Scudder
Tax Free
Money Fund
Annual Report
December 31, 1997
Pure No-Load(TM) Funds
A money market fund offering opportunities for income exempt from regular
federal income tax and stability of principal from high-quality, short-term
municipal securities.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder Tax Free Money Fund
- --------------------------------------------------------------------------------
Date of Inception: 1/9/80 Total Net Assets as of Ticker Symbol: STFXX
12/31/97: $283 million
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o Scudder Tax Free Money Fund provided a positive total return of 3.10% for the
12-month period ended December 31, 1997, while the Fund's 30-day net annualized
yield at the end of December was 3.22%.
o To match the Fund's 3.22% 30-day yield as of December 31, 1997, investors in
the 36% and 39.6% tax brackets would have had to earn 5.03% and 5.33%,
respectively, from a comparable taxable investment.
o As inflation fears cooled and it became apparent that the Fed would maintain
its hands-off policy on interest rates, we gradually extended the Fund's average
maturity.
Table of Contents
3 Letter from the Fund's President 19 Report of Independent Accountants
4 Portfolio Management Discussion 20 Tax Information
7 Investment Portfolio 21 Shareholder Meeting Results
13 Financial Statements 24 Officers and Trustees
16 Financial Highlights 25 Investment Products and Services
17 Notes to Financial Statements 26 Scudder Solutions
2 - Scudder Tax Free Money Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
The U.S. economy -- buoyed by moderate growth, little unemployment, low
inflation, and healthy corporate profits -- continued to enjoy strong
performance during Scudder Tax Free Money Fund's 1997 fiscal year. In fact, the
U.S. economy can now lay claim to one of the longest expansions on record -- 6
1/2 years -- a growth trend which we believe shows no sign of ending soon.
Throughout the period, stocks were on an upward climb, thanks to strong
positive fundamentals in the U.S. economy. On the fixed-income front, markets
benefited from several positive forces, including declining inflation, lower
federal deficits and a strong dollar.
Although inflation remains under control, there is still a chance that the
Federal Reserve Board (Fed) could raise interest rates in the coming months,
which would quickly affect market returns. This conclusion is based on the
belief that the Federal Reserve Board could view the tight labor market as a
potential inflation danger (unemployment levels are at a 25-year low) and that
the economy's underlying strength may lead to even stronger growth.
If such a scenario comes to pass, we believe you can rest assured that your
Fund offers a safe haven from market volatility. Your Fund seeks to maintain a
stable $1.00 share price -- and provide competitive income free from federal
income taxes -- through investment in the short-maturity and highest quality
tax-exempt money market securities.
Our long-term outlook for inflation, interest rates and the fixed-income
markets remains positive overall, based on a number of structural trends
including global deregulation and the impact of technology on the manufacture
and distribution of products and services. We invite you to review the Fund
management teams' commentary in the attached report. The following pages contain
important information about the Fund's investment activity over the past 12
months, as well as the managers' outlook for the coming year.
Finally, it should be noted that, as of January 1, 1998, your Fund has a
new management team, Frank J. Rachwalski, Jr. and John W. Stuebe. We are pleased
that they are bringing their extensive knowledge and expertise to the Fund.
Thank you for choosing Scudder Tax Free Money Fund to help meet your
investment needs. If you should have any questions regarding your investment, or
any of the Scudder Funds, please do not hesitate to call Investor Relations at
1-800-225-2470, or visit our Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Tax Free Money Fund
3 - Scudder Tax Free Money Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Thanks to a combination of robust growth, low inflation and benign interest
rates, the broader U.S. stock market continued its record run during your Fund's
1997 fiscal year, experiencing only short-lived setbacks along the way.
Encouraged, too, by relatively stable interest rates and low inflation -- and
undoubtedly heartened by the declining government budget deficit, which is
currently at a 20-year low -- bonds ended the year with solid, though not
stellar, performance.
The stock market's fresh gains -- which come on top of significant increases in
1995 and 1996 -- leave many investors wary of what might come next. Uncertainty
in the bond market in the months ahead remains a given as well, as investors
keep a close watch on inflation and the Federal Reserve Board's actions.
During this period of record growth -- and uncertainty in the fixed-income
markets -- your Fund's investments in short-term, high quality municipal
securities provided a balance to more aggressive stock and bond holdings.
Scudder Tax Free Money Fund maintained its $1.00 share price throughout the
period and was able to provide a positive total return of 3.10% for the year.
The Fund's 30-day net annualized yield at the end of December was 3.22%. To
match the Fund's yield during the same 30-day time frame, investors in the 36%
and 39.6% tax brackets would have had to earn 5.03% and 5.33%, respectively,
from a comparable taxable investment.
