Scudder
Short Term
Bond Fund
Semiannual Report
June 30, 1996
Pure No-Load(TM) Funds
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.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
In Brief
Scudder Short Term Bond Fund provided a 6.38% 30-day net annualized SEC yield on
June 30, 1996, significantly higher than the average 4.77% yield of taxable
money market funds tracked by IBC/Donoghue.
According to Lipper Analytical Services, your fund's yield placed in the top 20%
of 97 comparable bond funds with a similar objective at the end of June. Please
see page 4 for additional performance information.
BAR CHART TITLE:
Comparing Yields
SEC Yields as of June 30, 1996
BAR CHART DATA:
Scudder Short Term Bond Fund 6.38%
Average Short Investment Grade Debt Fund 5.69%
Since the 10-month bond rally came to a sudden halt in March, interest rates
have trended upward, pressuring bond prices. Scudder Short Term Bond Fund's
focus on bonds with shorter maturities helped cushion the Fund's net asset value
from much of the market's volatility this spring.
2
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We hope you enjoy our newly redesigned shareholder report. The new format,
which is being implemented on a test basis with select Scudder funds, is
designed to enhance the attractiveness and readability of the reports. Let us
know what you think.
In this era of electronic information we have also taken a look at our
short-form quarterly reports, which you generally receive two or more weeks
after the end of your fund's first and third fiscal quarters. Going forward, in
lieu of these printed reports, portfolio information will be made available on a
more timely basis -- each month, in most cases -- through Scudder's Web site,
Scudder's automated information line (SAIL) and by calling a Scudder Investor
Relations representative.
The first half of Scudder Short Term Bond Fund's 1996 fiscal year -- the
period covered by this report -- began on a high note, with bond investors
happily cheering low interest rates, low inflation, and sluggish economic
growth. In early March, however, the bond market rally came to a sudden halt as
evidence of rapid employment growth fueled fears of inflation and a possible end
to the Federal Reserve Board's program of monetary ease. Throughout the spring,
interest rates continued to trend upward as investors tried to interpret
conflicting economic reports, most of which suggested fairly solid economic
growth.
Shorter-term investments fared better than their longer-term counterparts,
and your fund was no exception. While many longer-term bond investments posted
negative returns for the six months ended June 30, 1996, your Fund delivered a
positive total return of 0.40%. A combination of performance gains made early in
the reporting period and a timely decision to dampen the fund's sensitivity to
interest rates did much to offset the adverse effects of the rise in rates.
Scudder Short Term Bond Fund continues to be a competitive alternative to
money market funds and similar investments without the higher degree of price
fluctuation traditionally associated with longer-term fixed-income investments.
Please contact us at 1-800-225-2470 if you have any questions.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Short Term Bond Fund
3
<PAGE>
PERFORMANCE UPDATE as of June 30, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER SHORT TERM BOND FUND
- --------------------------------------
1 Year $10,511 5.11% 5.11%
5 Year $13,262 32.62% 5.81%
10 Year* $20,190 101.90% 7.28%
- --------------------------------------
SALOMON BROTHERS INC. BROAD INVESTMENT
GRADE BOND INDEX (1-3 YEARS)
- --------------------------------------
1 Year $10,557 5.57% 5.57%
5 Year $13,639 36.39% 6.40%
10 Year* $20,354 103.54% 7.36%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
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 SHORT TERM BOND FUND
Year Amount
- ----------------------
'86 $10,000
'87 $10,751
'88 $11,266
'89 $12,369
'90 $13,523
'91 $15,224
'92 $16,743
'93 $18,158
'94 $18,264
'95 $19,208
'96 $20,190
SALOMON BROTHERS INC. BROAD INVESTMENT
GRADE BOND INDEX (1-3 YEARS)
Year Amount
- ----------------------
'86 $10,000
'87 $10,646
'88 $11,464
'89 $12,485
'90 $13,534
'91 $14,924
'92 $16,492
'93 $17,606
'94 $17,905
'95 $19,279
'96 $20,354
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 JUNE 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $11.62 $11.33 $11.63 $11.58 $11.89 $12.01 $12.12 $11.37 $11.19 $11.03
INCOME DIVIDENDS.. $ .74 $ .75 $ .71 $ 1.03 $ 1.09 $ 1.03 $ .87 $ .76 $ .74 $ .72
CAPITAL GAINS
DISTRIBUTIONS..... $ .19 $ .08 $ .03 $ .06 $ - $ - $ - $ .07 $ - $ -
FUND TOTAL
RETURN (%)........ 7.52 4.79 9.80 9.33 12.58 9.98 8.45 .58 5.17 5.11
INDEX TOTAL
RETURN (%)........ 6.46 7.69 8.91 8.41 10.27 10.50 6.76 1.69 7.68 5.57
</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 18.
*The Fund, with its current name and objective, commenced operations on July 31
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 59.73% and 7.00%,
respectively.
