This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
70-6-85
MIS89S
Scudder
Zero Coupon
2000 Fund
Semiannual Report
June 30, 1995
o 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.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
- --------------------------------------------------------------------------------
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Management Discussion
8 Investment Portfolio
9 Financial Statements
12 Financial Highlights
13 Notes to Financial Statements
17 Officers and Trustees
18 Investment Products and Services
19 How to Contact Scudder
IN BRIEF
* Reflecting an environment of declining interest rates and slowing economic
growth, Scudder Zero Coupon 2000 Fund posted a total return of 12.41% for
the semiannual period ended June 30, 1995, a welcome change after a
difficult 1994.
* As shown in the chart below, the Fund's return outpaced that of the
unmanaged Lehman Brothers Government/Corporate Bond Index during the
six-month period, as well as over longer periods.
Total Returns For Periods Ended June 30, 1995*
BAR CHART OMITTED
CHART TITLE: Total Returns For Periods Ended June 30, 1995*
CHART DATA:
Scudder Zero Lehman Brothers Government/
Coupon 2000 Fund Corporate Bond Index
---------------- --------------------
6 Months 12.41% 11.80%
1 Year 11.91% 12.76%
3 Years 9.23% 7.93%
5 Years 10.68% 9.60%
* For the one-year, 3-year, and 5-year total returns, the figures are average
annual total returns.
Past performance does not guarantee future results.
* As evidence pointed to a slowing U.S. economy and as inflation fears eased,
Treasury prices rallied strongly, pushing yields lower. The Fund's strategy
during the period included a focus on intermediate-term Treasuries, which
benefited the most among Treasury issues from the recent interest rate
declines.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
- --------------------------------------------------------------------------------
Dear Shareholders,
We are pleased to report a 12.41% total return for Scudder Zero Coupon 2000
Fund in the first six months of 1995. The dramatic rally in bonds so far this
year reflects a much more positive interest rate environment than existed last
year. Indeed, the recent easing of interest rates by the Federal Reserve, coming
after a series of rate hikes in 1994 and early 1995, testifies to their
confidence in the current trend of slower economic growth and relatively low
inflation. While interest rates have eased in many parts of the globe after
rising overall last year, U.S. investors have responded most enthusiastically to
the trend change in the past six months.
After a difficult 1994, the positive bond market performance is gratifying
- -- and investors who rode out the price fluctuations and maintained a long-term
investment stance have been duly rewarded. Still, the change in rates over the
past eight months and the resultant bond market rally are reminders of the often
short-term nature of dramatic market fluctuations. While our outlook is for
generally lower interest rates in the coming months -- and therefore positive
bond market conditions -- we do expect pockets of market volatility along the
way.
If you have questions about Scudder Zero Coupon 2000 Fund or other Scudder
investments, please contact an Investor Relations representative at
1-800-225-2470. Page 19 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
3
<PAGE>
Scudder Zero Coupon 2000 Fund
Performance Update as of June 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Zero Coupon 2000 Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 11,191 11.91% 11.91%
5 Year $ 16,612 66.12% 10.68%
Life of
Fund* $ 25,447 154.47% 10.44%
LB Government/Corporate Bond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 11,276 12.76% 12.76%
5 Year $ 15,820 58.20% 9.60%
Life of
Fund* $ 22,468 124.68% 9.06%
*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 June 30
Scudder Zero Coupon 2000 Fund
Year Amount
- ----------------------
2/28/86 10000
86 10419
87 10315
88 10815
89 13100
90 13378
91 14506
92 17055
93 20843
94 19859
95 22224
LB Government/Corporate Bond Index
Year Amount
- ----------------------
2/28/86 10000
86 10491
87 10982
88 11803
89 13259
90 14202
91 15653
92 17871
93 20221
94 19925
95 22468
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 June 30
- ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986* 1987 1988 1989 1990 1991 1992 1993 1994 1995
-------------------------------------------------------------------------------
Net Asset Value... $11.93 $11.20 $11.03 $12.63 $12.29 $12.46 $13.62 $13.99 $11.30 $11.99
Income Dividends.. $ -- $ .55 $ .67 $ .63 $ .52 $ .85 $ .98 $ .91 $ .80 $ .60
Capital Gains
Distributions..... $ -- $ .11 $ -- $ -- $ .11 $ -- $ .03 $ 1.46 $ 1.38 $ --
Fund Total
Return (%)........ 19.30 -1.00 4.84 21.12 2.13 8.43 17.57 22.21 -4.72 11.91
Index Total
Return (%)........ 4.91 4.67 7.49 12.34 7.10 10.20 14.15 13.16 -1.46 12.76
</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
periods would have been lower.
