Filed with the Securities and Exchange Commission on April 30, 1999
File No. 2-65669
File No. 811-2959
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
---------
Post-Effective Amendment No. 26
---------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28
---------
Scudder Tax Free Money Fund
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
--------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-1000
--------------
Daniel Pierce
Scudder Kemper Investments, Inc.
Two International Place, Boston, MA 02110
-----------------------------------------
(Name Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / 75 days after filing pursuant to paragraph (a) (2)
/ X / On May 1, 1999 pursuant to paragraph (b)
/ / On __________________ pursuant to paragraph (a) (1)
/ / On __________________ pursuant to paragraph (a) (2) of Rule 485.
If Appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Money market mutual funds managed to provide monthly income while maintaining
liquidity and stability of capital.
No-Load/No Sales Charge
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
SCUDDER
[GRAPHIC OMITTED]
Scudder Cash Investment
Trust (065)
Scudder U.S. Treasury
Money Fund (059)
Scudder Tax Free Money
Fund (071)
Scudder Money Market
Series
o Prime Reserve Money Market
Shares (309)
o Premium Money Market
Shares (402)
Prospectus
May 1, 1999
<PAGE>
Contents
1 Money Market Investing
- --------------------------------------------------------------------------------
1 About the Funds
- --------------------------------------------------------------------------------
1 Scudder Cash Investment Trust
Minimum initial investment: $2,500
5 Scudder U.S. Treasury Money Fund
Minimum initial investment: $2,500
8 Scudder Tax Free Money Fund
Minimum initial investment: $2,500
12 Scudder Money Market Series
Prime Reserve Money Market Shares
Minimum initial investment: $10,000
Premium Money Market Shares
Minimum initial investment: $25,000
18 Financial highlights
23 A message from the President
24 Investment adviser
27 Distributions
27 Taxes
28 About Your Investment
- --------------------------------------------------------------------------------
28 Transaction information
30 Buying and selling shares
30 Purchases
32 Exchanges and redemptions
34 Investment products and services
36 Trustees and Officers
37 Directors and Officers
<PAGE>
Money Market Investing
The funds presented in this prospectus are each money market mutual funds that
are managed to provide investors with monthly income while maintaining liquidity
and stability of capital. Money market funds are conservative investments. Each
fund invests in a diversified pool of short-term, high quality securities in an
effort to maintain a stable net asset value of $1.00 per share. Each fund
distributes income, if any, to shareholders monthly, and shareholders can
purchase or redeem shares on a daily basis, in a variety of ways. The funds'
yields are most affected by short-term interest rates. These funds may be
appropriate for investors who want (i) stability of principal, (ii) some
checkwriting privileges, (iii) to invest for less than three years or (iv) to
invest the cash portion of their overall portfolio.
While the objectives and policies of these funds may be similar, they have
different features, including different initial investment requirements. These
funds are presented together so that you can understand their important
differences and decide which fund and class, if applicable, is most suitable for
your investment needs.
About the Funds
Scudder Cash Investment Trust
Investment objectives
The fund seeks to maintain stability of capital and, consistent therewith, to
maintain liquidity of capital and to provide current income.
Unless otherwise indicated, the fund's investment objectives and policies may be
changed without a vote of shareholders.
Main investment strategies
The fund pursues its goal by investing exclusively in a broad range of high
quality, short-term securities that are U.S. dollar-denominated. The fund
maintains a dollar-weighted average maturity of 90 days or less.
These high quality securities include:
o obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities,
o obligations of organizations such as the World Bank,
o certain corporate and bank obligations,
o instruments whose credit has been enhanced by banks, insurance companies
or other corporate entities,
1
<PAGE>
o asset-backed securities and
o municipal securities.
The fund generally invests only in securities with credit ratings in the two
highest short-term categories as determined by one or more nationally recognized
rating services. The fund may also invest in unrated securities that its
portfolio managers believe to be of comparable quality.
In selecting securities, the fund's portfolio managers conduct thorough credit
analyses to identify what appear to be the safest investments. From this group,
the fund then selects individual securities based on the portfolio managers'
perception of monetary conditions, the available supply of appropriate
investments, and the managers' projections for short-term interest rate
movements.
