Scudder
GNMA
Fund
Annual Report
March 31, 1998
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund which seeks high current
income primarily from U.S. Government guaranteed mortgage-backed ("Ginnie Mae")
securities.
SCUDDER (logo)
<PAGE>
Scudder GNMA Fund
- --------------------------------------------------------------------------------
Date of Inception: 7/5/85 Total Net Assets as of Ticker Symbol: SGMSX
3/31/98: $392.4 million
- --------------------------------------------------------------------------------
o For its most recent fiscal year ended March 31, 1998, Scudder GNMA Fund
provided a total return of 10.44%, close to the average return of the 52 GNMA
funds tracked by Lipper Analytical Services. On March 31, the Fund yielded 5.69%
based on the 30-day SEC method of calculation.
o In response to declines in interest rates, we reduced the Fund's exposure to
new production GNMAs in favor of seasoned bonds with 6-1/2%, 7%, 8%, and 9%
coupons. Seasoned bonds have more predictable prepayment characteristics and
afford greater protection against increases in refinancings.
o We are optimistic about the GNMA market's prospects over the coming months, as
mortgage investors shift away from FNMA and FHLMC issues in response to
increased prepayment risk.
Table of Contents
3 Letter from the Fund's President 14 Notes to Financial Statements
4 Performance Update 17 Report of Independent Accountants
5 Portfolio Summary 18 Shareholder Meeting Results
6 Portfolio Management Discussion 20 Officers and Trustees
9 Investment Portfolio 21 Investment Products and Services
10 Financial Statements 22 Scudder Solutions
13 Financial Highlights
2 - Scudder GNMA Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We're pleased to provide you with this annual report on Scudder GNMA Fund
for the period ended March 31, 1998. The Fund posted a 10.44% total return as of
March 31 for the 12-month period, roughly in keeping with its peers as gauged by
Lipper Analytical Services. As of March 31, the Fund offered a 5.69% 30-day SEC
yield. Please read the Portfolio Management Discussion beginning on page 6 for
additional information.
As of January 1, 1998, the Fund's investment adviser changed its name to
Scudder Kemper Investments, Inc., from Scudder, Stevens & Clark, Inc., pursuant
to the acquisition of a majority interest in Scudder, Stevens & Clark by Zurich
Insurance Company, and the combining of Scudder's business with that of Zurich
Kemper Investments, Inc. As of January 1 we also welcomed a new portfolio
management team for Scudder GNMA Fund: Richard L. Vandenberg, Lead Portfolio
Manager, and Scott E. Dolan, Portfolio Manager, with a combined 31 years of
investment industry experience.
For those of you interested in new Scudder products, we recently introduced
three industry sector funds as a part of our Choice Series: Scudder Financial
Services Fund, which seeks long-term growth by investing in financial services
companies in the U.S. and abroad; Scudder Health Care Fund, which seeks
long-term growth from health care companies located around the world; and
Scudder Technology Fund, which pursues long-term growth by investing in
companies that develop, produce, or distribute technology. In addition, April 6,
1998, marked the debut of our newest entrant in the growth and income category:
Scudder Real Estate Investment Fund, investing in equity securities of companies
in the real estate industry. Please see page 21 for more information on Scudder
products and services.
