Scudder
Short Term
Bond Fund
Semiannual Report
June 30, 1999
- -----------------
No-Load Funds
- -----------------
Seeks to provide a high level of income consistent with a high degree of
principal stability.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Short Term Bond Fund
Date of Inception: 4/2/84 Total Net Assets as of Ticker Symbol: SCSTX
6/30/99: $892.3 million
o Bonds posted poor performance in the first half of the year as continued
strength in the United States and signs of a recovery in Asia sparked fears of
higher interest rates. Corporate issues, in which the Fund has a significant
weighting, generally underperformed other sectors of the bond market during the
period.
o Management maintained its focus on bonds issued by companies in non-cyclical
industries, such as the consumer nondurables, telecommunications, and media
sectors. Such companies tend to have steady, recurring cash flows, and are less
affected by fluctuations in the economy.
o The Fund received an overall Morningstar Rating(TM)of four stars for its risk
adjusted performance as of June 30, 1999.^1
Table of Contents
3 Letter from the Fund's President 16 Financial Highlights
5 Performance Update 17 Notes to Financial Statements
6 Portfolio Summary 20 Officers and Trustees
6 Portfolio Management Discussion 21 Investment Products and Services
9 Investment Portfolio 22 Scudder Solutions
13 Financial Statements
^1 Morningstar proprietary rankings reflect historical risk-adjusted performance
as of June 30, 1999. The ratings are subject to change every month and are
calculated from the funds' 3-, 5-, and 10-year average annual returns in
excess of 90-day Treasury bill returns with appropriate fee adjustments, and a
risk factor that reflects fund performance below 90-day T-bill returns. Past
performance is no guarantee of future results. Scudder Short Term Bond Fund
received 4 stars for the 3- and 10-year periods and 3 stars for the 5-year
period. The top 10% of funds in a broad asset class receive 5 stars, and the
next 22.5% receive 4 stars, and the next 35% receive 3 stars. Scudder Short
Term Bond Fund was rated among 1543, 1102, and 371 taxable bond funds for the
3-, 5-, and 10-year periods, respectively. Not all Scudder Funds receive 4-
and 5-star ratings. Ratings are subject to change.
2 - Scudder Short Term Bond Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
The first half of 1999 proved to be a challenging period for fixed income
investors, as the positive sentiment that pervaded the bond market in the third
and fourth quarters of last year gradually dissipated. Continued strength in the
U.S. proved to be beneficial for businesses, consumers, and stock market
investors, but bonds did not fare as well. Fears of higher interest rates, which
had receded in the months following last year's financial crisis, resurfaced on
concerns that the benign level of inflation would not be sustainable given the
tight labor markets in the U.S. The yield on the 30-year Treasury bond climbed
back above the 6% level (compared to its lows below 5% last fall), and the
performance of corporate issues was dampened by the excessive levels of new
supply coming to the market.
While price declines of any kind are always undesirable to bond investors,
the rise in yields (and corresponding retreat in bond prices) over the last few
months has been relatively small by historical standards. Seasoned investors
understand that some price fluctuation is to be expected with bond funds.
However, investments with a conservative approach and a history of below-average
volatility, such as Scudder Short Term Bond Fund, can help to minimize one's
exposure during periods of rising rates. For more information on the recent
market environment and the Fund's investment strategy, please turn to the
Portfolio Management Discussion on page 6.
For those of you who are interested in new Scudder products, we are pleased
to introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of pursuing long-term outperformance compared to
their benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Thank you for your continued investment in Scudder Short Term Bond Fund. If
you have any questions about your investment, please call Scudder Investor
Information at 1-800-SCUDDER, or visit our Web site at www.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, 1999
- ------------------------------------------------
Fund Index Comparisons
- ------------------------------------------------
Total Return
---------------------------------------------
Period
Ended Growth of Average
6/30/1999 $10,000 Cumulative Annual
---------------------------------------------
Scudder Short Term Bond Fund
---------------------------------------------
1 Year $ 10,313 3.13% 3.13%
5 Year $ 12,739 27.39% 4.96%
10 Year* $ 18,809 88.09% 6.52%
---------------------------------------------
Salomon Brothers Inc. Treasury/Government
Sponsored Corporate Index (1-3 years)
---------------------------------------------
1 Year $ 10,517 5.17% 5.17%
5 Year $ 13,618 36.18% 6.37%
10 Year* $ 19,531 95.31% 6.92%
- -------------------------------------------------
Growth of a $10,000 Investment
- -------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Salomon Brothers Inc.
