Scudder
Short Term
Bond Fund
Semiannual Report
June 30, 1998
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>
Scudder Short Term Bond Fund
- --------------------------------------------------------------------------------
Date of Inception: 4/24/84 Total Net Assets as of Ticker Symbol: SCSTX
6/30/98: $1,062 million
- --------------------------------------------------------------------------------
o Scudder Short Term Bond Fund's 30-day net annualized SEC yield at the end of
June was 5.46%, comparing favorably with the 5.01% average yield for taxable
money market funds tracked by IBC/Donoghue.
o During a challenging period for short-term fixed-income investments, the Fund
produced a six-month total return of 1.74% and a twelve-month return of 5.25%.
The average short-term bond fund, as tracked by Lipper Analytical Services
returned 2.82% and 6.28% for the same periods.
o The Fund continued to hold a broadly diversified mix of short-maturity
alternatives to U.S. Treasuries to pursue its objective of high current income
with a high degree of principal stability.
o The Fund maintained its high quality orientation, with 68% of portfolio
holdings rated AA or better by Standard & Poor's and/or Moody's as of June 30,
1998.
Table of Contents
3 Letter from the Fund's President 14 Financial Statements
4 Performance Update 17 Financial Highlights
5 Portfolio Summary 18 Notes to Financial Statements
6 Portfolio Management Discussion 21 Investment Products and Services
8 Glossary of Investment Terms 22 Scudder Solutions
9 Investment Portfolio
2 - Scudder Short Term Bond Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Short Term Bond Fund's performance
over its most recent semiannual period ended June 30, 1998. The Fund posted a
modest 1.74% total return for the period, as shorter-maturity fixed income
securities generally traded in a narrow range. On June 30, the Fund's yield was
5.46%, considerably higher than the current low level of U.S. inflation. As the
Fund's managers state in the portfolio management discussion that begins on page
6, we believe the Asian economic downturn could continue to dampen U.S. growth,
contributing to a supportive environment for bonds over the coming months.
For those of you interested in new Scudder products and services, we would like
to take this opportunity to highlight two upcoming additions to our
international category, both of which are scheduled to begin operations on
September 1st. Scudder International Growth Fund will seek long-term capital
appreciation by investing primarily in the equity securities of non-U.S.
companies with high growth potential, and Scudder International Value Fund will
seek long-term capital appreciation by investing primarily in undervalued
foreign equity securities. These two funds make Scudder among the first in the
industry to offer funds that pursue long-term growth of capital internationally
in both the growth and value styles of investing, respectively. Please see page
21 for more information on Scudder products and services.
If you have any questions regarding Scudder Short Term Bond Fund or any other
Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470. Or visit Scudder's 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, 1998
- -----------------------------------------------------------------
FUND INDEX COMPARISONS
- -----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/98 $10,000 Cumulative Annual
- -----------------------------------------
SCUDDER SHORT TERM BOND FUND
- -----------------------------------------
1 Year $ 10,525 5.25% 5.25%
5 Year $ 12,424 24.24% 4.44%
10 Year* $ 20,025 100.25% 7.19%
- -----------------------------------------
SALOMON BROTHERS INC. TREASURY/GOVERNMENT
SPONSORED CORPORATE INDEX (1-3 YEARS)
- -----------------------------------------
1 Year $ 10,684 6.84% 6.84%
5 Year $ 13,170 31.70% 5.66%
10 Year* $ 20,225 102.25% 7.29%
- -----------------------------------------
- -----------------------------------------------------------------
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
- ----------------------
'88 $10,000
'89 $10,979
'90 $12,003
'91 $13,513
'92 $14,861
'93 $16,118
'94 $16,212
'95 $17,050
'96 $17,922
'97 $19,027
'98 $20,025
SALOMON BROTHERS INC. TREASURY/GOVERNMENT
SPONSORED CORPORATE INDEX (1-3 YEARS)
Year Amount
- ----------------------
'88 $10,000
'89 $10,890
'90 $11,806
'91 $13,017
'92 $14,387
'93 $15,357
'94 $15,619
'95 $16,819
'96 $17,757
'97 $18,930
'98 $20,225
Salomon Brothers Inc. Treasury/Government Sponsored Corporate 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>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 11.63 $ 11.58 $ 11.89 $ 12.01 $ 12.12 $ 11.37 $ 11.19 $ 11.03 $ 11.00 $ 10.92
INCOME DIVIDENDS.. $ .71 $ 1.03 $ 1.09 $ 1.03 $ .87 $ .76 $ .74 $ .72 $ .69 $ .64
CAPITAL GAINS
DISTRIBUTIONS..... $ .03 $ .06 $ -- $ -- $ -- $ .07 $ -- $ -- $ -- $ --
FUND TOTAL
RETURN (%)........ 9.80 9.33 12.58 9.98 8.45 .58 5.17 5.11 6.17 5.25
INDEX TOTAL
RETURN (%)........ 8.91 8.41 10.27 10.50 6.76 1.69 7.68 5.57 6.61 6.84
</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.
