Scudder
Zero Coupon 2000 Fund
Semiannual Report
June 30, 1997
Pure No-Load(TM) Funds
For investors who seek as high an investment return over a selected period as is
consistent with investment in U.S. government securities and the minimization of
reinvestment risk.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER [logo]
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Management Discussion
7 Investment Portfolio
8 Financial Statements
11 Financial Highlights
12 Notes to Financial Statements
16 Officers and Trustees
17 Investment Products and Services
18 Scudder Solutions
In Brief
o During a period that witnessed healthy U.S. economic growth and higher
interest rates for short-term Treasury securities, Scudder Zero Coupon 2000 Fund
posted a positive total return of 1.96% for the six months ended June 30, 1997.
For the 12-month period ended June 30, the Fund's total return was 6.15%.
o As the Fund approaches its 2000 maturity, we are keeping the Fund's duration
in a neutral stance, at the midpoint of its permissible maturity range.
- -------------------------------------------------------
Total Returns for Periods Ended June 30, 1997
- -------------------------------------------------------
Period Scudder Zero Lehman Brothers
Coupon 2000 Government/Corporate
Fund Index
- -------------------------------------------------------
6 months 1.96% 2.74%
- -------------------------------------------------------
1 year 6.15% 7.74%
- -------------------------------------------------------
5 years* 7.21% 7.23%
- -------------------------------------------------------
10 years* 8.88% 8.71%
- -------------------------------------------------------
* Average Annual Return
2 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Zero Coupon 2000 Fund's
performance over its most recent semiannual period ended June 30, 1997. The
Fund's managers continue to invest in high quality U.S. Treasuries, with almost
all maturities set within one year of the Fund's 2000 target date. Given the
Fund's relatively short time to maturity, the Fund's philosophy is to invest for
as high and predictable a return as possible, and to minimize risk. For more
information on the Fund's investment strategy, results, and outlook, please read
the portfolio management discussion beginning on page 5.
For those interested in news about Scudder's most recent product and
service offerings, we would like to take this opportunity to tell you about a
new addition to Scudder's family of funds -- Scudder International Growth and
Income Fund. The Fund employs a yield-oriented approach to international
investing and 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 to international investing may appreciate the Fund's
emphasis on the dividend paying stocks of well-established companies outside the
United States. For a complete listing of Scudder's mutual fund offerings, see
page 17.
If you have any questions regarding Scudder Zero Coupon 2000 Fund or any
other Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470. Or visit Scudder's Website at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Zero Coupon 2000 Fund
3 - SCUDDER ZERO COUPON 2000 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 ZERO COUPON 2000 FUND
- --------------------------------------
1 Year $ 10,615 6.15% 6.15%
5 Year $ 14,167 41.67% 7.21%
10 Year $ 23,422 134.22% 8.88%
- --------------------------------------
LB GOVERNMENT/CORPORATE BOND INDEX
- --------------------------------------
1 Year $ 10,774 7.74% 7.74%
5 Year $ 14,179 41.79% 7.23%
10 Year $ 23,069 130.69% 8.71%
- --------------------------------------
- -----------------------------------------------------------------
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 ZERO COUPON 2000 FUND
Year Amount
- ----------------------
'87 $10,000
'88 $10,484
'89 $12,699
'90 $12,969
'91 $14,062
'92 $16,533
'93 $20,206
'94 $19,252
'95 $21,545
'96 $22,065
'97 $23,422
LB GOVERNMENT/CORPORATE BOND INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $10,748
'89 $12,076
'90 $12,933
'91 $14,253
'92 $16,270
'93 $18,411
'94 $18,143
'95 $20,461
'96 $21,412
'97 $23,069
The unmanaged Lehman Brothers (LB) Government/Corporate Bond Index is
composed of U.S. government treasury and agency securities, corporate and Yankee
bonds. Index returns assume reinvestment of dividends and, unlike Fund returns,
do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods Ended June 30
<TABLE>
<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... $ 11.03 $ 12.63 $ 12.29 $ 12.46 $ 13.62 $ 13.99 $ 11.30 $ 11.99 $ 11.64 $ 11.61
INCOME DIVIDENDS.. $ .67 $ .63 $ .52 $ .85 $ .98 $ .91 $ .80 $ .60 $ .65 $ .73
CAPITAL GAINS
DISTRIBUTIONS..... $ - $ - $ .11 $ - $ .03 $ 1.46 $ 1.38 $ - $ - $ -
FUND TOTAL
RETURN (%)........ 4.84 21.12 2.13 8.43 17.57 22.21 -4.72 11.91 2.41 6.15
INDEX TOTAL
RETURN (%)........ 7.49 12.34 7.10 10.20 14.15 13.16 -1.46 12.76 4.66 7.74
</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.