4
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
U.S. Gov't Backed Mortgages 28%
Asset-Backed Securities 23%
Collateralized Mortgage Obligations 20%
Corporate Bonds 18%
Indexed Securities 6%
Foreign Bonds-Non U.S.$
Denominated 4%
Cash Equivalents 1%
- ------------------------------------------
100%
- ------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund's holdings of U.S.
government securities were replaced
during the period with bonds less
sensitive to rising interest rates.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
U.S. Gov't & Agencies 41%
AAA* 29%
AA 3%
A 6%
BBB 21%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Weighted Average Quality:AAA-
*Category includes cash equivalents
Historically, the Fund has manitained
a high-quality portfolio.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Under 1 year 13%
1-5 years 73%
5-8 year 8%
8 years or greater 6%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Weighted average effective maturity: 2.00 years
The Fund's weighted average effective maturity was reduced
during the period as higher interest rates adversely
impacted securities prices.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 9. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Thanks to headway made early in the period, Scudder Short Term Bond Fund posted
a total return of 0.40% for the six months ended June 30, 1996. While this
performance might be considered somewhat lackluster in absolute terms, the
Fund's return relative to longer-maturity investments was quite good. The Fund's
benchmark index, the unmanaged Salomon Brothers Broad Investment Grade Bond
Index (1 to 3 years), returned 1.50% for the same time frame. Despite the bond
market's turbulence, your fund achieved its primary objective of providing
higher income than is available from money market or savings accounts, with
greater stability of principal than investments in longer-maturity bonds.
Another positive: The trend toward higher interest rates this spring is likely
to have a favorable impact on the Fund's yield. On June 30, the Fund's 30-day
net annualized SEC yield was 6.38%, well above the 5.84% at the start of the
fiscal year on January 1.
Lower Average Maturity Helps Minimize
Price Fluctuation
At the start of the year, the economy had all the makings of a recession.
Business investment and consumer spending were low. A harsh winter and the
General Motors strike were among several factors suppressing business activity.
With little pressure on interest rates, the yield on two-year Treasuries fell to
4.80% -- a bullish indicator of investor sentiment given that it was well below
the 5.25% federal funds rate. We began the fiscal year well-positioned for such
an environment, just having lengthened the Fund's average effective maturity to
three years -- its limit under the Fund's stated investment policies. The
Federal Reserve's lowering of short-term interest rates by a quarter of a
percentage point on January 31 only served to confirm predictions that the
economy was under pressure and that inflation was not a concern. Despite the
breakdown of budget talks in Washington, bond prices and investor confidence
soared.
On March 8, February's employment numbers were announced, and the extended rally
came to an abrupt halt. The stronger-than-expected jobs report sent a shock wave
through the stock and bond markets. Bond prices had their worst day in nearly
two decades, with the 30-year Treasury bond falling $30.94 for each $1,000
invested. Its yield climbed about a quarter percentage point to 6.72%, the
largest single-day increase in several years.
Falling prices are the natural outcome for fixed-income securities in a rising
interest rate environment. Bond investments of all stripes suffered in the weeks
following the March employment report. However, Scudder Short Term Bond Fund --
with its focus on shorter-maturity investments -- fared better than its more
aggressive counterparts. A shorter average maturity can translate into lower
volatility as interest rates fluctuate, and thus can be instrumental in
softening the impact of market declines. As evidence increasingly pointed to
stronger economic activity, we reduced the Fund's average maturity and thus its
sensitivity to interest rate changes.
6
<PAGE>
The Fund's relatively longer average maturity played an important role in
boosting net asset value during the first two months of the period -- when
interest rates were declining -- just as the shortened maturity helped smooth
out the bumps once signs of stronger economic growth emerged in March. By June,
we had reduced the Fund's average maturity to 2 years.
During the spring, the bond market continued to drift lower amidst further
evidence of a growing economy and the likelihood that the Federal Reserve's
program of lowering short-term interest rates had ended. Gross domestic product
(GDP) for the first quarter of 1996 came in at a higher-than-expected 2.8%. In
early June, the announcement of May's employment numbers, which showed
additional job growth, caused more concern. Compounding bond investor worries
was a rise in commodity prices and rebounds in the Japanese and German
economies, signaling a potential pickup in U.S. export activity.
Despite this evidence of an expanding economy, the future is shrouded by
contradictory data. In March, for example, the employment numbers showed signs
of weakness on the heels of February's roaring gains. More recently, commodity
prices have come down. Given the difficulty of clearly determining the direction
of the economy, many bondholders have moved away from the long end of the market
to the relatively safe haven of shorter maturities. This stronger demand has
contributed some price support to securities such as those held in the
portfolio.
Recent Interest Rate
Volatility Prompts More Defensive Strategy
Today's economic environment poses many challenges for investors. We believe the
key to the Fund's success in the months ahead will be a defensive, diversified,
and high-quality portfolio. We continue to spread Fund assets among mortgage
backed, asset-backed, corporate, and government issues with a weighted average
quality of AAA-. Nearly 80% of the Fund's holdings are rated A or above.
Importantly, U.S. Treasury holdings have been reduced in favor of other sectors
that are less sensitive to interest rate fluctuations and possess different sets
of attractive characteristics.
Current market conditions, while inhospitable to most segments of the
fixed-income market, remain somewhat favorable for the Fund's corporate bond
holdings. Corporate bonds generally perform well during times of solid economic
growth, because issuing corporations benefit from increased earnings. As a
result, the Fund's weighting in the corporate bond sector witnessed a modest
increase during the period. By June 30, corporate bonds represented 18% of the
portfolio's total assets, up from 16% at the start of the fiscal year. Specific
purchases were made in the telecommunications and broadcasting industries,
including Time Warner and Telecommunications, Inc.; as well as in the consumer
finance and industrial sectors, including The Money Store and Tenneco, Inc.
Investments were based not only on each company's ability to weather a changing
investment environment but on its prospects for credit rating upgrades.
Asset-backed securities (ABS) are a vital component of your portfolio since they
have less credit risk than corporate securities and exhibit more stable
cashflows than mortgage securities. Asset-backeds are a form of debt security
7
<PAGE>
that pools loans made by companies offering such services as home equity loans,
credit cards and automobile loans. Since their introduction in 1985, ABS have
not been downgraded due to poor loan performance, despite the recessions
experienced during this period. Investor demand for these securities continues
to be brisk on account of their yield, creditworthiness, and relative value,
providing a natural price support. During the reporting period, ABS climbed from
17% to 23% of the portfolio's total assets.