Treasury/Government
Sponsored Corporate Index Scudder Short Term
(1 - 3 years) Bond Fund
'89 10000 10000
'90 10842 10932
'91 11954 12307
'92 13212 13535
'93 14102 14680
'94 14342 14765
'95 15444 15529
'96 16306 16323
'97 17383 17329
'98 18572 18238
'99 19531 18809
Yearly periods ended June 30
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
- ----------------------------------------
Yearly Periods Ended June 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $11.58 $11.89 $12.01 $12.12 $11.37 $11.19 $11.03 $11.00 $10.92 $10.65
- -----------------------------------------------------------------------------------------------------------------------------
Income Dividends $ 1.03 $ 1.09 $ 1.03 $ .87 $ .76 $ .74 $ .72 $ .69 $ .64 $ .61
- -----------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ .06 $ -- $ -- $ -- $ .07 $ -- $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 9.33 12.58 9.98 8.45 .58 5.17 5.11 6.17 5.25 3.13
- -----------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 8.41 10.27 10.50 6.76 1.69 7.68 5.57 6.61 6.84 5.17
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. If the Adviser had not maintained the Fund's
expenses, the one year total return for the Fund would have been lower.
* 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 87.45% and 6.49%,
respectively.
4 - Scudder Short Term Bond Fund
<PAGE>
Portfolio Summary as of June 30, 1999
- ------------------------------------
Diversification
- ------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Corporate Bonds 31%
U.S. Government & Treasury
Obligations 20%
Asset-Backed Securities 19%
Collateralized Mortgage Obligations 14%
Government National Mortgage
Association 6%
U.S. Government Agency Pass-Thrus 5%
Repurchase Agreements 4%
Foreign Bonds -- U.S.$ Denominated 1%
- -------------------------------------------
100%
- -------------------------------------------
Management continues to find the most compelling investment opportunities in
the corporate sector.
- ------------------------------------
Quality
- ------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
U.S. Government & Treasury
Obligations 31%
AAA* 29%
AA 13%
A 8%
BBB 18%
NR 1%
- ------------------------------------
100%
- ------------------------------------
Weighted Average Quality: AA
*Category includes cash equivalents
The Fund's bias toward higher quality bonds proved beneficial in a difficult
environment.
- -------------------------------
Effective Maturity
- -------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Under 1 year 20%
1 through 5 years 70%
5 through 8 years 7%
8 years or greater 3%
- ------------------------------------
100%
- ------------------------------------
Weighted average effective
maturity: 2.87 years
The decision to increase the Fund's average maturity detracted from
performance when bond prices weakened in the second quarter.
For more complete details about the Fund's investment portfolio, see page 9. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Short Term Bond Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager Steven Wohler discusses
Scudder Short Term Bond Fund's strategy and the market environment during the
six-month period ended June 30, 1999.
Q: The bond market has endured a difficult environment so far in 1999. What
factors have contributed to its poor performance?
A: The ability of the U.S. economy to remain strong in the wake of the recent
crises in Japan and the emerging markets has been bad news for bonds, since
prosperity can ultimately lead to inflation and higher interest rates. When the
period began, investors were still focused on deflation, rather than inflation.
Despite the steady growth in the U.S. economy at that point, the consensus view
was that the weakness overseas would put a damper on global demand, and by
extension, commodity prices and inflation. As this possibility began to seem
more remote as the first quarter progressed, the yield on the 30-year Treasury
bond crept up to 5.625% by the end of the first quarter, well above its 5.095%
level of December 31, 1998. Corporate issues held up slightly better in the
first three months of the year since the stronger domestic economy was
interpreted as a positive for the financial health of U.S. companies.
