5 year Balloon, 5%, 6/1/99 . . . . . . . . 1,064,632
24,099,146 Federal Home Loan Mortgage Corp.,
5 year Balloon, 6%, 10/1/98 . . . . . . . . 22,683,321
8,673,724 Federal Home Loan Mortgage Corp.,
5 year Balloon, 6%, 1/1/99 . . . . . . . . 8,164,143
18,683,599 Federal Home Loan Mortgage Corp.,
5 year Balloon, 7%, 9/1/98 . . . . . . . . 18,053,027
73,966,135 Federal National Mortgage Association
7 year Balloon, 5.5% with various
maturities to 7/1/01 . . . . . . . . . . . 66,985,209
50,770,292 Federal National Mortgage Association
7 year Balloon, 6% with various
maturities to 11/1/01 . . . . . . . . . . . 46,581,743
8,791,027 Government National Mortgage Association
Pass-thru 10% with various maturities
to 1/20/22 . . . . . . . . . . . . . . . . 9,084,911
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
4,550,523 Government National Mortgage Association
Pass-thru 11% with various maturities
to 8/20/15 . . . . . . . . . . . . . . . 4,829,244
33,350,541 Government National Mortgage Association
Pass-thru 11.5% with various maturities
to 4/15/19 (b) . . . . . . . . . . . . . 36,597,877
-----------
TOTAL U.S. GOVERNMENT GUARANTEED
MORTGAGES (Cost $237,002,472) . . . . . . 231,104,620
-----------
23.2% COLLATERALIZED MORTGAGE OBLIGATIONS
------------------------------------------------------------------------
8,642,940 CMC Security Corp.,1992-D, 7.2%, 12/25/08 . . 8,254,007
8,069,243 Chase Mortgage Finance Corp., Series 1992-L,
5.5%, 11/25/09 . . . . . . . . . . . . . . 7,974,681
38,846,000 Chase Mortgage Finance Corp., Series 1993-N,
6.75%, 11/25/24 . . . . . . . . . . . . . . 34,572,940
8,656,942 Chase Mortgage Finance Corp., Series
1993-I2 A2, 7.25%, 7/25/24 . . . . . . . . 8,537,909
20,589,000 Chase Mortgage Finance Corp., Series
1993-I2 A3, 7.25%, 7/25/24 . . . . . . . . 19,829,781
4,175,000 Chemical Mortgage Securities Inc. Series
1993-1 A4, 7.45%, 2/25/23 . . . . . . . . . 3,933,635
57,241,126 Countrywide Funding Corp., Series 1994A,
6.25%, 3/25/94 . . . . . . . . . . . . . . 49,566,808
34,747,000 Countrywide Funding Corp., Series 1994A,
6.75%, 3/25/24 . . . . . . . . . . . . . . 31,532,903
4,158,750 Daiwa Mortgage Acceptance Corp.,
Series 1991A, 8.625%, 4/15/10 . . . . . . . 4,127,559
63,075,893 Federal Home Loan Mortgage Corp., REMIC,
1724-PO, 5/15/01 . . . . . . . . . . . . . 45,178,045
63,186,756 Federal Home Loan Mortgage Corp., STRIP,
PO, 5/15/99 . . . . . . . . . . . . . . . . 49,838,554
48,332,924 Federal Home Loan Mortgage Corp., 1719-C,
PO, 4/15/99 . . . . . . . . . . . . . . . . 38,122,593
1,605,113 Federal Home Loan Mortgage Corp., Series
1337 A, 6%, 4/15/03 . . . . . . . . . . . . 1,595,579
9,850,000 Federal Home Loan Mortgage Corp., Series
1267 O, 7.25%, 12/15/05 . . . . . . . . . . 9,443,688
25,055,425 Federal Home Loan Mortgage Corp., Series
1152-J, 8%, 12/15/19 . . . . . . . . . . . 24,562,084
12,500,000 Federal Home Loan Mortgage Corp., Series
1276-G, 7.5%, 12/15/05 . . . . . . . . . . 12,265,625
5,204,096 Federal Home Loan Mortgage Corp.,,Series
1381 Z, 6%, 7/15/05 . . . . . . . . . . . . 4,856,046
4,400,000 Federal Home Loan Mortgage Corp., Series
1406 E, 6%, 12/15/18 . . . . . . . . . . . 3,902,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5,250,000 Federal Home Loan Mortgage Corp.,Series
1250 F, 7%, 4/15/19 . . . . . . . . . . . . 4,961,250
10,432,793 Federal National Mortgage Association, Series
G93-4 B, 9/25/22 . . . . . . . . . . . . . 10,139,370
213,702 Federal National Mortgage Association
1989-11 H, PO, Zero Coupon, 3/25/19 . . . . 208,360
1,825,354 Federal National Mortgage Association 1989-68 G,
8.75%, 8/25/18 . . . . . . . . . . . . . . 1,837,895
20,469,000 First Bank System Inc. Series 1993-F,
7.187%, 11/25/24 . . . . . . . . . . . . . 18,450,885
30,075,000 General Electric Capital Mortgage Services,
Inc. Series 1993, 6.5%, 1/25/18 . . . . . . 28,120,125
500,000 General Electric Capital Mortgage Services,
Inc. Series 1992-2F, 7%, 6/25/07 . . . . . 465,625
236,364 Kidder, Peabody & Co. Mortgage Assets Trust,
2-B, 8.2%, 1/20/18 . . . . . . . . . . . . 234,074
1,331,462 Merrill Lynch Mortgage Investors Inc. 37-B,