4 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Zero Coupon 2000 Fund provided a 30-day net annualized SEC yield of
5.33% as of June 30. Though a healthy U.S. economy was accompanied by low to
declining inflation during the period, the wary short-term Treasury market
registered its worries over a possible resurgence of inflation in the form of
slightly higher interest rates. The Fund's total return of 1.96% for the
six-month period reflects a $0.16 decline in the Fund's net asset value to
$11.61, offset by $0.38 per share in income distributions. The unmanaged Lehman
Brothers Government/Corporate Bond Index's return during the same period was
2.74%. For the 12 months ended June 30, the Fund posted a total return of 6.15%.
Scudder Zero Coupon 2000 Fund seeks to provide investors with as high an
investment return over a selected period as is consistent with direct
investments in government securities, but with the additional advantages of
professional management, diversification, and liquidity. The Fund invests in
high-quality zero-coupon bonds that pay no current income but, similar to
savings bonds, are issued at substantial discounts to their value at maturity.
When held to maturity, a zero-coupon bond's entire return comes from the
difference between its issue price and its par value.
Short-Term Inflation Worries
The U.S. economy roared out of the gate during the first quarter of 1997 at a
4.9% annualized rate of GDP growth, sparking fears of renewed inflation among
many market participants. Growth retreated to a more modest 2.2% rate during the
second quarter. All the while inflation not only remained at a low level, but
producer prices -- a leading indicator of inflation -- actually fell for six
consecutive months from January through June 1997.
Despite inflation's present retreat and the slowing of the U.S. economy in the
second quarter, the short-term Treasury market posted interest rate increases
overall during the six-month period ended June 30, as shown in the chart below.
THE ORIGINAL DOCUMENT HAS A LINE CHART HERE
LINE CHART TITLE:
U.S. Treasury Yields --
12/31/96 versus 6/30/97
LINE CHART DATA:
------------------------------------------------
12/31/96 6/30/97
------------------------------------------------
3 mos 5.186% 5.172%
------------------------------------------------
6 mos 5.297 5.251
------------------------------------------------
1 year 5.488 5.651
------------------------------------------------
2 years 5.868 6.059
------------------------------------------------
3 years 6.010 6.209
------------------------------------------------
5 years 6.206 6.372
------------------------------------------------
10 yrs 6.418 6.491
------------------------------------------------
30 yrs 6.641 6.780
------------------------------------------------
Portfolio Review
Our goal in managing Scudder Zero Coupon 2000 Fund is to maximize the value of
your investment on the December 2000 maturity date. Since zero- coupon bonds
such as those held by the Fund lack the cushion of regular interest payments,
the Fund can be more volatile than other fixed-income investments of comparable
maturity. Because some shareholders may need to redeem Fund shares before the
5 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
maturity date, we try to limit share price volatility where possible while at
the same time seeking a higher return than other fixed-income investments.
As the Fund comes within hailing distance of its 2000 maturity, we continue to
gradually shorten the duration of the Fund, keeping 75% of the bonds in the
Fund's portfolio within two months of the target date, and 97% within one year
of the date. For the same reason, we are keeping the Fund's duration in a
relatively neutral stance: As of June 30, the Fund's duration was 3.5 years, at
the midpoint of its current allowable range of 2.5 years to 4.5 years. (Duration
gives relative weight to both interest and principal payments and has replaced
maturity as the standard measure of interest rate sensitivity among professional
investors. Generally the shorter the duration, the less sensitive a portfolio
will be to changes in interest rates.)
Economic and
Market Prospects
Although we are in the seventh consecutive year of economic growth for the
United States, the odds still appear to favor a continuation of that growth,
perhaps even at a slightly higher rate. At the same time, the enormous expansion
of U.S. consumer credit, among other factors, leaves the U.S. economy little
margin for error. Whether growth continues unabated or is interrupted, we
believe inflation will remain at low levels, which is always a positive
foundation for the bond market.
As we get closer to Scudder Zero Coupon 2000 Fund's target year, we will monitor
events influencing the bond market closely and adjust the Fund's duration and
maturity structure accordingly. We will continue to seek to maximize the Fund's
net asset value on its maturity date.
