Scudder
Short Term
Bond Fund
Semiannual Report
June 30, 1997
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.
SCUDDER [logo]
<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
24 Officers and Trustees
25 Investment Products and Services
26 Scudder Solutions
In Brief
o Scudder Short Term Bond Fund provided a 6.06% 30-day net annualized SEC yield
on June 30, 1997, considerably higher than the 5.00% average yield of the
taxable money market funds tracked by IBC Financial Data, Inc. (Money funds seek
to maintain a stable $1.00 net asset value per share.)
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE: Comparative Yields
30-day SEC yields as of June 30, 1997
CHART DATA: Scudder Taxable Money
Short Term Market Fund
Bond Fund Average*
6.06% 5.00%
CALLOUT TO PRECEDING CHART: *Source: IBC Financial Data, Inc.
o The Fund's 2.63% total return for the 6 months ended June 30, 1997, was
achieved in a challenging environment for fixed-income investments.
o The Fund's duration (and therefore its sensitivity to changing interest rates)
was shortened early in the year to help protect the portfolio from price
volatility.
o Throughout the period, the Fund maintained its focus on high-quality
alternatives to U.S. Treasuries, including mortgage- and asset-backed
securities, and corporate bonds.
2 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Letter From the Fund's President
Dear Shareholders,
So far, 1997 looks a lot like 1996. Over the first six months of Scudder
Short-Term Bond Fund's 1997 fiscal year, inflation continued to be dormant, yet
investors responded to strong economic growth as if higher prices were just
around the corner. At the end of March, the Federal Reserve Board engineered a
small increase in short-term interest rates. The anticipation of this event in
the financial markets affected all types of fixed-income investments. However,
those most sensitive to changes in the level of interest rates --
longer-maturity bonds and Treasuries, in particular -- were the hardest hit.
Your Fund's focus on short-maturity alternatives to U.S. Treasuries helped lead
to a positive 2.63% total return in a period when some long-term bonds posted
negative returns.
Despite near-term uncertainty in the financial markets, we believe the
global economic landscape provides an excellent long-term backdrop for
fixed-income investors. In the report that follows, your fund's managers discuss
the events of the past six months as well as their outlook for the remainder of
the year.
To keep you abreast of developments within the Scudder Family of Funds,
we're pleased to tell you about a newcomer to our mutual fund lineup: Scudder
International Growth and Income Fund. The Fund employs a yield-oriented approach
to international investing and seeks long-term growth of capital plus current
income. Investors who desire international exposure but who wish to take a more
conservative approach may appreciate the Fund's emphasis on the dividend-paying
stocks of well-established companies listed on foreign exchanges. For a complete
listing of Scudder's mutual fund offerings, see page 25.
We thank you for your continued investment in Scudder Short Term Bond Fund.
As always, please do not hesitate to call Investor Relations at 1-800-225-2470
with any questions, or visit our Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Short Term Bond Fund
3 - SCUDDER SHORT TERM BOND FUND
<PAGE>
PERFORMANCE UPDATE as of June 30, 1997
- -----------------------------------------------------------------
FUND INDEX COMPARISONS
- -----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/97 $10,000 Cumulative Annual
- ---------------------------------------
SCUDDER SHORT TERM BOND FUND
- ---------------------------------------
1 Year $ 10,617 6.17% 6.17%
5 Year $ 12,803 28.03% 5.07%
10 Year* $ 19,938 99.38% 7.14%
- ---------------------------------------
SALOMON BROTHERS INC. BROAD INVESTMENT
GRADE BOND INDEX (1-3 YEARS)
- ---------------------------------------
1 Year $ 10,661 6.61% 6.61%
5 Year $ 13,158 31.58% 5.64%
10 Year* $ 20,384 103.84% 7.38%
- ---------------------------------------
- -----------------------------------------------------------------
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
- ----------------------
'87 $10,000
'88 $10,479
'89 $11,505
'90 $12,578
'91 $14,160
'92 $15,573
'93 $16,890
'94 $16,988
'95 $17,867
'96 $18,780
'97 $19,938
SALOMON BROTHERS INC. BROAD INVESTMENT
GRADE BOND INDEX (1-3 YEARS)
Year Amount
- ----------------------
'87 $10,000
'88 $10,768
'89 $11,726
'90 $12,713
'91 $14,018
'92 $15,492
'93 $16,537
'94 $16,818
'95 $18,111
'96 $19,121
'97 $20,384
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>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 11.33 $ 11.63 $ 11.58 $ 11.89 $ 12.01 $ 12.12 $ 11.37 $ 11.19 $ 11.03 $ 11.00
INCOME DIVIDENDS.. $ .75 $ .71 $ 1.03 $ 1.09 $ 1.03 $ .87 $ .76 $ .74 $ .72 $ .69
CAPITAL GAINS
DISTRIBUTIONS..... $ .08 $ .03 $ .06 $ - $ - $ - $ .07 $ - $ - $ -
FUND TOTAL
RETURN (%)........ 4.79 9.80 9.33 12.58 9.98 8.45 .58 5.17 5.11 6.17
INDEX TOTAL
RETURN (%)........ 7.69 8.91 8.41 10.27 10.50 6.76 1.69 7.68 5.57 6.61
</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 3,
1989. Performance figures include the performance of its predecessor, the
General 1994 Portfolio of Scudder Target Fund. Since adopting its current
objective, the cumulative and average annual returns are 72.70% and 7.07%,
respectively.