4
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
During its semiannual period ended June 30, 1995, Scudder Zero Coupon 2000
Fund benefited from a strong rally in the U.S. Treasury market. The Fund's net
asset value per share rose $1.04 to $11.99 on June 30, and the Fund distributed
$0.30 per share in income to shareholders, contributing to a total return of
12.41% for the six-month period. By comparison, the unmanaged Lehman Brothers
Government/Corporate Bond Index returned 11.80%. The Fund has also outpaced the
Index over three- and five-year periods. (For additional comparisons to the
Index please turn to pages 2 and 4.)
Scudder Zero Coupon 2000 Fund seeks to provide investors with as high an
investment return over a selected period as is consistent with direct
investments in U.S. government securities, but with the additional advantages of
professional management, diversification, liquidity, and the minimization of
reinvestment risk. The Fund invests primarily in high-quality zero-coupon bonds
that pay no cash income but, similar to savings bonds, are issued at substantial
discounts to their value at maturity. When held to maturity, a zero-coupon
bond's entire return comes from the difference between its issue price and its
maturity value.
Treasuries Lead a Bond Market Rally
During the first half of 1995, U.S. Treasuries benefited from a very
favorable set of circumstances. Inflation fears eased as consumers generally
spent less and the overall U.S. economy slowed. With inflation no longer an
immediate concern, the Federal Reserve ended its round of short-term rate
increases. At the same time, the U.S. dollar declined relative to other
currencies, which spurred some large foreign investors -- the Bank of Japan, for
example -- to make massive purchases of Treasury securities in order to stem the
rise of their own currencies relative to the dollar. Though the upward swing in
bond prices wasn't always smooth, Treasury yields, especially those of
intermediate maturities, declined sharply and steadily. Five-year Treasury notes
declined 1.8 percentage points during the period, and the price of a typical
five-year note rose 8%. The following chart shows the declines in yields across
the Treasury maturity spectrum:
5
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
- --------------------------------------------------------------------------------
LINE CHART OMITTED
CHART TITLE: Yields of Treasury Securities
Declined Sharply from
12/31/94 to 6/30/95
CHART DATA:
12/31/94 6/30/95
-------- -------
3 mos 5.682 5.56
6 mos 6.495 5.58
1 yr 7.162 5.62
2 yrs 7.690 5.79
3 yrs 7.778 5.85
5 yrs 7.827 5.97
10 yrs 7.827 6.20
30 yrs 7.876 6.62
Portfolio Review
As managers of Scudder Zero Coupon 2000 Fund, our goal is to maximize the
value of your investment on the December 2000 maturity date. 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. Since some
shareholders may need to redeem Fund shares before 2000, we try to limit
share-price volatility where possible while at the same time seeking a higher
return than other fixed-income investments.
Over the first six months of 1995, the Fund's investment approach was
somewhat cautious, given the recent volatility of the Treasury market. By the
end of March we had slightly shortened the Fund's duration to 4.86 years from
5.01 years at the end of 1994. (Duration measures a bond's sensitivity to
interest rates by giving relative weight to both interest and principal payments
and has become the industry standard among professional investors. Generally,
the shorter the duration, the less sensitive a portfolio will be to changes in
interest rates.) As our confidence grew that interest rates would either remain
neutral or decline slightly, we extended the Fund's duration to 5.11 years as of
June 30. In addition, we altered Scudder Zero Coupon 2000 Fund's maturity
structure during the semiannual period to take advantage of the fact that
intermediate-maturity Treasuries were outperforming shorter- and longer-term
bonds. We sold zero coupon bonds with longer and shorter maturities and focused
instead on bonds with three- to eight-year maturities. As of June 30, 100% of
the securities in the Fund's portfolio were in this maturity range.