Supply and Demand Key to Tax Exempt Market
In contrast to taxable money markets, the tax-exempt money market is driven more
by supply and demand than by the general economy. And, unlike the constant
supply of taxable money market securities, the supply of tax-free money market
instruments is much more seasonal in nature -- further contributing to potential
yield volatility.
Throughout the period, however, there was an amazingly stable mix of supply and
demand -- which meant that prices, and therefore yields, remained relatively
constant. In fact, looking back over the past 12 months, yields for six-month
AAA tax-free securities remained in a relatively narrow range. This relative
balance of supply and demand also meant that there was little opportunity to
significantly increase the Fund's yield over the past year.
Average Maturity Gradually
Extended to Capture Higher Yields
During the course of the year, we kept a watchful eye on the Federal Reserve
Board, in anticipation of further interest rate hikes. (The Fed raised the
federal funds rate -- a key short-term interest rate in March, but left rates
untouched for the remainder of the year). As inflation fears cooled and it
became apparent that the Fed would maintain its hands-off policy on interest
rates, we gradually extended the Fund's average maturity.
4 - Scudder Tax Free Money Fund
<PAGE>
Shorter maturities are generally sought for the stability and liquidity they may
provide -- the primary goals of Scudder Tax Free Money Fund. Yet, in a
relatively stable interest rate environment, we seek out longer maturities which
tend to offer higher yields in exchange for slightly higher risk. In contrast,
when we expect rates to rise, we typically shorten the portfolio's average
maturity, so that issues coming due can be reinvested at higher rates.
Of course, the Fund's average maturity remains in line with its objective of
price stability and liquidity. Going forward, we will strive to keep the Fund's
average maturity on the longer side so that we can fully take advantage of all
investment opportunities along the yield curve.
A Flexible Portfolio
As always, your Fund's portfolio consists of a varied mix of tax-exempt
commercial paper, municipal notes, and variable-rate demand notes. Variable-rate
demand notes are securities with floating rates that are adjusted weekly or
daily to capture current yields and preserve liquidity. Because of their
attractive characteristics, they continue to comprise a significant portion of
the portfolio -- 71% of Fund assets.
Tax-exempt commercial paper, on the other hand, boosts stability by allowing the
Fund to lock in relatively attractive rates over a period of one to three
months. At the end of December, 12% of portfolio investments were allocated to
tax-exempt commercial paper.
Uncertain Investment Climate Ahead
Looking ahead, we believe that interest rates are likely to remain flat, as the
economy continues on its slow, steady, non-inflationary growth path. While this
scenario is extremely positive for the long term, it is unlikely that 1998 will
see a repeat of the last three years' outstanding stock market performance.
Consensus predictions for the economy overall are a modest 2.5% growth in gross
domestic product. The meltdown in many smaller Asian economies and growing
problems in Japan are what many economists predict will hold back growth in the
U.S. Weaker markets for exports and competition from cheaper foreign goods sold
in devalued currencies will provide a head wind in the near term. In fact,
Southeast Asia's problems may reverberate throughout the world for some time,
bringing volatility to both the stock and bond markets.
Another potential bump in the road to lower interest rates -- and continued bond
market strength -- are growing problems among Japanese banks that may cause them
to sell big chunks of their massive U.S. bond portfolios.
In an uncertain investment climate such as this, your Fund offers the safety and
stability of short-term, high quality money market instruments -- plus the tax
advantages of municipal securities. We continue to believe in the value of
owning a short-term investment vehicle, like Scudder Tax Free Money Fund, as
part of a well-diversified portfolio.
5 - Scudder Tax Free Money Fund
<PAGE>
In the months ahead, we will continue to collect economic data and carefully
monitor the investment climate as we position your Fund for high current income
free from federal taxes plus price stability and liquidity.
Sincerely,
Your Portfolio Management Team
/s/K. Sue Cote /s/Donald C. Carleton
K. Sue Cote Donald C. Carleton
Scudder Tax Free
Money Fund:
A Team Approach to Investing
Scudder Tax Free Money Fund is managed by a team of Scudder Kemper
Investments, Inc. (SKI) 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. They are supported by SKI'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 SKI's extensive resources.
Lead Portfolio Manager K. Sue Cote, who joined SKI in 1983, assumed
responsibility for the Fund's investment strategy and operations in 1986 and
has over 10 years of experience in short-term tax free investing. Donald C.
Carleton, Portfolio Manager, has worked on the Fund since 1986 and has 26
years of experience in tax-free investing.