8.5%, 8/1/15 . . . . . . . . . . . . . . . 1,336,868
1,824,000 Paine Webber Mortgage Acceptance Corp.,
Series 1993-6, 6.9%, 8/25/08 . . . . . . . 1,697,745
8,944,000 Prudential Home Mortgage Securities Co.,
1993-4 Series A3, 7%, 3/25/23 . . . . . . . 8,630,960
3,430,597 Prudential Home Mortgage Securities Co.,
Series 1992-47 A7, 7.5%, 1/25/23 . . . . . 3,381,265
3,220,000 Residential Funding Mortgage Securities,
Series 1993-A2, 6.85%, 9/25/23 . . . . . . 2,839,638
19,500,000 Residential Funding Mortgage Securities,
Series 1993-A5, 7.112%, 10/25/23 . . . . . 18,077,109
1,370,674 Resolution Trust Corp., Series 1992-2, 7.2%,
11/25/21 . . . . . . . . . . . . . . . . . 1,367,248
3,698,162 Resolution Trust Corp., Series 1992 A2A, 7.5%,
8/25/23 . . . . . . . . . . . . . . . . . . 3,591,839
6,108,000 Resolution Trust Corp., Series 1992 A2C, 7.5%,
8/25/23 . . . . . . . . . . . . . . . . . . 6,066,008
1,185,520 Resolution Trust Corp., Series 1992-7,
Class A-2B, 8.35%, 6/25/29 . . . . . . . . 1,182,372
49,550 Resolution Trust Corp. Series 1992-5 A-3,
8.75%, 5/25/26 . . . . . . . . . . . . . . 48,249
905,000 Resolution Trust Corp., Series A, Zero Coupon,
7/15/97 . . . . . . . . . . . . . . . . . . 744,299
16,320,000 Ryland Acceptance Corp., Four, Series 97-H,
8.95%, 8/20/19 . . . . . . . . . . . . . . 16,422,000
7,050,000 Sears Mortgage Security Corp., Series
1993-11T4, 7.125%, 11/25/20 . . . . . . . . 6,318,563
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $541,430,907) . . . . . . . . . . . . 494,216,434
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.1% FOREIGN BONDS - U.S. $ DENOMINATED
------------------------------------------------------------------------------------
15,479,940 Comision Federal de Electricidad Promissory
Note, 5.5%, 6/22/98 . . . . . . . . . . . . . . 13,704,205
11,900,000 Korea Development Bank Medium-Term
Note, 8.67%, 3/15/95 . . . . . . . . . . . . . 11,945,220
2,000,000 Third Mexican Acceptance Corp., 7.37%,
3/15/98 . . . . . . . . . . . . . . . . . . . . 1,950,000
32,000,000 United Mexican States Tesobonos, 1/26/95 . . . . 31,694,400
9,084,000 United Mexican States Tesobonos, 3/23/95 . . . . 8,820,019
43,135,000 United Mexican States Tesobonos, 8/17/95 . . . . 39,563,422
-----------
TOTAL FOREIGN BONDS - U.S. $
DENOMINATED (Cost $110,530,743) . . . . . . . . 107,677,266
-----------
2.5% FOREIGN BONDS - NON U.S. $ DENOMINATED
------------------------------------------------------------------------------------
MXN 50,487,600 Certificados de la Tesoreria, 1/19/95 . . . . . . 9,928,279
CLP 131,460,000 Citibank Chilean Time Deposit, 16.5%, 1/10/95 . . 327,830
MXN 124,178,612 Nacional Financiera Pagare, 1/5/95 . . . . . . . 24,774,552
MXN 90,641,619 Nacional Financiera Pagare, 1/19/95 . . . . . . 17,949,395
-----------
TOTAL FOREIGN BONDS - NON U.S. $
DENOMINATED (Cost $75,319,718) . . . . . . . . 52,980,056
-----------
24.5% ASSET-BACKED SECURITIES
------------------------------------------------------------------------------------
AUTOMOBILE RECEIVABLES 3.1%
25,000,000 Ford Motor Credit Co. Series 1992 3A
Automobile Loan Master Trust,
5.625%, 10/15/97 . . . . . . . . . . . . . . . 24,640,500
4,028,792 Navistar Financial Corp., Series 1993-A,
4.8%, 10/15/98 . . . . . . . . . . . . . . . . 3,909,177
14,155,261 Premier Auto Trust Asset Backed Certificate,
Series 1993-2, 5%, 10/15/98 . . . . . . . . . . 13,628,827
3,715,442 Premier Auto Trust, Series 1994-1, 4.7%, 2/2/00 . 3,536,637
10,129,539 Premier Auto Trust, Series 1993-5,
4.875%, 1/3/00 . . . . . . . . . . . . . . . . 9,645,144
7,967,283 Premier Auto Trust Asset Backed Certificate,
4.45%, 3/2/99 . . . . . . . . . . . . . . . . . 7,561,429
1,079,450 Select Automobile Receivables Trust, Series
1991-A, 7.4%, 5/15/96 . . . . . . . . . . . . . 1,079,450
1,077,245 Western Financial Corp., 1991-2A Grantor
Trust, 7.3%, 10/1/96 . . . . . . . . . . . . . 1,075,899
-----------
65,077,063
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CREDIT CARD RECEIVABLES 6.6%
1,910,000 Discover Credit Card Trust, Series 1993-A,
6.8%, 8/15/00 . . . . . . . . . . . . . . . . . 1,812,705