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Our Outlook
So far, 1995 has been very good to both the bond and stock markets. Since
economies are by their nature cyclical, current conditions are bound to change.
At this point, we are uncertain whether the next phase will include a
re-acceleration of economic growth or a downturn. If economic growth continues
to slow, we will most likely extend the Fund's duration slightly to take
advantage of what we believe will be additional declines in interest rates. As
always, we strive to adjust the Fund's maturity structure as the need arises so
that we can better maximize Scudder Zero Coupon 2000 Fund's value on 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
7
<PAGE>
<TABLE>
SCUDDER ZERO COUPON 2000 FUND
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
----------------------------------------------------------------------------------
100.0% U.S. GOVERNMENT OBLIGATIONS
----------------------------------------------------------------------------------
290,000 U.S. Treasury Note, 5.125%, 11/30/98.................... 282,567
275,000 U.S. Treasury Note, 5%, 1/31/99......................... 266,665
395,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 5/15/96 (5.68%*)............. 376,123
4,753,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 11/15/98 (5.92%*)............ 3,904,067
2,003,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/00 (5.91%*)............. 1,529,871
2,113,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 8/15/00 (5.97%*)............. 1,562,817
21,524,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/01 (6.02%*)............. 15,419,578
6,157,000 U.S. Treasury Separate Trading Registered
Interest and Principal, 2/15/02 (6.14%*)............. 4,124,698
----------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $26,316,872) (a)............................... 27,466,386
==========
- --------------------------------------------------------------------------------------------------
<FN>
(a) The cost for federal income tax purposes was $26,486,368. At June 30, 1995,
net unrealized appreciation for all securities was $980,018. This consisted
of aggregate gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $980,018.
* Bond equivalent yield to maturity; not a coupon rate.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------
JUNE 30, 1995 (UNAUDITED)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $26,316,872)
(Note A).................................................... $27,466,386
Cash........................................................... 595
Receivables:
Interest.................................................... 6,994
Fund shares sold............................................ 4,158
-----------
Total assets........................................... 27,478,133
LIABILITIES
Payables:
Fund shares redeemed........................................ $28,852
Accrued management fee (Note C)............................. 1,301
Other accrued expenses (Note C)............................. 29,846
-------
Total liabilities...................................... 59,999
-----------
Net assets, at market value.................................... $27,418,134
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income......................... $ 732,036
Net unrealized appreciation on investments.................. 1,149,514
Accumulated net realized loss............................... (1,584,610)
Shares of beneficial interest............................... 22,867
Additional paid-in capital.................................. 27,098,327
-----------
Net assets, at market value.................................... $27,418,134
===========
NET ASSET VALUE, offering and redemption price per share
($27,418,134 / 2,286,685 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized)....................................... $11.99
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
SCUDDER ZERO COUPON 2000 FUND
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $ 888,321
Expenses:
Management fee (Note C)..................................... $10,497
Services to shareholders (Note C)........................... 43,443
Custodian and accounting fees (Note C)...................... 22,355
Trustees' fees (Note C)..................................... 7,416
Auditing ................................................... 18,678
Reports to shareholders..................................... 13,058
State registration.......................................... 7,065
Legal....................................................... 3,747
Other....................................................... 2,892 129,151
------------------
Net investment income....................................... $ 759,170
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments.......................... (121,055)
Net unrealized appreciation on investments
during the period....................................... 2,402,155
----------
Net gain on investments..................................... 2,281,100
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,040,270
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income.............................. $ 759,170 $ 1,313,676
Net realized loss from investments................. (121,055) (1,399,239)
Net unrealized appreciation (depreciation)
on investments during the period................ 2,402,155 (2,122,299)
----------- ------------
Net increase (decrease) in net assets
resulting from operations...................... 3,040,270 (2,207,862)
----------- ------------
Distributions to shareholders:
From net investment income ($.30 and $.31 per
share, respectively)............................ (667,151) (674,895)
----------- ------------
From net realized gains from investments
($.59 per share)................................ -- (1,284,256)
----------- ------------