As the second quarter began, the environment turned even more negative for
bonds. Growth in the U.S. picked up at the same time as evidence began to build
that the recession in Asia was bottoming, sparking concerns that the Federal
Reserve would be compelled to raise interest rates. The bond market's fears were
seemingly confirmed in May when the April consumer price index (CPI) report
showed the largest monthly gain in inflation since March of 1996. Shortly after,
Japan reported that its first quarter GDP shot ahead at an annualized rate of
7.9%, which served to increase investors' fears regarding the strength of the
global economy. The bond market rapidly priced in a rate hike in the wake of
these developments, causing the yield on the 30-year issue to climb to 6.16% by
June 24, its high-water mark for the period. Corporate bonds also suffered
during the selloff, as record levels of issuance caused excess supply to flood
the market at a time when demand was on the wane. Since the markets had already
discounted in the possibility of a rate hike, the Fed's announcement of a
quarter-point rate increase proved anticlimactic. However, its adoption of a
"neutral" bias toward further changes in interest rates was a positive surprise
that allowed the period to close on an upbeat note.
Q: How did the Fund perform in this environment?
A: The Fund trailed its benchmark because of a heavy emphasis on corporate
bonds, and an extended duration (interest rate exposure), both of which had a
negative impact on performance in a difficult market. For the six months ended
June 30, the Fund returned 0.57% compared to 1.33% for its unmanaged benchmark,
the Salomon Brothers, Inc. Treasury/Government Sponsored Corporate Index.
Q: In the last report, you had a fairly optimistic view on corporates. How did
this position affect performance early in the period, and how did you cope with
the difficult environment in the second quarter?
A: Heading into 1999, we held a favorable view of "spread products," those
issues that trade based on the difference between their yield and the yield on
6 - Scudder Short Term Bond Fund
<PAGE>
the U.S. Treasury issue of comparable maturity. We felt that corporates, in
particular, offered significant value at the time. Our overweight position had a
positive impact early in the period when the sector was strong, but we began to
pare back our holdings late in the first quarter, based on our belief that the
interest rate environment would take a turn for the worse. The decision to
reduce the Fund's weighting in corporates helped performance by lessening the
impact of the sector's weakness throughout the spring. Feeling that the slump
had largely played itself out by mid-June, we began to make selective purchases
of auxiliary issues that had fallen to attractive levels.
Q: In the corporate sector, are you still focused on noncyclicals?
A: Yes. Even though the economy has been doing well, we feel that it is best to
insulate the Fund from the volatility associated with the so-called "smokestack"
industries. We focus on bonds issued by companies with steady, recurring cash
flows. Consequently, we continue to overweight the consumer nondurables sector,
which includes Safeway, Gillette, and Kellogg Company. This strategy has held us
in good stead for a long time, but some of the names we have ridden for the past
year to two years gave up some ground in the second half of the period. A
parallel can be drawn to the stock market, where higher quality names
outperformed through 1998 and the first quarter of 1999, but gave way to
cyclicals and other groups of lesser quality once the global economy appeared to
be picking up steam. Despite this short-term weakness, we believe that a focus
on quality will benefit the Fund over time.
Q: What was your strategy with respect to duration and credit risk?
A: At the close of the period the Fund's duration stood at 2.1 years, above the
2.0 level of December 31, 1998, and higher than the average for comparable
funds. We pushed the Fund's duration out in order to capture extra income, but
the added risk proved to be a negative when bonds with maturities of 2 to 5
years underperformed those with maturities of 2 years or less. We view this as
being one of the most important reasons for the Fund's recent underperformance.
In terms of credit quality, we adopted a more conservative posture: Our 26%
weighting in bonds rated A or BBB was well below the 35% maximum we can hold in
these areas. Since bonds rated AA and above tended to outperform in the period,
this tactical decision had a positive impact on performance.
Q: What is your outlook for the bond market through the remainder of 1999? Is
the Year 2000 issue likely to be a factor in market performance?
A: In light of the Fed's adoption of a neutral bias, we believe that most of the
pressure that has weighed on the bond market in recent months has been relieved.
While investors will be keeping an eye on economic reports for evidence of
inflation, it is likely that the worst effects of the market's rate concerns are
now behind us. As a result, corporates and mortgage-backed securities have
become an attractive source of incremental yield versus Treasuries.
Looking ahead to the remainder of the year, the Y2K problem appears to be the
most significant wild card. While we don't expect substantial
7 - Scudder Short Term Bond Fund
<PAGE>
dislocations in the market, it is likely that liquidity will dry up as we enter
the fourth quarter. The high current levels of corporate bond issuance most
likely reflect an effort on the part of U.S. companies to complete their 1999
financing activities ahead of the fourth quarter, meaning that few issues will
be coming to market in the final three months of the year. We also expect demand
to fall as we approach the new year, since most institutions will avoid taking
on major new positions prior to Y2K. The combination of these phenomena should
create abnormalities in the flow of trading activity, and could affect the
durations of existing portfolios. Beyond that, however, we do not expect any
major disruptions.
