This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Zero Coupon
2000 Fund
Annual Report
December 31, 1994
* For investors who seek as high an investment return over a select
period as is consistent with investment in U.S. government securities and
the minimization of reinvestment risk.
* 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 Management Discussion
9 Investment Portfolio
10 Financial Statements
13 Financial Highlights
14 Notes to Financial Statements
17 Report of Independent Accountants
18 Tax Information
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
HIGHLIGHTS
* Reflecting an environment of rising interest rates and falling bond
prices, Scudder Zero Coupon 2000 Fund posted a total return of -7.92% for
its 1994 fiscal year.
(BAR CHART TITLE) Average Annual Total Returns
For Periods Ended December 31, 1994
(CHART DATA)
<TABLE>
<CAPTION>
Lehman Brothers
Scudder Zero Government/Corporate
Coupon 2000 Fund Bond Index
<S> <C> <C>
1 Year -7.92% -3.51%
3 Years 4.92% 4.84%
5 Years 7.71% 7.70%
</TABLE>
* Yields rose dramatically during the year among bonds of all maturities. For
example, yields of five-year Treasury notes rose by 2.63 percentage points.
* To provide a measure of protection from rising interest rates, the Fund
increased its holdings of short-term securities over the course of 1994.
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The world's financial markets were shaken repeatedly in 1994 by a
variety of events. Rising interest rates, losses for investors in highly
leveraged derivatives, and unsettling global developments combined to
create a difficult environment for bond investors. Masking the market
volatility, however, many broad indexes ended the year little changed from
a year ago.
The rise in interest rates in the past year has posed a challenge for
income funds: to provide shareholders with the higher income now available
from bonds while protecting against an inordinate amount of price erosion.
We expect this challenge to remain in 1995, since it is possible that
interest rates may rise further. 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
viewed as favorable for the financial markets.
Interest rate uncertainties may, of course, spark episodes of
volatility for fixed-income markets. At times like these, it's 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. But experience tells us that over the long term,
investors who have participated in the stock and bond markets have fared
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
23 provides more information on how to contact Scudder. Thank you for
choosing Scudder Zero Coupon 2000 Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Zero Coupon 2000 Fund
<PAGE>
Scudder Zero Coupon 2000 Fund
Performance Update as of December 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Zero Coupon 2000 Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 9,208 -7.92% -7.92%
5 Year $ 14,499 44.99% 7.71%
Life of
Fund* $ 22,637 126.37% 9.60%
LB Government/Corporate Bond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 9,649 -3.51% -3.51%
5 Year $ 14,493 44.93% 7.70%
Life of
Fund* $ 20,098 100.98% 8.22%
*The Fund commenced operations on February 4, 1986.
Index comparisons begin on February 28, 1986.
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 Zero Coupon 2000 Fund
Year Amount
- ----------------------
2/28/86 10000
86 11022
87 10139
88 11326
89 13635
90 14262
91 17118
92 18510
93 21472
94 19770
LB Government/Corporate Bond Index
Year Amount
- ----------------------
2/28/86 10000
86 11031
87 11284
88 12139
89 13867
90 15016
91 17437
92 18759
93 20829
94 20098
The unmanaged Lehman Brothers (LB) Government/Corporate Bond Index
is composed of U.S. government treasury and agency securities,
corporate and Yankee bonds. 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>
1986* 1987 1988 1989 1990 1991 1992 1993 1994
-------------------------------------------------------------------------
Net Asset Value... $12.62 $10.34 $10.92 $12.61 $12.27 $13.76 $12.55 $12.85 $10.95
Income Dividends.. $ -- $ 1.22 $ .63 $ .52 $ .83 $ .94 $ .93 $ .83 $ .31
Capital Gains
Distributions..... $ -- $ .11 $ -- $ .03 $ .08 $ -- $ 1.39 $ .89 $ .59
Fund Total
Return (%)........ 26.20 -8.01 11.71 20.39 4.59 20.03 8.13 16.00 -7.92
Index Total
Return (%)........ 10.31 2.29 7.58 14.23 8.28 16.12 7.58 11.03 -3.51
</TABLE>
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. If the Adviser had not temporarily capped expenses,
the average annual total return for the one year, five year, and life of fund
would have been lower.