*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 81.76% and 6.87%,
respectively.
4 - Scudder Short Term Bond Fund
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1998
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DIVERSIFICATION
- ---------------------------------------------------------------------------
Corporate Bonds 31%
Asset-Backed Securities 18%
Government National Mortgage Association 16%
Collateralized Mortgage Obligations 15%
U.S. Government Agency Pass-throughs 10%
U.S. Government Obligations 6%
Cash Equivalents 4%
- ------------------------------------------------
100%
- ------------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We have been increasing the
Fund's exposure to corporate
bonds as a precautionary
measure. We believe these bonds
would provide additional safety if
U.S. economic growth slows.
- ---------------------------------------------------------------------------
QUALITY
- ---------------------------------------------------------------------------
U.S. Government & Agencies 32%
AAA* 27%
AA 9%
A 3%
BBB 29%
- ------------------------------------------------
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 overall quality of the Fund's
portfolio holdings remains high.
- ---------------------------------------------------------------------------
EFFECTIVE MATURITY
- ---------------------------------------------------------------------------
Under 1 year 14%
1 - 5 years 76%
5 - 8 years 8%
8 years or greater 2%
- ------------------------------------------------
100%
- ------------------------------------------------
Weighted average effective maturity: 2.63 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund continued to maintain
a relatively neutral position on
maturities, with a portfolio
duration range of 1.6 to 1.8 years
during the period.
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
We recently asked Scudder Short Term Bond Fund's Co-Lead Portfolio Managers,
Stephen Wohler and Robert Cessine, to discuss fund strategy and market
conditions during the first half of 1998.
Q: How would you characterize the investment environment over the past six
months?
A: It was a period of strong economic growth, muted inflation and relatively
stable interest rates -- a market that favored equity over fixed income
investing. While the bond market rallied for longer maturities, short-term rates
held fairly steady due to the unchanging policy of the Federal Reserve, creating
a more challenging environment for the short-term issues in which the Fund
invests.
Q: How did Scudder Short Term Bond Fund perform during the six-month period?
A: Scudder Short Term Bond Fund continued to provide investors with a
competitive, high-yielding alternative for their short-term cash reserves,
providing a 30-day net annualized SEC yield of 5.46% at the end of June,
compared with 5.01% on average for the taxable money market funds tracked by
IBC/Donoghue, an independent research firm. The Fund historically has maintained
a comfortable yield advantage over money market funds. Of course, money market
funds seek to maintain a stable principal value, while the Fund's net asset
value will fluctuate with changing market conditions.
From a total return standpoint, however, the Fund did not perform up to our
expectations. It provided a total return of 1.74% for the six months ending June
30, 1998 compared to 2.82% for the average short-term bond fund tracked by
Lipper Analytical Services. At the beginning of the year, the Fund was
positioned to capture yield, but this strategy was not rewarded. While the
overall quality of the Fund's holdings remained high, relatively large positions
in weak areas such as asset-backed securities and REITs detracted from the
Fund's performance. In addition, high coupon mortgage pass-throughs also
underperformed due to rapid prepayments caused by refinancing activity as
mortgage rates continued to decline.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Treasury Yields:
December 31, 1997, versus June 30, 1998
LINE CHART DATA:
Maturity Yield
-------------------------------------------------
12/31/97 6/30/98
-------------------------------------------------
3 mos 5.342% 5.093%
6 mos 5.435 5.233
1 yr 5.476 5.365
2 yrs 5.642 5.475
3 yrs 5.669 5.491
5 yrs 5.705 5.465
10 yrs 5.741 5.446
30 yrs 5.924 5.626
Q: At the end of the period, 18% of the portfolio was in asset-backed
securities. What are they, and how do they differ from other types of fixed-
income investments?