4,720,000 Discover Credit Card Trust, Series 1991-D,
8.375%, 10/16/00 . . . . . . . . . . . . . . . 4,683,090
11,000,000 Discover Credit Card Trust, Series 1991-B,
8.85%, 7/16/98 . . . . . . . . . . . . . . . . 11,048,070
14,689,769 First USA Bank, Series 1994-1, 7.45%, 4/15/99 . . 13,977,315
2,106,573 First USA Credit Card Trust, Series 1989 B,
8.7%, 5/31/96 . . . . . . . . . . . . . . . . . 2,106,573
1,965,000 Household Credit Card Trust, Series 1993-3B,
4.95%, 3/15/99 . . . . . . . . . . . . . . . . 1,847,100
25,200,000 MBNA Credit Card Trust, Series 1991-1A
Pass-thru Certificate, 7.25%, 6/15/99 . . . . . 24,687,936
2,500,000 Signet Credit Card Trust, Series 1990-1A
Participating Certificate, 9%, 6/15/97 . . . . 2,507,800
34,700,000 Standard Credit Card Trust, Series 1994-1A,
4.65%, 3/7/99 . . . . . . . . . . . . . . . . . 32,384,859
41,700,000 Standard Credit Card Trust, Series 1992-2A,
5.875%, 7/7/95 . . . . . . . . . . . . . . . . 41,387,250
2,250,000 Standard Credit Card Trust, Series 1991-6B,
8.35%, 1/7/00 . . . . . . . . . . . . . . . . . 2,236,635
2,000,000 Standard Credit Card Trust, Series 1990-6B,
9.625%, 1/7/99 . . . . . . . . . . . . . . . . 2,054,360
-----------
140,733,693
-----------
HOME EQUITY LOANS 8.4%
2,021,870 AFC Home Equity Loan Trust, Series 1993-3A,
5.45%, 6/20/14 . . . . . . . . . . . . . . . . 1,819,683
1,463,148 AFC Home Equity Loan Trust, Series 1992-3A,
7.05%, 8/15/07 . . . . . . . . . . . . . . . . 1,375,359
3,424,235 AFC Home Equity Loan Trust, Series 1990-3A,
9.6%, 9/15/05 . . . . . . . . . . . . . . . . . 3,304,386
2,924,302 BCI Home Equity Loan, Series 1991 B,
7.5%, 9/15/06 . . . . . . . . . . . . . . . . . 2,902,370
2,238,109 CTS Home Equity Loan Trust, Series 1991-1A,
8.8%, 1/15/06 . . . . . . . . . . . . . . . . . 2,233,207
21,325,000 Contimortgage Home Equity Loan Trust, Series
1994-5 A1, 9.07%, 5/15/06 . . . . . . . . . . . 21,444,953
1,536,930 Contimortgage Home Equity Loan Trust, Series
1991-1, 9.52%, 3/15/06 . . . . . . . . . . . . 1,569,205
5,062,659 Equity Credit Corp. Home Equity Loan Trust,
5.3%, 9/15/08 . . . . . . . . . . . . . . . . . 4,605,440
3,776,404 Equity Credit Corp. Home Equity Loan Trust,
Series 1993-4B, 5.65%, 12/15/08 . . . . . . . . 3,430,629
6,451,860 Fleet Financial Home Equity Trust, Series
1991-2A, 6.65%, 10/16/06 . . . . . . . . . . . 6,264,356
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8,949,812 Home Equity Loan Trust, Series 1992 A, 6.65%,
11/20/12 . . . . . . . . . . . . . . . . . 8,527,471
1,954,557 Home Equity Loan Trust, Series 1992 B, 6.85%,
11/20/12 . . . . . . . . . . . . . . . . . 1,855,598
4,328,868 Household Finance Home Equity Trust, Series
1992-2 A3, 5.25%, 10/20/07 . . . . . . . . 4,182,768
2,329,483 Old Stone Credit Corp. Home Equity Loan,
Series 1993-1, 5.85%, 3/15/08 . . . . . . . 2,160,595
8,642,884 Old Stone Credit Corp. Home Equity Loan,
Series 1992-3 A2, 6.3%, 8/25/07 . . . . . . 8,029,758
9,591,426 Old Stone Credit Corp. Home Equity Loan,
Series 1992-2, 6.95%, 5/15/07 . . . . . . . 9,135,833
3,231,881 Old Stone Credit Corp., Series 1991-2, 8.42%,
9/15/06 . . . . . . . . . . . . . . . . . . 3,205,622
3,790,115 Security Pacific Home Equity Loan Trust,
Series 1991-2A, 8.1%, 6/15/20 . . . . . . . 3,794,853
4,483,479 Security Pacific Home Equity Loan Trust,
Series 1991-2B, 8.15%, 6/15/20 . . . . . . 4,414,792
15,600,000 Security Pacific Home Equity Trust, Series
1991-A B, 10.5%, 3/10/06 . . . . . . . . . 15,999,750
33,686,451 TMS Home Equity Loan Trust, Series 1993-D,
5.075%, 2/15/18 . . . . . . . . . . . . . . 31,440,687
4,903,854 TMS Home Equity Loan Trust, Series 1992-C1,
6.2%, 10/15/07 . . . . . . . . . . . . . . 4,523,805
21,700,000 TMS Home Equity Loan Trust, Series 1994-D,
7.625%, 9/15/04 . . . . . . . . . . . . . . 21,598,292
2,033,882 U.S. Home Equity Loan, Series 1991-2C, 8.5%,
4/15/21 . . . . . . . . . . . . . . . . . . 2,030,689
9,700,000 U.S. Home Equity Loan, Series 1991-2B,
9.125%, 4/15/21 . . . . . . . . . . . . . . 9,627,250
-----------
179,477,351
MANUFACTURED HOUSING -----------
RECEIVABLES 6.4%
6,584,709 Chemical Financial Acceptance Corp.