Sincerely,
Your Portfolio Management Team
/s/Timothy G. Raney /s/Stephen A. Wohler
Timothy G. Raney Stephen A. Wohler
6 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Investment Portfolio as of June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government Securities 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note, 5.125%, 11/30/98 .................................................... 290,000 286,739
U.S. Treasury Note, 5%, 1/31/99 ......................................................... 275,000 270,875
U.S. Treasury Separate Trading Registered Interest and Principal, 5/15/00 (6.21%*) ...... 1,565,000 1,312,706
U.S. Treasury Separate Trading Registered Interest and Principal, 11/15/00 (6.29%*) ..... 8,899,000 7,221,716
U.S. Treasury Separate Trading Registered Interest and Principal, 2/15/01 (6.31%*) ...... 10,955,000 8,746,362
U.S. Treasury Separate Trading Registered Interest and Principal, 11/15/01 (6.36%*) ..... 4,798,000 3,648,207
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Securities (Cost $21,156,698) 21,486,605
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $21,156,698) (a) 21,486,605
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $21,213,450. At June 30,
1997, unrealized appreciation based on tax cost consisted entirely of
aggregated gross unrealized appreciation of $273,155.
* Bond equivalent yield to maturity; not a coupon rate.
The accompanying notes are an integral part of the financial statements.
7 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $21,156,698) ................... $ 21,486,605
Cash ................................................................... 738
Interest receivable .................................................... 6,994
Receivable for Fund shares sold ........................................ 12,616
Other assets ........................................................... 618
----------------
Total assets ........................................................... 21,507,571
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for fund shares redeemed ....................................... 18,343
Other payables and accrued expenses .................................... 15,105
----------------
Total liabilities ...................................................... 33,448
--------------------------------------------------------------------------------------------
Net assets, at market value $ 21,474,123
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................... 589,810
Unrealized appreciation on investments ................................. 329,907
Accumulated net realized loss .......................................... (1,418,149)
Paid-in capital ........................................................ 21,972,555
--------------------------------------------------------------------------------------------
Net assets, at market value $ 21,474,123
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($21,474,123 / 1,850,267 outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized) ...... $11.61
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Statement of Operations
six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Interest ............................................................. $ 718,365
-----------------
Expenses:
Management fee ....................................................... 66,833
Services to shareholders ............................................. 66,118
Custodian and accounting fees ........................................ 30,158
Trustees' fees and expenses .......................................... 6,505
Auditing ............................................................. 13,500
Reports to shareholders .............................................. 4,823
Registration fees .................................................... 11,354
Legal ................................................................ 8,728
Other ................................................................ 296
-----------------
Total expenses before reductions ..................................... 208,315
Expense reductions ................................................... (97,776)
-----------------
Expenses, net ........................................................ 110,539
---------------------------------------------------------------------------------------------
Net investment income 607,826
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments ................................... 74,110
Net unrealized depreciation on investments during the period ......... (270,583)
---------------------------------------------------------------------------------------------
Net loss on investment transactions (196,473)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 411,353
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended
1997 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 607,826 $ 1,432,554
Net realized gain (loss) from investments ..................... 74,110 (261,794)
Net unrealized appreciation (depreciation) on investments
during the period .......................................... (270,583) (1,086,030)
--------------- ---------------
Net increase in net assets resulting from operations .......... 411,353 84,730
--------------- ---------------
Distributions to shareholders from net investment income ...... (707,584) (1,477,442)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ..................................... 794,975 6,651,479
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 693,585 1,435,813
Cost of shares redeemed ....................................... (5,158,620) (10,477,503)
--------------- ---------------
Net decrease in net assets from Fund share transactions ....... (3,670,060) (2,390,211)
--------------- ---------------
Decrease in net assets ........................................ (3,966,291) (3,782,923)
Net assets at beginning of period ............................. 25,440,414 29,223,337
Net assets at end of period (including undistributed net ---------------- ----------------
investment income of $589,810 and $689,568, respectively) .. $ 21,474,123 $ 25,440,414
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ..................... 2,161,757 2,359,785
--------------- ---------------
Shares sold ................................................... 68,523 560,049
Shares issued to shareholders in reinvestment of
distributions .............................................. 61,434 122,172
Shares redeemed ............................................... (441,447) (880,249)
--------------- ---------------
Net decrease in Fund shares ................................... (311,490) (198,028)
---------------- ----------------
Shares outstanding at end of period ........................... 1,850,267 2,161,757
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - SCUDDER ZERO COUPON 2000 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, Years Ended December 31,