4 - SCUDDER SHORT TERM BOND FUND
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
U.S. Gov't Backed Mortgages 29%
Asset-Backed Securities 23%
Corporate Bonds 21%
Collateralized Mortgage Obligations 18%
Cash Equivalents 5%
Indexed Securities 4%
- -------------------------------------------
100%
- -------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Portfolio assets are divided
primarily among alternatives to
U.S. Treasuries.
- ---------------------------------------------------------------------------
QUALITY
- ---------------------------------------------------------------------------
U.S. Gov't & Agencies 39%
AAA* 25%
AA 3%
A 7%
BBB 26%
- -------------------------------------------
100%
- -------------------------------------------
Weighted average quality: AA+
*Category includes cash equivalents
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The majority of the portfolio is
invested in securities with the
highest quality ratings. All securities
in the portfolio are investment
grade.
- ---------------------------------------------------------------------------
EFFECTIVE MATURITY
- ---------------------------------------------------------------------------
Under 1 year 19%
1 - 5 years 59%
5 - 8 years 14%
8 years or greater 8%
- -------------------------------------------
100%
- -------------------------------------------
Weighted average effective maturity: 2.35 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
With the near-term outlook for
interest rates uncertain, the Fund
has chosen to maintain a
relatively short effective maturity.
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 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
In the first half of 1997, bond investors reacted -- and in some cases,
overreacted -- to a flood of data that suggested the economy was overheating.
Their fears were not entirely unfounded. The economy grew at a 5.9% annual rate
in the first quarter of 1997, while unemployment dropped to its lowest level
since 1973. March's widely anticipated increase in the federal funds rate may
prove to have been the turning point, however. Bonds spent much of the remaining
weeks through June taking back lost ground, as data began to suggest that growth
in the second quarter would be slower.
Scudder Short Term Bond Fund steered a successful course through the period's
market volatility, reaching the midpoint of its 1997 fiscal year with a 2.63%
total return. The Fund's benchmark, the unmanaged Salomon Brothers Broad
Investment Grade Bond Index (1 to 3 years), returned 2.90% for the same period.
Scudder Short Term Bond Fund's 30-day net annualized SEC yield at the end of
June was 6.06%, compared with 5.00% on average for the taxable money market
funds tracked by IBC/Donoghue, an independent research firm. As shown in the
graph below, the Fund historically has maintained a comfortable yield advantage
over taxable money market funds. Of course, money market funds seek to maintain
a stable principal value, whereas your Fund's net asset value will fluctuate
with changing market conditions.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE: Yield Comparison:
December 1993-June 30, 1997
30-Day SEC Yields
CHART DATA:
IBC All Taxable Money Scudder Short Term
Fund Average Bond Fund
12/93 3.00 5.65
3/94 2.87 6.13
6/94 3.62 7.14
9/94 4.17 6.89
12/94 5.04 7.71
3/95 5.52 6.71
6/95 5.48 6.49
9/95 5.25 6.29
12/95 5.19 5.85
3/96 4.76 5.83
6/96 4.77 6.37
9/96 4.83 6.52
12/96 4.85 6.11
3/97 4.91 6.14
6/97 5.07 6.06
Duration Management
Adds Value
The active management of overall portfolio duration is integral to the Fund's
search for income and relative price stability. An important tool for investment
professionals, duration measures a portfolio's sensitivity to changes in
interest rates and is adjusted by altering a portfolio's mix of securities.
Essentially, the shorter a portfolio's duration, the less its net asset value
will be adversely affected by an increase in interest rates. At the same time, a
short duration will restrict a portfolio's participation in market rallies.
As evidence of stronger economic growth mounted in early 1997, we pared the
Fund's duration to approximately 1.7 years. This indicates a neutral outlook.
(As a short-term bond fund, your fund's duration typically will not exceed that
of a 3-year Treasury note -- about 2.5 years.) Our duration strategy added value
6 - SCUDDER SHORT TERM BOND FUND
<PAGE>
during the period; when interest rates began to rise in mid-February, bonds of
longer duration suffered relatively greater price declines.
Quality Portfolio Helps
Boost Returns
The Fund has a high-quality orientation. We have continued to structure the
portfolio with a diversified list of short-maturity alternatives to U.S.
Treasuries in order to increase the Fund's yield. At the end of June, assets
were spread across mortgage-backed, asset-backed, and corporate issues, with
over 65% of portfolio holdings rated AA or better by Standard & Poor's and/or
Moody's.
The Fund's mortgage-backed securities (almost 50% of portfolio holdings at the
end of June) performed particularly well during the period. Mortgage-backed
securities carry higher yields than Treasuries of equivalent maturity in order
to compensate investors for the risk of prepayment. (Because many homeowners opt
to refinance or prepay the underlying mortgages when interest rates fall -- and
lower mortgage rates become available -- this prepayment risk can dampen
performance of mortgage-backed securities.) The Fund's "seasoned" mortgages
carry little prepayment risk in the eyes of investors. The bonds represent
mortgages that could have been refinanced in the past but were not for one
reason or another, and now are even less likely to be refinanced given the
shortened time remaining before the loans are paid off. With coupons in the 9%
to 10% range, these bonds contributed a high level of income to the portfolio.