Thank you for your interest and investment in Scudder GNMA Fund. If you
have questions about the Fund, please contact a Scudder Investor Information
representative at 1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder GNMA Fund
3 - Scudder GNMA Fund
<PAGE>
PERFORMANCE UPDATE as of March 31, 1998
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
- --------------------------------------------
Period Ended Growth of Average
3/31/98 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER GNMA FUND
- --------------------------------------------
1 Year $11,044 10.44% 10.44%
5 Year $13,301 33.01% 5.87%
10 Year $21,628 116.28% 8.02%
- --------------------------------------------
LEHMAN BROTHERS MORTGAGE GNMA INDEX
- --------------------------------------------
1 Year $11,115 11.15% 11.15%
5 Year $14,034 40.34% 7.01%
10 Year $24,028 140.28% 9.16%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended March 31
SCUDDER GNMA FUND
Year Amount
- ----------------------
'88 $10,000
'89 $10,381
'90 $11,612
'91 $13,151
'92 $14,530
'93 $16,261
'94 $16,156
'95 $16,954
'96 $18,684
'97 $19,583
'98 $21,628
LEHMAN BROTHERS MORTGAGE GNMA INDEX
Year Amount
- ----------------------
'88 $10,000
'89 $10,562
'90 $12,076
'91 $13,759
'92 $15,378
'93 $17,121
'94 $17,314
'95 $18,398
'96 $20,394
'97 $21,617
'98 $24,028
The unmanaged Lehman Brothers Mortgage GNMA Index is a value-weighted
measure of 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 March 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-------------------------------------------------------------------------------
NET ASSET VALUE... $ 13.87 $ 14.22 $ 14.80 $ 15.07 $ 15.52 $ 14.33 $ 14.07 $ 14.54 $ 14.29 $ 14.81
INCOME DIVIDENDS.. $ 1.28 $ 1.26 $ 1.23 $ 1.24 $ 1.29 $ 1.12 $ .93 $ .94 $ .93 $ .94
FUND TOTAL
RETURN (%)........ 3.81 11.86 13.26 10.48 11.91 -0.64 4.94 10.20 4.81 10.44
INDEX TOTAL
RETURN (%)........ 5.62 14.33 13.96 11.77 11.34 1.13 6.26 10.84 6.00 11.15
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4 - Scudder GNMA Fund
<PAGE>
PORTFOLIO SUMMARY as of March 31, 1998
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Government National
Mortgage Association 90%
Cash Equivalents 8%
U.S.Treasury Obligations 2%
- --------------------------------------
100%
- --------------------------------------
Our strategy has been to
maintain a near-fully invested
position with a low cash balance.
- --------------------------------------------------------------------------
GNMA COUPONS
(Excludes Cash Equivalents, Net)
- --------------------------------------------------------------------------
0--Less than 7% 9%
7--Less than 8% 61%
8--Less than 9% 25%
9% or greater 5%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
In response to declines in interest
rates over the course of the
period, we reduced the Fund's
exposure to new production
issues in favor of seasoned bonds
which can afford greater
protection against increased
refinancings.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
0-5 years 18%
5-10 years 79%
Greater than 10 years 3%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 6.91 years
We believe that seasoned bonds
with 6-1/2%, 7%, 8% and 9%
coupons should perform well in
the relatively stable interest rate
environment we envision over the
coming months.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 9. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - Scudder GNMA Fund
<PAGE>
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
We are pleased to present Scudder GNMA Fund's annual report, covering the
12-month period through March 31, 1998. For its most recent fiscal year, the
Fund provided a solid 10.44% total return, roughly in keeping with the 10.69%
average return of the 52 GNMA Funds tracked by Lipper Analytical Services. The
unmanaged Lehman Brothers GNMA Mortgage Index, the Fund's benchmark, posted a
total return of 11.15% for the same period. Scudder GNMA Fund's 30-day net
annualized SEC yield as of March 31 was 5.69%.
Steady Growth and Low Inflation
GNMA securities, which are backed by the full faith and credit of the U.S.
government, are interests in pools of mortgages. Each month, principal and
interest payments from the mortgage pools pass through to investors. If interest
rates fall, homeowners tend to refinance and pay off their existing mortgages
early, and mortgage-backed investors are forced to reinvest money at lower
prevailing rates. If interest rates rise, while principal is typically repaid
more slowly, GNMA investors may receive lower returns as the result of price
declines on previously issued securities with lower coupon rates. Thus, GNMA
funds tend to perform best in low-volatility interest rate environments.
During the Fund's most recent fiscal year, interest rates declined and bond
prices rose as subdued inflation and the prospects for reduced Treasury issuance
supported investor enthusiasm for bonds. The Federal Reserve left interest rates
unchanged during the period as low inflation readings countered strong economic
growth. The bond market responded by pushing the yield on the 10-year Treasury
down by 1.3 percentage points. Mortgage rates also fell during the period,
providing homeowners with refinancing opportunities. This was apparent in the
GNMA mortgage market as refinancing activity led to increased prepayments on
higher coupon GNMAs.
A Focus on Seasoned Mortgages
Scudder GNMA Fund seeks to provide high current income and safety of principal,
and also emphasizes total return. The Fund's exposure to prepayment risk is
actively managed, taking into account our expectations for prepayments relative
to that of the market. In an effort to minimize prepayment risk, we may focus on
seasoned mortgages which typically exhibit greater predictability in prepayments
than new issue mortgages. In addition, we can also buy Treasury notes and bonds
which have no prepayment risk but offer lower yields.