A: Historically, most bonds in the public debt market have been issued either on
an unsecured basis, based on the financial strength of a corporation, or on a
secured basis, backed by high quality collateral. Asset-backed securities
evolved from the secured bond market, but unlike most of the secured bond
6 - Scudder Short Term Bond Fund
<PAGE>
market, they have been designed to insulate investors from the performance of
the issuing corporations. With asset-backed securities, the securities perform
based on the collateral, not the issuer. Even if the issuer goes bankrupt,
investors should still receive 100% of principal and interest payments from the
security. Historically, asset-backed securities have been one of the higher
yielding, lower risk investment options in the bond market.
Over the past six months, the Fund's manufactured housing and home equity
asset-backed securities underperformed, but we continue to believe they offer
good longer-term upside potential and a valuable source of diversification.
Q: Did you make any changes in the Fund's investment strategy during the first
half of the year?
A: We have been increasing the Fund's exposure to corporate bonds, which
accounted for 31% of the portfolio at the end of the period and now constitute
the Fund's largest sector weighting. To the extent possible, we are focusing our
corporate purchases in non-cyclical areas, such as consumables, cable TV, and
media. Although we don't anticipate a recession, we believe these sectors would
provide greater safety in a recessionary environment. We have also tried to
increase the upside potential of the portfolio in case short-term interest rates
fall. This included reducing the Fund's premium mortgages position from 31% at
the beginning of the year to 24% on June 30, 1998. That money has been
reallocated to new asset-backed securities and corporate bonds. At the end of
the period, asset-backed securities accounted for 18% of the portfolio.
Q: What about the Fund's duration?
A: Duration measures a portfolio's sensitivity to interest rate changes, and is
adjusted by altering the mix of securities. The shorter a portfolio's duration,
the less its net asset value will be affected by rising interest rates. As a
short-term bond fund, the Fund's duration will never exceed that of a 3-year
Treasury note -- about 2.5 years. The Fund's duration remained in the 1.6 to 1.8
year range throughout the period, in anticipation of a possible rise in short
term rates. This had little effect on performance, as short-term rates remained
relatively stable between January and June.
Q: What is your outlook for the rest of the year?
A: We are cautiously optimistic about the bond market. We believe the slowdown
in Asia may help keep U.S. economic growth to acceptable levels -- less than
3.0% -- which would be a supportive environment for bonds. Inventory buildup in
the first quarter may also lead to slower growth in the second half of the year.
We believe inflation will remain restrained, and in the absence of the economy
picking up steam, we would expect the Federal Reserve Board to stay on the
sidelines. It has been an unusual period, with the Federal Funds rate pegged at
5.5% and short-term interest rates even lower. Even so, U.S. rates are still
higher than those in Europe and Japan. And with very little difference in yields
between short-and long-term bonds, we believe the tradeoff for extending
maturities is not there for risk-averse investors. Scudder Short Term Bond Fund
continues to offer investors an opportunity for a high level of income,
consistent with relative price stability and liquidity.
7 - Scudder Short Term Bond Fund
<PAGE>
Glossary of Investment Terms
COUPON The interest rate on a bond the issuer (a
corporation or government entity) promises to
pay to the holder of the bond until maturity,
expressed as an annual percentage of face
value. As an example, a bond with a 10%
coupon will pay $100 of $1,000 of the face
amount each year.
DEFAULT Occurs when the issuer of a bond fails to
make timely payment of principal and/or
interest. In the event of default,
bondholders may make claims against the
assets of the issuing corporation.
DURATION Gauges the price sensitivity of a bond or
bond portfolio to changes in market interest
rate levels. A fixed income portfolio with an
overall duration of five years can be
expected to increase 5% for every 1% decrease
in interest rates (and decline 5% for every
1% increase in rates).
INVESTMENT-GRADE A bond that has a quality rating of BBB or
BOND higher.
SECTOR A similar group of bonds or stocks. Some
examples of sectors that could be found in a
fund that invests in corporate bonds include
airlines, financial services companies, and
pharmaceutical firms.
30-DAY SEC YIELD The standard yield reference for bond funds
since the SEC required all bond funds to
quote yields based on a prescribed formula.
This yield calculation reflects the 30-day
average of the annualized income earnings
capability of every holding in a given fund's
portfolio, assuming each is held to maturity,
net of expenses.
TOTAL RETURN The most common yardstick to measure the
performance of a mutual fund. Total return is
based on a combination of changes in share
price plus income and capital gain
distributions, if any, expressed as a
percentage gain or loss in value.