Going forward, we intend to use the same steady approach, emphasizing value in
corporates and looking for the best risk/reward opportunities on the short end
of the yield curve. While the Fund has underperformed in recent months, we
continue to believe in the long-term value of our investment strategy, and are
enthusiastic about the opportunities that currently exist in the bond market.
8 - Scudder Short Term Bond Fund
<PAGE>
Investment Portfolio as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------
Repurchase Agreements 3.7%
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/1999
at 4.8%, to be repurchased at $33,361,448 on 7/1/1999, collateralized
by a $33,801,000 U.S. Treasury Bond, 3.625%, 4/15/2028 (Cost $33,357,000) ..... 33,357,000 33,357,000
U.S. Government & Treasury Obligations 20.1%
- -------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, 5.625%, 9/2/2003 ...................................... 7,190,000 7,010,250
Federal Home Loan Bank, 5.5%, 4/14/2000 ......................................... 10,000,000 9,996,900
Federal Home Loan Bank, 5.625%, 3/19/2001 ....................................... 20,000,000 19,953,200
Federal Home Loan Bank, 5.125%, 9/15/2003 ....................................... 35,000,000 33,709,200
Federal Home Loan Mortgage Corp., 5.75%, 7/15/2003 .............................. 10,000,000 9,873,400
Federal National Mortgage Association, 5.625%, 3/15/2001 ........................ 20,000,000 19,965,600
U.S. Treasury Note, 5.75%, 11/15/2000 ........................................... 5,000,000 5,021,100
U.S. Treasury Note, 5.875%, 11/30/2001 .......................................... 15,000,000 15,093,750
U.S. Treasury Note, 5.625%, 12/31/2002 .......................................... 40,000,000 39,956,400
U.S. Treasury Principal Strip, Zero Coupon, 11/15/2000 .......................... 10,949,000 10,179,723
U.S. Treasury Principal Strip, Zero Coupon, 2/15/2001 ........................... 8,500,000 7,785,405
Total U.S. Government & Treasury Obligations (Cost $182,432,446) 178,544,928
Government National Mortgage Association 6.3%
- -------------------------------------------------------------------------------------------------------------
11.0%, 7/15/2015 ................................................................ 35,585 39,036
9.0%, 11/15/2020 ................................................................ 86,644 92,466
8.0% with various maturities to 12/15/2023 ...................................... 44,973,797 46,303,776
11.5%, 1/1/2029 ................................................................. 9,129,055 10,144,662
Total Government National Mortgage Association (Cost $57,315,779) 56,579,940
U.S. Government Agency Pass-thrus 4.8%
- -------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7.5%, 4/1/2013 ................................ 30,618,420 31,163,734
Federal Home Loan Mortgage Corp., 9.5%, 8/1/2016 ................................ 3,903,956 4,190,312
Federal National Mortgage Association, 8.0%, 12/1/2012 .......................... 7,011,188 7,205,047
Total U.S. Government Agency Pass-thrus (Cost $43,041,019) 42,559,093
Collateralized Mortgage Obligations 13.9%
- -------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Series 1998-13 A7, 6.75%, 8/25/2028 ..................... 9,373,797 9,347,363
First Bank System Inc. Series 1993-F, 7.14%, 11/25/2024 ......................... 5,727,268 5,720,109
General Electric Capital Mortgage Services, Inc., Series 1992-E, 7%, 1/25/2008 .. 3,834,948 3,849,329
General Electric Capital Mortgage Services, Inc. Series 1994-21A, 6.5%, 8/25/2009 10,630,474 10,537,458
General Electric Capital Mortgage Services, Inc. Series 1994-27, 6.5%, 7/25/2024 462,133 460,544
Morgan Stanley Capital Investment Inc., 6.25%, 7/15/2007 ........................ 7,542,083 7,398,017
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Short Term Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Index Amortizing Trust, Series 1997-1, 6.682%, 8/25/2004 ..................... 14,000,000 13,884,063