When investing for the Fund, we employ a "top down" approach, and make four
primary decisions: duration (interest rate sensitivity), sector (the Fund's
allocation of GNMAs versus Treasuries), selection (which coupon and of what
vintage/seasoning) and yield curve (at what points of the yield curve should the
Fund have exposure). When selecting individual mortgage securities we use a
relative value approach based on prepayment expectations, price relationships
among mortgages with different coupons, and projected total return analysis.
6 - Scudder GNMA Fund
<PAGE>
The Fund's portfolio spent much of the year concentrated in new production GNMAs
with 7-1/2% and 8% coupons as we attempted to take advantage of declining
volatility and collect the higher yields of these issues. In response to
declines in interest rates over the course of the period, we reduced the
portfolio's exposure to these new production issues in favor of seasoned bonds
with 6-1/2%, 7%, 8%, and 9% coupons. Because seasoned bonds have more
predictable prepayment characteristics than new production bonds, they can help
us seek greater protection against increased refinancings.
The Coming Months
From a cyclical standpoint, the GNMA portion of the mortgage market appears
attractive as investors have favored FNMA and FHLMC mortgages over GNMAs during
the past 12 months. We believe the GNMA sector currently offers lower prepayment
risk in addition to higher yields than FNMA and FHLMC issues. With respect to
interest rates, we believe they will move modestly lower or remain within their
current range given the current economic climate of low inflation, strong
economic growth, and increased fiscal responsibility in Washington. Of course,
the Fed will stand ready to raise interest rates at the first sign of rising
inflation.
7 - Scudder GNMA Fund
<PAGE>
GNMA issues should be supported by the relatively stable interest rate
environment we envision, as investors seek higher-yielding alternatives to
Treasuries. Scudder GNMA Fund remains a high-quality vehicle for pursuing
attractive income with relative safety of principal through investments in
mortgage securities. Thank you for your continued interest in Scudder GNMA Fund.
Sincerely,
Your Portfolio Management Team
/s/Richard L. Vandenberg /s/Scott E. Dolan
Richard L. Vandenberg Scott E. Dolan
Scudder GNMA Fund:
A Team Approach to Investing
Scudder GNMA Fund is managed by a team of Scudder Kemper Investments, Inc.
(the "Adviser") professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are supported
by the Adviser's large staff of economists, research analysts, traders, and
other investment specialists who work in our offices across the United States
and abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging our extensive resources.
Richard L. Vandenberg, Lead Portfolio Manager, joined the Adviser as a
portfolio manager in 1996, and is responsible for setting the Fund's
investment strategy and overseeing security selection for the Fund's
portfolio. Mr. Vandenberg has been a portfolio manager for several investment
management firms for over 22 years. Scott E. Dolan, Portfolio Manager, joined
the Adviser in 1989. Mr. Dolan has four years of experience in compliance
analysis and account administration and has been a portfolio manager since
1993.
8 - Scudder GNMA Fund
<PAGE>
Investment Portfolio as of March 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 8.4%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 3/31/98 at 5.85% to
be repurchased at $32,934,351 on 4/1/98, collateralized by a --------------
$32,994,000 U.S. Treasury Note, 5.875%, 2/28/99 (Cost $32,929,000) .................... 32,929,000 32,929,000
--------------
U.S. Treasury Obligations 2.5%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note, 5.5%, 1/31/03 (Cost $9,973,438) ..................................... 10,000,000 9,935,900
--------------
Government National Mortgage Association 98.8%*
- ------------------------------------------------------------------------------------------------------------------------------
6.50% with various maturities to 8/15/25 (c) ............................................ 35,938,235 35,663,481
7.00% with various maturities to 3/15/28 (b) ............................................ 109,035,201 110,193,576
7.50% with various maturities to 1/15/28 (b) ............................................ 124,295,027 127,455,068
8.00% with various maturities to 12/15/23 (b) (c) ....................................... 92,464,867 96,249,592
9.00%, 12/15/22 ......................................................................... 16,726,174 18,095,379
- ------------------------------------------------------------------------------------------------------------------------------
Total Government National Mortgage Association (Cost $387,114,266) 387,657,096
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
% of
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Investment Portfolio (Cost $430,016,704) (a) ...................................... 109.7 430,521,996
Other Assets and Liabilities, Net ....................................................... (9.7) (38,077,176)
------ --------------
Net Assets .............................................................................. 100.0 392,444,820
====== ==============
</TABLE>
(a) Cost for federal income tax purposes was $430,016,704. At March 31, 1998,
net unrealized appreciation for all securities based on tax cost was
$505,292. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $1,471,257 and unrealized depreciation for all securities in which
there was an excess of tax cost over market value of $965,965.