The mortgage sector climbed to more than 47% of the portfolio's total assets, up
from 42% at the start of the reporting period. The Fund's recent purchases --
the Fannie Mae balloon 7.00% coupon bond, for example -- are likely to have a
favorable impact on the Fund's income stream while at the same time providing
defensive characteristics relative to U.S. Treasuries.
The Months Ahead
Although the Federal Reserve has yet to raise interest rates, fears of rising
inflation (and rates) continue to dominate the market. Crosscurrents in economic
data have made it difficult to gauge the underlying strength of the economy and
the real risk of inflation. While this is fostering uncertainty in financial
markets, the Federal Reserve appears content to sit tight and await compelling
evidence of the economy's overheating. Should such evidence emerge, higher
interest rates and market volatility will likely ensue. However, growth will not
proceed without pause. Consumer spending, which provides roughly two-thirds of
the gross domestic product, will have difficulty continuing at the current pace
given household debt levels. Also, with the sharp rise in interest rates this
year, some slowing of the economy is to be expected.
Given the bond market's present skittishness, we believe the Fund's shorter-term
investment strategy will best serve shareholders until the dust settles and the
future course of interest rates becomes more evident.
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
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of June 30, 1996 (Unaudited)
<CAPTION>
Principal Market
Amount($) Value($)
- ---------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 0.5%
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 6/28/96 at 5.45%, to be repurchased at $7,946,607
on 7/1/96, collateralized by a $7,761,000 U.S. Treasury -----------
Note, 7.125%, 10/15/98 (Cost $7,943,000) ............................. 7,943,000 7,943,000
-----------
U. S. GOV'T BACKED MORTGAGES 27.9%
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. ARM, 7.978%, 11/1/21 .................. 712,268 739,427
Federal Home Loan Mortgage Corp., 5 year Balloon, 5%, with
various maturities to 7/1/99 ......................................... 16,364,817 15,531,195
Federal National Mortgage Association, ARM, 7.312%, 1/1/19 ............. 1,590,302 1,634,782
Federal National Mortgage Association, ARM, 7.605%, 11/1/22 ............ 2,903,955 2,977,018
Federal National Mortgage Association, ARM, 7.728%, 10/1/23 ............ 5,951,659 6,090,213
Federal National Mortgage Association, 10%, 8/1/25 ..................... 4,715,148 5,135,079
Federal National Mortgage Association,
7 year Balloon, 5.5%, with various maturities to 9/1/02 .............. 2,603,791 2,454,880
Federal National Mortgage Association,
7 year Balloon, 6%, 6/1/01 ........................................... 374,082 360,402
Federal National Mortgage Association,
7 year Balloon, 7%, 4/1/03 ........................................... 50,300,242 50,142,794
Federal National Mortgage Association,
7 year Balloon, 8.5%, with various maturities to 5/1/02 .............. 15,980,644 16,370,093
Government National Mortgage Association Pass-through,
ARM, 6.5%, 9/20/25 ................................................... 18,384,445 18,562,544
Government National Mortgage Association Midget Pass-through,
8%, with various maturities to 12/15/10 .............................. 51,367,301 52,720,104
Government National Mortgage Association Pass-through,
9%, with various maturities to 12/15/21 .............................. 123,586,308 130,007,956
Government National Mortgage Association Pass-through,
10%, with various maturities to 2/15/25 .............................. 100,469,122 109,526,131
Government National Mortgage Association Pass-through,
11%, with various maturities to 10/20/20 ............................. 3,102,517 3,461,368
Government National Mortgage Association Pass-through,
11.5%, with various maturities to 7/20/20 (b) ........................ 23,169,193 26,110,369
- ---------------------------------------------------------------------------------------------------------
TOTAL U.S. GOV'T BACKED MORTGAGES (Cost $442,290,229) 441,824,355
- ---------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 20.0%
- ---------------------------------------------------------------------------------------------------------
Chase Mortgage Finance Corp., Series 1993-I2 A2, 7.25%, 7/25/24 ........ 1,405,537 1,397,630
Chase Mortgage Finance Corp., Series 1993-I2 A3, 7.25%, 7/25/24 ........ 20,589,000 20,408,846
Chemical Mortgage Securities Inc., Series 1993-1 A4, 7.45%, 2/25/23 .... 4,175,000 4,185,438
Countrywide Funding Corp., Series 1994-2 A8, 6.5%, 2/25/09 ............. 1,900,000 1,883,375
Daiwa Mortgage Acceptance Corp., Series 1991A, 8.625%, 3/15/10 ......... 2,170,647 2,162,507
Federal Home Loan Mortgage Corp. Series 1381-Z, 6%, 7/15/05 ............ 5,749,983 5,719,393
Federal Home Loan Mortgage Corp. Series 1719-C PO, 4/15/99 ............. 39,254,088 34,347,327
Federal Home Loan Mortgage Corp. STRIP PO, Series 167A, 5/1/99 ......... 51,152,055 44,454,333
Federal Home Loan Mortgage Corp. REMIC, Series 1724-PO, 5/15/01 ........ 53,959,065 43,032,354
Federal Home Loan Mortgage Corp. Series 1267 O, 7.25%, 12/15/05 ........ 9,850,000 9,951,554