Also contributing to the Fund's positive return were its investments in
corporate bonds issued by real estate investment trusts. These securities
accounted for approximately 9% of portfolio holdings at the end of the period.
The strength of the economy in recent months has done much for the health of the
real estate and mortgage markets, boosting property values and promoting lower
default rates among mortgage owners. These issues benefited from upgrades in
credit quality during the period and contributed a measure of price appreciation
that helped offset declines in other areas.
A Cautionary Outlook
By the end of June, bonds had recovered from their late-March selloff, and a
host of crucial economic reports have suggested inflation is less of a threat
than many predicted. The six-year-old expansion may very well wind down, paving
the way for lower interest rates and a sustained bond market rally. Importantly,
profit expectations may be overly optimistic, given that many companies are
unable to raise prices. Also, at 5.5% the current federal funds rate does not,
in our view, constitute "easy money."
The timing of an economic downturn, however, is difficult to predict. For now,
growth is strong and reported profits continue to exceed expectations. Federal
Reserve Board Chairman Alan Greenspan's warning earlier this year that "history
counsels caution" was directed at U.S. equity investors, but may also be
appropriate for those in the bond markets. Although the Fed left interest rates
unchanged at its May 20 and July 2 meetings, it may find sufficient reason to
raise rates later this year. It is interesting to note that, historically, the
Fed has shifted monetary policy by producing a series of small rate changes,
7 - SCUDDER SHORT TERM BOND FUND
<PAGE>
seldom just one. Going forward, we intend to be cautious with Scudder Short Term
Bond Fund's duration, focusing on current income while investing in sectors of
the bond market which we believe offer value in the current interest rate
environment.
Sincerely,
Your Portfolio Management Team
/s/Thomas M. Poor /s/Scott E. Dolan
Thomas M. Poor Scott E. Dolan
/s/Susan R. Martland
Susan R. Martland
8 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Investment Portfolio as of June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement 4.5%
- -------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/97 at 5.9%, to
be repurchased at $57,206,374 on 7/1/97, collateralized by a $18,267,000 U.S.
Treasury Note, 6.75%, 4/30/00 and a $37,860,000 U.S. Treasury Note, 6.25%, -------------
7/31/98, (Cost $57,197,000) ............................................................. 57,197,000 57,197,000
-------------
U.S. Government Obligations 0.5%
- -------------------------------------------------------------------------------------------------------------------------
U.S.Treasury Note, 6.375%, 9/30/01 (Cost $6,038,906) ...................................... 6,000,000 6,000,960
-------------
U.S. Gov't Backed Mortgages 28.5%
- -------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., ARM, 7.792%, 11/1/21 .................................... 581,384 609,273
Federal National Mortgage Association, 7 year Balloon, 8.5% with various maturities
to 5/1/02 ............................................................................... 12,136,152 12,459,338
Federal National Mortgage Association, 10%, 9/1/17 ........................................ 3,779,274 4,116,423
Federal National Mortgage Association, ARM, 7.5%, 1/1/19 .................................. 1,239,552 1,285,452
Federal National Mortgage Association, ARM, 7.85%, 11/1/22 ................................ 2,235,992 2,343,252
Federal National Mortgage Association, ARM, 7.59%, 10/1/23 ................................ 4,594,688 4,659,481
Federal National Mortgage Association, ARM, 6.01%, with various maturities to 5/1/29 ...... 39,672,890 39,214,272
Federal National Mortgage Association, ARM, 6.02%, with various maturities to 2/1/31 ...... 10,836,553 10,711,282
Federal National Mortgage Association, ARM, 6.04%, with various maturities to 8/1/31 ...... 929,834 919,085
Federal National Mortgage Association, ARM, 6.03%, with various maturities to 9/1/31 ...... 2,904,384 2,870,810
Federal National Mortgage Association, ARM, 6.06%, with various maturities to 11/1/35 ..... 17,070,164 16,872,833
Government National Mortgage Association, Midget, 8%, with various maturities
to 12/15/10 ............................................................................. 33,252,841 34,340,843
Government National Mortgage Association Pass-through, 11.5%, with various maturities
to 7/20/20 (b) .......................................................................... 18,133,232 20,607,008
Government National Mortgage Association Pass-through, 11%, with various maturities
to 10/20/20 ............................................................................. 2,316,376 2,607,500
Government National Mortgage Association Pass-through, 9%, with various maturities
to 12/15/21 (b) ......................................................................... 100,265,657 107,235,351
Government National Mortgage Association Pass-through, 10%, with various maturities
to 2/15/25 .............................................................................. 77,901,887 85,641,188