6 - Scudder Tax Free Money Fund
<PAGE>
Investment Portfolio as of December 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b)
Amount ($) (Unaudited) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------
Municipal Investments 100.0%
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alaska
Alaska Housing Finance Corp., General Mortgage Revenue, Series 1991-A, Weekly
Demand Note, 3.8%, 6/1/26* .................................................. 10,000,000 A1+ 10,000,000
Valdez, AK Marine Terminal, Arco Transportation Alaska Inc. Project, Series
1994 A, Tax Exempt Commercial Paper, 3.75%, 1/27/98 ......................... 1,300,000 MIG1 1,300,000
Arizona
Apache County Industrial Development Revenue, Tuscan Electric Co., Springerville
Project:
Series 1983 B, Weekly Demand Note, 3.8%, 12/15/18* ......................... 2,500,000 A1+ 2,500,000
Series 1985 A, Weekly Demand Note, 3.75%, 12/1/20* ......................... 1,500,000 A1+ 1,500,000
Maricopa County, AZ, Industrial Development Authority, Royal Oaks Sun City
Project, Weekly Demand Note, 4.1%, 9/1/02* .................................. 200,000 MIG1 200,000
Maricopa County, AZ, Pollution Control Revenue, Palos Verde Project, Series
1985 F, Tax Exempt Commercial Paper, 3.75%, 2/3/98 .......................... 2,000,000 A1 2,000,000
Salt River, AZ Agricultural Improvement District Tax Exempt Commercial Paper,
3.75%, 2/9/98 ............................................................... 2,000,000 A1+ 2,000,000
California
City of Riverside, CA, Countrywood Apartments, Multi-Family Revenue,
Series 1985 D, Weekly Demand Bonds, 4.25%, 11/1/30* ......................... 1,000,000 SS&C 1,000,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.8%, 10/1/05* ............................... 1,700,000 A1+ 1,700,000
Kern County Board of Education, Tax and Revenue Anticipation Notes, Series
1998, 4.5%, 7/7/98 .......................................................... 2,500,000 SP1+ 2,507,369
Los Angeles County, CA, Tax and Revenue Anticipation Notes, Series 1997 A,
4.5%, 6/30/98 ............................................................... 3,000,000 SP1+ 3,009,257
Riverside, CA, Multi-Family Housing Revenue, Polk Apartments, Weekly Demand
Note, 3.5%, 12/1/05* ........................................................ 2,000,000 A1 2,000,000
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Agency,
Variable Rate Demand Bonds, 4.25%, 6/1/05* .................................. 5,000,000 A1 5,000,000
Colorado
Colorado Student Loan Revenue Authority, Series 1990 Weekly Demand Note,
Subject to AMT, 3.75%, 9/1/24* ............................................. 2,700,000 MIG1 2,700,000
Northglenn, CO, Industrial Development Revenue, 3.95%, 1/1/09* ................ 1,400,000 MIG1 1,400,000
Regional Transportation District Colorado Special Passenger Fair Revenue Bond,
Series 1989 A, Daily Demand Note, 3.65%, 6/1/99* ............................ 1,700,000 A1+ 1,700,000
District Of Columbia
District of Columbia, Transportation Authority, 4.5%, 9/30/98 ................. 3,000,000 SP1+ 3,013,540
</TABLE>
The accompanying notes are an integral part of the financial statements.
7 - Scudder Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b)
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Florida
Broward County, FL, Housing Finance Authority, Welleby Apartments Project,
Weekly Demand Note, 3.65%, 12/1/06* ......................................... 1,000,000 SS&C 1,000,000
City of Gainsville, FL, Utilities System Series C, Tax Exempt Commercial Paper,
3.75%, 2/13/98 .............................................................. 2,000,000 A1+ 2,000,000
Dade County, FL, Water and Sewer System Revenue, Series 1994, Weekly Demand
Note, 3.65%, 10/5/22 (c)* .................................................. 5,500,000 A1+ 5,500,000
Putnam County, FL, Pollution Control Revenue, Seminole Electric Cooperative
Finance Corp., 1984 Series H-2, Weekly Demand Note, 3.85%, 3/15/14* ......... 2,500,000 A1+ 2,500,000
Georgia
Burke County, GA, Dev. Authority, 4.95%, 9/1/34* .............................. 4,800,000 A1 4,800,000
DeKalb Private Hospital Authority, Egleston Children's Hospital at Emory
University, 1994 Series B, Weekly Demand Note, 3.7%, 3/1/24* ................ 5,000,000 A1+ 5,000,000