YIELD SPREAD The difference in yield between various types
of bonds. A corporate bond's yield is
generally measured against the yield of a
Treasury bond of similar maturity as a market
yardstick. If yield spreads are "narrow," for
example, it often means that corporate bond
yields have been declining, and prices
rising, compared with Treasury bonds of
similar maturity.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
8 - Scudder Short Term Bond Fund
<PAGE>
Investment Portfolio as of June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 0.7%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/1998 at 5.75%,
to be repurchased at $7,355,175 on 7/1/1998, collateralized by a $5,163,000 --------------
U.S. Treasury Bond, 12.75%, 11/15/2010 (Cost $7,354,000) .............................. 7,354,000 7,354,000
--------------
Short-Term Notes 3.8%
- ------------------------------------------------------------------------------------------------------------------------------
Prudential Funding Corp., 5.89%, 7/2/1998 ............................................... 20,000,000 20,000,000
Federal National Mortgage Association, 5.83%* with various maturities to 7/7/1998 ....... 20,000,000 19,980,600
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Notes (Cost $39,980,600) 39,980,600
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations 6.2%
- ------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.5%, 4/14/2000 ................................................. 10,000,000 9,973,400
Federal Home Loan Bank, 5.625%, 3/19/2001 (b) ........................................... 20,000,000 19,962,400
U.S. Treasury Note, 6.25%, 6/30/2002 .................................................... 10,000,000 10,251,600
U.S. Treasury Note, 5.625%, 12/31/2002 .................................................. 10,000,000 10,043,700
U.S. Treasury Note, 5.5%, 5/31/2003 ..................................................... 15,000,000 15,002,400
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Obligations (Cost $65,190,632) 65,233,500
- ------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 15.6%
- ------------------------------------------------------------------------------------------------------------------------------
11.5% with various maturities to 7/20/2020 .............................................. 13,291,660 14,996,092
11% with various maturities to 10/20/2020 ............................................... 1,599,088 1,769,596
9% with various maturities to 12/15/2020 (b) ............................................ 55,563,318 59,834,258
10% with various maturities to 1/20/2022 ................................................ 3,270,987 3,556,931
8% with various maturities to 12/15/2023 ................................................ 72,292,035 75,082,179
7.13% with various maturities to 9/20/2025 ............................................... 8,546,831 8,683,046
- ------------------------------------------------------------------------------------------------------------------------------
Total Government National Mortgage Association (Cost $162,610,155) 163,922,102
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Agency Pass-throughs 9.9%
- ------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Series 1719-C, Principal Only, 4/15/1999 (b) .......... 18,387,720 17,932,337
Federal Home Loan Mortgage Corp., 7.5%, 9/1/2012 ........................................ 46,774,129 48,074,918
Federal Home Loan Mortgage Corp., 9.5% with various maturities to 8/1/2016 .............. 5,618,104 6,090,081
Federal Home Loan Mortgage Corp., Series 1250-F, 7%, 4/15/2019 .......................... 78,698 78,550
Federal Home Loan Mortgage Corp., 7.792%, 11/1/2021 ..................................... 439,621 457,413
Federal Home Loan Mortgage Corp., 7.74% with various maturities to 9/1/2024 ............. 6,050,441 6,289,615
Federal National Mortgage Association, 7.31% with various maturities to 1/1/2019 ........ 925,200 955,121
Federal National Mortgage Association, 8.5% with various maturities to 8/1/2022 ......... 14,003,959 14,685,484
Federal National Mortgage Association, 7.38% with various maturities to 12/1/2022 ....... 5,496,713 5,659,031
Federal National Mortgage Association, 7.4% with various maturities to 10/1/2023 ........ 4,223,469 4,338,199
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Pass-throughs (Cost $104,831,347) 104,560,749
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Short Term Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 14.5%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Chemical Mortgage Securities, Inc., Series 1993-1 A4, 7.45%, 2/25/2023 .................. 1,417,678 1,420,780
Citicorp Mortgage Securities, Inc., Series 1997-3, 7%, 8/25/2027 ........................ 21,361,390 21,341,363
Countrywide Funding Corp., Series 1994-2 A8, 6.5%, 2/25/2009 ............................ 1,900,000 1,895,844