Housing Trust, Series 1989 A, Participating
Certificate, 9.25%, 5/15/98 . . . . . . . . 6,625,863
27,917,222 Green Tree Financial Corp. Securitized NIM
Series 1994B, 7.85%, 7/15/04 . . . . . . . 27,219,291
28,084,682 Green Tree Financial Corp., Securitized NIM,
Series 1994A, 6.9%, 2/15/04 . . . . . . . . 26,750,660
7,511,726 Merrill Lynch Mortgage Investors Inc.,
Series 1992-B A4, 7.85%, 4/15/12 . . . . . 7,368,477
4,456,940 Merrill Lynch Mortgage Investors Inc.,
Series 1992-D, 7.95%, 7/15/17 . . . . . . . 4,349,662
14,678,038 Merrill Lynch Mortgage Investors Inc.,
Series 1992-B, 8.5%, 4/15/12 . . . . . . . 14,246,797
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4,109,197 Merrill Lynch Mortgage Investors Inc.,
Series 1991-C, 8.9%, 7/15/11 . . . . . . . . . . 4,069,379
6,874,938 Merrill Lynch Mortgage Investors Inc.,
Series 1991-G, 9.15%, 10/15/11 . . . . . . . . . 6,761,020
1,468,135 Merrill Lynch Mortgage Investors Inc.,
Series 1991-B, 9.2%, 4/15/11 . . . . . . . . . . 1,471,336
6,277,106 Merrill Lynch Mortgage Investors Inc.,
Series 1990-H, 9.25%, 1/15/11 . . . . . . . . . . 6,286,899
4,487,848 Merrill Lynch Mortgage Investors Inc.,
Series 1991-A, 9.25%, 5/15/08 . . . . . . . . . . 4,487,848
400,038 Merrill Lynch Mortgage Investors Inc.,
Series 1988-H, 9.7%, 6/15/10 . . . . . . . . . . 401,410
3,161,825 Merrill Lynch Mortgage Investors Inc.,
Series 1990-C, 9.7%, 6/15/09 . . . . . . . . . . 3,182,566
538,299 Merrill Lynch Mortgage Investors Inc.,
Series 1989-F, 9.75%, 10/15/08 . . . . . . . . . 543,682
869,564 Merrill Lynch Mortgage Investors Inc.,
Series 1988-Q, 9.8%, 9/15/08 . . . . . . . . . . 874,182
5,532,938 Merrill Lynch Mortgage Investors Inc.,
Series 1990-I, 10%, 1/15/11 . . . . . . . . . . . 5,532,938
8,125,000 Security Pacific Acceptance Corp.,
Series 1991-A2, 7.1%, 6/15/12 . . . . . . . . . . 7,932,031
8,608,086 Security Pacific Acceptance Corp.,
Series 1991-2B, 8.55%, 9/15/11 . . . . . . . . . 8,411,649
-----------
136,515,690
TOTAL ASSET-BACKED SECURITIES -----------
(Cost $538,950,030) . . . . . . . . . . . . . . . 521,803,797
-----------
18.8% CORPORATE BONDS
------------------------------------------------------------------------------
CONSUMER STAPLES 2.3%
3,500,000 PepsiCo Inc., Medium-Term Note, 7.58%, 8/23/95 . . 3,507,000
44,625,000 RJR Nabisco Inc., Medium-Term Note, 5.25%,
9/15/95 . . . . . . . . . . . . . . . . . . . . . 43,754,366
1,410,000 RJR Nabisco Inc., Medium-Term Note,
6.8%, 9/1/01 . . . . . . . . . . . . . . . . . . 1,336,285
-----------
48,597,651
-----------
FINANCIAL 8.3%
5,000,000 American General Finance Corp., 8.875%,
3/15/96 . . . . . . . . . . . . . . . . . . . . . 5,048,950
4,000,000 Associates Corp. of North America, 5.875%,
8/15/97 . . . . . . . . . . . . . . . . . . . . . 3,766,920
6,000,000 Associates Corp. of North America, 8.75%,
2/1/96 . . . . . . . . . . . . . . . . . . . . . 6,047,520
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
14,000,000 British Aerospace Finance Inc., 7.15%, 6/24/97 . . 13,620,600
10,000,000 Discover Credit Corp. Medium-Term Note,
6.77%, 5/15/95 . . . . . . . . . . . . . . . . . 9,982,400
4,000,000 Discover Credit Corp. Medium-Term Note,
6.81%, 5/15/95 . . . . . . . . . . . . . . . . . 3,993,520
5,000,000 Discover Credit Corp. Medium-Term Note,
Series 2, 8.73%, 8/15/96 . . . . . . . . . . . . 5,038,500
18,725,000 First Fidelity Bancorp., 8.5%, 4/1/98 . . . . . . . 18,747,096
13,000,000 First Fidelity Bancorp., 9.75%, 5/25/95 . . . . . . 13,128,180
5,000,000 First Union Corp., 8.125%, 12/15/96 . . . . . . . 4,989,650
6,500,000 Fleet/Norstar Financial Group Inc., 6.09%,
7/10/95 . . . . . . . . . . . . . . . . . . . . . 6,463,665
4,000,000 Ford Motor Credit Co., 8.65%, 3/2/95 . . . . . . . 4,013,200
11,000,000 Household Finance Corp., 9%, 9/1/95 . . . . . . . 11,106,370
1,500,000 Household Finance Corp. Medium-Term Note,
10.08%, 4/1/96 . . . . . . . . . . . . . . . . . 1,540,260
5,000,000 KB Ifima NV Guaranteed Floating Rate Note,
4/25/11 . . . . . . . . . . . . . . . . . . . . . 4,660,000
18,000,000 Manufacturers Hanover Corp., 5.25%, 4/30/97 . . . 17,871,300
4,000,000 Marine Midland Bank, 5.25%, 12/16/00 . . . . . . . 3,927,600
21,520,000 The Money Store Inc., Series B, 9.16%, 9/9/97 . . 21,291,350
20,000,000 World Savings & Loan Association of Oakland,
CA, Medium-Term Note, 5.83%, 12/18/95 . . . . . . 19,707,000
2,500,000 World Savings & Loan Association of Oakland,
CA, 10.25%, 10/1/97 . . . . . . . . . . . . . . . 2,608,100
-----------
177,552,181
-----------
MEDIA 1.6%
15,525,000 News America Holdings Inc., 9.125%, 10/15/99 . . . 15,648,424
18,600,000 Time Warner Inc., senior note, 7.45%, 2/1/98 . . . 17,728,218
-----------
33,376,642
-----------
SERVICE INDUSTRIES 0.1%
2,000,000 Hertz Corp., 8%, 4/1/95 . . . . . . . . . . . . . 2,005,860
-----------
DURABLES 4.6%
6,813,687 Ford Motor Co., 8.42%, 12/30/96 . . . . . . . . . 6,840,942
25,825,000 Lockheed Corp., 4.875%, 2/15/96 . . . . . . . . . 25,002,732
45,000,000 Lockheed Corp., 5.875%, 3/15/98 . . . . . . . . . 41,891,400