Idaho
Idaho Tax Anticipation Notes, Series 1997, 4.625%, 6/30/98 .................... 1,500,000 MIG1 1,505,304
Illinois
Illinois Development Finance Authority:
Molex Inc. Project, Series 1985, Weekly Demand Note, 4.2%, 7/1/05* .......... 1,000,000 SS&C 1,000,000
Pollution Control Revenue, Weekly Demand Note, 3.85%, 4/1/32 (c)* ........... 1,700,000 AAA 1,700,000
Illinois Educational Facilities Authority, University Pooled Finance Program,
Weekly Demand Note, 3.8%, 12/1/05 (c)* ...................................... 2,220,000 MIG1 2,220,000
Illinois Health Facilities Authority Rush Presbyterian St. Lukes Hospital
Series 1989 A, Tax Exempt Commercial Paper, 3.75%, 3/23/98 .................. 1,000,000 A1+ 1,000,000
Skokie, IL, Skokie Fashion Square Weekly Demand Note, Series 1984,
4.075%, 12/1/14* ............................................................ 2,000,000 MIG1 2,000,000
Indiana
Jasper County, IN, Pollution Control Revenue, Northern Indiana Public Service
Co., Tax Exempt Commercial Paper, 3.7%, 4/6/98 .............................. 1,400,000 A1+ 1,400,000
Indianapolis, IN, Resource Recovery, Daily Demand Note, 5.2%, 12/1/16* ........ 2,500,000 A1+ 2,500,000
Iowa
Iowa Schools Cash Anticipation Program, Series 1997 A, 4.5%, 6/26/98 .......... 2,000,000 SP1+ 2,006,498
Kentucky
Jefferson County, KY, Board of Education Revenue Anticipation Notes,
Series 1997 N, 3.86%, 6/30/98 ............................................... 5,840,000 MIG1 5,840,263
Mayfield, KY, Multi-City Lease Revenue Kentucky League of Cities Funding
Trust, Weekly Demand Note, Series 1996, 3.9%, 7/1/26* ....................... 1,400,000 MIG1 1,400,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - Scudder Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b)
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Louisiana
Louisiana Public Facilities Authority, Variable Rate Note, Series 1985,
5.1%, 12/1/15* .............................................................. 13,000,000 P1 13,000,000
Parish of East Baton Rouge, LA, Pollution Control Revenue, Exxon Project,
4.8%, 3/1/22* .............................................................. 5,640,000 A1+ 5,640,000
Maine
Maine Educational Loan Marketing Corporation Student Loan Revenue, AMT,
Series 1997 A1, Weekly Demand Note, 3.75%, 5/1/32* .......................... 2,000,000 A1+ 2,000,000
Maryland
Ann Arundel County, MD, Baltimore Electric & Gas Company Tax Exempt
Commercial Paper, 3.9%, 3/9/98 .............................................. 3,700,000 A1 3,700,000
Anne Arundel County General Obligation, Consolidated Solid Waste Project,
AMT, Series 1997 C, 3.8%, 2/10/98 ........................................... 3,000,000 A1+ 3,000,000
Massachusetts
Massachusetts Bay Transportation Authority, Series 1997 B, 4.5%, 9/4/98 ....... 2,000,000 MIG2 2,008,169
Michigan
Wayne Charter County, Michigan, Airport Revenue, Detroit Metropolitan County,
Series 1996 B, Weekly Demand Note, 3.75%, 12/1/16* .......................... 2,900,000 MIG1 2,900,000
Minnesota
Cottage Grove, MN, Minnesota Mining and Manufacturing, Series 1982, Weekly
Demand Note, 4.428%, 8/1/12* ................................................ 1,100,000 AAA 1,100,000
Southern Minnesota Municipal Power Agency Power Supply System:
Commercial Paper Notes, Series B, 3.75%, 3/11/98 ............................ 2,000,000 P1 2,000,000
Tax Exempt Commercial Paper, 3.75%, 2/24/98 ................................. 4,000,000 A1 4,000,000
Missouri
Missouri State Health and Educational Facilities Authority, Health Facilities
Revenue, Sisters of Mercy, Weekly Demand Note, 4.125%, 6/1/19* .............. 3,000,000 MIG1 3,000,000
St. Charles County, MO, Industrial Development Authority, Multi-Family
Housing, Sun River Apartments, Weekly Demand Note, 4.1%, 12/1/07* ........... 3,200,000 MIG1 3,200,000
St. Louis, MO, Airport Revenue Municipal Securities Trust Receipts, AMT,
Series SGA 71, 4.3%, 7/1/22* ................................................ 3,000,000 A1+ 3,000,000
Montana
Montana State Transportation Notes, Series 1997 C, 4.5%, 6/30/98 .............. 2,500,000 SP1+ 2,508,161
New Jersey
Salem County, NJ, Industrial Pollution Control Financing Authority, E.I.