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
This report details Scudder Zero Coupon 2000 Fund's activities for the
year ended December 31, 1994. The Fund, which invests in high-quality,
government-backed zero-coupon bonds, seeks to provide investors with as
high an investment return over a selected period as is consistent with
investments in government securities. The Fund's investments in zero coupon
bonds pay no cash income but, similar to savings bonds, are issued at
substantial discounts to their value at maturity. When zero coupon bonds
are held to maturity, their entire return comes from the difference between
their issue price and their maturity value. As managers, we seek to
maximize the value you will receive when the Fund matures in December 2000
while moderating the Fund's potential share price volatility as we respond
to changing market conditions.
The Fund's 1994 Results
In 1994, fixed-income securities as a group provided their worst
returns in more than sixty years. Nagging fears of inflation due to the
economy's strength resulted in six short-term rate increases by the Federal
Reserve, which caused bond prices to decline substantially across the
board. Reflecting this environment, the Fund's net asset value declined to
$10.95 on December 31, 1994, from $12.85 at the start of the year. At the
same time, Fund shareholders received a total of $0.31 per share in income
and $0.59 in capital gain distributions, which helped offset the share
price decline somewhat. Combined, the distributions and change in net asset
value produced a total return of -7.92% for the 12 months ended December
31, 1994. This compares with a return of -3.51% for the unmanaged Lehman
Brothers Government/Corporate Bond Index. The Fund's performance trailed
that of the Index during 1994 primarily because the Fund's average
effective maturity was longer than that of the Index. In general, bonds
that take longer to mature are more sensitive to changes in interest rates.
Although negative returns are always disappointing, it is important to
view your Fund's short-term performance in the context of its longer-term
results. Scudder Zero Coupon 2000 Fund provided a 7.71% average annual
return for the five years through December 31, 1994, versus the Lehman
Index's 7.70%. Since its inception on February 4, 1986, the Fund has
generated a 9.60% average annual total return, compared with the Index's
8.22% return since February 28, 1986.
Markets Reacted to Inflation Fears
For the U.S. economy, 1994 was a year of dynamic change. A
capital-investment-led recovery picked up speed early in the year as
American businesses increased their spending on new machines and technology
at an unprecedented rate. Economic growth provided a challenging backdrop
for most investment markets. Interest rates rose faster and further than
most had expected despite the fact that inflation was relatively subdued.
Toward the end of the year, however, we saw signs that long-term rates were
beginning to stabilize, while short- and intermediate-term rates continued
to climb. In the year ahead, global economic expansion is expected to
continue at a more moderate pace, and inflation should remain under wraps.
Consequently, while U.S. rates may not reverse direction, it is possible
that the income markets will encounter less volatility in 1995 than they
did in 1994. Furthermore, because U.S. consumers' spending levels have
historically slowed in reaction to higher interest rates, we believe that
any additional Fed rate increases could lead to a slowdown in growth by the
end of the year. While this would hardly ease workers' concerns about the
United States' "jobless recovery," it should create a better environment
for bond investors.
Re-extending the Fund's "Barbell"
Scudder Zero Coupon 2000 Fund seeks to maximize the value of your
investment at maturity. Since the Fund's zero-coupon bonds lack the cushion
of regular interest payments, the Fund can be more volatile than other
types of fixed-income investments during periods of rising interest rates.
Therefore, we try to limit share price volatility where possible, in
fairness to those who may need to redeem Fund shares before the December
2000 maturity date. For those who remain invested until the Fund's
maturity, the positive tradeoff for interim volatility is a higher return
versus comparable fixed-income investments.
Over the course of 1994, we modified our "barbell" maturity structure
(a balance between bonds at the short and long ends of the maturity
spectrum) to provide a measure of protection from persistently rising
interest rates. As we reported last June, we moved to a more neutral
position at midyear, reducing our long-maturity exposure. During the second
half of the year, as longer-term bonds stabilized in price, we sold several
intermediate-maturity bonds which we believe are currently most vulnerable
to further rate hikes. With the proceeds of those sales, we purchased
additional bonds at the longer and shorter ends of the Fund's maturity
limits. During the year we also reduced the Fund's duration (a measure of
the Fund's sensitivity to changes in interest rates) from 7.99 years at the
beginning of the year to 5.01 years at its close.