(b) At March 31, 1998, these pools, in part or in whole, have been segregated
to cover when-issued or forward delivery pools and initial margin
requirements for open futures contracts.
(c) When-issued or forward delivery pools included.
* The investments in mortgage-backed securities of the Government National
Mortgage Association are interests in separate pools of mortgages. All
separate investments in each of these issues which have similar coupon
rates have been aggregated for presentation purposes in the Investment
Portfolio. Effective maturities of these investments will be shorter than
stated maturities due to prepayments.
At March 31, 1998, open futures contracts purchased were as follows:
<TABLE>
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond June 1998 25 2,998,600 3,006,250
---------- ----------
Total unrealized appreciation on open futures contracts purchased ........... 7,650
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder GNMA Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1998
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $430,016,704) .................. $ 430,521,996
Receivable for investments sold ........................................ 15,312,856
Receivable for Fund shares sold ........................................ 228,975
Interest receivable .................................................... 2,261,102
Receivable for daily variation margin on open futures contracts ........ 7,650
Other assets ........................................................... 13,966
----------------
Total assets ........................................................... 448,346,545
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 18,112,098
Payable for when-issued and forward delivery pools ..................... 36,439,829
Payable for Fund shares redeemed ....................................... 357,801
Dividends payable ...................................................... 528,302
Accrued management fee ................................................. 201,865
Other payables and accrued expenses .................................... 261,830
----------------
Total liabilities ...................................................... 55,901,725
-------------------------------------------------------------------------------------------
Net assets, at market value $ 392,444,820
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Unrealized appreciation (depreciation) on:
Investments ......................................................... 505,292
Futures ............................................................. 7,650
Accumulated net realized loss .......................................... (21,164,139)
Paid-in capital ........................................................ 413,096,017
-------------------------------------------------------------------------------------------
Net assets, at market value $ 392,444,820
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($392,444,820 / 26,503,842 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) .......................................................... $14.81
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder GNMA Fund
<PAGE>
Statement of Operations
year ended March 31, 1998
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ............................................................. $ 28,776,301
----------------
Expenses:
Management fee ....................................................... 2,433,157
Services to shareholders ............................................. 1,116,217
Trustees' fees and expenses .......................................... 39,469
Custodian and accounting fees ........................................ 152,741
Reports to shareholders .............................................. 76,793
Legal ................................................................ 51,493
Auditing ............................................................. 43,021
Registration fees .................................................... 25,834
Other ................................................................ 33,323
----------------
3,972,048
-------------------------------------------------------------------------------------------
Net investment income 24,804,253
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... 7,829,007
Futures .............................................................. (131,395)
----------------
7,697,612
Net unrealized appreciation (depreciation) during the period on:
Investments .......................................................... 5,949,281
Futures .............................................................. 7,650
----------------
5,956,931
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 13,654,543
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 38,458,796
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder GNMA Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended March 31,
Increase (Decrease) in Net Assets 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ........................................ $ 24,804,253 $ 26,152,397
Net realized gain from investment transactions ............... 7,697,612 248,489
Net unrealized appreciation (depreciation) on
investment transactions during the period .................. 5,956,931 (7,140,110)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ................................................. 38,458,796 19,260,776
Distributions to shareholders from net investment
income ..................................................... (24,804,253) (26,152,397)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .................................... 73,746,402 70,592,166
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 18,027,356 18,819,045
Cost of shares redeemed ...................................... (95,991,645) (124,343,431)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... (4,217,887) (34,932,220)