Fund share transactions:
Proceeds from shares sold.......................... 6,137,831 10,304,177
Net asset value of shares issued to
shareholders in reinvestment of
distributions................................... 652,889 1,933,362
Cost of shares redeemed............................ (6,613,738) (13,967,971)
----------- ------------
Net increase (decrease) in net assets from
Fund share transactions......................... 176,982 (1,730,432)
----------- ------------
INCREASE (DECREASE) IN NET ASSETS.................. 2,550,101 (5,897,445)
Net assets at beginning of period.................. 24,868,033 30,765,478
----------- ------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income of
$732,036 and $640,017, respectively)............ $27,418,134 $ 24,868,033
=========== ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period.......... 2,271,921 2,394,451
----------- ------------
Shares sold........................................ 536,885 891,083
Shares issued to shareholders in
reinvestment of distributions................... 57,932 169,739
Shares redeemed.................................... (580,053) (1,183,352)
----------- ------------
Net increase (decrease) in Fund shares............. 14,764 (122,530)
----------- ------------
Shares outstanding at end of period................ 2,286,685 2,271,921
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER ZERO COUPON 2000 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>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995 -------------------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990 1989 1988 1987(b) 1986(c)
---------------- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $10.95 $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). .34 .59 .79 .94 .99 .86 .51 .63 .91 .56
Net realized and
unrealized gain
(loss) on investments.. 1.00 (1.59) 1.23 .17 1.44 (.29) 1.73 .58 (1.86) 2.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................ 1.34 (1.00) 2.02 1.11 2.43 .57 2.24 1.21 (.95) 2.62
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income................. (.30) (.31) (.83) (.93) (.94) (.83) (.52) (.63) (1.22) --
From net realized gains
on investments......... -- (.59) (.89) (1.39) -- (.08) (.03) -- (.11) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.......... (.30) (.90) (1.72) (2.32) (.94) (.91) (.55) (.63) (1.33) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period.................... $11.99 $10.95 $12.85 $12.55 $13.76 $12.27 $12.61 $10.92 $10.34 $12.62
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (d)......... 12.41** (7.92) 16.00 8.13 20.03 4.59 20.39 11.71 (8.01) 26.20**
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of period
($ millions).............. 27 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 1.00*
Ratio of net investment
income to average
daily net assets (%)...... 5.88* 5.23 5.29 6.38 7.12 7.62 7.10 8.10 8.13 7.27*
Portfolio turnover rate (%).. 90.4* 89.3 101.6 118.8 90.7 98.5 87.1 149.2 37.3 79.4*
<FN>
(a) Portion of expenses
reimbursed by the
Adviser (Note C)...... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ .14 $ .29 $ .26
Management fee not
imposed by the
Adviser (Note C)...... $ .03 $ .05 $ .04 $ .04 $ .03 $ .04 $ .04 $ .04 $ .06 $ .04
Ratio of operating
expenses including
management and other
expenses not imposed
and reimbursement
absorbed (%).......... 1.52* 1.47 1.28 1.28 1.23 1.39 1.62 3.37 4.13 5.64*
(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
</FN>
</TABLE>
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
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.
13
<PAGE>
SCUDDER ZERO COUPON 2000 FUND
- --------------------------------------------------------------------------------
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 six months ended June 30, 1995, purchases and sales of investment
securities were $11,855,387 and $12,418,797, respectively.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, 1996. For the six months ended June 30, 1995, the management
fee aggregated $78,138, of which $67,641 was not imposed.
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 six months ended June 30, 1995, $35,472 was charged to the Fund
by SSC, of which $5,990 was unpaid at June 30, 1995.
Effective January 10, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the six months ended June 30, 1995, the
amount charged to the Fund by SFAC aggregated $18,006, of which $3,125 is
unpaid at June 30, 1995.
The Trust pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1995, Trustees' fees amounted to $7,416.
15
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16
<PAGE>
OFFICERS AND TRUSTEES
- --------------------------------------------------------------------------------
Daniel Pierce*
President and Trustee
Thomas J. Devine
Trustee; Consultant
Peter B. Freeman
Trustee; Corporate Director and Trustee
Dr. 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.
17
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The Scudder Family of Funds
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Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
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IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
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The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea 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.
</TABLE>
18
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
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 New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
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.
</TABLE>
19
<PAGE>
Celebrating Over 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 us 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 long-standing
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.