Effective Maturity Structure of Scudder Zero Coupon 2000 Fund
<TABLE>
<CAPTION>
12/31/93 12/31/94
<S> <C> <C>
1-3 years 0.0% 8.4%
3-4 years 0.0 17.5
4-5 years 29.9 1.0
5-6 years 0.0 12.2
6-8 years 46.4 60.9
8-10 years 5.8 0.0
10+ years 17.9 0.0
</TABLE>
A Look Ahead
The difference in yields between one- and 30-year Treasuries--2.75
percentage points at the beginning of 1994--had declined to 0.60 percentage
points by year's end. In 1995, it is possible that short- and
intermediate-term rates may continue to move closer to the level of
long-term rates, especially if the Federal Reserve continues its tight
monetary policy. If the Fed's actions over the past year result in slower
economic growth, long-term rates might even move down slightly in 1995,
which would help bond prices.
In the coming months, we will continue to adjust the Fund's maturity
structure as the need arises and, as always, maintain flexibility in our
strategic approach. We remain committed to maximizing Scudder Zero Coupon
2000 Fund's value as it approaches its maturity date.
Sincerely,
Your Portfolio Management Team
/s/Ruth Heisler /s/Renee L. Ross
Ruth Heisler Renee L. Ross
/S/Stephen A. Wohler
Stephen A. Wohler
Scudder Zero Coupon 2000 Fund:
A Team Approach to Investing
Scudder Zero Coupon 2000 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 Zero Coupon 2000 Fund
investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager Ruth Heisler has responsibility for overseeing
the Fund's day-to-day operations and setting the Fund's investment
strategy. Ruth has been in charge of security selection since 1988 and has
been involved in bond research and investing at Scudder since 1953. Renee
L. Ross, Portfolio Manager, assists Ruth with trading bonds for the Fund's
portfolio. Renee has worked on the team since 1986 and at Scudder since
1981. Stephen Wohler, Portfolio Manager, joined the team in 1994 and is
also responsible for implementing the Fund's strategy. Steve has over 14
years' experience managing fixed income investments and has been with
Scudder since 1979.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of December 31, 1994
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
100.0% U.S. GOVERNMENT OBLIGATIONS
290,000 U.S. Treasury Note, 5.125%, 11/30/98 . . . . . . . . 263,810
275,000 U.S. Treasury Note, 5%, 1/31/99 . . . . . . . . . . 247,973
1,080,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/96 (7.41*) . . . . . 995,328
1,215,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 5/15/96 (7.52*) . . . . . 1,097,983
1,884,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/98 (7.81*) . . . . . 1,483,123
3,505,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 11/15/98 (7.83*) . . . . 2,603,374
4,506,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/00 (7.82*) . . . . . 3,042,406
21,297,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/01 (7.83*) . . . . . 13,305,301
3,179,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/02 (7.86*) . . . . . 1,835,300
----------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $26,127,239) (a) . . . . . . . . . . . . . . 24,874,598
==========
- -----------------------------------------------------------------------------------------
<FN>
(a) The cost for federal income tax purposes was $26,314,039. At December 31, 1994, net
unrealized depreciation for all securities was $1,439,441. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $721 and aggregate gross unrealized depreciation for all
securities in which there was an excess tax cost over market value of $1,440,162.