A security is typically sold if it ceases to be rated or its rating is reduced
below the minimum required for purchase by the fund, unless the fund's Board
determines that selling the security would not be in the best interests of the
fund.
Of course, there can be no guarantee that by following these investment
strategies, the fund will achieve its objectives.
Other investments
To a more limited extent, the fund may, but is not required to, utilize other
investments and investment techniques that may impact fund performance
including, but not limited to, floating and variable rate instruments
(obligations that do not bear interest at fixed rates) and third party puts
(certain fixed rate bonds that have been coupled with an option granted by a
third party financial institution to tender the bonds at their face value).
Risk management strategies
The fund manages credit risk by investing only in high quality securities, whose
issuers are considered unlikely to default, based on their credit ratings. The
fund also diversifies its assets across a broad range of industry sectors and
issuers.
Main risks
As with most money market funds, the major factor affecting this fund's
performance is short-term interest rates. If short-term interest rates fall, the
fund's yield is also likely to fall. Moreover, the portfolio managers' strategy
or choice of specific investments may not perform as expected. This fund may
have lower returns than other funds that invest in lower-quality securities. It
is also possible that securities in the fund's portfolio could be downgraded in
credit rating or go into default.
2
<PAGE>
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year. Of
course, past performance is not necessarily an indication of future performance.
Total returns for years ended December 31
[The following information was represented by a bar graph in the printed
materials.]
1989 .............8.86%
1990 .............7.84%
1991 .............5.96%
1992 .............3.51%
1993 .............2.58%
1994 .............3.70%
1995 .............5.25%
1996 .............4.70%
1997 .............4.85%
1998 .............4.83%
For the periods included in the bar chart, the fund's highest return for a
calendar quarter was 2.30% (the second quarter of 1989), and the fund's lowest
return for a calendar quarter was 0.62% (the second quarter of 1993).
The fund's year-to-date total return as of 3/31/99 was 1.04%.
To obtain the current 7-day yield please call 1-800-343-2890.
Average annual total returns
For periods ended
December 31, 1998 Fund
- --------------------------------------------------------------------------------
One Year 4.83%
Five Years 4.66%
Ten Years 5.19%
- --------------------------------------------------------------------------------
3
<PAGE>
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the fund.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as % of offering price) NONE
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) NONE
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends/distributions NONE
- --------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE*
- --------------------------------------------------------------------------------
Exchange fee NONE
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):
- --------------------------------------------------------------------------------
Management fee 0.42%**
- --------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- --------------------------------------------------------------------------------
Other expenses 0.53%
- --------------------------------------------------------------------------------
Total annual fund operating expenses 0.95%**
- --------------------------------------------------------------------------------
* You may redeem by writing or calling the fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "About Your Investment --
Exchanges and redemptions."
** Through September 30, 1999, total fund operating expenses are
contractually maintained by the Adviser at 0.85%.
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "Total annual fund operating expenses" remaining the same each year. The
expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual fund expenses and return vary from year
to year, and may be higher or lower than those shown.
- --------------------------------------------------------------------------------
One Year $ 97
- --------------------------------------------------------------------------------
Three Years $ 303
- --------------------------------------------------------------------------------
Five Years $ 525
- --------------------------------------------------------------------------------
Ten Years $ 1,166
- --------------------------------------------------------------------------------
4
<PAGE>
Scudder U.S. Treasury Money Fund
Investment objectives
The fund seeks to provide safety, liquidity and stability of capital and,
consistent therewith, to provide current income.
Unless otherwise indicated, the fund's investment objectives and policies may be
changed without a vote of shareholders.
Main investment strategies
The fund pursues its goal by investing exclusively in short-term securities
unconditionally guaranteed by the U.S. Government (as to payment of principal
and interest) and repurchase agreements backed fully by U.S. Treasury
securities. At least 80% of the fund's total assets are invested in U.S.
Treasury obligations and repurchase agreements collateralized by U.S. Treasury
securities. The interest earned on U.S. Government securities in which the fund
invests (not repurchase agreements) is typically exempt from state and local
income taxes. (Most, but not all, states allow this tax-exempt character of the
fund's income to pass through to shareholders, so that distributions from the
fund to the extent derived from interest that is exempt from state and local
income taxes, are exempt from such taxes when earned by a shareholder of the
fund. Shareholders should consult their own tax advisers.) The fund only invests
in U.S. dollar-denominated securities and it maintains a dollar-weighted average
maturity of 90 days or less.