24,970,000 McDonnell Douglas Corp., Medium-Term
Note, 6.54%, 7/29/96 . . . . . . . . . . . . . . 24,202,173
-----------
97,937,247
-----------
MANUFACTURING 1.9%
13,775,000 Lyondell Petrochemical Co., 8.25%, 3/15/97 . . . . 13,629,949
12,940,000 Lyondell Petrochemical Co., 9.95%, 6/1/96 . . . . 13,184,178
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
14,400,000 Lyondell Petrochemical Co., 10%, 6/1/99 . . . . . 14,935,824
-----------
41,749,951
-----------
TOTAL CORPORATE BONDS (Cost $414,642,508) . . . . 401,219,532
-----------
0.2% MEDIUM-TERM MUNICIPAL INVESTMENTS
------------------------------------------------------------------------------
1,000,000 Massachusetts Industrial Finance Agency,
6%, 7/1/96 . . . . . . . . . . . . . . . . . . . 973,050
4,035,000 Virgin Islands Public Finance Authority,
7.5%, 10/1/95 . . . . . . . . . . . . . . . . . . 4,029,956
-----------
TOTAL MEDIUM-TERM MUNICIPAL INVESTMENTS
(Cost $5,035,000) . . . . . . . . . . . . . . . . 5,003,006
-----------
6.7% COUPON INDEXED SECURITIES
------------------------------------------------------------------------------
24,850,000 Credit Suisse Medium-Term Note, inversely
indexed to 2 year Spanish Peseta Swap Rate,
3.44%, 7/8/96 . . . . . . . . . . . . . . . . . . 22,300,390
7,200,000 Federal Home Loan Bank, inversely indexed
to 6 month U.S. LIBOR Rate, 0.813%, 3/23/98 . . . 5,490,000
39,000,000 Federal Home Loan Bank, inversely indexed
to COFI, 4.832%, 10/28/98 . . . . . . . . . . . . 29,347,500
5,183,586 Federal Home Loan Mortgage Corp., inversely
indexed to COFI, 9.774%, 8/15/08 . . . . . . . . 2,695,465
9,932,013 Federal Home Loan Mortgage Corp., inversely
indexed to COFI, 10.27%, 5/15/08 . . . . . . . . 5,214,307
1,192,909 Federal Home Loan Mortgage Corp., inversely
index to COFI, 10.432%, 10/15/08 . . . . . . . . 627,023
828,152 Federal Home Loan Mortgage Corp., inversely
indexed to COFI, 12.042%, 9/15/07 . . . . . . . . 581,518
12,140,325 Federal Home Loan Mortgage Corp., inversely
indexed to COFI, 9.492%, 4/15/08 . . . . . . . . 6,130,864
5,500,000 Federal National Mortgage Association,
inversely indexed to COFI, 9.306%, 7/25/08 . . . 2,715,625
52,400,000 Federal National Mortgage Association
Medium-Term Note, inversely indexed to 30
day Commercial Paper Bond Equivalent Yield,
9.949%, 12/29/97 . . . . . . . . . . . . . . . . 50,042,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5,423,725 Federal National Mortgage Association REMIC,
inversely indexed to COFI, 10.532%, 11/25/07 . . . 3,308,473
13,825,000 Student Loan Marketing Association, inversely
indexed to 6 month LIBOR Bond Equivalent
Yield, 11.938%, 8/22/95 . . . . . . . . . . . . . 13,963,250
-------------
TOTAL COUPON INDEXED SECURITIES
(Cost $178,930,407) . . . . . . . . . . . . . . . 142,416,415
-------------
2.3% PRINCIPAL INDEXED SECURITIES
------------------------------------------------------------------------------
30,000,000 Plus Capital Co., Ltd., collateralized by
United Mexican States adjustable bonds,
7.875%, 1/15/95 . . . . . . . . . . . . . . . . . 27,900,000
25,000,000 Plus Capital Co., Ltd., collateralized by
United Mexican States adjustable bonds, Zero
Coupon, 1/17/95 . . . . . . . . . . . . . . . . . 20,500,000
-------------
TOTAL PRINCIPAL INDEXED SECURITIES
(Cost $54,948,999) . . . . . . . . . . . . . . . 48,400,000
-------------
0.5% CONVERTIBLE BONDS
------------------------------------------------------------------------------
FINANCIAL 0.1%
Real Estate 2,500,000 Health Care Property Investors Inc., 6%, 11/8/00 2,187,500
-------------
ENERGY 0.4%
Oilfield Services/
Equipment 14,850,000 Halliburton Co., Zero Coupon, 3/13/06 . . . . . . . 7,387,875
-------------
TOTAL CONVERTIBLE BONDS
(Cost $9,669,872) . . . . . . . . . . . . . . . . 9,575,375
-------------
0.1% PURCHASED OPTIONS
------------------------------------------------------------------------------
2,250,000 Put on Eurodollar Futures, strike price 91.75,
expire 9/16/95 . . . . . . . . . . . . . . . . . 1,192,500
2,250,000 Put on Eurodollar Futures, strike price 92,
expire 6/19/95 . . . . . . . . . . . . . . . . . 900,000
2,250,000 Put on Eurodollar Futures, strike price 92.75,
expire 3/13/95 . . . . . . . . . . . . . . . . . 495,000
-------------
TOTAL PURCHASED OPTIONS
(Cost $2,657,250) . . . . . . . . . . . . . . . . 2,587,500
-------------
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $2,282,185,046)(a) . . . . . . . . . . . . 2,130,051,141
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SCUDDER SHORT TERM BOND FUND
- -------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $2,282,185,046.
At December 31, 1994, net unrealized depreciation for all
securities based on tax cost was $152,133,905. This
consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value
over tax cost of $2,871,110 and aggregate gross
unrealized depreciation for all securities in which there
was an excess oftax cost over market value of $155,005,015.
(b) At December 31, 1994, this security, in part, has been
pledged to cover initial margin requirements for open futures
contracts sold short.