* Bond equivalent yield to maturity; not a coupon rate.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
FINANCIAL STATEMENTS
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- ----------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at market (identified cost $26,127,239)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . $24,874,598
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Receivables:
Fund shares sold . . . . . . . . . . . . . . . . . . . 80,991
Interest . . . . . . . . . . . . . . . . . . . . . . . 7,061
-----------
Total assets . . . . . . . . . . . . . . . . . . . 24,962,831
LIABILITIES
Payables:
Fund shares redeemed . . . . . . . . . . . . . . . . . $ 44,860
Accrued management fee (Note C) . . . . . . . . . . . 18,428
Other accrued expenses (Note C) . . . . . . . . . . . 31,510
--------
Total liabilities . . . . . . . . . . . . . . . . . 94,798
-----------
Net assets, at market value . . . . . . . . . . . . . . . 24,868,033
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . $ 640,017
Unrealized depreciation on investments . . . . . . . . (1,252,641)
Accumulated net realized loss . . . . . . . . . . . . (1,463,555)
Shares of beneficial interest . . . . . . . . . . . . 22,719
Additional paid-in capital . . . . . . . . . . . . . . 26,921,493
-----------
Net assets, at market value . . . . . . . . . . . . . . . 24,868,033
===========
NET ASSET VALUE, offering and redemption price per share
($24,868,033 -:- 2,271,921 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) . . . . . . . . . . . . . . . . $10.95
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 1,564,944
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . $ 33,453
Services to shareholders (Note C) . . . . . . . . . . . 85,865
Trustees' fees (Note C) . . . . . . . . . . . . . . . . 13,432
Custodian fees . . . . . . . . . . . . . . . . . . . . 30,861
State registration . . . . . . . . . . . . . . . . . . 16,760
Auditing . . . . . . . . . . . . . . . . . . . . . . . 27,067
Legal . . . . . . . . . . . . . . . . . . . . . . . . . 16,877
Reports to shareholders . . . . . . . . . . . . . . . . 22,261
Other . . . . . . . . . . . . . . . . . . . . . . . . . 4,692 251,268
----------------------
Net investment income . . . . . . . . . . . . . . . . . $ 1,313,676
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments . . . . . . . . . . (1,399,239)
Net unrealized depreciation on investments
during the period . . . . . . . . . . . . . . . . . (2,122,299)
-----------
Net loss on investments . . . . . . . . . . . . . . . . (3,521,538)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . $(2,207,862)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . $ 1,313,676 $ 1,718,621
Net realized gain (loss) from investments . . . . (1,399,239) 3,018,446
Net unrealized depreciation on investments
during the period . . . . . . . . . . . . . . (2,122,299) (33,379)
----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . . (2,207,862) 4,703,688
----------- -----------
Distributions to shareholders:
From net investment income ($.31 and $.83 per
share, respectively) . . . . . . . . . . . . . (674,895) (1,792,574)
----------- -----------
From net realized gains from investments
($.59 and $.89 per share, respectively). . . . (1,284,256) (1,934,280)
----------- -----------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . 10,304,177 16,608,035
Net asset value of shares issued to
shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . . 1,933,362 3,672,065
Cost of shares redeemed . . . . . . . . . . . . . (13,967,971) (19,458,474)
----------- -----------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . . (1,730,432) 821,626
----------- -----------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . (5,897,445) 1,798,460
Net assets at beginning of period . . . . . . . . 30,765,478 28,967,018
----------- -----------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income of
$640,017 and $13,413, respectively). . . . . . 24,868,033 $30,765,478
=========== ===========
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . 2,394,451 2,308,913
----------- -----------
Shares sold . . . . . . . . . . . . . . . . . . . 891,083 1,210,179
Shares issued to shareholders in
reinvestment of distributions . . . . . . . . 169,739 282,758
Shares redeemed . . . . . . . . . . . . . . . . . (1,183,352) (1,407,399)
----------- -----------
Net increase (decrease) in Fund shares . . . . . (122,530) 85,538
----------- -----------
Shares outstanding at end of period . . . . . . . 2,271,921 2,394,451
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
Years Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987(b) 1986(c)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>>
Net asset value, beginning of
period . . . . . . . . . . . . . $12.85 $12.55 $13.76 $12.27 $12.61 $10.92 $10.34 $12.62 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income (a) . . . . .59 .79 .94 .99 .86 .51 .63 .91 .56
Net realized and unrealized
gain (loss) on investments . . . (1.59) 1.23 .17 1.44 (.29) 1.73 .58 (1.86) 2.06
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations (1.00) 2.02 1.11 2.43 .57 2.24 1.21 (.95) 2.62
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment income . . . (.31) (.83) (.93) (.94) (.83) (.52) (.63) (1.22) --
From net realized gains on
investments . . . . . . . . . . (.59) (.89) (1.39) -- (.08) (.03) -- (.11) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions . . . . . . . . (.90) (1.72) (2.32) (.94) (.91) (.55) (.63) (1.33) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period . . $10.95 $12.85 $12.55 $13.76 $12.27 $12.61 $10.92 $10.34 $12.62