The fund selects securities based on the portfolio managers' perception of
monetary conditions, the available supply of appropriate investments, and the
managers' projections for short-term interest rate movements. In addition, the
portfolio managers attempt to increase income and manage risk by investing in
securities of varying maturities.
Of course, there can be no guarantee that by following these investment
strategies, the fund will achieve its objectives.
Other investments
To a more limited extent, the fund may, but is not required to, utilize other
investments and investment techniques that may impact fund performance
including, but not limited to, floating and variable rate instruments
(obligations that do not bear interest at fixed rates) and third party puts
(certain fixed rate bonds that have been coupled with an option granted by a
third party financial institution to tender the bonds at their face value).
Risk management strategies
The fund minimizes credit risk by investing exclusively in short-term securities
unconditionally guaranteed by the U.S. Government and repurchase agreements
backed fully by U.S. Treasury securities.
5
<PAGE>
Main Risks
As with most money market funds, the major factor affecting this fund's
performance is short-term interest rates. If short-term interest rates fall, the
fund's yield is also likely to fall. Moreover, the portfolio managers' strategy
or choice of specific investments may not perform as expected. This fund may
have lower returns than other funds that invest in lower-quality securities.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year. Of
course, past performance is not necessarily an indication of future performance.
Total returns for years ended December 31
[The following information was represented by a bar graph in the printed
materials.]
1989 .............8.27%
1990 .............7.34%
1991 .............5.66%
1992 .............3.36%
1993 .............2.56%
1994 .............3.52%
1995 .............5.22%
1996 .............4.62%
1997 .............4.67%
1998 .............4.78%
For the periods included in the bar chart, the fund's highest return for a
calendar quarter was 2.14% (the second quarter of 1989), and the fund's lowest
return for a calendar quarter was 0.63% (the first quarter of 1993).
The fund's year-to-date total return as of 3/31/99 was 1.02%.
To obtain the current 7-day yield please call 1-800-343-2890.
6
<PAGE>
Average annual total returns
For periods ended
December 31, 1998 Fund
- --------------------------------------------------------------------------------
One Year 4.78%
Five Years 4.56%
Ten Years 4.99%
- --------------------------------------------------------------------------------
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the fund.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as % of offering price) NONE
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) NONE
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends/distributions NONE
- --------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE*
- --------------------------------------------------------------------------------
Exchange fee NONE
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):
- --------------------------------------------------------------------------------
Management fee 0.50%**
- --------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- --------------------------------------------------------------------------------
Other expenses 0.50%
- --------------------------------------------------------------------------------
Total annual fund operating expenses 1.00%**
- --------------------------------------------------------------------------------
* You may redeem by writing or calling the fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "About Your Investment --
Exchanges and redemptions."
** Through September 30, 1999 total fund operating expenses are contractually
maintained by the Adviser at 0.65%.
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "Total annual fund operating expenses" remaining the same each year. The
expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual fund expenses and return vary from year
to year, and may be higher or lower than those shown.
- --------------------------------------------------------------------------------
One Year $ 102
- --------------------------------------------------------------------------------
Three Years $ 318
- --------------------------------------------------------------------------------
Five Years $ 552
- --------------------------------------------------------------------------------
Ten Years $ 1,225
- --------------------------------------------------------------------------------
7
<PAGE>
Scudder Tax Free Money Fund
Investment objectives
The fund seeks to provide income exempt from regular federal income tax and
stability of principal through investments in municipal securities.
Unless otherwise indicated, the fund's investment objectives and policies may be
changed without a vote of shareholders.
Main investment strategies
While the fund normally expects to be fully invested in municipal securities, it
is a policy of the fund, which may not be changed without a vote of
shareholders, to invest at least 80% of its net assets in short-term municipal
securities. (This policy may not be changed without the approval of a majority
of the outstanding shares of the fund.) In addition, the fund may not invest
more than 20% of its net assets in securities whose investment income is subject
to the alternative minimum tax. The fund maintains an average dollar-weighted
maturity of 90 days or less.