Government National Mortgage Association Pass-through, ARM, 7.125%, with various maturities
to 9/20/25 .............................................................................. 14,139,265 14,428,678
- -------------------------------------------------------------------------------------------------------------------------
Total U.S Gov't Backed Mortgages (Cost $357,191,752) ...................................... 360,922,069
- -------------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 18.0%
- -------------------------------------------------------------------------------------------------------------------------
Chase Mortgage Finance Corp., Series 1993-I2 A3, 7.25%, 7/25/24 ........................... 15,423,859 15,472,058
Chemical Mortgage Securities Inc., Series 1993-1 A4, 7.45%, 2/25/23 ....................... 4,175,000 4,206,313
Countrywide Funding Corp., Series 1994-2 A8, 6.5%, 2/25/09 ................................ 1,900,000 1,891,836
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Daiwa Mortgage Acceptance Corp., Series 1991 A, 8.625%, 3/15/10 ........................... 972,449 1,014,690
Federal Home Loan Mortgage Corp., Series 1719-C PO, 4/15/99 ............................... 32,107,291 29,789,546
Federal Home Loan Mortgage Corp., Series 1724-PO, 5/15/01 ................................. 47,377,510 39,826,719
Federal Home Loan Mortgage Corp., Series 1381-Z, 6%, 7/15/05 .............................. 1,941,751 1,938,100
Federal Home Loan Mortgage Corp., Series 1276-C, 7.5%, 12/15/05 ........................... 1,676,383 1,673,231
Federal Home Loan Mortgage Corp., Series 1406-E, 6%, 12/15/18 ............................. 4,400,000 4,329,875
Federal Home Loan Mortgage Corp., Series 1250-F, 7%, 4/15/19 .............................. 2,717,798 2,733,072
First Bank System Inc., Series 1993-FRN, 7.182%, 11/25/24 ................................. 20,469,000 20,325,077
Fund America Investors Corp., Series 1991-1H, 7.95%, 2/20/20 .............................. 2,217,122 2,239,293
General Electric Capital Mortgage Services, Inc. Series 1992-2F, 7%, 6/25/07 .............. 404,784 406,808
General Electric Capital Mortgage Services, Inc. Series 1993-14, 6.5%, 1/25/18 ............ 30,075,000 29,445,305
General Electric Capital Mortgage Services, Inc. Series 1994-19 A1, 7.5%, 6/25/24 ......... 9,027,408 9,078,142
General Electric Capital Mortgage Services, Inc. Series 1994-27, 6.5%, 7/25/24 ............ 8,890,788 8,835,220
Norwest Asset Security Corp., Series 1996-5 AB, 7.5%, 11/25/26 ............................ 9,914,475 10,002,776
Paine Webber Mortgage Acceptance Corp., Series 1993-6, 6.9%, 8/25/08 ...................... 1,824,000 1,828,560
Prudential Home Mortgage Securities Co., Series 1992-47 A7, 7.5%, 1/25/23 ................. 1,034,504 1,032,239
Prudential Home Mortgage Securities Co., Series 1993-43-A1, 5.4%, 10/25/23 ................ 967,907 955,808
Residential Funding Mortgage Securities, Series 1996-S15, 7.75%, 1/25/07 .................. 8,704,365 8,836,291
Residential Funding Mortgage Securities, Series 1993-A2, 6.85%, 9/25/23 ................... 3,220,000 3,167,675
Residential Funding Mortgage Securities, Series 1993-A5, FRN, 7.112%, 10/25/23 ............ 19,500,000 19,420,781
Resolution Trust Corp., Series A, STRIP, Zero Coupon, 7/15/97 ............................. 905,000 903,208
Resolution Trust Corp., Series 1992-A 2A, 7.5%, 8/25/23 ................................... 1,575,705 1,580,629
Ryland Acceptance Corp., Four Series 97-H, 8.95%, 8/20/19 ................................. 5,177,142 5,262,875
Ryland Mortgage Securities Corp., 8%, 8/25/25 ............................................. 3,791,659 3,881,711
- -------------------------------------------------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations (Cost $235,608,101) 230,077,838
- -------------------------------------------------------------------------------------------------------------------------
Asset Backed Securities 24.7%
- -------------------------------------------------------------------------------------------------------------------------
Credit Card Receivables 0.6%
First USA Bank, Series 1994-1, 7.45%, 4/15/99 ............................................. 7,547,170 7,518,491
-------------
Home Equity Loans 9.6%
Advanta Corp., Series 1997-1 A4, 7.65%, 5/25/27 ........................................... 4,435,000 4,494,595
Advanta Corp., Series 1997-2 A3, 7.3%, 10/25/22 ........................................... 10,500,000 10,559,063
AFC Home Equity Loan Trust, Series 1990-3A, 9.6%, 9/15/05 ................................. 1,544,768 1,546,216
AFC Home Equity Loan Trust, Series 1992-3A, 7.05%, 8/15/07 ................................ 655,057 646,254
CTS Home Equity Loan Trust, Series 1991-1A, 8.8%, 1/15/06 ................................. 994,342 1,001,780
Chevy Chase Home Equity Loan Trust, Series 1996-1, 7.15%, 5/15/15 ......................... 5,000,000 5,037,500
Contimortgage Home Equity Loan Trust, Series 1991-1, 9.52%, 4/15/06 ....................... 648,522 666,357
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Contimortgage Home Equity Loan Trust, Series 1995-1 A2, 8.6%, 2/15/10 ..................... 6,666,200 6,690,156
Contimortgage Home Equity Loan Trust, Series 1996-4 A6, 6.71%, 6/15/14 .................... 6,200,000 6,120,516