du Pont de Nemours and Co., Floating Rate Demand Note, 3.8%, 3/1/12* ........ 11,400,000 P1 11,400,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b)
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Mexico
Albuquerque, NM, Gross Receipts/Lodgers Tax, Series 1991, Weekly Demand Note,
3.7%, 7/1/22* ............................................................... 1,000,000 A1+ 1,000,000
New York
New York City Health and Hospital Corporation Revenue, Series 1997 A, Weekly
Demand Note, 3.5%, 2/15/26* ................................................. 500,000 MIG1 500,000
New York City, NY, Municipal Water Finance Authority, Series C, Daily Demand
Note, 5.1%, 6/15/23* (c) .................................................... 10,000,000 MIG1 10,000,000
New York City, Series B, Daily Demand Note, 5%, 8/15/22* (c) .................. 1,700,000 A1+ 1,700,000
New York, NY, General Obligation Series 1995 B4, Daily Demand Note,
5.1%, 8/15/23* (c) .......................................................... 100,000 A1+ 100,000
New York State Job Development Authority, Special Purpose, Series A1-13, Daily
Demand Note, Subject To AMT, 5.5%, 3/1/02* .................................. 80,000 MIG1 80,000
New York, NY, Revenue Anticipation Notes Series 1997 A, 4.125%, 6/30/98 ....... 2,000,000 SP1+ 2,006,251
Suffolk County, NY, Tax Anticipation Notes, 4.25%, 8/13/98 .................... 3,000,000 SP1+ 3,011,340
North Dakota
Grand Forks, ND, Hospital Facilities Revenue, Daily Demand Note, 5.1%,
12/1/16* .................................................................... 5,000,000 MIG1 5,000,000
Mercer County, ND, Pollution Control Revenue, Cooperative Finance Corp.,
United Power, Weekly Demand Note, 3.85%, 8/15/14* ........................... 3,000,000 A1 3,000,000
Ohio
Cuyahoga County, OH, Health & Education, University Hospital of Cleveland,
Daily Demand Note, 5.2%, 1/1/16* ............................................ 800,000 MIG1 800,000
Hamilton County, OH, Franciscan Sisters of the Poor Health System, Series A,
Daily Demand Note, 5.25%, 3/1/17* ........................................... 8,100,000 MIG1 8,100,000
Pennsylvania
Bucks County, PA, Oxford Falls Plaza, Series 1984, 4.2%, 10/1/14* ............. 9,100,000 SS&C 9,100,000
Elk County, PA, Industrial Development Authority,Series 1989, Weekly Demand
Note, 4.415%, 3/1/04* ....................................................... 1,000,000 SS&C 1,000,000
Emmaus, PA, General Authority Local Government, Revenue Bond Pool Program,
Weekly Demand Note, 3.80%, 3/1/24* .......................................... 2,500,000 A1+ 2,500,000
Lancaster, PA, Multi-Family Revenue, Series 1985, Weekly Demand Note,
3.8%, 2/1/05* ............................................................... 3,650,000 A1 3,650,000
Langhorne, PA, Franciscan Health System Pooled Financing, Saint Mary Hospital,
Series C, Daily Demand Note, 5%, 12/1/24* ................................... 200,000 A1+ 200,000
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue,
Series 1997 A, Weekly Demand Note, 3.85%, 3/1/27* ........................... 2,000,000 MIG1 2,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b)
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philadelphia, PA, School District Tax and Revenue Anticipation Notes, Series
1993A, 4.5%, 7/1/98 (c) ..................................................... 1,000,000 AAA 1,002,888
Philadelphia, PA School District Tax and Revenue Anticipation Notes,
4.5%, 6/30/98 ............................................................... 1,500,000 SP1+ 1,504,890
Temple University of the Commonwealth, PA, Higher Education, Series 1997,
4.75%, 5/18/98 (c) .......................................................... 2,000,000 SP1+ 2,006,135
Puerto Rico
Puerto Rico Commonwealth Tax and Revenue Anticipation Notes, Series 1997 A,
4.5%, 7/30/98 ............................................................... 2,000,000 SP1+ 2,008,453
Tennessee
Franklin, TN, Industrial Development Revenue, Franklin Oaks Apartments, Weekly
Demand Note, Series 1985, 4.15%, 12/15/21* .................................. 2,600,000 MIG1 2,600,000
Texas
Board of Regents University of Texas System Univ. Fund, Series A, Tax Exempt
Commercial Paper, 3.7%, 1/20/98 ............................................. 3,000,000 A1+ 3,000,000
Camp County, TX, Industrial Development, Pollution Control Revenue, Texas Oil
& Gas Corp., Floating Rate Demand Bond, 3.9%, 12/1/13* ...................... 2,000,000 A1 2,000,000
Harris County, TX, Children's Hospital, Series 1996, Weekly Demand Note,
3.65%, 8/1/20* .............................................................. 1,000,000 A1+ 1,000,000
Harris County, TX, Health Facilities Sisters of Charity Series 1997 A, Tax
Exempt Commercial Paper, 3.75%, 2/9/98 ...................................... 3,800,000 A1+ 3,800,000