Norwest Asset Securities Corp., Series 1998-23 A2, 6.75%, 10/25/2028 .................. 11,627,350 11,529,244
Norwest Integrated Structured Assets, Inc., Series 1999-1 A1, 6.5%, 4/25/2029 ......... 19,092,502 18,737,501
Residential Accredit Loans, Inc., Series 1999-QS3 A1, 6.5%, 3/25/2029 ................. 6,790,546 6,658,979
Residential Accredit Loans, Inc., Series 1999-QS7 A1, 6.75%, 6/25/2029 ................ 15,465,000 15,252,356
Residential Funding Mortgage Securities, Series 1996-S15, 7.75%, 1/25/2007 ............ 7,375,178 7,460,453
Residential Funding Mortgage Securities, Series 1993-A5, 7.05%, 10/25/2023 ............ 4,405,748 4,342,415
Residential Funding Mortgage Securities I Inc., Series 1997-S19 A6, 6.5%, 12/25/2012 .. 8,394,178 8,383,685
Total Collateralized Mortgage Obligations (Cost $125,399,282) 123,561,516
Foreign Bonds -- U.S.$ Denominated 1.0%
- -------------------------------------------------------------------------------------------------------------------
Cadbury Schweppes, plc, 6.25%, 10/4/1999 (Cost $9,028,620) ............................ 9,000,000 9,004,500
Asset Backed 19.2%
- -------------------------------------------------------------------------------------------------------------------
Manufacturing 1.3%
PBG Equipment Trust Series 1A, 6.27%, 1/20/2012 ....................................... 11,758,128 11,643,722
------------
Automobile Receivables 3.7%
Capital Automobile Receivable Asset Trust, Series 1999-1 A2, 5.58%, 6/15/2002 ......... 8,000,000 7,945,000
First Security Auto Owner Trust, Series 1999-2 A3, 6%, 10/15/2003 ..................... 10,000,000 9,987,500
World Omni Automobile Lease Securitization Trust, Series 1996-B, 6.85%, 11/15/2002 .... 14,575,197 14,586,584
------------
32,519,084
------------
Credit Card Receivables 3.4%
Advanta Corp. Series 1997-2 A3, 7.3%, 10/25/2022 ...................................... 10,500,000 10,586,955
Citibank Credit Card Master Trust I, Series 1999-1 A, 5.5%, 2/15/2006 ................. 10,000,000 9,609,300
Proffitt's, Inc. Credit Card Master Trust, 6%, 9/15/2004 .............................. 10,000,000 9,953,125
------------
30,149,380
------------
Home Equity Loans 5.4%
Contimortgage Home Equity Loan Trust, Series 1997-3 M1-F, 7.31%, 8/15/2028 ............ 18,500,000 18,390,156
Contimortgage Net Interest Margin Notes, Series 1997-3, 7.23%, 7/16/2028 (b) .......... 4,819,485 4,646,284
Equity Credit Corp. Home Equity Loan Trust, Series 1999-2, Class A2F, 6.223%, 6/25/2011 14,800,000 14,661,250
Green Tree Home Equity Loan Trust, Series 1997-B A5, 7.15%, 4/15/2027 ................. 9,600,000 9,678,750
Old Stone Credit Corp. Home Equity Loan, Series 1993-1, 5.85%, 3/15/2008 .............. 458,376 458,268
------------
47,834,708
------------
Manufactured Housing Receivables 5.4%
Associated Manufactured Housing Corp., Series 1997-1 B1, 7.6%, 6/15/2028 .............. 8,000,000 7,615,625
Green Tree Financial Corp., Series 1995-3 B2, 8.1%, 8/15/2025 ......................... 20,636,400 17,070,017
</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>
Green Tree Financial Corp., Series 1995-8 B1, 7.3%, 12/15/2026 ...... 9,500,000 9,063,570
Green Tree Financial Corp., Series 1996-5 B2, 8.45%, 7/15/2027 ...... 9,998,413 8,183,501
Merrill Lynch Mortgage Investors Inc., Series 1992-B, 8.5%, 4/15/2012 6,512,935 6,533,255
------------
48,465,968
Total Asset Backed (Cost $178,108,333) 170,612,862
Corporate Bonds 31.0%
- -------------------------------------------------------------------------------------------------
Consumer Discretionary 1.7%
Wal-Mart Stores Inc., 5.85%, 6/1/2000 ............................... 15,000,000 15,025,200
------------
Consumer Staples 5.8%
Gillette Company, 5.75%, 8/3/2001 ................................... 12,000,000 11,890,320
Kellogg Co., 5.75%, 2/2/2001 ........................................ 10,000,000 9,955,000
