This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
62-6-115
MIS06S
Scudder
GNMA
Fund
Semiannual Report
September 30, 1995
o A fund designed to provide high current income primarily from high quality
U.S. government mortgage-backed GNMA securities.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER GNMA FUND
- --------------------------------------------------------------------------------
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
11 Financial Statements
14 Financial Highlights
15 Notes to Financial Statements
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
IN BRIEF
* Long-term interest rates remained on a downward path throughout the
six-month fiscal period ended September 30, 1995. Scudder GNMA Fund
generated a total return of 7.28% for the period, reflecting not only
reinvested dividend distributions of $0.47 per share, but also a $0.54 rise
in share price to $14.61 on September 30.
* The Fund emphasized lower-coupon Ginnie Mae securities that afford a steady
stream of income and protection from mortgage prepayments.
LINE CHART TITLE: Yield Ratio of 30-Year GNMAs vs. 10-Year Treasuries
TIME PERIOD: 3/88 - 9/95
CHART DATA:
0 1.1522
1 1.1222
2 1.1166
3 1.1396
4 1.1623
5 1.1950
6 1.1914
7 1.1786
8 1.1570
9 1.1558
10 1.1248
11 1.1432
12 1.1217
13 1.1186
14 1.1178
15 1.1005
16 1.1201
17 1.0971
18 1.1461
19 1.1356
20 1.1475
21 1.1361
22 1.1487
23 1.1568
24 1.1744
25 1.1451
26 1.1327
27 1.1381
28 1.1440
29 1.1998
30 1.1861
CALLOUT TO CHART:
Ginnie Mae securities currently offer high yields compared with Treasuries and
are priced below what we believe to be their intrinsic worth. As investors
recognize the attractiveness of Ginnie Maes, we believe the yield differential
between Treasuries and Ginnie Maes will narrow, providing the Fund with share
price appreciation.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
- --------------------------------------------------------------------------------
Dear Shareholders,
Declining interest rates in 1995 and strong bond market returns so far
this year stand in vivid contrast to 1994's rising rates and disappointing
performance. Bond investors who stayed the course were rewarded this year as
inflation remained low, growth remained modest, and the likelihood of an
economic slowdown in 1996 increased. Against this backdrop, bond prices rallied
strongly and yields declined.
The dramatic shift in bond market conditions underscores the value of a
total return-oriented investment approach for income portfolios. Last year,
higher interest rates raised Scudder GNMA Fund's income levels, helping to
offset the Fund's decline in share price. In 1995, the Fund's strong
year-to-date total return of 12.35% reflects significant price appreciation,
which more than made up for the Fund's modest decline in yield.
While economic growth accelerated in the third quarter of this year, we
believe the ingredients that foster positive bond market performance -- slow
economic growth, low inflation, and falling interest rates -- will prevail in
the coming months, which should benefit Scudder GNMA Fund. Ginnie Mae investors
now earn higher yields than those available from comparable Treasury securities
without having to compromise credit quality. Meanwhile, the current balance
between the supply of Ginnie Mae securities and the demand for them favors
continued solid performance. Even better, there are reasons to believe that
demand could rise -- among them recent signs of the long-awaited decline of the
U.S. dollar versus the Japanese yen, which may attract investors from abroad to
dollar-based investments. Highly creditworthy securities such as Ginnie Maes
also should experience increased demand if economic growth slows as expected.