The municipal securities in which the fund may invest include municipal notes,
short-term municipal bonds, variable rate demand instruments and tax-exempt
commercial paper. The fund also may invest more than 25% of its assets in
industrial development or other private activity bonds, and, on a temporary
basis, up to 20% in cash and cash equivalents and certain short-term taxable
securities.
The fund generally invests only in securities with credit ratings in the two
highest categories as determined by two or more nationally recognized rating
services. The fund may also invest in unrated securities that its portfolio
managers believe to be of comparable quality.
In selecting securities, the fund's portfolio managers conduct thorough credit
analyses to identify what appear to be the safest investments. From this group,
the fund then selects individual securities based on the portfolio managers'
perception of monetary conditions, the available supply of appropriate
investments, and the managers' projections for short-term interest rate
movements.
A security is typically sold if it ceases to be rated or its rating is reduced
below the minimum required for purchase by the fund, unless the fund's Board
determines that selling the security would not be in the best interests of the
fund.
Of course, there can be no guarantee that by following these investment
strategies, the fund will achieve its objectives.
8
<PAGE>
Other investments
To a more limited extent, the fund may, but is not required to, utilize other
investments and investment techniques that may impact fund performance
including, but not limited to, floating and variable rate instruments
(obligations that do not bear interest at fixed rates) and third party puts
(certain fixed rate bonds that have been coupled with an option granted by a
third party financial institution to tender the bonds at their face value).
Risk management strategies
The fund manages credit risk by investing only in high quality securities, whose
issuers are considered unlikely to default, based on their credit rating. The
fund also diversifies its assets across a broad range of municipal securities.
As an extreme defensive measure, the fund may invest more than 20% of its assets
in cash and cash equivalents and in temporary investments of certain short-term
taxable securities.
Main Risks
As with most money market funds, the major factor affecting this fund's
performance is short-term interest rates. If short-term interest rates fall, the
fund's yield is also likely to fall. Moreover, the portfolio managers' strategy
or choice of specific investments may not perform as expected. This fund may
have lower returns than other funds that invest in lower-quality securities. It
is also possible that securities in the fund's portfolio could be downgraded in
credit rating or go into default.
To the extent that the fund invests in taxable securities, a portion of its
income would be taxable. Industrial development bonds may involve more risk than
general obligation bonds because they are generally secured by the revenues of
the facility being financed rather than the taxing power of the municipality.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
9
<PAGE>
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year. Of
course, past performance is not necessarily an indication of future performance.
Total returns for years ended December 31
[The following information was represented by a bar graph in the printed
materials.]
1989 .............5.82%
1990 .............5.44%
1991 .............4.20%
1992 .............2.54%
1993 .............1.86%
1994 .............2.26%
1995 .............3.27%
1996 .............2.91%
1997 .............3.10%
1998 .............2.92%
For the periods included in the bar chart, the fund's highest return for a
calendar quarter was 1.52% (the second quarter of 1989), and the fund's lowest
return for a calendar quarter was 0.43% (the first quarter of 1994).
The fund's year-to-date total return as of 3/31/99 was 0.58%.
To obtain the current 7-day yield please call 1-800-343-2890.
Average annual total returns
For periods ended
December 31, 1998 Fund
- --------------------------------------------------------------------------------
One Year 2.92%
Five Years 2.89%
Ten Years 3.42%
- --------------------------------------------------------------------------------
10
<PAGE>
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the fund.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as % of offering price) NONE
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) NONE
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends/distributions NONE
- --------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE*
- --------------------------------------------------------------------------------
Exchange fee NONE
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):
- --------------------------------------------------------------------------------
Management fee 0.50%**
- --------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- --------------------------------------------------------------------------------
Other expenses 0.21%
- --------------------------------------------------------------------------------
Total annual fund operating expenses 0.71%**
- --------------------------------------------------------------------------------
* You may redeem by writing or calling the fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "About Your Investment --
Exchanges and redemptions."
** Through September 30, 1999, total fund operating expenses are
contractually maintained by the Adviser at 0.65%.