<TABLE>
AT DECEMBER 31, 1994, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Aggregate Market
Futures Expiration Contracts Face Value ($) Value ($)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eurodollars Dec. 1995 1,400 323,970,450 320,145,000
Eurodollars Mar. 1996 1,400 323,701,625 320,425,000
Eurodollars Jun. 1996 1,400 323,227,250 320,670,000
Eurodollars Sep. 1996 1,400 322,844,500 320,845,000
Eurodollars Dec. 1996 1,400 322,372,725 320,845,000
Eurodollars Mar. 1997 1,400 321,641,070 321,195,000
Eurodollars Jun. 1997 1,400 321,427,795 321,370,000
----- ----------- -----------
9,800 2,259,185,415 2,245,495,000
===== ============= =============
Total net unrealized appreciation on open futures contracts . . . . . 13,690,415
==========
</TABLE>
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 will be shorter than stated maturities due to
prepayments. All separate investments in each of the
Government National Mortgage Association issues which have
similar coupon rates have been aggregated for presentation
purposes in the investment portfolio.
<TABLE>
CURRENCY ABBREVIATIONS AND OTHER ACRONYMS USED IN THIS PORTFOLIO:
<CAPTION>
<S> <C>
CLP Chilean Peso
MXN Mexican Peso
COFI Cost of Funds Index
NIM Net Interest Margin
LIBOR London Inter-Bank Offering Rate
REMIC Real Estate Mortgage Investment Conduit
STRIP Separate Trading Registered Interest and Principal
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DECEMBER 31, 1994
ASSETS
Investments, at market (identified cost $2,282,185,046)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . $2,130,051,141
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,607,580
Receivables:
Investments sold . . . . . . . . . . . . . . . . . . . . 3,619,972
Interest . . . . . . . . . . . . . . . . . . . . . . . . 20,572,514
Fund shares sold . . . . . . . . . . . . . . . . . . . . 3,020,424
Daily variation margin on open futures contracts
(Note A) . . . . . . . . . . . . . . . . . . . . . . 1,190,000
--------------
Total assets . . . . . . . . . . . . . . . . . . . . 2,165,061,631
LIABILITIES
Payables:
Fund shares redeemed . . . . . . . . . . . . . . . . . . $13,444,956
Investments purchased . . . . . . . . . . . . . . . . . 10,838,642
Dividends . . . . . . . . . . . . . . . . . . . . . . . 3,159,432
Accrued management fee (Note C) . . . . . . . . . . . . 890,904
Other accrued expenses (Note C) . . . . . . . . . . . . 790,962
-----------
Total liabilities . . . . . . . . . . . . . . . . . . 29,124,896
--------------
Net assets, at market value . . . . . . . . . . . . . . . . 2,135,936,735
==============
NET ASSETS
Net assets consist of:
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . (152,133,905)
Futures contracts . . . . . . . . . . . . . . . . . . 13,690,415
Accumulated net realized loss . . . . . . . . . . . . . (43,456,565)
Shares of beneficial interest . . . . . . . . . . . . . 1,957,765
Additional paid-in capital . . . . . . . . . . . . . . 2,315,879,025
--------------
Net assets, at market value . . . . . . . . . . . . . . . . $2,135,936,735
==============
NET ASSET VALUE, offering and redemption price per
share ($2,135,936,735 -:- 195,776,523 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) . . . . . . . . . $10.91
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
- ---------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 207,436,125
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . $ 12,415,709
Services to shareholders (Note C) . . . . . . . . . . . . 5,080,612
Trustees' fees (Note C) . . . . . . . . . . . . . . . . . 13,974
Custodian fees . . . . . . . . . . . . . . . . . . . . . 1,105,177
Reports to shareholders . . . . . . . . . . . . . . . . . 662,158
Federal and state registration . . . . . . . . . . . . . 132,574
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . 42,345
Auditing . . . . . . . . . . . . . . . . . . . . . . . . 87,155
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 119,111 19,658,815
-------------------------------------
Net investment income . . . . . . . . . . . . . . . . . . 187,777,310
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . (73,433,253)
Futures . . . . . . . . . . . . . . . . . . . . . . . (1,771,309)
Options . . . . . . . . . . . . . . . . . . . . . . . 1,138,746
Foreign currency related transactions . . . . . . . . (5,703,227) (79,769,043)
--------------
Net unrealized appreciation (depreciation)
during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . (202,883,212)
Futures . . . . . . . . . . . . . . . . . . . . . . . 13,690,415
Options . . . . . . . . . . . . . . . . . . . . . . . 628,110
Foreign currency related transactions . . . . . . . . (62,210) (188,626,897)
-------------------------------------
Net loss on investment transactions . . . . . . . . . . . (268,395,940)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . $ (80,618,630)
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . $ 187,777,310 $ 218,430,196
Net realized gain (loss) from investment
transactions . . . . . . . . . . . . . . . . . . (79,769,043) 7,342,919
Net unrealized appreciation (depreciation) on
investment transactions during the
period . . . . . . . . . . . . . . . . . . . . . (188,626,897) 10,509,177
-------------- --------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . . (80,618,630) 236,282,292
-------------- --------------
Distributions to shareholders from:
Net investment income ($.64 and $.80 per
share, respectively) . . . . . . . . . . . . (149,862,207) (200,957,465)
-------------- --------------
Net realized gains from investment
transactions ($.03 per share) . . . . . . . . -- (7,342,919)
-------------- --------------
In excess of realized gains from investment
transactions ($.04 per share) . . . . . . . . -- (11,225,930)
-------------- --------------
Tax return of capital ($.12 per share) . . . . . (27,524,389) --
-------------- --------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . 1,037,772,973 1,985,122,252
Net asset value of shares issued to
shareholders in reinvestment of distributions . 134,347,811 173,554,830
Cost of shares redeemed . . . . . . . . . . . . . . (1,968,606,250) (1,846,962,196)
-------------- --------------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . . . (796,485,466) 311,714,886
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . (1,054,490,692) 328,470,864
Net assets at beginning of period . . . . . . . . . 3,190,427,427 2,861,956,563
-------------- --------------
NET ASSETS AT END OF PERIOD (including
accumulated net investment loss