</TABLE>
The accompanying notes are in integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
9 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount($) Value($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Series 1276-C, 7.5%, 12/15/05 ......................... 6,007,658 6,054,577
Federal Home Loan Mortgage Corp. Series 1406-E, 6%, 12/15/18 ........................... 4,400,000 4,267,313
Federal Home Loan Mortgage Corp. Series 1250-F, 7%, 4/15/19 ............................ 5,250,000 5,304,128
Federal National Mortgage Association 1989-68G, 8.75%, 8/25/18 ......................... 466,171 468,502
First Bank System Inc. Series 1993-F, 7.183%, 11/25/24 ................................. 20,469,000 19,931,689
Fund America Investors Corp. Series 1991-1H, 7.95%, 2/20/20 ............................ 6,874,177 6,957,905
General Electric Capital Mortgage Services, Inc. Series 1992-2F, 7%, 6/25/07 ........... 500,000 500,000
General Electric Capital Mortgage Services, Inc. Series 1993-14, 6.5%, 1/25/18 ......... 30,075,000 29,285,531
General Electric Capital Mortgage Services, Inc. Series 1994-19 A1, 7.5%, 6/24/24 ...... 12,433,577 12,456,890
General Electric Capital Mortgage Services, Inc. Series 1994-27, 6.5%, 7/25/24 ......... 11,791,528 11,680,982
Paine Webber Mortgage Acceptance Corp., Series 1993-6, 6.9%, 8/25/08 ................... 1,824,000 1,814,310
Prudential Home Mortgage Securities Co. Series 1992-47 A7, 7.5%, 1/25/23 ............... 1,843,100 1,840,797
Prudential Home Mortgage Securities Co. Series 1993-43-A1, 5.4%, 10/25/23 .............. 1,314,943 1,284,120
Residential Funding Mortgage Securities Series 1996-S15, 7.75%, 1/25/07 ................ 9,301,000 9,469,581
Residential Funding Mortgage Securities Series 1993-A2, 6.85%, 9/25/23 ................. 3,220,000 3,097,238
Residential Funding Mortgage Securities Series 1993-A5, 7.09%, 10/25/23 ................ 19,500,000 18,951,563
Resolution Trust Corp., Series A, STRIP, Zero Coupon, 7/15/97 .......................... 905,000 852,655
Resolution Trust Corp., Series 1992 A2A, 7.5%, 8/25/23 ................................. 2,327,915 2,327,915
Resolution Trust Corp., Series 1992 A2C, 7.5%, 8/25/23 ................................. 2,556,356 2,559,951
Ryland Acceptance Corp. Four, Series 97-H, 8.95%, 8/20/19 .............................. 10,151,407 10,497,164
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $328,895,706) 317,145,568
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS - NON U. S.$ DENOMINATED 4.1%
- ----------------------------------------------------------------------------------------------------------------------
Government of New Zealand, 9%, 11/15/96 (Cost $64,033,277) .......................... NZD 93,500,000 64,048,202
-----------
ASSET BACKED SECURITIES 22.9%
- ----------------------------------------------------------------------------------------------------------------------
CREDIT CARD RECEIVABLES 0.8%
First USA Bank, Series 1994-1, 7.45%, 4/15/99 .......................................... 13,735,849 13,612,226
-----------
HOME EQUITY LOANS 11.9%
AFC Home Equity Loan Trust, Series 1990-3A, 9.6%, 9/15/05 .............................. 2,100,943 2,159,375
AFC Home Equity Loan Trust, Series 1992-3A, 7.05%, 8/15/07 ............................. 921,829 906,561
AFC Home Equity Loan Trust, Series 1993-3A, 5.45%, 6/20/13 ............................. 1,355,710 1,269,284
CTS Home Equity Loan Trust, Series 1991-1A, 8.8%, 1/15/06 .............................. 1,337,476 1,355,439
Chevy Chase Home Improvement Trust, Series 1996-1, 7.15%, 5/15/15 ...................... 11,200,000 11,161,500
Contimortgage Home Equity Loan Trust, Series 1991-1, 9.52%, 3/15/06 .................... 971,167 1,020,636
Contimortgage Home Equity Loan Trust, Series 1995-4 A5, 6.56%, 12/15/10 ................ 3,250,000 3,223,155
Contimortgage Home Equity Loan Trust, Series 1995-1 A2, 8.6%, 6/15/25 .................. 26,577,310 26,818,167
Equity Credit Corp. Home Equity Loan Trust, Series 1993-1, 5.3%, 9/15/08 ............... 3,251,058 3,106,792
</TABLE>
The accompanying notes are in integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
10 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount($) Value($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Credit Corp. Home Equity Loan Trust, Series 1993-4B, 5.65%, 12/15/08 ...... 2,505,442 2,405,224
Fleet Financial Home Equity Trust, Series 1991-2A, 6.7%, 10/15/06 ................ 3,187,839 3,191,824
Home Equity Loan Trust, Series 1992 A, 6.65%, 11/20/12 ........................... 5,499,693 5,410,323
Home Equity Loan Trust, Series 1992 B, 6.850%, 11/20/12 .......................... 1,201,083 1,182,671
Household Finance Corp., Home Equity Loan Series 1992-2 A3, 5.25%, 10/20/07 ...... 1,774,912 1,764,919
Mid-State Homes IV Series 1, 8.33%, 4/1/30 ....................................... 1,683,335 1,732,520
Old Stone Credit Corp., Series 1991-2, 8.42%, 9/15/06 ............................ 1,872,279 1,901,533
Old Stone Credit Corp. Home Equity Loan, Series 1992-2, 6.95%, 5/15/07 ........... 6,060,265 5,987,352
Old Stone Credit Corp. Home Equity Loan Series 1992-3 A2, 6.3%, 8/25/07 .......... 5,475,858 5,336,881
Old Stone Credit Corp. Home Equity Loan Series 1993-1, 5.85%, 3/15/08 ............ 1,440,853 1,403,030