Contimortgage Home Equity Loan Trust, Series 1996-4 A7, 6.99%, 3/15/21 .................... 3,000,000 2,978,438
Contimortgage Home Equity Loan Trust, Series 1997-3 M1-F, 7.31%, 8/15/28 .................. 18,500,000 18,592,500
Equity Credit Corp. Home Equity Loan Trust, Series 1993-4B, 5.65%, 12/15/08 ............... 1,804,241 1,747,858
Fleet Financial Home Equity Trust, Series 1991-2A, 6.7%, 10/15/06 ......................... 1,202,290 1,207,362
Green Tree Financial Corp., Series 1997-B A5, 7.15%, 4/15/27 .............................. 9,600,000 9,654,000
Green Tree Home Improvement Loan Trust, Series 1995-C B1, 7.2%, 7/15/20 ................... 1,950,000 1,934,461
Green Tree Home Improvement Loan Trust, Series 1995-F B2, 7.1%, 1/15/21 ................... 2,000,000 1,905,469
Green Tree Home Improvement Loan Trust, Series 1995-D A3, 6.45%, 9/15/25 .................. 695,000 691,740
Green Tree Home Improvement Loan Trust, Series 1995-D B1, 7.05%, 9/15/25 .................. 750,000 749,760
Green Tree Home Improvement Loan Trust, Series 1995-10 B1, 7.05%, 2/15/27 ................. 4,000,000 3,977,500
Green Tree Home Improvement Loan Trust, 6.95%, 3/15/27 .................................... 4,000,000 3,957,500
Household Finance Corp., Home Equity Loan Series 1992-2 A3, 5.25%, 10/20/07 ............... 514,321 511,750
Old Stone Credit Corp., Series 1991-2, 8.42%, 9/15/06 ..................................... 1,309,684 1,326,055
Old Stone Credit Corp., Home Equity Loan, Series 1992-2, 6.95%, 5/15/07 ................... 4,060,140 4,054,430
Old Stone Credit Corp., Home Equity Loan, Series 1992-3A2, 6.3%, 8/25/07 .................. 3,558,132 3,510,311
Old Stone Credit Corp., Home Equity Loan, Series 1993-1, 5.85%, 3/15/08 ................... 981,042 960,502
Security Pacific Home Equity Loan Trust, Series 1991-2B, 8.15%, 6/15/20 ................... 3,159,287 3,192,361
Security Pacific Home Equity Trust, Series 1991-A B, 10.5%, 3/10/06 ....................... 7,511,870 7,532,997
TMS Home Equity Loan Trust, Series 1994-A A3, 5.525%, 9/15/18 ............................. 756,911 738,106
TMS Home Equity Loan Trust, Series 1996-B A7, 7.55%, 2/15/20 .............................. 6,935,000 6,989,180
U.S. Home Equity Loan, Series 1991-2B, 9.125%, 4/15/21 .................................... 9,700,000 9,736,375
U.S. Home Equity Loan, Series 1991-2C, 8.5%, 4/15/21 ...................................... 301,616 302,557
-------------
123,013,649
-------------
Manufactured Housing Receivables 12.3%
Associated Manufactured Housing Corp., Series 1997-1 B1, 7.6%, 6/15/28 .................... 8,000,000 8,096,250
Chemical Financial Acceptance Corp. Housing Trust, Series 1989 A, Participating
Certificate, 9.25%, 5/15/98 ............................................................. 3,232,467 3,288,001
Green Tree Financial Corp., Securitized NIM Series 1994-A, 6.9%, 2/15/04 .................. 16,752,220 16,682,201
Green Tree Financial Corp., Securitized NIM Series 1994-B, 7.85%, 7/15/04 ................. 14,014,146 14,132,285
Green Tree Financial Corp., Series 1993-2B, 8%, 7/15/18 ................................... 8,187,000 8,351,380
Green Tree Financial Corp., Series 1997-A, 7.58%, 8/15/23 ................................. 1,250,000 1,257,413
Green Tree Financial Corp., Series 1995-1 B2, 9.2%, 6/15/25 ............................... 5,715,000 6,185,818
Green Tree Financial Corp., Series 1995-3 B2, 8.1%, 8/15/25 ............................... 20,636,400 21,090,240
Green Tree Financial Corp., Series 1995-6 B2, 8%, 9/15/26 ................................. 12,059,720 12,224,599
Green Tree Financial Corp., Series 1995-5 B2, 7.65%, 9/15/26 .............................. 9,000,000 8,824,219
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Green Tree Financial Corp., Series 1995-6 B1, 7.7%, 9/15/26 ............................... 3,925,000 3,983,875
Green Tree Financial Corp., Series 1995-8 B1, 7.3%, 12/15/26 .............................. 9,500,000 9,537,852
Green Tree Financial Corp., Series 1997-2 B1, 7.56%, 4/15/28 .............................. 4,000,000 4,044,688
Merrill Lynch Mortgage Investors Inc., Series 1989-F, 9.75%, 10/15/09 ..................... 54,327 54,513
Merrill Lynch Mortgage Investors Inc., Series 1990-C, 9.7%, 6/15/10 ....................... 1,188,104 1,222,262
Merrill Lynch Mortgage Investors Inc., Series 1990-H, 9.25%, 1/15/11 ...................... 2,181,319 2,227,672
Merrill Lynch Mortgage Investors Inc., Series 1990-I, 10%, 1/15/11 ........................ 2,366,644 2,480,361
Merrill Lynch Mortgage Investors Inc., Series 1991-B, 9.2%, 3/15/11 ....................... 335,171 339,568
Merrill Lynch Mortgage Investors Inc., Series 1991-A, 9.25%, 4/15/11 ...................... 1,757,532 1,802,559
Merrill Lynch Mortgage Investors Inc., Series 1991-G, 9.15%, 10/15/11 ..................... 5,232,054 5,464,201
Merrill Lynch Mortgage Investors Inc., Series 1992-B, 8.5%, 4/15/12 ....................... 9,706,933 9,940,482
Merrill Lynch Mortgage Investors Inc., Series 1992-B A4, 7.85%, 4/15/12 ................... 2,493,766 2,518,704
Merrill Lynch Mortgage Investors Inc., Series 1992-D, 7.95%, 7/15/17 ...................... 2,301,387 2,343,801