of ($1,696,479) at December 31, 1993 . . . . . . $2,135,936,735 $3,190,427,427
============== ==============
OTHER INFORMATION
Increase (decrease) in Fund shares
Shares outstanding at beginning of period . . . . . 265,610,358 239,890,892
-------------- --------------
Shares sold . . . . . . . . . . . . . . . . . . . . 89,258,004 164,136,014
Shares issued to shareholders in
reinvestment of distributions . . . . . . . . . 11,736,021 14,356,576
Shares redeemed . . . . . . . . . . . . . . . . . . (170,827,860) (152,773,124)
-------------- --------------
Net increase (decrease) in Fund shares . . . . . . (69,833,835) 25,719,466
-------------- --------------
Shares outstanding at end of period . . . . . . . . 195,776,523 265,610,358
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------------
1994 1993(c) 1992 1991 1990 1989 1988 1987 1986 1985
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. . . . . $12.01 $11.93 $12.25 $11.72 $11.71 $11.19 $11.23 $11.92 $11.35 $10.26
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income (a). . .81 .87 .97 1.08 1.09 .83 .73 .74 .81 .96
Net realized and
unrealized gains
(losses) . . . . . . . . . (1.15) .08 (.33) .53 .01 .61 (.04) (.58) .78 1.09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
transactions . . . . . . . (.34) .95 .64 1.61 1.10 1.44 .69 .16 1.59 2.05
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income. . . . (.64) (.80) (.96) (1.08) (1.09) (.83) (.73) (.74) (.81) (.96)
Net realized gains . . . . . -- (.03) -- -- -- (.09) -- (.11) (.21) --
In excess of gains . . . . . -- (.04) -- -- -- -- -- -- -- --
Tax return of capital. . . . (.12) -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions . . . . . (.76) (.87) (.96) (1.08) (1.09) (.92) (.73) (.85) (1.02) (.96)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . . . $10.91 $12.01 $11.93 $12.25 $11.72 $11.71 $11.19 $11.23 $11.92 $11.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) . . . . . . (2.87) 8.18 5.43 14.38 9.88 13.20 6.10 1.40 14.70 20.30
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) . . . . . . . 2,136 3,190 2,862 2,247 340 72 10 10 8 5
Ratio of operating
expenses net, to average
net assets (%)(a) . . . . . .73 .68 .75 .44 .16 .36 1.50 1.45 1.45 1.27
Ratio of net investment
income to average
net assets (%) . . . . . . 6.93 7.21 8.01 8.96 9.36 7.97 6.48 6.34 6.89 8.82
Portfolio turnover rate (%) . 65.3 66.1 83.7(b) 41.0 52.9 40.0 23.5 28.7 15.6 58.1
<FN>
(a) Portion of expenses
reimbursed by the
Adviser . . . . . . . . $ -- $ -- $ -- $ -- $ .02 $ .10 $ .04 $ .04 $ -- $.02
Management fee not
imposed by the
Adviser (Note C) . . . . $ -- $ -- $ -- $ .06 $ .07 $ .05 $ -- $ -- $ .01 $.07
Ratio of operating expenses, including expenses reimbursed, management fee and other expenses not imposed,
to average daily net assets aggregated .78%, 1% and 1.19% for the years ended December 31, 1992, 1991
and 1990, respectively.
(b) The high turnover rate reflects an increase in principal prepayments on
mortgage securities in the Fund.
(c) Per share amounts have been calculated using weighted average shares outstanding.
On July 3, 1989, the Fund adopted its present name and objective. Prior to that date, the Fund
was known as the General 1994 Portfolio of Scudder Target Fund and its objectives were current
income, capital preservation, and possible capital appreciation. Financial information prior
to July 3, 1989 should not be considered representative of the present Fund.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Short Term Bond Fund (the "Fund") is a diversified series of Scudder
Funds Trust (the "Trust"). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end, management investment company. The policies described below are
followed consistently by the Fund in the preparation of its financial
statements in conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost. All other securities are valued at their fair
value as determined in good faith by the Valuation Committee of the Board of
Trustees.
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call
and put options on securities, currencies and other financial instruments. When
the Fund writes a call, it gives the purchaser of the call option the right to
buy the underlying security or currency at the price specified in the option
(the "exercise price") at any time during the option period, generally ranging
up to nine months. When the Fund writes a put option, it gives the purchaser of
the put option the right to sell the underlying security or currency to the
Fund at the exercise price at any time during the option period, generally
ranging up to nine months. If the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the option is exercised, a decision
over which the Fund has no control, the Fund must sell the underlying security
or currency to the option holder or purchase the underlying security or
currency from the option holder at the exercise price. Certain options,
including options on indices will require cash settlement by the Fund if the
option is exercised. By writing a call option, the Fund foregoes, in exchange
<PAGE>
SCUDDER SHORT TERM BOND FUND
- --------------------------------------------------------------------------------
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security or currency above the exercise price.
By writing a put option, the Fund, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security or
currency below the exercise price. The liability representing the Fund's
obligation under an exchange traded written call or put option is valued at the
last sale price or, in the absence of a sale, the mean between the closing bid
and asked price or at the most recent asked price if no bid and asked price are
available. Over the counter written options are valued using dealer supplied
valuations.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities, currencies and securities indices. Exchange traded
purchased options are valued at the last sales price or, in the absence of a
sale, the mean between the closing bid and asked prices or at the most recent
bid price if no bid and asked prices are available. Over-the-counter purchased
options are valued using dealer supplied valuations.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write (sell) call and
put options on futures contracts which are traded for bona fide hedging
purposes. Options on futures contracts will be valued in accordance with the
security and options valuation policies described above.