In the months ahead, your Fund managers will continue to strive to
balance the need for income with opportunities for price appreciation. As
always, we welcome your comments, suggestions, and inquiries. Thank you for
choosing Scudder GNMA Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder GNMA Fund
3
<PAGE>
Scudder GNMA Fund
Performance Update as of September 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder GNMA Fund
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,285 12.85% 12.85%
5 Year $14,923 49.23% 8.34%
10 Year $22,399 123.99% 8.40%
Lehman Brothers Mortgage GNMA Index
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,407 14.07% 14.07%
5 Year $15,606 56.06% 9.30%
10 Year $26,277 162.77% 10.14%
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 September 30
Scudder GNMA Fund
Year Amount
- ----------------------
85 $10,000
86 $11,321
87 $11,351
88 $12,713
89 $13,820
90 $15,010
91 $17,305
92 $19,319
93 $20,559
94 $19,849
95 $22,399
Lehman Brothers Mortgage GNMA Index
Year Amount
- ----------------------
85 $10,000
86 $11,784
87 $12,013
88 $13,820
89 $15,384
90 $16,837
91 $19,635
92 $21,878
93 $23,320
94 $23,035
95 $26,277
The unmanaged Lehman Brothers Mortgage GNMA Index is a market
value-weighted measure of all fixed-rate securities backed by mortgage pools
of the GNMA. Index returns are calculated monthly and assume reinvestment of
dividends. Unlike Fund returns, Index 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 September 30
- ---------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
Net Asset Value... $15.30 $14.10 $14.42 $14.35 $14.30 $15.19 $15.61 $15.30 $13.84 $14.61
Income Dividends.. $ 1.47 $ 1.27 $ 1.32 $ 1.26 $ 1.25 $ 1.22 $ 1.28 $ 1.27 $ .95 $ .95
Capital Gains
Distributions..... $ .08 $ - $ - $ - $ - $ - $ - $ - $ - $ -
Fund Total
Return (%)........ 13.20 .30 12.00 8.70 8.61 15.29 11.63 6.42 -3.45 12.85
Index Total
Return (%)........ 17.84 1.94 15.04 11.31 9.45 16.61 11.43 6.59 -1.22 14.07
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4
<PAGE>
Portfolio Summary as of September 30, 1995
- --------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Government National
Mortgage Association 96% As interest rates fell, we
Cash Equivalents, net 4% increased investments in
---- Ginnie Mae securities selling
100% at attractive values.
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
GNMA Coupons
- --------------------------------------------------------------------------
6.5% 9%
7.0% 25%
7.5% 27% The Fund emphasized lower-
8.0% 20% coupon bonds, adding new
8.5% 7% investments in bonds with
9.0% 1% coupons of 6.5%.
9.5% 5%
10% 4%
Greater than 10% 2%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 5% Increasing investments in
1 - 5 years 10% slightly longer-maturity
5 - 10 years 6% bonds helped the Fund take
Greater than 10 years 79% advantage of rising bond
---- prices.
100%
====
Weighted average effective maturity: 10 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
SCUDDER GNMA FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
The six months ended September 30, 1995, closed a rewarding fiscal
period for Scudder GNMA Fund, as long-term interest rates remained on a downward
slope. By the end of this year's first quarter, your Fund had more than regained
ground lost from 1994's steady rise in rates. For the six months under review,
Scudder GNMA Fund generated a total return of 7.28%, reflecting the reinvestment
of $0.47 per share in income distributions paid during the period and an
increase in share price to $14.61 on September 30 from $14.07 six months ago. By
comparison, the 62 GNMA funds tracked by Lipper Analytical Services, Inc.
returned an average of 7.15%, while the unmanaged Lehman Brothers Mortgage GNMA
Index returned 7.64% for the period. The Fund's 30-day net annualized SEC yield
at the end of September was 6.58% -- down slightly from its 7.00% yield six
months earlier.
These results illustrate the twin effects of declining interest rates
on bonds: lower yields but substantially higher prices.
Falling Interest Rates Yield Opportunity and Challenge
Since long-term interest rates peaked in November 1994, bond investors
have pushed up fixed-income prices and driven down yields, encouraged by reports
indicating slowing economic growth and the continued absence of inflationary
pressures. Because mortgage-backed securities are subject to prepayment risk --
the risk that issuers will prepay principal and refinance at more favorable
rates -- they tend to lag other high-quality bonds that carry no risk of
prepayment, such as U.S. Treasury securities, during periods of falling interest
rates. On the other hand, favorable supply/demand dynamics are creating
extraordinary opportunities for Ginnie Mae investors. Today the supply of new
Ginnie Maes remains modest in comparison with other periods. At current interest
rate levels, refinancing is unlikely to accelerate and significantly increase
supply. And while this year's lower rates mean mortgages are more affordable,
the economy's sluggish pace has hindered home sales, which also translates into
lower supply. Since January, monthly fixed-rate new GNMA supply has ranged from
$1.8 to $5.0 billion, barely a trickle when viewed in the context of a
marketplace that tops $1 trillion. Meanwhile, investor demand for mortgage
securities has remained steady and could well escalate, thanks to their high
quality and attractive relative yields.