Harris County, TX, Tax Anticipation Note, Series 1997, 4.25%, 2/27/98 ......... 3,000,000 MIG1 3,002,424
Lone Star, TX, Airport Improvement Authority:
Daily Demand Note, Series 1995 A-3, 5%, 12/1/14* ............................ 1,100,000 MIG1 1,100,000
Daily Demand Note, 5%, 12/1/14* ............................................. 1,000,000 MIG1 1,000,000
Daily Demand Note, 5%, 12/1/14* ............................................. 1,300,000 MIG1 1,300,000
Matagorda County Texas, District 1, 4.95%, 11/1/28* ........................... 7,500,000 MIG1 7,500,000
North Central Texas Health Facilities Development Corp., Presbyterian
Medical Center, 1995 Series D, Daily Demand Note, 5%, 12/1/15 (c)* .......... 800,000 A1 800,000
Panhandle-Plains, TX, Higher Education Authority, Student Loan Revenue:
3.75%, 6/1/25* .............................................................. 1,900,000 MIG1 1,900,000
AMT, Series 1997 Y, Weekly Demand Note, 3.75%, 10/1/02* ..................... 2,500,000 MIG1 2,500,000
San Antonio, TX, Industrial Development Authority, River Center Associates
Project, Weekly Demand Note, 4.25%, 12/1/12* ................................ 3,300,000 SS&C 3,300,000
San Antonio, TX, Electric & Gas Public Services:
3.8%, 2/1/20* ............................................................... 2,000,000 A1+ 2,000,000
SG #79, Series 1996, Weekly Demand Note, 4.25%, 2/1/18* ..................... 2,000,000 SS&C 2,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b)
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
State of Texas, Tax and Revenue Anticipation Note, Series 1998A,
4.75%, 8/31/98 .............................................................. 6,000,000 MIG1 6,036,615
Sabine River Authority, Texas Pollution Control Revenue, 5.1%, 3/1/26* ........ 2,500,000 AAA 2,500,000
State of Texas, General Obligation, Veterans Housing Assistance Refunding
Bonds, Series 1995, Weekly Demand Note, 3.65%, 12/1/16* ..................... 2,000,000 A1+ 2,000,000
State of Texas, Tax and Revenue Anticipation Note, Series 1997 B Tax Exempt
Commercial Paper, 3.70%, 2/17/98 ............................................ 3,000,000 A1+ 3,000,000
Utah
Utah Board of Regents, Student Loan Revenue Series 1988, Weekly Demand Note,
3.75%, 11/1/13 (c)* ......................................................... 2,500,000 MIG1 2,500,000
Virginia
Virginia Port Authority Facility, Municipal Trust Receipts, AMT, SG 111,
Series 1997, Weekly Demand Note, 4.3%, 7/1/24* .............................. 2,605,000 A1+ 2,605,000
Washington
Student Loan Finance Association, WA, Series 1988 A, Weekly Demand Note,
4.1%, 1/1/04* ............................................................... 2,000,000 MIG1 2,000,000
Washington Motor Vehicle Fuel Tax, Series 1996, 5%, 7/1/98 .................... 2,000,000 SS&C 2,011,346
Washington State Public Power Supply System, Nuclear Project #2, Series
1993 B, 4.3%, 7/1/98 (c) .................................................... 2,000,000 AAA 2,003,649
Wisconsin
Wausau, WI, Pollution Control Revenue, Minnesota Mining and Manufacturing:
Floating Rate Demand Note, 4.428%, 12/1/01* ................................. 900,000 AAA 900,000
Series 1982, Floating Rate Demand Notes, 4.428%, 8/1/17* (c) ................ 2,300,000 AAA 2,300,000
Whitewater, WI, Industrial Development Maclean Fogg Project, AMT, Weekly
Demand Note, 3.9%, 12/1/09* ................................................. 1,000,000 MIG1 1,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $277,287,552) (a) 277,287,552
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $277,287,552.
(b) All of the securities held have been determined by the Adviser to be of
appropriate credit quality as required by the Fund's investment
objectives. Credit ratings shown are assigned by either Standard & Poor's
Ratings Group, Moody's Investors Service, Inc. or Fitch Investors Service,
Inc. Securities rated by Scudder (SS&C) have been determined by the
Adviser to be of comparable quality to rated eligible securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC, FSA or MBIA.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such as
the coupon-equivalent of the Treasury Bill rate. Variable rate demand
notes are securities whose yields are periodically reset at levels that
are generally comparable to tax-exempt commercial paper. These securities
are payable on demand within seven calendar days and normally incorporate
an irrevocable letter of credit or line of credit from a major bank. These
notes are carried, for purposes of calculating average weighted maturity,
at the longer of the period remaining until the next rate change or to the
extent of the demand period.
The accompanying notes are an integral part of the financial statements.