First Bank System Inc., Series 1993-F, 7.178%, 11/25/2024 (b) ........................... 17,626,602 17,747,785
General Electric Capital Mortgage Services, Inc., 7%, 1/25/2008 ......................... 6,500,000 6,577,155
General Electric Capital Mortgage Services, Inc., Series 1994-21A, 6.5%,
8/25/2009 ............................................................................. 14,372,712 14,350,147
General Electric Capital Mortgage Services, Inc., Series 1994-19 A1, 7.5%,
6/25/2024 ............................................................................. 995,741 992,624
General Electric Capital Mortgage Services, Inc., Series 1994-27 A1, 6.5%,
7/25/2024 ............................................................................. 5,842,203 5,836,726
Norwest Asset Security Corp., Series 1996-5 AB, 7.5%, 11/25/2026 ........................ 8,796,142 8,848,369
Residential Funding Mortgage Securities, Series 1996-A17, 7.75%, 1/25/2007 .............. 8,063,349 8,172,961
Residential Funding Mortgage Securities, Series 1993-S35, 7.087%, 10/25/2023 ............ 16,290,434 16,361,705
Residential Funding Mortgage Securities I Inc., Series 1997-S19 A6, 6.5%,
12/25/2012 ............................................................................ 26,528,498 26,462,171
Residential Funding Mortgage Securities I Inc., Series 1997-S13 A8, 7.1%,
9/25/2027 ............................................................................. 21,076,321 21,076,321
Resolution Trust Corp., Series 1992-12 A2A, 7.5%, 8/25/2023 ............................. 748,026 749,545
Ryland Acceptance Corp. Four, Series 97-H, 8.95%, 8/20/2019 ............................. 1,092,919 1,093,936
- ------------------------------------------------------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations (Cost $153,940,898) 152,927,432
- ------------------------------------------------------------------------------------------------------------------------------
Asset Backed 17.8%
- ------------------------------------------------------------------------------------------------------------------------------
Miscellaneous 2.6%
Bally's Health & Tennis Master Trust, 8.43%, 8/1/2002 ................................... 13,000,000 13,018,281
Mortgage Index Amortizing Trust Series 1997-1, 6.682%, 8/25/2004 ........................ 14,000,000 14,095,703
--------------
27,113,984
--------------
Credit Card Receivables 1.4%
First USA Bank, Series 1994-1, 7.45%, 4/15/1999 ......................................... 4,528,302 4,538,264
Proffitt's, Inc. Credit Card Master Trust, 6%, 9/15/2004 ................................ 10,000,000 9,970,703
--------------
14,508,967
--------------
Home Equity Loans 5.2%
Advanta Corp., Series 1997-2 A3, 7.3%, 10/25/2022 (b) ................................... 10,500,000 10,782,188
AFC Home Equity Loan Trust, Series 1990-3A, 9.6%, 7/26/2005 ............................. 943,056 952,192
AFC Home Equity Loan Trust, Series 1992-3A, 7.05%, 8/15/2007 ............................ 474,177 472,844
CTS Home Equity Loan Trust, Series 1991-1A, 8.8%, 1/15/2006 ............................. 263,019 262,443
Contimortgage Home Equity Loan Trust, Series 1991-1, 9.52%, 4/15/2006 ................... 475,299 470,843
Contimortgage Home Equity Loan Trust, Series 1997-3 M1-F, 7.31%, 8/15/2028 (b) .......... 18,500,000 18,913,359
Contimortgage Net Interest Margin Notes, Series 1997-3, Series 1997-3, 7.23%,
7/16/2028 ............................................................................. 6,781,279 6,755,849
Green Tree Financial Corp., Series 1997-B A5, 7.15%, 4/15/2027 .......................... 9,600,000 9,748,500
Old Stone Credit Corp. Home Equity Loan, Series 1992-2, 6.95%, 5/15/2007 ................ 2,757,427 2,768,622
</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>
Old Stone Credit Corp. Home Equity Loan, Series 1993-1, 5.85%, 3/15/2008 ................ 659,389 654,855
Security Pacific Home Equity Trust, Series 1991-A B, 10.5%, 3/10/2006 ................... 2,543,398 2,553,334
--------------
54,335,029
--------------
Manufactured Housing Receivables 8.6%
Associated Manufactured Housing Corp., Series 1997-1 B1, 7.6%, 6/15/2028 ................ 8,000,000 8,111,250
Green Tree Financial Corp., Securitized NIM, Series 1994-A, 6.9%, 2/15/2004 ............. 13,385,116 13,364,725
Green Tree Financial Corp., Securitized NIM, Series 1994-B, 7.85%, 7/15/2004 ............ 11,105,567 11,227,034
Green Tree Financial Corp., Series 1995-3 B2, 8.1%, 8/15/2025 ........................... 20,636,400 20,744,419
Green Tree Financial Corp., Series 1995-5 B2, 7.65%, 9/15/2026 .......................... 9,000,000 9,013,711
Green Tree Financial Corp., 7.3%, 12/15/2026 ............................................ 9,500,000 9,566,797
Green Tree Financial Corp., Series 1996-5 B2, 8.45%, 7/15/2027 .......................... 9,998,413 10,311,644
Merrill Lynch Mortgage Investors Inc., Series 1991-B, 9.2%, 3/15/2011 ................... 41,626 41,613