Security Pacific Home Equity Loan Trust, Series 1991-2A, 8.1%, 6/15/20 ........... 1,320,620 1,333,591
Security Pacific Home Equity Loan Trust, Series 1991-2B, 8.15%, 6/15/20 .......... 3,716,558 3,748,498
Security Pacific Home Equity Trust, Series 1991-A B, 10.5%, 3/10/06 .............. 15,600,000 16,036,313
TMS Home Equity Loan Trust, Series 1996-A4, 6.53%, 6/15/16 ....................... 2,750,000 2,718,203
TMS Home Equity Loan Trust, Series 1995-C A2, 6.25%, 8/15/16 ..................... 9,262,000 9,073,866
TMS Home Equity Loan Trust, Series 1993-D, 5.075%, 2/15/18 ....................... 23,117,269 22,337,061
TMS Home Equity Loan Trust Series 1996-B A1, 6.72%, 3/15/10 ...................... 33,935,000 33,998,628
U.S. Home Equity Loan, Series 1991-2B, 9.125%, 4/15/21 ........................... 9,700,000 9,878,771
U.S. Home Equity Loan, Series 1991-2C, 8.5%, 4/15/21 ............................. 881,912 891,552
United Companies Financial Corp., Series 1994-A A3, 6.1%, 7/10/18 ................ 7,175,000 7,013,563
-----------
188,367,232
-----------
MANUFACTURED HOUSING RECEIVABLES 10.1%
Chemical Financial Acceptance Corp. Housing Trust, Series 1989 A,
Participating Certificate, 9.25%, 5/15/98 ...................................... 4,348,980 4,449,529
Green Tree Financial Corp., Securitized NIM Series 1994-A, 6.9%, 2/15/04 ......... 20,283,077 20,086,584
Green Tree Financial Corp., Securitized NIM Series 1994-B2, 7.85%, 7/15/04 ....... 17,974,692 18,036,480
Green Tree Financial Corp., Series 1993-2 B, 8%, 6/15/13 ......................... 8,187,000 8,227,935
Green Tree Financial Corp., Series 1995-1 B2, 9.2%, 6/15/25 ...................... 5,715,000 6,120,408
Green Tree Financial Corp., Series 1995-3 B2, 8.1%, 8/15/25 ...................... 20,636,400 20,807,295
Green Tree Financial Corp., Series 1995-6 B2, 8%, 9/15/25 ........................ 11,769,720 11,583,979
Green Tree Financial Corp., Series 1995-5 B2, 7.65%, 10/15/25 .................... 9,000,000 8,711,719
Green Tree Financial Corp., Series 1995-C B1, 7.2%, 7/15/20 ...................... 1,950,000 1,920,141
Green Tree Financial Corp., Series 1995-D A3, 6.45%, 9/15/25 ..................... 445,000 437,350
Green Tree Financial Corp., Series 1995-D B1, 7.05%, 9/15/25 ..................... 750,000 740,625
Green Tree Financial Corp., Series 1995-F A4, 6.15%, 1/15/21 ..................... 2,825,000 2,724,359
Green Tree Financial Corp., Series 1995-F B2, 7.1%, 1/15/21 ...................... 2,000,000 1,882,500
Merrill Lynch Mortgage Investors Inc., Series 1988-H, 9.7%, 6/15/08 .............. 138,671 140,057
</TABLE>
The accompanying notes are in integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
11 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount($) Value($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch Mortgage Investors Inc., Series 1988-Q, 9.8%, 9/15/08 ............ 309,906 313,780
Merrill Lynch Mortgage Investors Inc., Series 1989-F, 9.75%, 10/15/09 .......... 225,017 228,532
Merrill Lynch Mortgage Investors Inc., Series 1990-C, 9.7%, 6/15/10 ............ 1,923,213 1,986,314
Merrill Lynch Mortgage Investors Inc., Series 1990-H, 9.25%, 1/15/11 ........... 3,701,691 3,794,233
Merrill Lynch Mortgage Investors Inc., Series 1990-I, 10%, 1/15/11 ............. 3,590,775 3,729,918
Merrill Lynch Mortgage Investors Inc., Series 1991-B, 9.2%, 3/15/11 ............ 713,320 726,695
Merrill Lynch Mortgage Investors Inc., Series 1991-A, 9.25%, 5/15/11 ........... 2,709,508 2,784,019
Merrill Lynch Mortgage Investors Inc., Series 1991-C, 8.9%, 7/15/11 ............ 3,280,860 3,312,619
Merrill Lynch Mortgage Investors Inc., Series 1991-G, 9.15%, 10/15/11 .......... 5,644,271 5,843,570
Merrill Lynch Mortgage Investors Inc., Series 1992-B, 8.5%, 4/15/12 ............ 11,288,695 11,524,967
Merrill Lynch Mortgage Investors Inc., Series 1992-B A4, 7.85%, 4/15/12 ........ 4,264,552 4,313,850
Merrill Lynch Mortgage Investors Inc., Series 1992-D, 7.95%, 7/15/17 ........... 3,114,257 3,160,970
Security Pacific Acceptance Corp., Series 1991-2B, 8.55%, 9/15/11 .............. 7,258,057 7,407,718
Security Pacific Acceptance Corp., Series 1991-A2, 7.1%, 6/15/12 ............... 5,151,637 5,182,393
-----------
160,178,539
-----------
MISCELLANEOUS 0.1%
Green Tree Recreational Equipment Trust Series 1996-A A1, 5.55%, 2/15/18 ....... 905,730 890,163
- --------------------------------------------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES (Cost $363,960,956) 363,048,160
- --------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 18.6%
- --------------------------------------------------------------------------------------------------------------
FINANCIAL 8.6%
Capital One Bank, 6.875%, 4/24/00 .............................................. 565,000 560,203
Capital One Bank, 7%, 4/30/01 .................................................. 18,450,000 18,296,312
Discover Credit Corp., Medium Term Note, Series 2, 8.73%, 8/15/96 .............. 5,000,000 5,016,600
Health Care Properties Investors Inc., 6%, 11/8/00 ............................. 5,225,000 4,983,344
Marine Midland Bank, FRN, 5.68%, 12/20/00 ...................................... 4,000,000 3,980,000
Spieker Properties, Inc., 6.65%, 12/15/00 ...................................... 11,000,000 10,667,030