Pepsi Bottling Holdings, Inc., 5.625%, 2/17/2009 .................... 10,000,000 9,228,900
Philip Morris Companies Inc., 6.15%, 3/15/2000 ...................... 15,000,000 15,059,550
Safeway Inc., 5.875%, 11/15/2001 .................................... 6,000,000 5,935,980
------------
52,069,750
------------
Communications 1.2%
Sprint Capital Corp., 5.875%, 5/1/2004 .............................. 11,500,000 11,068,750
------------
Financial 15.3%
AT&T Capital Corp., 6.25%, 5/15/2001 ................................ 11,000,000 10,875,150
BANK ONE CORP., 6.25%, 10/1/2001 .................................... 10,000,000 10,014,500
BankAmerica Corp., 5.75%, 3/1/2004 .................................. 10,000,000 9,700,000
Capital One Bank, 6.57%, 1/27/2003 .................................. 7,000,000 6,859,300
Citicorp, 8.03%, 2/15/2000 .......................................... 15,000,000 15,195,300
Colonial Realty LP (REIT), 7.5%, 7/15/2001 .......................... 4,000,000 3,967,440
Commercial Credit Co., 6.375%, 9/15/2002 ............................ 8,000,000 7,993,920
Ford Motor Credit Co., 6.5%, 2/28/2002 .............................. 8,000,000 8,019,520
General Electric Capital Corp., 6.02%, 5/4/2001 ..................... 15,000,000 14,943,750
Home Savings of America, 6%, 11/1/2000 .............................. 500,000 498,555
NBD Bank NA Michigan, 6.25%, 8/15/2003 .............................. 6,500,000 6,465,615
Oasis Residential Inc. (REIT), 6.75%, 11/15/2001 .................... 13,400,000 12,908,488
Spieker Properties, Inc. (REIT), 6.65%, 12/15/2000 .................. 15,000,000 15,022,500
Spieker Properties, Inc. (REIT), 6.8%, 12/15/2001 ................... 5,500,000 5,489,275
Spieker Properties, Inc. (REIT), 6.95%, 12/15/2002 .................. 3,500,000 3,486,210
Susa Partnership LP (REIT), 7.125%, 11/1/2003 ....................... 5,400,000 5,293,134
------------
136,732,657
------------
</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>
Media 0.7%
Tele-Communications, Inc., 7.375%, 2/15/2000 .............. 6,000,000 6,059,400
Manufacturing 1.1%
Xerox Corp., 5.5%, 11/15/2003 ............................. 10,000,000 9,526,600
-----------
Technology 1.7%
Raytheon Co., 6.45%, 8/15/2002 ............................ 15,000,000 15,032,850
-----------
Energy 2.7%
Atlantic Richfield Co., 5.55%, 4/15/2003 .................. 12,000,000 11,640,000
Vastar Resources, Inc., 6%, 4/20/2000 ..................... 12,500,000 12,557,625
-----------
24,197,625
-----------
Metals & Minerals 0.2%
Alcan Aluminium Ltd., 9.625%, 7/15/2019 ................... 1,680,000 1,762,018
-----------
Utilities 0.6%
Detroit Edison Co., 5.93%, 2/1/2001 ....................... 5,000,000 4,976,300
Total Corporate Bonds (Cost $281,090,734) 276,451,150
- ---------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $909,773,213) (a) 890,670,989
</TABLE>
(a) The cost for federal income tax purposes was $909,773,213. At June 30,
1999, net unrealized depreciation for all securities based on tax cost was
$19,102,224. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $849,025 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $19,951,249.
(b) Restricted Securities are securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
The aggregate fair value of restricted securities at June 30, 1999 amounted
to $4,646,284, which represents 0.52% of net assets. Information concerning
such restricted securities at June 30, 1999 is as follows:
Acquisition
Security Date Cost ($)
------------------------------------------ ------------ ------------
Contimortgage Net Interest Margin Notes 10/8/1997 4,819,485
Abbreviations and other acronyms used in this portfolio:
-----------------------------------------------------------------------
REIT Real Estate Investment Trust
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 may be shorter than stated
maturities due to prepayments. All separate investments in the 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.