Merrill Lynch Mortgage Investors Inc., Series 1992-B, 8.5%, 4/15/2012 ................... 8,560,721 8,582,123
--------------
90,963,316
- ------------------------------------------------------------------------------------------------------------------------------
Total Asset Backed (Cost $185,863,466) 186,921,296
- ------------------------------------------------------------------------------------------------------------------------------
Corporate Bonds 31.5%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 1.4%
Wal-Mart Stores Inc., 5.85%, 6/1/2000 ................................................... 15,000,000 14,960,625
--------------
Consumer Staples 1.4%
Philip Morris Companies Inc., 6.15%, 3/15/2000 .......................................... 15,000,000 14,945,625
--------------
Communications 1.1%
AT&T Capital Corp., 6.25%, 5/15/2001 .................................................... 11,000,000 11,029,700
--------------
Financial 19.2%
American Health Properties, Inc. (REIT), 7.05%, 1/15/2002 ............................... 2,200,000 2,247,718
BANC ONE CORP., 6.25%, 10/1/2001 ........................................................ 10,000,000 10,112,500
Citicorp, 8.03%, 2/15/2000 .............................................................. 15,000,000 15,514,050
Colonial Realty LP (REIT), 7.5%, 7/15/2001 (b) .......................................... 4,000,000 4,090,600
ERP Operating LP (REIT), 8.5%, 5/15/1999 ................................................ 4,100,000 4,177,326
General Electric Capital Corp., 6.02%, 5/1/2001 (b) ..................................... 15,000,000 15,075,000
Health Care Properties Investors, Inc. (REIT), 6%, 11/8/2000 ............................ 5,225,000 5,172,750
Morgan Stanley Capital Investment, Inc., 6.25%, 7/15/2007 ............................... 7,914,192 7,973,239
NationsBank Corp., 5.75%, 3/15/2001 ..................................................... 19,000,000 18,997,744
Oasis Residential Inc. (REIT), 6.75%, 11/15/2001 ........................................ 13,400,000 13,603,680
Oasis Residential Inc. (REIT), 7%, 11/15/2003 ........................................... 14,900,000 15,120,222
Simon Debartolo Group, Inc. (REIT), 6.625%, 6/15/2003 ................................... 15,000,000 14,995,500
</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>
Spieker Properties, Inc. (REIT), 6.65%, 12/15/2000 ...................................... 15,000,000 15,105,600
Spieker Properties, Inc. (REIT), 6.8%, 12/15/2001 ....................................... 5,500,000 5,590,860
Spieker Properties, Inc. (REIT), 6.95%, 12/15/2002 ...................................... 3,500,000 3,561,005
Sun Communities, Inc. (REIT), 7.625%, 5/1/2003 .......................................... 5,850,000 6,061,419
Susa Partnership LP (REIT), 7.125%, 11/1/2003 ........................................... 5,400,000 5,523,768
Taubman Realty Group LP (REIT), Medium Term Note, 8%, 6/15/1999 ......................... 4,755,000 4,832,887
Taubman Realty Group LP (REIT), Medium Term Note, 7.5%, 6/15/2002 ....................... 19,150,000 19,678,540
World Omni Automobile Lease Securitization Trust, Series 1996-B, 6.85%,
11/15/2002 ............................................................................ 14,982,494 15,188,503
--------------
202,622,911
--------------
Media 2.1%
Comcast Cable Communications, 8.125%, 5/1/2004 .......................................... 15,000,000 16,251,450
Tele-Communications, Inc., 7.375%, 2/15/2000 ............................................ 6,000,000 6,126,300
--------------
22,377,750
--------------
Technology 2.9%
Pitney Bowes, Inc., 6.27%, 1/20/2012 .................................................... 15,000,000 15,018,750
Raytheon Co., 6.45%, 8/15/2002 .......................................................... 15,000,000 15,148,800
--------------
30,167,550
--------------
Energy 1.4%
Lyondell Petrochemical Co., Global Note, 9.125%, 3/15/2002 .............................. 8,900,000 9,607,906
Lyondell Petrochemical Co., 9.75%, 9/4/2003 ............................................. 4,600,000 5,334,758
--------------
14,942,664
--------------
Metals & Minerals 1.4%
Alcan Aluminium Ltd., 9.625%, 7/15/2019 (b) ............................................. 14,000,000 14,999,600
--------------
Transportation 0.6%
Continental Airlines Inc. Pass-thru Trust, 7.42%, 4/1/2007 .............................. 6,178,750 6,343,416
- ------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $329,266,224) 332,389,841
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,049,037,322) (a) 1,053,289,520
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $1,049,037,322. At June 30,
1998, net unrealized appreciation for all securities based on tax cost was
$4,252,198. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $7,933,764 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$3,681,566.