Mid-State Homes IV, Series 1, 8.33%, 4/1/30 ............................................... 1,569,369 1,672,420
Security Pacific Acceptance Corp., Series 1991-2B, 8.55%, 9/15/11 ......................... 6,374,446 6,515,385
Security Pacific Acceptance Corp., Series 1991-A2, 7.1%, 6/15/12 .......................... 1,816,465 1,817,591
-------------
156,098,340
-------------
Miscellaneous 2.2%
Bally's Health & Tennis Master Trust, 8.43%, 8/1/02 ....................................... 13,000,000 13,018,200
World Omni Automobile Security Securitization Trust, Series 1996-B, 6.85%, 11/15/02 ....... 15,050,000 15,092,328
-------------
28,110,528
-------------
- -------------------------------------------------------------------------------------------------------------------------
Total Asset Backed Securities (Cost $313,011,251) 314,741,008
- -------------------------------------------------------------------------------------------------------------------------
Corporate Bonds 19.7%
- -------------------------------------------------------------------------------------------------------------------------
Consumer Staples 0.4%
J. Seagram & Sons Inc., 8.375%, 2/15/07 ................................................... 4,775,000 5,173,187
-------------
Financial 13.4%
American Health Properties, Inc., 7.05%, 1/15/02 .......................................... 2,200,000 2,192,344
Colonial Realty LP , 7.5%, 7/15/01 ........................................................ 4,000,000 4,044,440
ERP Operating LP, 8.5%, 5/15/99 ........................................................... 4,100,000 4,229,560
Health Care Properties Investors Inc., 6%, 11/8/00 ........................................ 5,225,000 5,068,250
Oasis Residential Inc., 6.75%, 11/15/01 ................................................... 13,400,000 13,240,004
Oasis Residential Inc., 7%, 11/15/03 ...................................................... 14,900,000 14,635,525
Spieker Properties, Inc., 6.65%, 12/15/00 ................................................. 15,000,000 14,880,000
Spieker Properties, Inc., 6.8%, 12/15/01 .................................................. 5,500,000 5,442,580
Spieker Properties, Inc., 6.95%, 12/15/02 ................................................. 3,500,000 3,476,970
Spieker Properties, Inc., 8%, 7/19/05 ..................................................... 500,000 520,960
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - SCUDDER SHORT TERM BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spieker Properties, Inc., 7.125%, 12/1/06 ................................................. 3,425,000 3,385,202
Sun Communities, Inc., 7.625%, 5/1/03 ..................................................... 5,850,000 5,976,243
Susa Partnership LP, 7.125%, 11/1/03 ...................................................... 5,400,000 5,369,976
Taubman Realty Group LP, Medium Term Note, 8%, 6/15/99 .................................... 4,755,000 4,849,292
Taubman Realty Group LP, Medium Term Note, 7.4%, 6/10/02 .................................. 3,300,000 3,333,000
Taubman Realty Group LP, Medium Term note, 7.5%, 6/15/02 .................................. 19,150,000 19,437,250
Taubman Realty Group LP, Medium Term Note, 7%, 10/1/03 .................................... 3,595,000 3,570,087
The Money Store Inc., 9.16%, 9/9/97 ....................................................... 15,700,000 15,762,800
The Money Store Inc., Series B, 9.16%, 9/9/97 ............................................. 21,520,000 21,606,080
The Money Store Inc., 7.63%, 4/15/98 ...................................................... 9,500,000 9,570,585
United Dominion Realty Trust Inc., Medium Term Note, 7.02%, 11/15/05 ...................... 10,000,000 9,816,400
-------------
170,407,548
Media 3.0%
Time Warner Inc., 7.95%, 2/1/00 ........................................................... 37,695,000 38,753,853
-------------
Manufacturing 1.2%
Lyondell Petrochemical Co., Global Note, 9.125%, 3/15/02 .................................. 8,900,000 9,671,452
Lyondell Petrochemical Co., 9.75%, 9/4/03 ................................................. 4,600,000 5,206,786
-------------
14,878,238
Metals & Minerals 1.2%
Alcan Aluminium Ltd., 9.625%, 7/15/19 ..................................................... 14,000,000 15,225,980
-------------
Transportation 0.5%
Continental Air, 7.42%, 4/1/07 ............................................................ 6,295,000 6,337,051
-------------
- -------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $252,244,147) 250,775,857
- -------------------------------------------------------------------------------------------------------------------------
Coupon Indexed Securities 4.1%
- -------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association Medium Term Note, inversely indexed to 30 day -------------
Commercial Paper Bond Equivalent Yield, 9.692%, 12/29/97 (Cost $52,624,656) ............. 51,400,000 52,299,500
-------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,273,915,813)(a) 1,272,014,232
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $1,273,915,813. At June 30,
1997, net unrealized depreciation for all securities based on tax cost was
$1,901,581. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $9,244,338 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$11,145,919.