12 - Scudder Short Term Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $909,773,213) .......... $ 890,670,989
Cash ........................................................... 630,518
Interest receivable ............................................ 9,564,964
Receivable for Fund shares sold ................................ 381,297
Receivable for investments sold ................................ 12,891,648
Other assets and receivables ................................... 22,170
---------------
Total assets ................................................... 914,161,586
Liabilities
- ----------------------------------------------------------------------------------------------------
Dividends payable .............................................. 924,894
Payable for Fund shares redeemed ............................... 19,636,995
Accrued management fee ......................................... 337,161
Other payables and accrued expenses ............................ 928,773
---------------
Total liabilities .............................................. 21,827,823
Net assets, at market value $ 892,333,763
Net Assets
- ----------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................ 3,265,219
Net unrealized appreciation (depreciation) on investments ...... (19,102,224)
Accumulated net realized gain (loss) ........................... (146,888,932)
Paid-in capital ................................................ 1,055,059,700
Net assets, at market value $ 892,333,763
Net Asset Value
- ----------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($892,333,763 / 83,763,556 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares authorized) $ 10.65
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Short Term Bond Fund
<PAGE>
Statement of Operations
six months ended June 30, 1999 (Unaudited)
<TABLE>
Investment Income
- ------------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest ...................................................... $ 30,712,056
------------
Expenses:
Management fee ................................................ 2,624,388
Services to shareholders ...................................... 1,356,894
Custodian and accounting fees ................................. 123,888
Trustees' fees and expenses ................................... 22,962
Reports to shareholders ....................................... 97,188
Auditing ...................................................... 30,438
Legal ......................................................... 11,748
Registration fees ............................................. 23,496
Other ......................................................... 45,627
------------
Total expenses before reductions .............................. 4,336,629
Expense reductions ............................................ (296,649)
------------
Expenses, net ................................................. 4,039,980
Net investment income 26,672,076
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... (6,176,075)
Net unrealized appreciation (depreciation) during the period on
investments ................................................. (14,969,938)
Net gain (loss) on investment transactions (21,146,013)
Net increase (decrease) in net assets resulting from operations $ 5,526,063
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Short Term Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1999 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................ $ 26,672,076 $ 65,426,101
Net realized gain (loss) from investment transactions (6,176,075) (3,844,223)
Net unrealized appreciation (depreciation) on
investment transactions during the period ......... (14,969,938) (16,197,280)
--------------- ---------------
Net increase (decrease) in net assets resulting from
operations ........................................ 5,526,063 45,384,598
--------------- ---------------
Distributions to shareholders from:
Net investment income ................................ (25,057,898) (62,427,806)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ............................ 567,384,396 425,742,760
Net asset value of shares issued to shareholders in
reinvestment of distributions ..................... 19,209,744 47,687,597
Cost of shares redeemed .............................. (666,668,820) (629,978,033)
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ...................................... (80,074,680) (156,547,676)
--------------- ---------------
Increase (decrease) in net assets .................... (99,606,515) (173,590,884)
Net assets at beginning of period .................... 991,940,278 1,165,531,162
Net assets at end of period (including undistributed
net investment income of $3,265,219 and $1,651,041,
respectively) ..................................... $ 892,333,763 $ 991,940,278
Other Information
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............ 91,279,720 105,576,081
--------------- ---------------
Shares sold .......................................... 52,178,668 38,872,025
Shares issued to shareholders in reinvestment of
distributions ..................................... 1,784,972 4,362,339
Shares redeemed ...................................... (61,479,804) (57,530,725)
--------------- ---------------
Net increase (decrease) in Fund shares ............... (7,516,164) (14,296,361)
Shares outstanding at end of period .................. 83,763,556 91,279,720
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - 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, 1999(a) Years Ended December 31,
(Unaudited) 1998(a) 1997(a) 1996(a) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 10.87 $ 11.04 $ 11.05 $ 11.35 $ 10.91 $ 12.01
Income from investment operations:
Net investment income ......................... .30 .66 .73 .74 .71 .81
Net realized and unrealized gain (loss) on
investment transactions ..................... (.24) (.19) (.07) (.32) .44 (1.15)
Total from investment operations .............. .06 .47 .66 .42 1.15 (.34)
Less distributions from:
Net investment income ......................... (.28) (.64) (.67) (.72) (.43) (.64)
Tax return of capital ......................... -- -- -- -- (.28) (.12)
Total distributions ........................... (.28) (.64) (.67) (.72) (.71) (.76)
Net asset value, end of period ................ $ 10.65 $ 10.87 $ 11.04 $ 11.05 $ 11.35 $ 10.91
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .............................. .57(c)** 4.34(b) 6.17 3.86 10.74 (2.87)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........ 892 992 1,166 1,468 1,823 2,136
Ratio of operating expenses net, to average
daily net assets (%) ........................ .85* .86 .86 .80 .75 .73
Ratio of operating expenses before expense
reductions, to average daily net assets (%) . .91* .86 .86 .80 .75 .73
Ratio of net investment income to average daily
net assets (%) .............................. 5.61* 6.07 6.64 6.66 6.37 6.93
Portfolio turnover rate (%) ................... 58.1* 95.4 39.4 61.8 101.1 65.3
</TABLE>
(a) Per share amounts have been calculated using weighted average shares
outstanding.