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Emphasis on Total Return Produces Good Results
We manage the Fund to provide competitive yields, but in keeping with
our total-return-oriented approach we also strive for good price performance.
During the past six months, our strategy has been essentially two-fold: first,
to protect the Fund's income stream by focusing on bonds less likely to be
prepaid; and second, to enhance the Fund's ability to capture price gains by
maintaining a longer average portfolio maturity.
To mitigate prepayment risk, we replaced some of the portfolio's
higher-coupon securities -- that is, bonds paying higher stated rates of
interest -- with lower-coupon bonds in the vicinity of 6.5% to 7.5%. These
coupons are below those of bonds we believed to be most exposed to the
possibility of prepayments. Despite their lower relative coupons, the bonds in
the portfolio still produced income above most other high-quality fixed-income
investments. In addition, lower-coupon bonds enjoyed better price performance,
precisely because they were less susceptible to prepayments. Of course, we
continue to vary the mix of coupons in the overall portfolio to maximize the
Fund's income and total return.
To participate more fully in this year's strong price rally, we
continued to target a somewhat longer average effective maturity than that of
the Lehman Brothers Mortgage GNMA Index -- 9.6 years versus 8.0 years. (The
longer a bond's maturity, the more sensitive it is to changes in interest
rates.) Moreover, we took steps to capitalize on the pattern of movement in
interest rates, which have fluctuated more or less between 7% and 6.5% since
May. For example, we extended maturities when rates were at the upper end of the
range.
In addition, we strategically invested in U.S. Treasury securities
during the period. Treasuries added value to the Fund because, unlike Ginnie
Maes, they are noncallable. However, by late July we had entirely eliminated the
Fund's investments in Treasuries in favor of Ginnie Maes selling at bargain
prices.
7
<PAGE>
SCUDDER GNMA FUND
- --------------------------------------------------------------------------------
Outlook
Not since 1989 have Ginnie Maes been so attractively valued. Although
the potential for mortgage refinancings remains, we believe that Ginnie Maes --
at current prices -- already reflect the risk of prepayment. Meanwhile, our
outlook for slow economic growth and low inflation calls for interest rates to
head lower still, though not at the rapid clip of the past several months. In
short, we believe we are in the enviable position of investing within a market
characterized by fundamentally sound, high-quality securities selling at cheap
prices, with potential for appreciation.
We continue to monitor prepayment activity carefully, wary that
homeowners today are far quicker to refinance, many having refinanced their
mortgages multiple times. In the meantime, Ginnie Mae securities are currently
providing a 20% premium in yield over Treasuries with comparable maturities, but
less price fluctuation than corporate or other bonds. We think the Fund's
current blend of Ginnie Mae securities affords shareholders attractive
opportunities for price appreciation, a competitive stream of income, and ample
protection from prepayments. Thank you for your continued interest in Scudder
GNMA Fund.