---------------- ----------------
Increase (decrease) in net assets ............................ 9,436,656 (41,823,841)
Net assets at beginning of period ............................ 383,008,164 424,832,005
---------------- ----------------
Net assets at end of period .................................. $392,444,820 $383,008,164
---------------- ----------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................... 26,796,857 29,220,534
---------------- ----------------
Shares sold .................................................. 5,020,317 4,875,126
Shares issued to shareholders in reinvestment of
distributions .............................................. 1,225,867 1,300,541
Shares redeemed .............................................. (6,539,199) (8,599,344)
---------------- ----------------
Net increase (decrease) in Fund shares ....................... (293,015) (2,423,677)
---------------- ----------------
Shares outstanding at end of period .......................... 26,503,842 26,796,857
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder GNMA 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>
Years Ended March 31,
1998 1997 1996 1995 1994(b) 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ------------------------------------------------------------------------------
of period ..................... $14.29 $14.54 $14.07 $14.33 $15.52 $15.07
Income from investment operations: ------------------------------------------------------------------------------
Net investment income ............ .94 .93 .94 .93 1.12 1.29
Net realized and unrealized gain
(loss) on investment
transactions .................. .52 (.25) .47 (.26) (1.19) .45
------------------------------------------------------------------------------
Total from investment operations.. 1.46 .68 1.41 .67 (.07) 1.74
------------------------------------------------------------------------------
Less distributions from:
Net investment income ............ (.94) (.93) (.94) (.92) (1.12) (1.29)
Net realized gains on investment
transactions .................. -- -- -- -- -- --
Tax return of capital ............ -- -- -- (.01) -- --
------------------------------------------------------------------------------
Total distributions .............. (.94) (.93) (.94) (.93) (1.12) (1.29)
------------------------------------------------------------------------------
Net asset value, end of ------------------------------------------------------------------------------
period ........................ $14.81 $14.29 $14.54 $14.07 $14.33 $15.52
- -------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 10.44 4.81 10.20 4.94 (.64) 11.91
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................. 392 383 425 429 544 597
Ratio of operating expenses to
average daily net assets (%)... 1.02 .96 .94 .95 .87 .93
Ratio of net investment income to
average net assets (%) ........ 6.38 6.44 6.45 6.65 7.35 8.36
Portfolio turnover rate (%) ...... 197.2(a) 188.0 157.8 220.5(a) 272.1(a) 87.3(a)
</TABLE>
1992 1991 1990 1989
- -------------------------------------------------------------------------------
Net asset value, beginning -------------------------------------------
of period ..................... $14.80 $14.22 $13.87 $14.61
Income from investment operations: -------------------------------------------
Net investment income ............ 1.24 1.23 1.26 1.28
Net realized and unrealized gain
(loss) on investment
transactions .................. .27 .58 .35 (.74)
-------------------------------------------
Total from investment operations.. 1.51 1.81 1.61 .54
-------------------------------------------
Less distributions from:
Net investment income ............ (1.24) (1.23) (1.26) (1.28)
Net realized gains on investment
transactions .................. -- -- -- --
Tax return of capital ............ -- -- -- --
-------------------------------------------
Total distributions .............. (1.24) (1.23) (1.26) (1.28)
-------------------------------------------
Net asset value, end of -------------------------------------------
period ........................ $15.07 $14.80 $14.22 $13.87
- -------------------------------------------------------------------------------
Total Return (%) ................. 10.48 13.26 11.86 3.81
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................. 350 264 251 242
Ratio of operating expenses to
average daily net assets (%)... .99 1.04 1.05 1.04
Ratio of net investment income to
average net assets (%) ........ 8.24 8.49 8.74 8.95
Portfolio turnover rate (%) ...... 87.1(a) 52.1 71.3 128.4
(a) 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 250.8%,
255.4%, 392.5%, 356.8%, and 147.0%, for the periods ended March 31, 1998,
1995, 1994, 1993, and 1992, respectively.
(b) Per share amounts have been calculated using monthly average shares
outstanding.
13 - Scudder GNMA Fund
<PAGE>
Notes to Financial Statements
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market investments 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.
When-issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price. The Fund will establish a segregated account in which it will
maintain cash and liquid debt securities equal in value to commitments for
when-issued or forward delivery securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the year ended
March 31, 1998, the Fund sold interest rate futures to hedge against declines in
the value of portfolio securities and purchased interest rate futures to manage
the duration of the portfolio.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to
14 - Scudder GNMA Fund
<PAGE>
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, 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 March 31, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $21,164,000 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.