Spieker Properties, Inc., 6.8%, 12/15/01 ....................................... 5,500,000 5,280,605
Spieker Properties, Inc., 6.95%, 12/15/02 ...................................... 3,500,000 3,353,560
Sun Communities, Inc., 7.625%, 5/1/03 .......................................... 5,850,000 5,817,357
Taubman Realty Group LP Medium Term Note, 7.4%, 6/10/02 ........................ 3,300,000 3,176,250
Taubman Realty Group LP Medium Term Note, 7.5%, 6/15/02 ........................ 19,150,000 18,551,563
The Money Store Inc., 9.16%, 9/9/97 ............................................ 37,220,000 38,138,590
The Money Store Inc., 7.63%, 4/15/98 ........................................... 8,000,000 8,047,360
United Savings Association of Texas, 9.05%, 5/15/98 ............................ 10,000,000 9,800,000
-----------
135,668,774
-----------
MEDIA 5.0%
Tele-Communications Inc., 6.875%, 2/15/06 ...................................... 15,000,000 13,538,550
</TABLE>
The accompanying notes are in integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
12 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount($) Value($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tele-Communications, Inc. Senior note, 9.25%, 4/15/02 ................... 17,515,000 18,624,225
Tele-Communications, Inc., 8.25%, 1/15/03 ............................... 8,700,000 8,791,698
Time Warner Inc., 7.95%, 2/1/00 ......................................... 37,695,000 38,505,443
-----------
79,459,916
-----------
DURABLES 1.8%
Ford Motor Co., 8.42%, 12/30/96 ......................................... 3,488,726 3,534,079
McDonnell Douglas Corp., Medium-Term Note, 6.54%, 7/29/96 ............... 24,970,000 24,984,483
-----------
28,518,562
-----------
MANUFACTURING 2.2%
Lyondell Petrochemical Co., 10%, 6/1/99 ................................. 15,580,000 16,827,958
Lyondell Petrochemical Co. Global Note, 9.125%, 3/15/02 ................. 9,000,000 9,726,390
Lyondell Petrochemical Co., 9.75%, 9/4/03 ............................... 4,600,000 5,243,034
Tenneco Inc., 10.375%, 11/15/00 ......................................... 2,600,000 2,915,666
-----------
34,713,048
-----------
METALS & MINERALS 1.0%
Alcan Aluminium Ltd., 9.625%, 7/15/19 ................................... 14,000,000 15,327,060
- ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $298,963,452) 293,687,360
- ----------------------------------------------------------------------------------------------------------
MEDIUM-TERM MUNICIPAL INVESTMENTS 0.1%
- ----------------------------------------------------------------------------------------------------------
-----------
Massachusetts Industrial Finance Agency, 6%, 7/1/96 (Cost $1,000,000) ... 1,000,000 1,000,000
-----------
COUPON INDEXED SECURITIES 5.9%
- ----------------------------------------------------------------------------------------------------------
Bayerische Landesbank Medium Term Note, inversely indexed to 30 day
Commercial Paper Bond Equivalent Yield, 5.98%, 12/29/97 ............... 39,500,000 39,065,500
Federal National Mortgage Association Medium Term Note, inversely
indexed to 30 day Commercial Paper Bond Equivalent
Yield, 9.8415%, 12/29/97 (b) .......................................... 52,400,000 54,430,500
- ----------------------------------------------------------------------------------------------------------
TOTAL COUPON INDEXED SECURITIES (Cost $93,148,405) 93,496,000
- ----------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS 0.0%
- ----------------------------------------------------------------------------------------------------------
Put on New Zealand Dollars, strike price 1.516, -----------
expires 11/14/96 (Cost $773,607) ...................................... NZD 97,308,962 399,982
-----------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0% (Cost $1,601,008,632)(a) 1,582,592,627
- ----------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $1,601,008,632. At June 30,
1996, net unrealized depreciation for all securities based on tax cost was
$18,416,005. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $7,691,292 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$26,107,297.
Included in the portfolio are investments in mortgage or asset-backed
securities which are interests in separate pools of mortgages or assets.
Effective maturities of these investments will be shorter than stated
maturities due to prepayments. All separate investments in each of the
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association and the Government National Mortgage Association issues which
have similar coupon rates have been aggregated for presentation purposes in
the investment portfolio.
</TABLE>
The accompanying notes are in integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
13 - SCUDDER SHORT TERM BOND FUND
<PAGE>
- -------------------------------------------------------------------------------
Currency abbreviations and other acronyms used in this portfolio:
ARM Adjustable Rate Mortgage
FRN Floating Rate Note
NIM Net Interest Margin
NZD New Zealand Dollars
REMIC Real Estate Mortgage Investment Conduit
STRIP Separate Trading Registered Interest and Principal
PO Principal Only
(b) At June 30, 1996, these securities, in whole or in part, have been pledged
to cover initial margin requirements for open futures contracts.