The accompanying notes are an integral part of the financial statements.
12 - Scudder Short Term Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
(b) At June 30, 1998 these securities, in whole or in part, have been pledged
to cover initial margin requirements for open futures contracts.
At June 30, 1998, open future contracts sold short were as follows:
<TABLE>
<CAPTION>
Aggregate
---------
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
5 Year U.S. Treasury Note September 21, 1998 1,000 109,196,875 109,687,500
------------ ------------
Total net unrealized depreciation on open futures contracts sold short ................. (490,625)
============
</TABLE>
Abbreviations and other acronyms used in this portfolio:
----------------------------------------------------------------------
REIT Real Estate Investment Trust
NIM Net Interest Margin
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>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $1,049,037,322) ............. $ 1,053,289,520
Cash ................................................................ 687,501
Receivable for investments sold ..................................... 3,342,836
Interest receivable ................................................. 8,075,048
Receivable for Fund shares sold ..................................... 1,512,437
Other assets ........................................................ 15,349
------------------
Total assets ........................................................ 1,066,922,691
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Dividends payable ................................................... 1,101,788
Payable for Fund shares redeemed .................................... 2,451,775
Payable for investments purchased ................................... 7,029
Payable for daily variation margin on open futures contracts ........ 210,180
Accrued management fee .............................................. 459,770
Other payables and accrued expenses ................................. 678,264
------------------
Total liabilities ................................................... 4,908,806
-------------------------------------------------------------------------------------------
Net assets, at market value $ 1,062,013,885
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................. 3,739,631
Net unrealized appreciation (depreciation) on:
Investments ...................................................... 4,252,198
Futures .......................................................... (490,625)
Accumulated net realized loss ....................................... (146,448,580)
Paid-in capital ..................................................... 1,200,961,261
-------------------------------------------------------------------------------------------
Net assets, at market value $ 1,062,013,885
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($1,062,013,885 / 97,291,906 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ------------------
authorized) ....................................................... $10.92
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Short Term Bond Fund
<PAGE>
Statement of Operations
six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................ $ 39,795,647
----------------
Expenses:
Management fee ...................................................... 2,994,960
Services to shareholders ............................................ 1,423,746
Custodian and accounting fees ....................................... 149,325
Trustees' fees and expenses ......................................... 26,788
Reports to shareholders ............................................. 107,152
Auditing ............................................................ 32,037
Legal ............................................................... 17,195
Registration fees ................................................... 19,005
Other ............................................................... 23,613
----------------
4,793,821
-------------------------------------------------------------------------------------------
Net investment income 35,001,826
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... (472,085)
Futures ............................................................. (7,369,695)
Options ............................................................. (11,842)
----------------
(7,853,622)
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ......................................................... (8,473,457)
Futures ............................................................. 170,036
----------------
(8,303,421)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (16,157,043)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 18,844,783
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Short Term Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended
1998 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................. $ 35,001,826 $ 85,116,159
Net realized gain (loss) from investment transactions ............. (7,853,622) (20,654,427)
Net unrealized appreciation (depreciation) on
investment transactions during the period ....................... (8,303,421) 11,486,176
----------------- -----------------
Net increase (decrease) in net assets resulting from
operations ...................................................... 18,844,783 75,947,908
----------------- -----------------
Distributions to shareholders from:
Net investment income ............................................. (31,641,266) (78,060,393)
----------------- -----------------
Fund share transactions:
Proceeds from shares sold ......................................... 158,485,931 225,970,263
Net asset value of shares issued to shareholders in
reinvestment of distributions ................................... 24,057,737 58,987,223
Cost of shares redeemed ........................................... (273,264,462) (585,484,724)
----------------- -----------------
Net increase (decrease) in net assets from Fund share
transactions .................................................... (90,720,794) (300,527,238)
----------------- -----------------
Increase (decrease) in net assets ................................. (103,517,277) (302,639,723)
Net assets at beginning of period ................................. 1,165,531,162 1,468,170,885
Net assets at end of period (including undistributed
net investment income of $3,739,631 and $379,071, ----------------- -----------------
respectively) ................................................... $1,062,013,885 $1,165,531,162
----------------- -----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ......................... 105,576,081 132,860,852
----------------- -----------------
Shares sold ....................................................... 14,397,761 20,508,345