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 year ended March 31, 1998, purchases and sales of investment
securities (excluding short-term investments, mortgage dollar roll transactions
and direct U.S. Government obligations) aggregated $721,728,275 and
$718,605,250, respectively. Purchases and sales of mortgage dollar roll
transactions aggregated $252,982,540 and $253,820,092, respectively. Purchases
and sales of direct U.S. Government obligations aggregated $22,165,806 and
$12,214,562, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended March 31, 1998 was $31,328,953 and $28,330,353, respectively.
15 - Scudder GNMA Fund
<PAGE>
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 0.65% on the first $200,000,000 of the Fund's 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. For the
year ended March 31, 1998, the fees pursuant to these agreements amounted to
$2,433,157, which was equivalent to an annualized effective rate of 0.63% of the
Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended March 31, 1998, the amount charged to the Fund by SSC aggregated
$597,013, of which $49,359 is unpaid at March 31, 1998.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended March 31, 1998,
the amount charged to the Fund by STC aggregated $170,217, of which $15,440 is
unpaid at March 31, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
March 31, 1998, the amount charged to the Fund by SFAC aggregated $68,114, of
which $5,167 is unpaid at March 31, 1998.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At March 31, 1998, the Special
Servicing Agreement expense charged to the Fund amounted to $111,455, of which
$55,839 is unpaid at March 31, 1998.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended March 31, 1998, Trustees' fees and expenses aggregated $39,469.
16 - Scudder GNMA Fund
<PAGE>
Report of Independent Accountants
To the Trustees and the Shareholders of Scudder GNMA Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
GNMA Fund, including the investment portfolio, as of March 31, 1998, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder GNMA Fund as of March 31, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 6, 1998
17 - Scudder GNMA Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder GNMA Fund (the
"Fund") was held on October 24, 1997, at the office of Scudder Kemper
Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), Two International
Place, Boston, Massachusetts 02110. At the Meeting, as adjourned and reconvened,
the following matters were voted upon by the shareholders (the resulting votes
for each matter are presented below). With regard to certain proposals, it was
recommended that the Meeting be reconvened in order to provide shareholders with
an additional opportunity to return their proxies. The date of the reconvened
meeting at which the matters were decided is noted after the proposed matter.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
14,979,127 783,357 558,271 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 15,652,749 668,007
Dawn-Marie Driscoll 15,651,844 668,912
Peter B. Freeman 15,645,562 675,194
George M. Lovejoy, Jr. 15,647,360 673,396
Wesley W. Marple, Jr. 15,660,561 660,195
Daniel Pierce 15,657,786 662,970
Kathryn L. Quirk 15,657,687 663,069
Jean C. Tempel 15,654,266 666,490
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes
---------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
13,562,691 1,220,529 847,883 689,653
18 - Scudder GNMA Fund
<PAGE>
4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
14,230,714 1,041,750 861,521 672,881
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
<S> <C> <C> <C> <C>
5.1 Diversification 13,752,122 1,069,669 836,313 689,652
5.2 Borrowing 13,666,216 1,126,582 838,306 689,652
5.3 Senior securities 13,711,392 1,083,311 836,401 689,652
5.4 Concentration 13,700,613 1,092,202 838,289 689,652
5.5 Underwriting of securities 13,720,226 832,974 1,077,903 689,652
5.6 Investment real estate 13,711,477 842,053 1,077,573 689,652
5.7 Purchase of physical 13,708,006 844,952 1,078,146 689,652
commodities
5.8 Lending 13,664,894 886,876 1,079,334 689,652
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
15,226,422 322,967 771,366
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
19 - Scudder GNMA Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Kathryn L. Quirk*
Trustee; Vice President and
Assistant Secretary
Henry P. Becton, Jr.
Trustee; WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow, Center
for Business Ethics, Bentley
College; President, Driscoll
Associates
Peter B. Freeman
Trustee; Corporate Director and
Trustee
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; Managing Partner,
Technology Equity Partners
David H. Glen*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Richard L. Vandenberg*
Vice President
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
20 - Scudder GNMA Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. +++ +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
21 - Scudder GNMA Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
22 - Scudder GNMA 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
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
23 - Scudder GNMA Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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