Included in the portfolio are investments in mortgage or asset-backed
securities which are interests in separate pools of mortgages or assets.
Effective maturities of these investments will be shorter than stated
maturities due to prepayments. All separate investments in each of the
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association and the Government National Mortgage Association issues which
have similar coupon rates have been aggregated for presentation purposes
in the investment portfolio.
The accompanying notes are an integral part of the financial statements.
13 - SCUDDER SHORT TERM BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
Currency abbreviations and other acronyms used in this portfolio:
ARM Adjustable Rate Mortgage
FRN Floating Rate Note
NIM Net Interest Margin
NZD New Zealand Dollars
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
STRIP Separate Trading Registered Interest and Principal
(b) At June 30, 1997 these securities, in whole or in part, have been pledged
to cover initial margin requirements for open futures contracts.
At June 30, 1997, open future contracts sold short were as follows:
<TABLE>
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
5 Year U.S.
Treasury Note September 30, 1997 2,353 247,894,938 249,160,640
----------- -----------
Total net unrealized appreciation on open futures contracts sold short ....... (1,265,702)
===========
</TABLE>
Transactions in written options for the six months ended June 30, 1997 are
summarized as follows:
Over-the-Counter Options
----------------------------
NZD Premiums
------------ -----------
Beginning of Period ....... 88,000,000 $ 431,200
Written ................... -- --
Closed .................... (88,000,000) (431,200)
Exercised ................. -- --
Expired ................... -- --
------------ -----------
End of Period -- --
============ ===========
The accompanying notes are an integral part of the financial statements.
14 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $1,273,915,813) ......... $1,272,014,232
Cash ............................................................ 995,460
Receivable for investments sold ................................. 13,624
Interest receivable ............................................. 9,853,210
Receivable for fund shares sold ................................. 1,198,477
Receivable for daily variation margin on open futures contracts . 588,250
Other assets .................................................... 26,474
----------------
Total assets .................................................... 1,284,689,727
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Dividends payable ............................................... 1,494,863
Payable for fund shares redeemed ................................ 4,081,560
Payable for investments purchased ............................... 294,332
Accrued management fee .......................................... 565,846
Other payables and accrued expenses ............................. 774,861
----------------
Total liabilities ............................................... 7,211,462
--------------------------------------------------------------------------------------
Net assets, at market value $1,277,478,265
--------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................. 3,568,116
Net unrealized appreciation (depreciation) on:
Investment securities ......................................... (1,901,581)
Futures ....................................................... (1,265,702)
Accumulated net realized loss ................................... (128,901,247)
Paid-in capital ................................................. 1,405,978,679
--------------------------------------------------------------------------------------
Net assets, at market value $1,277,478,265
--------------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($1,277,478,265 / 116,097,080 outstanding shares of
beneficial interest, $.01 par value, unlimited number of ----------------
shares authorized) .............................................. $ 11.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Statement of Operations
six months ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
- -------------------------------------------------------------------------------------------------------------------------
Income:
Interest ........................................................ $ 50,489,059
----------------
Expenses:
Management fee .................................................. 3,528,351
Services to shareholders ........................................ 1,762,467
Custodian and accounting fees ................................... 188,115
Trustees' fees and expenses ..................................... 11,217
Reports to shareholders ......................................... 175,955
Auditing ........................................................ 38,375
Legal ........................................................... 17,139
Registration fees ............................................... 28,364
Interest expense ................................................ 973
Other ........................................................... 20,316
----------------
Total expenses .................................................. 5,771,272
--------------------------------------------------------------------------------------
Net investment income 44,717,787
--------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investment securities ........................................... (3,087,850)
Futures ......................................................... (1,548,097)
Options ......................................................... (1,016,995)
Foreign currency related transactions ........................... (428,293)
----------------
(6,081,235)
----------------
Net unrealized appreciation (depreciation) during the period on:
Investment securities ........................................... (2,426,015)
Futures ......................................................... (1,265,702)
Options ......................................................... (54,384)
----------------
(3,746,101)
--------------------------------------------------------------------------------------
Net loss on investment transactions (9,827,336)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 34,890,451
--------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1997 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 44,717,787 $ 107,842,813
Net realized loss from investment transactions ............ (6,081,235) (33,115,928)
Net unrealized depreciation on investment transactions
during the period ...................................... (3,746,101) (17,329,463)
---------------- ----------------
Net increase in net assets resulting from operations ...... 34,890,451 57,397,422
---------------- ----------------
Distributions to shareholders from:
Net investment income ..................................... (41,149,671) (104,839,251)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................. 117,782,225 349,361,957
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 31,103,856 79,869,940
Cost of shares redeemed ................................... (333,319,481) (736,440,233)