FUTURES CONTRACTS. The Fund may enter into interest rate, securities index and
currency futures contracts for bona fide hedging purposes. During the period,
to shorten portfolio duration, the Fund sold short Eurodollar futures
contracts. Upon entering into a futures contract, the Fund is required to
deposit with a broker an amount ("initial margin") equal to a certain
percentage of the purchase price indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on 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,
for book purposes, a gain or loss equal to the difference between the value of
the futures contract to sell and the futures contract to buy.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Futures contracts are valued at the most recent settlement price. Certain risks
may arise upon entering into futures contracts from the contingency of
imperfect market conditions.
INDEXED SECURITIES. Indexed securities held by the Fund are investments whose
value is indexed to another financial instrument, index, currency, or commodity
(the "reference instrument"). For principal indexed securities, the principal
amount payable at maturity may be more or less than the amounts shown depending
on fluctuations in the value of the reference instrument. For coupon indexed
securities, the principal amount payable at maturity is fixed. However, the
coupon is indexed to the reference instrument. The price sensitivity of these
securities may be greater than that of non-indexed securities with similar
maturities.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income
and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on interest and
foreign withholding taxes.
<PAGE>
SCUDDER SHORT TERM BOND FUND
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts. Realized and
unrealized gains and losses arising from such transactions are included in net
realized and unrealized gain (loss) from foreign currency related transactions.
FEDERAL INCOME TAXES. It is the Fund's policy to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no provision for federal
income taxes was required.
At December 31, 1994, the Fund had a net tax basis capital loss carryforward of
approximately $27,264,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December
31, 2002, the expiration date.
In addition, from November 1, 1994 through December 31, 1994, the Fund incurred
approximately $19,600,000 of net realized currency losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ended December 31, 1995.
DISTRIBUTION OF INCOME AND GAINS. Substantially all of the net investment
income of the Fund is declared as a dividend to shareholders of record as of
the close of business each day and is paid to shareholders monthly. During any
particular year, net realized gains from investment transactions, in excess of
available capital loss carryforwards, would be taxable to the Fund if not
distributed and, therefore, will be distributed to shareholders. An additional
distribution may be made to the extent necessary to avoid the payment of a four
percent federal excise tax. Distributions of net realized capital gains to
shareholders are recorded on the ex-dividend date.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. These differences
primarily relate to investments in foreign denominated investments,
mortgage-backed securities, and certain securities sold at a loss. As a result,
net investment income and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
OTHER. Investment security transactions are accounted for on a trade date
basis. Interest income is recorded on the accrual basis. All original issue
discounts are accreted for both tax and financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
- -------------------------------------------------------------------------------
For the year ended December 31, 1994, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $1,407,666,008 and $1,778,976,271, respectively. Purchases and sales
of U.S. Government obligations aggregated $76,872,422 and $254,795,335,
respectively.
The face value of futures contracts opened and closed during the year ended
December 31, 1994 amounted to $3,038,216,692 and $779,031,277, respectively.
Transactions in written options for the year ended December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS CONTRACTS OPTIONS ON CURRENCIES
------------------------- ---------------------------------------------
GERMAN
NUMBER OF PREMIUMS DEUTSCHE AUSTRALIAN PREMIUMS
CONTRACTS RECEIVED ($) MARKS DOLLARS RECEIVED ($)
--------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Beginning of Period . . 500 206,650 -- 51,000,768 441,157
Written . . . . . . . . -- -- 97,440,000 89,000,000 1,720,025
Closed . . . . . . . . (500) (206,650) (97,440,000) (95,500,768) (1,718,407)
Expired . . . . . . . . -- -- -- (44,500,000) (442,775)
----- --------- ------------ ------------ -----------
End of Period . . . . . -- -- -- -- --
===== ========= ============ ============ ===========
</TABLE>
<PAGE>
SCUDDER SHORT TERM BOND FUND
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Management Agreement") with
Scudder, Stevens & Clark, Inc. ("the Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Management Agreement.
The management fee payable under the Management Agreement is equal to an annual
rate of 0.60% on the first $500,000,000 of average daily net assets, 0.50% on
the next $500,000,000 of such net assets, 0.45% on the next $500,000,000 of
such net assets, 0.40% on the next $500,000,000 of such net assets, 0.375% on
the next $1,000,000,000 of such net assets and 0.35% on such net assets in
excess of $3,000,000,000, computed and accrued daily and payable monthly. The
Management Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
For the year ended December 31, 1994, the fee pursuant to the Management
Agreement amounted to $12,415,709, which was equivalent to an annualized
effective rate of .46% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
Included in services to shareholders is $3,931,601 charged to the Fund by SSC
for the year ended December 31, 1994, of which $298,604 is unpaid at December
31, 1994.
The Trust pays each of its Trustees not affiliated with the Adviser $4,000
annually, divided equally among the series of the Trust, plus specified amounts
for attended board and committee meetings. For the year ended December 31,
1994, Trustees' fees aggregated $13,974.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER FUNDS TRUST AND TO THE SHAREHOLDERS OF SCUDDER SHORT
TERM BOND FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Short Term Bond Fund as of December 31, 1994, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights
for each of the ten years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Short Term Bond Fund as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the ten years in the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 22, 1995
<PAGE>
SCUDDER SHORT TERM BOND FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
By now shareholders to whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund. For corporate shareholders no amount of the income dividends paid by the
Fund qualified for the dividends received deduction.
In many states the amount of income you receive from obligations of the U.S.
Government is exempt from your state income taxes. Of the Fund's dividends from
net investment income, 1.92% was derived from direct obligations of the U.S.
Government, 0.95% from the Student Loan Marketing Association and 1.23% from
the Federal Home Loan Bank.
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at (800) 225-5163.
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Lynn S. Birdsong*
Trustee
Thomas J. Devine
Trustee; Consultant
Peter B. Freeman
Trustee; Corporate Director and Trustee
Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Thomas M. Poor*
Vice President
Robert E. Pruyne*
Vice President
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark, Inc. was the first independent investment
counsel firm in the United States. Since its birth, Scudder's pioneering
spirit and commitment to professional long-term investment management have
helped shape the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 36 pure no load(tm) funds,
including the first international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our longstanding principles: managing money with integrity and
distinction, keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