Sincerely,
Your Portfolio Management Team
/s/David H. Glen /s/Mark Boyadjian
David H. Glen Mark Boyadjian
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of September 30, 1995 (Unaudited)
<CAPTION>
% of Principal Market
Net Assets Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
------------------------------------------------------------------------------------
5.8% REPURCHASE AGREEMENT
------------------------------------------------------------------------------------
24,812,000 Repurchase Agreement with State Street Bank
and Trust Company dated 9/29/95 at 6.25%,
to be repurchased at $24,824,923 on 10/2/95,
collateralized by a $25,485,000 U.S. Treasury
Note, 4.375%, 8/15/96 (Cost $24,812,000).......... 24,812,000
-----------
------------------------------------------------------------------------------------
96.1% GOV'T NATIONAL MORTGAGE ASSOC. *
------------------------------------------------------------------------------------
39,700,001 6.5% with various maturities to 8/15/24............. 38,310,501
103,950,444 7% with various maturities to 4/15/25............... 102,781,002
110,616,352 7.5% with various maturities to 11/15/24............ 111,722,516
81,371,153 8% with various maturities to 8/15/25............... 83,659,309
26,234,448 8.5% with various maturities to 8/15/24............. 27,332,884
3,309,513 9% with various maturities to 7/15/17............... 3,514,522
17,707,307 9.5% with various maturities to 10/15/21............ 19,072,108
16,529,407 10% with various maturities to 10/15/21............. 18,049,431
500,508 10.5% with various maturities to 8/20/19............ 543,676
1,287,499 11.5% with various maturities to 2/15/16............ 1,458,093
3,364,639 12% with various maturities to 2/20/16.............. 3,766,979
284,363 12.5% with various maturities to 10/20/13........... 315,998
825,552 13% with various maturities to 10/15/15............. 932,354
217,028 13.5% with various maturities to 8/15/14............ 244,834
28,049 15% with various maturities to 7/15/12.............. 31,994
------------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION (Cost $399,176,412).......... 411,736,201
------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------
% of
Net Assets
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENT PORTFOLIO (Cost $423,988,412) (a).... 101.9 436,548,201
OTHER ASSETS AND LIABILITIES, NET..................... (1.9) (8,253,948)
----- ------------
NET ASSETS............................................ 100.0 428,294,253
===== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
- -------------------------------------------------------------------------------
SCUDDER GNMA FUND
- -------------------------------------------------------------------------------
(a) Cost for federal income tax purposes was $423,988,412. At
September 30, 1995, net unrealized appreciation for all securities
based on tax cost was $12,559,789. This consisted of aggregate
gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $12,712,253 and
aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over market value of $152,464.
* The investments in mortgage-backed securities of the Government
National Mortgage Association are interests in separate pools of
mortgages. All separate investments in each of these issues
which have similar coupon rates have been aggregated for
presentation purposes in the Investment Portfolio. Effective
maturities of these investments will be shorter than stated
maturities due to prepayments.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------
SEPTEMBER 30, 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $423,988,412)
(Note A)................................................. $436,548,201
Cash........................................................ 1,563
Receivables:
Fund shares sold......................................... 302,080
Interest................................................. 2,599,860
------------
Total assets.......................................... 439,451,704
LIABILITIES
Payables:
Investments purchased.................................... $9,666,875
Fund shares redeemed..................................... 377,017
Distributions............................................ 671,472
Accrued management fee (Note C).......................... 224,505
Other accrued expenses (Note C).......................... 217,582
---------
Total liabilities..................................... 11,157,451
------------
Net assets, at market value................................. $428,294,253
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments................... $ 12,559,789
Accumulated net realized loss............................ (39,169,977)
Shares of beneficial interest............................ 293,115
Additional paid-in capital............................... 454,611,326
------------
Net assets, at market value................................. $428,294,253
============
NET ASSET VALUE, offering and redemption price per share
($428,294,253 / 29,311,477 outstanding shares of
beneficial interest, $.01 par value, unlimited
number of shares authorized)........................... $14.61
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER GNMA FUND
- -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................ $16,172,836
Expenses:
Management fee (Note C)................................. $1,342,492
Services to shareholders (Note C)....................... 488,793
Trustees' fees (Note C)................................. 20,210
Custodian and accounting fees (Note C).................. 111,715
Reports to shareholders................................. 44,077
Legal................................................... 3,885
Auditing................................................ 22,557
State registration...................................... 25,610
Other................................................... 5,398 2,064,737
-------------------------
Net investment income................................... 14,108,099
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENT TRANSACTIONS
Net realized gain from:
Investments.......................................... 2,649,587
Futures.............................................. 812,313 3,461,900
----------
Net unrealized appreciation during the period on
Investments.......................................... 12,920,583
-----------
Net gain on investment transactions..................... 16,382,483
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $30,490,582
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1995 MARCH 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income.......................... $ 14,108,099 $ 30,707,579
Net realized gain (loss) from investment
transactions............................... 3,461,900 (34,856,802)
Net unrealized appreciation on
investments during the period.............. 12,920,583 23,662,007
------------ -------------
Net increase in net assets
resulting from operations.................. 30,490,582 19,512,784
------------ -------------
Distributions to shareholders from:
Net investment income ($.47
and $.92 per share, respectively).......... (14,108,099) (30,323,833)
------------ -------------
Tax return of capital ($.01 per share)......... -- (383,746)
------------ -------------
Fund share transactions:
Proceeds from shares sold...................... 26,633,539 54,359,548
Net asset value of shares issued to share-
holders in reinvestment of distributions... 9,963,048 21,482,210
Cost of shares redeemed........................ (53,651,666) (179,639,479)
------------ -------------
Net decrease in net assets from
Fund share transactions.................... (17,055,079) (103,797,721)
------------ -------------
DECREASE IN NET ASSETS......................... (672,596) (114,992,516)
Net assets at beginning of period.............. 428,966,849 543,959,365
------------ -------------
NET ASSETS AT END OF PERIOD.................... $428,294,253 $ 428,966,849
============ =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period...... 30,493,920 37,951,648
------------ -------------
Shares sold.................................... 1,844,689 3,907,473
Shares issued to shareholders in
reinvestment of distributions.............. 688,118 1,540,397
Shares redeemed................................ (3,715,250) (12,905,598)
------------ -------------
Net decrease in Fund shares.................... (1,182,443) (7,457,728)
------------ -------------
Shares outstanding at end of period............ 29,311,477 30,493,920
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER GNMA FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout each period and other performance information derived
from the financial statements.