<TABLE>
AT JUNE 30, 1996, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Futures Expiration Contracts Aggregate Face Value Market Value($)
------- ---------- --------- -------------------- ---------------
<S> <C> <C> <C> <C>
5 Year U.S. Treasury Notes Sep. 1996 1,900 198,973,344 200,925,000
10 Year U.S. Treasury Notes Sep. 1996 1,300 137,878,300 139,750,000
----- ----------- -----------
3,200 336,851,644 340,675,000
----- ----------- -----------
Total net unrealized depreciation on open futures contracts sold short ............. (3,823,356)
===========
</TABLE>
<TABLE>
At June 30, 1996, outstanding written call options were as follows (Note A):
<CAPTION>
PRINCIPAL EXPIRATION STRIKE MARKET
AMOUNT DATE PRICE VALUE($)
-------------------------------------------------------
<S> <C> <C> <C> <C>
New Zealand Dollar
(Premiums received $773,607) .... NZD 97,308,962 Nov. 96 NZD 1.516 679,442
</TABLE>
<TABLE>
Transactions in written call options during the six months ended June 30, 1996 were:
<CAPTION>
PRINCIPAL AMOUNT PREMIUMS RECEIVED ($)
--------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1995 -- --
Contracts written .......... NZD 97,308,962 773,607
---------- -------
Outstanding at
June 30, 1996 .............. NZD 97,308,962 773,607
========== =======
</TABLE>
The accompanying notes are in integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
14 - SCUDDER SHORT TERM BOND FUND
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities
as of June 30, 1996 (Unaudited)
<S> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $1,601,008,632) (Note A) ................... $1,582,592,627
Cash ............................................................................... 1,111,554
Receivable for investments sold .................................................... 23,194
Receivable for fund shares sold .................................................... 1,300,172
Interest receivable ................................................................ 16,745,869
--------------
Total assets ....................................................................... 1,601,773,416
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................................. $ 5,642,329
Payable for fund shares redeemed ................................................... 1,701,551
Dividends payable .................................................................. 2,076,512
Accrued management fee (Note C) .................................................... 679,060
Other accrued expenses (Note C) .................................................... 613,851
Payable for daily variation margin on open futures contracts (Note A) .............. 1,914,063
Written options, at value (premiums received $773,607) (Note A) .................... 679,442
--------------
Total liabilities .................................................................. 13,306,808
---------------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $1,588,466,608
---------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments .................................................................... (18,416,005)
Options ........................................................................ 94,165
Futures ........................................................................ (3,823,356)
Foreign currency related transactions .......................................... 8,851
Accumulated net realized loss ...................................................... (105,520,304)
Shares of beneficial interest ...................................................... 1,440,463
Additional paid-in capital ......................................................... 1,714,682,794
---------------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $1,588,466,608
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ($1,588,466,608/
144,046,277 outstanding shares of beneficial interest, $.01 par value, unlimited --------------
number of shares authorized) $ 11.03
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
15 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
Statement of Operations
six months ended June 30, 1996 (Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------
Income:
Interest ....................................................... $ 62,182,552
------------
Expenses:
Management fee (Note C) ........................................ 4,286,321
Services to shareholders (Note C) .............................. 1,831,407
Custodian and accounting fees (Note C) ......................... 218,521
Trustees' fees and expenses (Note C) ........................... 10,869
Reports to shareholders ........................................ 211,733
Auditing ....................................................... 34,309
Federal and state registration ................................. 29,582
Legal .......................................................... 11,569
Other .......................................................... 40,371
------------
6,674,682
--------------------------------------------------------------------------------
NET INVESTMENT INCOME .......................................... 55,507,870
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ----------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... (7,379,806)
Options ........................................................ (3,976,034)
Futures ........................................................ 679,231
Foreign currency related transactions .......................... (38,611)
------------
(10,715,220)
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (36,324,286)
Options ........................................................ 94,165
Futures ........................................................ (3,823,356)
Foreign currency related transactions .......................... 8,851
------------
(40,044,626)
------------
Net loss on investment transactions ............................ (50,759,846)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 4,748,024
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
16 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 55,507,870 $ 123,943,165
Net realized loss from investment transactions ...................... (10,715,220) (79,840,870)
Net unrealized appreciation (depreciation) on investment transactions
during the period ............................................... (40,044,626) 156,351,771
-------------- --------------
Net increase in net assets resulting from operations ................ 4,748,024 200,454,066
-------------- --------------
Distributions to shareholders from:
Net investment income ($.36 and $.43, respectively) ................. (55,507,870) (75,809,129)
Tax return of capital ($.28 per share) .............................. -- (48,134,036)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ........................................... 165,190,834 434,415,510
Net asset value of shares issued to shareholders in reinvestment of
distributions ................................................... 42,290,730 93,453,411
Cost of shares redeemed ............................................. (391,076,160) (917,495,507)
-------------- --------------
Net decrease in net assets from Fund share transactions ............. (183,594,596) (389,626,586)
-------------- --------------
DECREASE IN NET ASSETS .............................................. (234,354,442) (313,115,685)
Net assets at beginning of period ................................... 1,822,821,050 2,135,936,735
-------------- --------------
NET ASSETS AT END OF PERIOD ......................................... $1,588,466,608 $1,822,821,050
-------------- --------------
OTHER INFORMATION
- --------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ........................... 160,534,389 195,776,523
-------------- -------------