(b) If the Adviser had not reimbursed the Fund, the total return for the year
ended December 31, 1998 would have been lower.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
16 - 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") which is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusetts business trust.
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 purchased with an original
maturity greater than sixty days are valued by pricing agents approved by the
officers of the Fund whose 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 or
sub-custodian bank, 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 is equal to at least the
principal amount of the repurchase price plus accrued interest.
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. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At December 31, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $140,296,000 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
($27,917,000), December 31, 2005 ($18,998,000) and December 31, 2006
($6,027,000), the respective expiration dates.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. 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 at least annually.
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. 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.
17 - Scudder Short Term Bond Fund
<PAGE>
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. Original issue discounts are accreted for both tax and
financial reporting purposes.
B. Purchases and Sales of Securities
During the six months ended June 30, 1999, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $217,934,525 and $277,260,599, respectively. Purchases and sales of
U.S. Government obligations aggregated $43,416,936 and $55,282,188,
respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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. Effective October 1, 1998, the Adviser has
agreed not to impose all or a portion of the Fund's management fee until April
30, 2000 in order to maintain the annualized expenses of the Fund at not more
than .85% of average daily net assets. For the six months ended June 30, 1999,
the Adviser did not impose a portion of its management fee aggregating $296,649,
and the amount imposed aggregated $2,327,739. This was equivalent to an
annualized effective rate of 0.49% of the Fund's daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended June 30, 1999, the amount charged to the Fund by SSC aggregated
$732,461, of which $119,102 is unpaid at June 30, 1999.
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,
1999, the amount charged to the Fund by STC aggregated $257,148, of which
$41,458 is unpaid at June 30, 1999.
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, 1999, the amount charged to the Fund by SFAC aggregated $59,933,
of which $8,875 is unpaid at June 30, 1999.
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,
1999, Trustees' fees and expenses aggregated $22,962.
18 - Scudder Short Term Bond Fund
<PAGE>
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to 33 percent of its net assets under the agreement.
E. Merger
On April 12, 1999, the Fund acquired substantially all of the assets and all of
the identified and stated liabilities of Scudder Zero Coupon 2000 Fund in a tax
free exchange for 1,644,820 shares of common stock (valued at $17,796,950). The
net assets of Scudder Zero Coupon 2000 Fund included unrealized appreciation of
$401,355.
19 - Scudder Short Term Bond Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll Associates;
Executive Fellow, Center for Business
Ethics, Bentley College
Peter B. Freeman
Trustee; Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of
Business Administration,
Northeastern University
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Venture Partner,
Venture Capital Group
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Stephen A. Wohler*
Vice President
John Millette*
Vice President
and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
20 - Scudder Short Term Bond Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Prime Reserve Shares*
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 GNMA Fund
Scudder Income Fund
Scudder Corporate Bond 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 Select 500 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 Select 1000 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
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
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 or classes thereof 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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold 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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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:
- ------------------------------------------------------------------------------------------------------------------------------
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
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. 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.
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
</TABLE>
23 - Scudder Short Term Bond Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $280 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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