<CAPTION>
FOR THE PERIOD
SIX MONTHS JULY 5, 1985
ENDED (COMMENCEMENT OF
SEPTEMBER 30, YEARS ENDED MARCH 31, OPERATIONS) TO
1995 ------------------------------------------------------------------------------- MARCH 31,
(UNAUDITED) 1995 1994(d) 1993 1992 1991 1990 1989 1988 1987 1986
------------- ------------------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period................. $14.07 $14.33 $15.52 $15.07 $14.80 $14.22 $13.87 $14.61 $15.44 $15.41 $15.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment operations:
Net investment
income............... .47 .93 1.12 1.29 1.24 1.23 1.26 1.28 1.30 1.34 1.12
Net realized and
unrealized gain
(loss) on investment
transactions......... .54 (.26) (1.19) .45 .27 .58 .35 (.74) (.83) .11 .41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............. 1.01 .67 (.07) 1.74 1.51 1.81 1.61 .54 .47 1.45 1.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income............... (.47) (.92) (1.12) (1.29) (1.24) (1.23) (1.26) (1.28) (1.30) (1.34) (1.12)
Net realized gains
on investment
transactions......... -- -- -- -- -- -- -- -- --(a) (.08) --(a)
Tax return of
capital.............. -- (.01) -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions....... (.47) (.93) (1.12) (1.29) (1.24) (1.23) (1.26) (1.28) (1.30) (1.42) (1.12)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period.............. $14.61 $14.07 $14.33 $15.52 $15.07 $14.80 $14.22 $13.87 $14.61 $15.44 $15.41
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%).......... 7.28** 4.94 (.64) 11.91 10.48 13.26 11.86 3.81 3.47 9.81 10.56**
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions).... 428 429 544 597 350 264 251 242 251 294 154
Ratio of operating
expenses to average
daily net assets (%)... .96* .95 .87 .93 .99 1.04 1.05 1.04 1.04 1.05 1.02*(b)
Ratio of net investment
income to average
daily net assets (%)... 6.55* 6.65 7.35 8.36 8.24 8.49 8.74 8.95 8.93 8.63 10.11*
Portfolio turnover rate
(%).................... 112.0* 220.5(c) 272.1(c) 87.3(c) 87.1(c) 52.1 71.3 128.4 92.1 58.7 123.8*
<FN>
* Annualized ** Not annualized
(a) Distributions from net realized gains were less than 3/10 of $.01 per share.
(b) The Adviser did not impose a portion of its fee amounting to $.019 per share.
(c) The significant increase in the portfolio turnover rate for the year ended March 31, 1994 is primarily attributable
to prepayments. The portfolio turnover rates including mortgage dollar roll transactions were 255.4%, 392.5%, 356.8%, and
147.0%, for the periods ended March 31, 1995, 1994, 1993, and 1992, respectively.
(d) Per share amounts have been calculated using weighted average shares outstanding.
</FN>
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder GNMA Fund (the "Fund") is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The policies described
below are followed consistently by the Fund in the preparation of its financial
statements in conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost. All other securities are valued at their fair
value as determined in good faith by the Valuation Committee of the Board of
Trustees.