Shares issued to shareholders in reinvestment of
distributions ................................................... 2,195,694 5,352,697
Shares redeemed ................................................... (24,877,630) (53,145,813)
----------------- -----------------
Net increase (decrease) in Fund shares ............................ (8,284,175) (27,284,771)
----------------- -----------------
Shares outstanding at end of period ............................... 97,291,906 105,576,081
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - 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, Years Ended December 31,
1998(a)
(Unaudited) 1997(a) 1996(a) 1995 1994 1993(a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 11.04 $ 11.05 $ 11.35 $ 10.91 $ 12.01 $ 11.93
--------------------------------------------------------------------------
Income from investment operations:
Net investment income .......................... .34 .73 .74 .71 .81 .87
Net realized and unrealized gain (loss) on
investments .................................. (.15) (.07) (.32) .44 (1.15) .08
--------------------------------------------------------------------------
Total from investment transactions ............. .19 .66 .42 1.15 (.34) .95
--------------------------------------------------------------------------
Less distributions:
From net investment income ..................... (.31) (.67) (.72) (.43) (.64) (.80)
From net realized gains ........................ -- -- -- -- -- (.03)
In excess of gains ............................. -- -- -- -- -- (.04)
From tax return of capital ..................... -- -- -- (.28) (.12) --
--------------------------------------------------------------------------
Total distributions ............................ (.31) (.67) (.72) (.71) (.76) (.87)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net asset value, end of period ................. $ 10.92 $ 11.04 $ 11.05 $ 11.35 $ 10.91 $ 12.01
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............................... 1.74** 6.17 3.86 10.74 (2.87) 8.18
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......... 1,062 1,166 1,468 1,823 2,136 3,190
Ratio of operating expenses net, to average
daily net assets (%) ......................... .86* .86 .80 .75 .73 .68
Ratio of net investment income to average
daily net assets (%) ......................... 6.30* 6.64 6.66 6.37 6.93 7.21
Portfolio turnover rate (%) .................... 152.2* 39.4 61.8 101.1 65.3 66.1
</TABLE>
(a) Per share amounts have been calculated using weighted average shares
outstanding.
* Annualized
** Not annualized
17 - 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 other than money market
instruments with an original maturity over 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. Money market
instruments purchased with an original 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.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
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 purchased and 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.
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
18 - Scudder Short Term Bond
<PAGE>
(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. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund accordingly paid no federal income taxes and no provision
for federal income taxes was required.
At December 31, 1997, the Fund had a net tax basis capital loss carryforward of
approximately $134,629,000 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), December 31, 2004
($27,896,000) and December 31, 2005 ($19,379,000), the respective expiration
dates.
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 annually 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 (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 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, 1998, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $722,365,276 and $799,037,486, respectively. Purchases and sales of
U.S. Government obligations aggregated $80,748,047 and $116,614,141,
respectively.
19 - Scudder Short Term Bond
<PAGE>
The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1998 was $9,329,943,690 and $9,425,604,654, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, 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 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. For the six months ended June 30, 1998, the
fee pursuant to these agreements amounted to $2,994,960, of which $459,770 is
unpaid at June 30, 1998. The management fee was equivalent to an annualized
effective rate of 0.54% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. Included
in services to shareholders is $829,599 charged to the Fund by SSC for the six
months ended June 30, 1998, of which $261,880 is unpaid at June 30, 1998.
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,
1998, the amount charged to the Fund by STC aggregated $275,201, of which
$131,415 is unpaid at June 30, 1998.
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, 1998, the amount charged to the Fund by SFAC aggregated $84,934,
of which $27,083 is unpaid at June 30, 1998.
The Trust pays each of its Trustees not affiliated with the Adviser an annual
retainer, divided equally among the series of the Trust, plus specified amounts
for attended board and committee meetings. For the six months ended June 30,
1998, Trustees' fees and expenses aggregated $26,788.
20 - Scudder Short Term Bond
<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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. Certain Scudder funds may not be available for
purchase or exchange. +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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
21 - 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 previously designated.
Distributions Direct
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
- ------------------------------------------------------------------------------------------------------------------------------
22 - Scudder Short Term Bond Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
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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 8,000 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 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
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Additional Information on How to Contact Scudder:
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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
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23 - Scudder Short Term Bond Fund
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About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
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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