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (d) . . . . . . . (7.92) 16.00 8.13 20.03 4.59 20.39 11.71 (8.01) 26.20**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) . . . . . . . . . . 25 31 29 33 33 32 5 2 1
Ratio of operating expenses net,
to average daily net
assets (%) (a) . . . . . . . . . 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00*
Ratio of net investment income to
average daily net assets (%) . . 5.23 5.29 6.38 7.12 7.62 7.10 8.10 8.13 7.27*
Portfolio turnover rate (%) . . . . 89.3 101.6 118.8 90.7 98.5 87.1 149.2 37.3 79.4*
(a) Portion of expenses
reimbursed by the Adviser
(Note C) . . . . . . . . . . . $ -- $ -- $ -- $ -- $ -- $ -- $ .14 $ .29 $ .26
Management fee not
imposed by the Adviser
(Note C) . . . . . . . . . . . $ .05 $ .04 $ .04 $ .03 $ .04 $ .04 $ .04 $ .06 $ .04
Ratio of operating expenses
including management
and other expenses not
imposed and reimbursement
absorbed (%) . . . . . . . . . 1.47 1.28 1.28 1.23 1.39 1.62 3.37 4.13 5.64*
<FN>
(b) Per share amounts for the year ended December 31, 1987 have been calculated using the monthly weighted average shares
outstanding during the year method.
(c) For the period February 4, 1986 (commencement of operations) to December 31, 1986.
(d) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</TABLE>
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Zero Coupon 2000 Fund (the "Fund") is organized as a diversified series
of Scudder Funds Trust (the "Trust"), a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund primarily invests in U.S. Government zero coupon
securities. At least 50% of the Fund's net assets will be invested in zero
coupon securities maturing within two years of the Fund's target maturity date.
It is expected that the Fund will be liquidated in December of the year 2000.
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 prices 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 Trustees.
FEDERAL INCOME TAXES. The Fund's policy is 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 $883,000 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 $393,000 of net realized
capital 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. 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.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in certain securities sold at
a loss. 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 Fund uses the specific identification 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 generally recorded on the accrual basis under the
amortized cost method whereby the Fund adjusts the cost of each investment
assuming a constant accretion to maturity of any discount. All original issue
discounts are accreted for both tax and financial reporting purposes.
Distributions to shareholders are recorded on the ex-dividend date.
B. PURCHASES AND SALES OF SECURITIES
During the year ended December 31, 1994, purchases and sales of investment
securities were $22,754,268 and $27,101,128, respectively.
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "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 Agreement. The
management fee payable under the Agreement is equal to an annual rate of
approximately 0.60% of the average daily net assets of the Fund computed and
accrued daily and payable monthly. The 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. In addition, the Adviser has agreed to maintain the
annualized expenses of the Fund at not more than 1% of average daily net assets
until April 30, 1995. For the year ended December 31, 1994, the management fee
aggregated $150,769 of which $117,316 was not imposed and $18,428 is unpaid at
December 31, 1994.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend disbursing and shareholder service agent for the
Fund. For the year ended December 31, 1994, $71,971 was charged to the Fund by
SSC of which $6,250 was unpaid at December 31, 1994.
The Trust pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended December 31, 1994, Trustees' fees amounted to $13,432.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER FUNDS TRUST AND THE SHAREHOLDERS OF SCUDDER ZERO
COUPON 2000 FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Zero Coupon 2000 Fund including the investment portfolio, 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 eight years in the
period then ended and for the period February 4, 1986 (commencement of
operations) to December 31, 1986. 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 Zero Coupon 2000 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 eight years in the period then ended and for the
period February 4, 1986 (commencement of operations) to December 31, 1986, in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 3, 1995
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
By now shareholders for 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 received from direct obligations of the
U.S. Government is exempt from your state income taxes. Of the Zero Coupon 2000
Fund's dividend from ordinary income, which includes net short-term capital
gains, 100% was derived from direct obligations of the U.S. Government.
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 1-800-225-5163.
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Thomas J. Devine
Trustee; Consultant
Peter B. Freeman
Trustee; Corporate Director and Trustee
Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Lynn S. Birdsong*
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 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.