Shares sold ......................................................... 14,764,294 39,170,009
Shares issued to shareholders in reinvestment of distributions ...... 3,796,934 8,406,276
Shares redeemed ..................................................... (35,049,340) (82,818,419)
-------------- --------------
Net decrease in Fund shares ......................................... (16,488,112) (35,242,134)
-------------- --------------
Shares outstanding at end of period ................................. 144,046,277 160,534,389
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
17 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following table includes select 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,
1996
(UNAUDITED) 1995 1994 1993(c) 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, -------------------------------------------------------------------------------------------
beginning of period ................ $11.35 $10.91 $12.01 $11.93 $12.25 $11.72 $11.71 $11.19 $11.23 $11.92 $11.35
-------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (a) .......... .36 .71 .81 .87 .97 1.08 1.09 .83 .73 .74 .81
Net realized and unrealized
gain (loss) on investments ....... (.32) .44 (1.15) .08 (.33) .53 .01 .61 (.04) (.58) .78
Total from investment -------------------------------------------------------------------------------------------
transactions ....................... .04 1.15 (.34) .95 .64 1.61 1.10 1.44 .69 .16 1.59
-------------------------------------------------------------------------------------------
Less distributions:
From net investment income ......... (.36) (.43) (.64) (.80) (.96) (1.08) (1.09) (.83) (.73) (.74) (.81)
From net realized gains ............ -- -- -- (.03) -- -- -- (.09) -- (.11) (.21)
In excess of gains ................. -- -- -- (.04) -- -- -- -- -- -- --
From tax return of capital ......... -- (.28) (.12) -- -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------
Total distributions .................. (.36) (.71) (.76) (.87) (.96) (1.08) (1.09) (.92) (.73) (.85) (1.02)
===========================================================================================
Net asset value, end of period ....... $11.03 $11.35 $10.91 $12.01 $11.93 $12.25 $11.72 $11.71 $11.19 $11.23 $11.92
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) ..................... .40** 10.74 (2.87) 8.18 5.43 14.38 9.88 13.20 6.10 1.40 14.70
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) ....................... 1,588 1,823 2,136 3,190 2,862 2,247 340 72 10 10 8
Ratio of operating expenses net,
to average daily net assets (%) .... .79* .75 .73 .68 .75 .44 .16 .36 1.50 1.45 1.45
Ratio of net investment income net,
to average daily net assets (%) .... 6.54* 6.37 6.93 7.21 8.01 8.96 9.36 7.97 6.48 6.34 6.89
Portfolio turnover rate (%) .......... 47.3* 101.1 65.3 66.1 83.7(b) 41.0 52.9 40.0 23.5 28.7 15.6
(a) Portion of expenses
reimbursed by the Adviser ........ $ -- $ -- $ -- $ -- $ -- $ -- $ .02 $ .10 $ .04 $ .04 $ --
Management fee not imposed
by the Adviser (Note C) .......... $ -- $ -- $ -- $ -- $ -- $ .06 $ .07 $ .05 $ -- $ -- $ .01
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.
* Annualized ** Not Annualized
</TABLE>
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
18-SCUDDER SHORT TERM BOND FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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.
FUTURES CONTRACTS. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period the Fund
sold interest rate futures to hedge against declines in the value of portfolio
securities.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund 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 a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge, the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options on currencies and wrote call options on
currencies as a hedge against potential adverse price movements in the value of
portfolio assets. In addition during the period the Fund purchased call options
on other financial instruments.
If the Fund writes an option and 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 Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
19-SCUDDER SHORT TERM BOND FUND
<PAGE>
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
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.
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Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
20-SCUDDER SHORT TERM BOND FUND
<PAGE>
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, 1995, the Fund had a net tax basis capital loss carryforward of
approximately $79,822,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December 31,
2002 ($27,264,000) and December 31, 2003 ($52,558,000), the respective
expiration dates. In addition, from November 1, 1995 through December 31, 1995,
the Fund incurred approximately $1,093,000 of net realized capital losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as having arisen in the year ended December 31, 1996.
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.
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 futures, options, 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 six months ended June 30, 1996, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $329,236,448 and $363,480,263 respectively. Purchases and sales of
U.S. Government obligations aggregated $62,775,081 and $259,869,361,
respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1996 was $704,753,369 and $367,901,725, respectively.
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
21-SCUDDER SHORT TERM BOND FUND
<PAGE>
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 six
months ended June 30, 1996, the fee pursuant to the Management Agreement
amounted to $4,286,321, which was equivalent to an annualized effective rate of
0.51% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. Included
in services to shareholders is $1,159,670 charged to the Fund by SSC for the six
months ended June 30, 1996, of which $184,018 is unpaid at June 30, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended June 30,
1996, the amount charged to the Fund by STC aggregated $274,223, of which
$89,844 is unpaid at June 30, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible 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, 1996, the amount charged to the Fund by SFAC aggregated $100,617
of which $32,256 is unpaid at June 30, 1996.
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 six months ended June 30,
1996, Trustees' fees and expenses aggregated $10,869.
- ------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- ------------------------------------------------------------------------
22-SCUDDER SHORT TERM BOND FUND
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23
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24
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Lynn S. Birdsong*
Trustee
Sheryle J. Bolton
Trustee; Consultant
Thomas J. Devine
Trustee; Consultant
Peter B. Freeman
Trustee; Corporate Director and Trustee
Dr. 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
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25
<PAGE>
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 Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value 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.
26
<PAGE>
How to Contact Scudder
Account Service and Information
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
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
Visit the Scudder World Wide Web Site at:
http://funds.scudder.com
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 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.
27
<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 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