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 and the underlying collateral, is equal to at least 100.5% of the
resale 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 six months
ended September 30, 1995, the Fund sold interest rate futures to hedge against
declines in the value of portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security,
and are recorded for financial reporting purposes as unrealized gains or losses
by the Fund. When entering into a closing transaction, the Fund will realize a
gain or loss equal to the difference
15
<PAGE>
SCUDDER GNMA FUND
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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.
MORTGAGE DOLLAR ROLLS. The Fund may enter into mortgage dollar rolls in which
the Fund sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase similar, but not identical,
securities at the same price on a fixed date. The Fund receives compensation as
consideration for entering into the commitment to repurchase. The compensation
is paid in the form of a fee, or alternatively, a lower price for the security
upon its repurchase.
The counterparty receives all principal and interest payments, including
prepayments, made in respect of the security while it is the holder. Mortgage
dollar rolls may be renewed with a new sale and repurchase price and a cash
settlement made at each renewal without physical delivery of the securities
subject to the contract.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.
At March 31, 1995, the Fund had a net tax basis capital loss carryforward of
approximately $36,291,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until March 31,
2003, the expiration date.
In addition, from November 1, 1994 through March 31, 1995, the Fund incurred
approximately $6,341,000 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them
as arising in the fiscal year ended March 31, 1996.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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DISTRIBUTION OF INCOME AND GAINS. 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. Therefore,
the Fund intends to distribute these amounts to shareholders. An additional
distribution may be made to the extent necessary to avoid the payment of a
four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in mortgage backed securities. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period.
Accordingly, the Fund may periodically make reclassifications among certain
of its capital accounts without impacting the net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are accounted for on a trade date basis.
Distributions to shareholders are recorded on the ex-dividend date. Interest
income is accrued pro rata to maturity.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the six months ended September 30, 1995, purchases and sales of U.S.
Government Securities (excluding short-term investments) aggregated $225,580,437
and $278,813,133, respectively.
The aggregate face value of futures contracts opened and closed during the
six months ended September 30, 1995 was $247,753,625, respectively.
17
<PAGE>
SCUDDER GNMA FUND
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C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objectives, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Agreement. The
management fee payable under the Agreement is equal to an annual rate of 0.65%
on the first $200,000,000 of average daily net assets, 0.60% on the next
$300,000,000 of such net assets, and 0.55% of such net assets in excess of
$500,000,000, computed and accrued daily and payable monthly.
The Agreement also provides that if the Fund's expenses, exclusive of taxes,
interest and extraordinary expenses, exceed specified limits, such excess,
up to the amount of the management fee, will be paid by the Adviser. For the
six months ended September 30, 1995, the fee pursuant to the Agreement amounted
to $1,342,492, which was equivalent to an annualized effective rate of 0.62%
of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the six months ended September 30, 1995, the amount charged to the Fund
by SSC aggregated $399,241 of which $78,344 is unpaid at September 30, 1995.
Effective May 9, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility 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 September 30,
1995, the amount charged to the Fund by SFAC aggregated $38,496.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the six
months ended September 30, 1995, Trustees' fees aggregated $20,210.
18
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19
<PAGE>
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20
<PAGE>
OFFICERS AND TRUSTEES
- --------------------------------------------------------------------------------
Daniel Pierce*
President and Trustee
David S. Lee*
Vice President and Trustee
Cuyler W. Findlay*
Trustee
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University,
College of Business Administration
Jean C. Tempel
Trustee; General Partner, TL Ventures
David H. Glen*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Robert E. Pruyne*
Vice President
Kathryn L. Quirk*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder 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. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not available in all states. +++A no-load
variable annuity contract provided by Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc. are traded
on various stock exchanges. ++For information on Scudder Treasurers Trust,(TM) an institutional cash management
service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
</TABLE>
22
<PAGE>
HOW TO CONTACT SCUDDER
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<TABLE>
<CAPTION>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
<S> <C>
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
</TABLE>
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
23
<PAGE>
Celebrating Over 75 Years of Serving Investors
- --------------------------------------------------------------------------------
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 37 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped us become one of
the largest and most respected investment managers in the world. Though times
have changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