---------------- ----------------
Net decrease in net assets from Fund share transactions ... (184,433,400) (307,208,336)
---------------- ----------------
Decrease in net assets .................................... (190,692,620) (354,650,165)
Net assets at beginning of period ......................... 1,468,170,885 1,822,821,050
Net assets at end of period (including undistributed net ---------------- ----------------
investment income of $3,568,116 at June 30, 1997) ...... $1,277,478,265 $1,468,170,885
---------------- ----------------
Other Information
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................. 132,860,852 160,534,389
---------------- ----------------
Shares sold ............................................... 10,709,291 31,416,978
Shares issued to shareholders in reinvestment of
distributions .......................................... 2,829,358 7,197,179
Shares redeemed ........................................... (30,302,421) (66,287,694)
---------------- ----------------
Net decrease in Fund shares ............................... (16,763,772) (27,673,537)
---------------- ----------------
Shares outstanding at end of period ....................... 116,097,080 132,860,852
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1997(a) Years Ended December 31,
(Unaudited) 1996(a) 1995 1994 1993(a) 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, ------------------------------------------------------------------------------------------------------
beginning of period ..... $11.05 $11.35 $10.91 $12.01 $11.93 $12.25 $11.72 $11.71 $11.19 $11.23 $11.92
------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ... .36 .74 .71 .81 .87 .97 1.08 1.09 .83 .73 .74
Net realized and
unrealized gain (loss)
on investments ........ (.07) (.32) .44 (1.15) .08 (.33) .53 .01 .61 (.04) (.58)
Total from investment ------------------------------------------------------------------------------------------------------
transactions ............ .29 .42 1.15 (.34) .95 .64 1.61 1.10 1.44 .69 .16
------------------------------------------------------------------------------------------------------
Less distributions:
From net investment
income ................ (.34) (.72) (.43) (.64) (.80) (.96) (1.08) (1.09) (.83) (.73) (.74)
From net realized gains . -- -- -- -- (.03) -- -- -- (.09) -- (.11)
In excess of gains ...... -- -- -- -- (.04) -- -- -- -- -- --
From tax return of
capital ............... -- -- (.28) (.12) -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------
Total distributions ........ (.34) (.72) (.71) (.76) (.87) (.96) (1.08) (1.09) (.92) (.73) (.85)
------------------------------------------------------------------------------------------------------
Net asset value, ------------------------------------------------------------------------------------------------------
end of period ........... $11.00 $11.05 $11.35 $10.91 $12.01 $11.93 $12.25 $11.72 $11.71 $11.19 $11.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ........... 2.63** 3.86 10.74 (2.87) 8.18 5.43 14.38 9.88 13.20 6.10 1.40
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............ 1,277 1,468 1,823 2,136 3,190 2,862 2,247 340 72 10 10
Ratio of operating expenses
net, to average daily
net assets (%) .......... .86* .80 .75 .73 .68 .75 .44 .16 .36 1.50 1.45
Ratio of operating expenses
before expense
reductions, to average
daily net assets (%) .... .86* .80 .75 .73 .68 .78 1.00 1.19 2.06 1.86 1.77
Ratio of net investment
income net, to average
daily net assets (%) .... 6.70* 6.66 6.37 6.93 7.21 8.01 8.96 9.36 7.97 6.48 6.34
Portfolio turnover rate (%) 26.0* 61.8 101.1 65.3 66.1 83.7 41.0 52.9 40.0 23.5 28.7
</TABLE>
(a) 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
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 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
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
19 - SCUDDER SHORT TERM BOND FUND
<PAGE>
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.
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.
20 - SCUDDER SHORT TERM BOND FUND
<PAGE>
At December 31, 1996, the Fund had a net tax basis capital loss carryforward of
approximately $115,250,000 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), December 31, 2003 ($60,090,000), and December 31, 2004
($27,896,000), the respective expiration dates. In addition, from November 1,
1996 through December 31, 1996, the Fund incurred approximately $3,990,000 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, 1997.
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,
foreign currency contracts, and foreign currency denominated investments. 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, 1997, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $102,708,529 and $349,121,128, respectively. Purchases and sales of
U.S. Government obligations aggregated $39,252,891 and $32,891,406,
respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1997 was $557,639,406 and $309,744,468, respectively.
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
21 - SCUDDER SHORT TERM BOND FUND
<PAGE>
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, 1997, the fee pursuant to the
Management Agreement amounted to $3,528,351, which was equivalent to an
annualized effective rate of .53% of the Fund's average daily net assets.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
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 $1,028,293 charged to the Fund by SSC for the six
months ended June 30, 1997, of which $165,142 is unpaid at June 30, 1997.
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,
1997, the amount charged to the Fund by STC aggregated 311,282, of which $51,545
is unpaid at June 30, 1997.
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, 1997, the amount charged to the Fund by SFAC aggregated $89,077,
of which $14,434 is unpaid at June 30, 1997.
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,
1997, Trustees' fees and expenses aggregated $11,217.
22 - SCUDDER SHORT TERM BOND FUND
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This Page
intentionally
left blank.
23 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Sheryle J. Bolton
Trustee; Consultant
William T. Burgin
Trustee; Corporate Director
Thomas J. Devine
Trustee; Consultant
Peter B. Freeman
Trustee; Corporate Director and Trustee
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
David S. Lee*
Trustee and Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas M. Poor*
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
*Scudder, Stevens & Clark, Inc.
24 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil 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 Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
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. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **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.
25 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - SCUDDER SHORT TERM BOND FUND
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
27 - SCUDDER SHORT TERM BOND FUND
<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 over 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.
SCUDDER
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