1997(a)
(Unaudited) 1996(a) 1995 1994 1993 1992 1991 1990 1989 1988 1987(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
Net asset value, beginning
of period ................... $11.77 $12.38 $10.95 $12.85 $12.55 $13.76 $12.27 $12.61 $10.92 $10.34 $12.62
---------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ......... .31 .64 .65 .59 .79 .94 .99 .86 .51 .63 .91
Net realized and unrealized
gain (loss) on investments .. (.09) (.57) 1.40 (1.59) 1.23 .17 1.44 (.29) 1.73 .58 (1.86)
---------------------------------------------------------------------------------------------------
Total from investment
operations .................. .22 .07 2.05 (1.00) 2.02 1.11 2.43 .57 2.24 1.21 (.95)
---------------------------------------------------------------------------------------------------
Less distributions:
From net investment income .... (.38) (.68) (.62) (.31) (.83) (.93) (.94) (.83) (.52) (.63) (1.22)
From net realized gains on
investments ................. -- -- -- (.59) (.89) (1.39) -- (.08) (.03) -- (.11)
---------------------------------------------------------------------------------------------------
Total distributions ........... (.38) (.68) (.62) (.90) (1.72) (2.32) (.94) (.91) (.55) (.63) (1.33)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Net asset value, end of
period ...................... $11.61 $11.77 $12.38 $10.95 $12.85 $12.55 $13.76 $12.27 $12.61 $10.92 $10.34
---------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) .......... 1.96** .65 19.08 (7.92) 16.00 8.13 20.03 4.59 20.39 11.71 (8.01)
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................ 21 25 29 25 31 29 33 33 32 5 2
Ratio of operating expenses,
net to average daily net
assets (%) .................. 1.00* 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Ratio of operating expenses
before expense reductions,
to average daily net
assets (%) .................. 1.88* 1.45 1.48 1.47 1.28 1.28 1.23 1.39 1.62 3.37 4.13
Ratio of net investment
income to average daily
net assets (%) .............. 5.50* 5.42 5.59 5.23 5.29 6.38 7.12 7.62 7.10 8.10 8.13
Portfolio turnover rate (%) ... 1.42* 85.2 86.6 89.3 101.6 118.8 90.7 98.5 87.1 149.2 37.3
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
11 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Zero Coupon 2000 Fund (the "Fund") is organized as a diversified series
of Scudder Funds Trust (the "Trust"), a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund primarily invests in U.S. Government zero coupon
securities. At least 50% of the Fund's net assets will be invested in zero
coupon securities maturing within two years of the Fund's target maturity date.
It is expected that the Fund will be liquidated in December of the year 2000.
The 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 prices reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost. All other securities are valued at their fair
value as determined in good faith by the Valuation Committee of the Trustees.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no provision for federal income taxes
was required.
At December 31, 1996, the Fund had a net tax basis capital loss carryforward of
approximately $1,436,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December 31,
2002 ($884,000,) December 31, 2003 ($178,000), and December 31, 2004 ($374,000)
the respective expiration dates.
Distribution of Income and Gains. Distributions of net investment income are
made annually. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in certain securities sold at a
loss. As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment security transactions are accounted for on a trade date basis.
Interest income is generally recorded on the accrual basis under the amortized
cost method whereby the Fund adjusts the cost of each investment assuming a
constant
12 - SCUDDER ZERO COUPON 2000 FUND
<PAGE>
accretion to maturity of any discount. All original issue discounts are accreted
for both tax and financial reporting purposes. Distributions to shareholders are
recorded on the ex-dividend date.
B. Purchases and Sales of Securities
During the six months ended June 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $159,954 and
$4,695,644, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objectives, policies and
restrictions. The Adviser determines the securities, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of approximately 0.60% of
the average daily net assets of the Fund computed and accrued daily and payable
monthly. The Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest and extraordinary expenses exceed specified limits, such excess,
up to the amount of the management fee, will be paid by the Adviser. In
addition, the Adviser has agreed to maintain the annualized expenses of the Fund
at not more than 1.00% of average daily net assets until December 31, 1997. For
the six months ended June 30, 1997, the management fee aggregated $66,833, all
of which was not imposed.
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 disbursing and shareholder service agent for the Fund. For
the six months ended June 30, 1997, the amount charged to the Fund by SSC
aggregated $33,456, of which $17,614 was not imposed, and $12,261 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 for the Fund. For the six months ended June 30, 1997, the
amount charged to the Fund by STC aggregated $6,589, of which $3,409 was not
imposed, and $2,443 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 $18,750,
of which $9,920 was not imposed, and $6,795 is unpaid at June 30, 1997.
The Fund pays each Trustee not affiliated with the Adviser $2,000 annually, plus
specified amounts for attended board and committee meetings. For the six months
ended June 30, 1997, Trustees' fees and expenses aggregated $6,505.
13 - SCUDDER ZERO COUPON 2000 FUND
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intentionally
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14 - SCUDDER ZERO COUPON 2000 FUND
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15 - SCUDDER ZERO COUPON 2000 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.
16 - SCUDDER ZERO COUPON 2000 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#
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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.
17 - SCUDDER ZERO COUPON 2000 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:
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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
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18 - SCUDDER ZERO COUPON 2000 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.
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19 - SCUDDER ZERO COUPON 2000 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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