12 - Scudder Tax Free Money Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at value (amortized cost $277,287,552) ................. $ 277,287,552
Cash ................................................................ 5,524,192
Receivable for Fund shares sold ..................................... 2,663,736
Interest receivable ................................................. 1,891,631
Other assets ........................................................ 9,775
----------------
Total assets ........................................................ 287,376,886
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................... 3,011,340
Payable for Fund shares redeemed .................................... 1,029,961
Dividends payable ................................................... 50,831
Accrued management fee .............................................. 97,318
Other payables and accrued expenses ................................. 131,603
----------------
Total liabilities ................................................... 4,321,053
--------------------------------------------------------------------------------------------
Net assets, at value $ 283,055,833
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized loss ....................................... (699,042)
Paid-in capital ..................................................... 283,754,875
--------------------------------------------------------------------------------------------
Net assets, at value $ 283,055,833
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($283,055,833 / 282,884,441) outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized)... $1.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Tax Free Money Fund
<PAGE>
Statement of Operations
year ended December 31, 1997
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest ............................................................ $ 8,306,132
----------------
Expenses:
Management fee ...................................................... 1,120,092
Services to shareholders ............................................ 290,670
Custodian and accounting fees ....................................... 88,068
Trustees' fees ...................................................... 36,951
Reports to shareholders ............................................. 45,380
Auditing ............................................................ 41,151
Registration fees ................................................... 26,144
Legal ............................................................... 21,637
Other ............................................................... 24,834
----------------
Total expenses before reductions .................................... 1,694,927
Expense reductions .................................................. (238,094)
----------------
Expenses, net ....................................................... 1,456,833
--------------------------------------------------------------------------------------------
Net investment income 6,849,299
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net realized loss from investments (2,932)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 6,846,367
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Tax Free Money Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 6,849,299 $ 6,491,913
Net realized gain (loss) from investment transactions ....... (2,932) 3,478
-------------- ----------------
Net increase in net assets resulting from operations ........ 6,846,367 6,495,391
-------------- ----------------
Distributions to shareholders from net investment income .... (6,849,299) (6,491,913)
-------------- ----------------
Fund share transactions at net asset value of
$1.00 per share:
Shares sold ................................................. 815,443,293 544,612,524
Shares issued to shareholders in reinvestment of
distributions ............................................. 6,236,249 5,875,747
Shares redeemed ............................................. (758,866,018) (569,334,268)
-------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. 62,813,524 (18,845,997)
-------------- ----------------
Increase (decrease) in net assets ........................... 62,810,592 (18,842,519)
Net assets at beginning of period ........................... 220,245,241 239,087,760
-------------- ----------------
Net assets at end of period ................................. $283,055,833 $220,245,241
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Tax Free Money 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 December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning -----------------------------------------------------------------------------------------------
of period ....................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-----------------------------------------------------------------------------------------------
Net investment income ............. .031 .029 .032 .022 .018 .025 .041 .053 .057 .046
Less distributions from net
investment income ............... (.031) (.029) (.032) (.022) (.018) (.025) (.041) (.053) (.057) (.046)
-----------------------------------------------------------------------------------------------
Net asset value, end of period .... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .................. 3.10 2.91 3.27 2.26 1.86 2.54 4.20 5.44 5.83 4.73
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................... 283 220 239 257 222 267 279 303 279 358
Ratio of operating expenses net, to
average daily net assets (%) .... .65 .70 .75 .77 .75 .73 .70 .72 .70 .67
Ratio of operating expenses before
expense reductions to average
daily net assets ................ .76 .75 .75 .77 .75 .73 .70 .72 .70 .67
Ratio of net investment income
to average daily net assets (%).. 3.06 2.86 3.21 2.24 1.84 2.53 4.12 5.30 5.67 4.61
</TABLE>
16 - Scudder Tax Free Money Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Tax Free Money 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. The Fund values all portfolio securities utilizing the
amortized cost method permitted in accordance with Rule 2a-7 under the
Investment Company Act of 1940, as amended, and pursuant to which the Fund must
adhere to certain conditions. Under this method, which does not take into
account unrealized securities gains or losses, an instrument is initially valued
at its cost and thereafter assumes a constant accretion/amortization to maturity
of any discount/premium.
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 income to its shareholders.
The Fund accordingly paid no federal income taxes and no provision for federal
income taxes was required.
As of December 31, 1997, the Fund had a net tax basis capital loss carryforward
of approximately $699,000, which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until, December 31, 2000
($7,000), December 31, 2001 ($29,000), December 31, 2002 ($38,000), December 31,
2003 ($78,000), December 31, 2004 ($544,000) and December 31, 2005 ($3,000), the
respective expiration dates, whichever occurs first.
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 twelve o'clock noon
each business day and is paid to shareholders monthly. During any particular
year, net realized gains from investment transactions, in excess of available
capital loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
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 transactions are accounted for on a trade date basis (which in
most cases is the same as the settlement date). Interest income is accrued pro
rata to maturity. All premiums and discounts are amortized/accreted for both tax
and financial reporting purposes.
B. 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
17 - Scudder Tax Free Money Fund
<PAGE>
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 these agreements. The management fee
payable under the Agreement is equal to an annual rate of 0.50% on the first
$500,000,000 of average daily net assets, and 0.48% of such net assets in excess
of $500,000,000, computed and accrued daily and payable monthly. The Adviser has
agreed to maintain the annualized expenses of the Fund at not more than .65% of
average daily net assets until April 30, 1998. For the year ended December 31,
1997, the Adviser did not impose a portion of its fee, amounting to $238,094,
and the portion imposed amounted to $881,998, equivalent to an annual effective
rate of .39% 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 December 31, 1997, the amount charged to the Fund by SSC aggregated
$204,129, of which $16,512 is unpaid at December 31, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
December 31, 1997, the amount charged to the Fund by SFAC aggregated $44,913, of
which $3,793 is unpaid at December 31, 1997.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the year ended December 31, 1997,
Trustees' fees and expenses aggregated $36,951.
18 - Scudder Tax Free Money Fund
<PAGE>
Report of Independent Accountants
To the Trustees and Shareholders of the Scudder Tax Free Money Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Tax Free Money Fund, including the investment portfolio, as of December 31,
1997, 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
December 31, 1997 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 Tax Free Money Fund as of December 31, 1997, 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.
February 11, 1998
19 - Scudder Tax Free Money Fund
<PAGE>
Tax Information
Of the dividends paid by the Scudder Tax Free Money Fund from net investment
income for the taxable year ended December 31, 1997, 100% were exempt interest
dividends which are tax exempt for purposes of regular federal income tax, and
for purposes of the federal alternative minimum tax.
20 - Scudder Tax Free Money Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Tax Free Money Fund
("Fund") was held on October 24, 1997, at the offices 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*
--- ------- ------- -----------------
144,693,513 4,083,786 5,213,834 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 149,140,801 4,850,333
Dawn-Marie Driscoll 149,153,285 4,837,849
Peter B. Freeman 148,922,104 5,069,030
George M. Lovejoy, Jr. 148,963,784 5,027,349
Dr. Wesley W. Marple, Jr. 149,002,170 4,988,963
Daniel Pierce 149,209,950 4,781,184
Kathryn L. Quirk 149,009,586 4,981,548
Jean C. Tempel 149,073,843 4,917,291
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*
--- ------- ------- -----------------
137,284,323 9,798,118 6,875,556 33,137
21 - Scudder Tax Free Money 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*
--- ------- ------- -----------------
138,255,446 8,711,493 7,621,925 33,137
5. To approve the revisions 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 138,831,457 7,210,448 7,916,092 33,137
5.2 Borrowing 138,405,301 7,636,603 7,916,092 33,137
5.3 Senior securities 138,711,187 7,330,718 7,916,092 33,137
5.4 Concentration 138,681,591 7,360,314 7,916,092 33,137
5.5 Loans 138,905,038 7,136,867 7,916,092 33,137
5.6 Underwriting of securities 138,912,277 7,122,302 7,923,417 33,137
5.7 Investment in real estate 138,919,594 7,122,311 7,916,092 33,137
5.8 Purchase of physical commodities 138,919,602 7,122,302 7,916,092 33,137
5.9 Investment in California municipal N/A N/A N/A N/A
securities
5.10 Investment in municipal securities N/A N/A N/A N/A
5.11 Investment in Massachusetts N/A N/A N/A N/A
municipal securities
5.12 Investment in New York municipal N/A N/A N/A N/A
securities
5.13 Investment in Ohio municipal N/A N/A N/A N/A
securities
5.14 Investment in Pennsylvania N/A N/A N/A N/A
municipal securities
22 - Scudder Tax Free Money Fund
<PAGE>
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
5.15 Investment in short-term municipal 138,933,446 7,108,459 7,916,092 33,137
securities
5.16 Elimination of tax diversification N/A N/A N/A N/A
5.17 Purchases of voting securities N/A N/A N/A N/A
5.18 Affiliated transactions N/A N/A N/A N/A
5.19 Disclosed practices N/A N/A N/A N/A
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
147,512,984 1,704,063 4,774,087
* 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.
23 - Scudder Tax Free Money Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; 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
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel*
Trustee; Managing Partner,
Technology Equity Partners
Donald C. Carleton*
Vice President
K. Sue Cote*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Edward J. O'Connell*
Vice President and Assistant
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - Scudder Tax Free Money 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
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
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. +++ +++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.
25 - Scudder Tax Free Money 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.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Tax Free Money Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
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27 - Scudder Tax Free Money Fund
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About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
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.
Shares of Scudder Tax Free Money Fund are not insured or guaranteed by the U.S.
Government. The Fund seeks to maintain a constant net asset value of $1.00 per
share, but there can be no assurance that the stable net value will be
maintained.
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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