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "Total annual fund operating expenses" remaining the same each year. The
expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual fund expenses and return vary from year
to year, and may be higher or lower than those shown.
- --------------------------------------------------------------------------------
One Year $ 73
- --------------------------------------------------------------------------------
Three Years $ 227
- --------------------------------------------------------------------------------
Five Years $ 395
- --------------------------------------------------------------------------------
Ten Years $ 883
- --------------------------------------------------------------------------------
11
<PAGE>
Scudder Money Market Series:
Prime Reserve Money Market Shares
Premium Money Market Shares
Investment objectives
The fund seeks as high a level of current income as is consistent with its
investment policies and with preservation of capital and liquidity.
Unless otherwise indicated, the fund's investment objectives and policies may be
changed without a vote of shareholders.
Main investment strategies
Premium Money Market Shares and Prime Reserve Money Market Shares are both
classes of Scudder Money Market Series. The fund pursues its goal by investing
exclusively in a broad range of short-term money market instruments and certain
repurchase agreements. The fund maintains an average dollar-weighted maturity of
90 days or less.
These money market securities consist of:
o obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities,
o taxable and tax-exempt municipal obligations,
o corporate and bank obligations,
o certificates of deposit,
o bankers' acceptances and
o variable amount master demand notes.
The fund focuses its investments in first tier securities (securities generally
rated in the highest short-term category by at least two nationally recognized
rating services). The fund may also invest in unrated securities that its
portfolio managers believe to be of comparable quality. Generally, the fund may
not invest less than 25% of its total assets in bank obligations (including bank
obligations subject to repurchase agreements) that meet certain criteria. In
addition, the fund has the option of investing in U.S. dollar-denominated
obligations of foreign banks, provided certain conditions are met and the
portfolio managers believe their investment quality is comparable to obligations
of U.S. banks in which the fund may invest.
12
<PAGE>
In selecting securities, the fund's portfolio managers conduct thorough credit
analyses to identify what appear to be the safest investments. From this group,
the fund then selects individual securities based on the portfolio managers'
perception of monetary conditions, the available supply of appropriate
investments, and the managers' projections for short-term interest rate
movements.
A security is typically sold if it ceases to be rated or its rating is reduced
below the minimum required for purchase by the fund, unless the fund's Board
determines that selling the security would not be in the best interests of the
fund.
Of course, there can be no guarantee that by following these investment
strategies, the fund will achieve its objectives.
Other investments
To a more limited extent, the fund may, but is not required to, utilize other
investments and investment techniques that may impact fund performance
including, but not limited to, floating and variable rate instruments
(obligations that do not bear interest at fixed rates) and third party puts
(certain fixed rate bonds that have been coupled with an option granted by a
third party financial institution to tender the bonds at their face value).
Risk management strategies
The fund manages credit risk by investing only in high quality securities whose
issuers are considered unlikely to default, based on their credit ratings. The
fund also diversifies its assets across many industry sectors and issuers.
Main risks
As with most money market funds, the major factor affecting this fund's
performance is short-term interest rates. If short-term interest rates fall, the
fund's yield is also likely to fall. Moreover, the portfolio managers' strategy
or choice of specific investments may not perform as expected. This fund may
have lower returns than other funds that invest in lower-quality securities. It
is also possible that securities in the fund's portfolio could be downgraded in
credit rating or go into default.
To the extent that the fund invests in obligations of foreign banks, these
investments may involve greater risks than those affecting U.S. banks. In
addition, foreign banks are not subject to examination by any U.S. Government
agency or instrumentality.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
13
<PAGE>
Past performance
As the Prime Reserve Money Market Shares class of the fund commenced operations
on October 15, 1998, it did not have a full calendar year of performance to
report as of the date of this prospectus.
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how Premium Money Market Shares class of the fund has
performed. Of course, past performance is not necessarily an indication of
future performance.
Total return for year ended December 31
[The following information was represented by a bar graph in the printed
materials.]
1998 .............5.46%
For the period included in the bar chart, Premium Money Market Shares' highest
return for a calendar quarter was 1.39% (the third quarter of 1998), and Premium
Money Market Shares' lowest return for a calendar quarter was 1.29% (the fourth
quarter of 1998).
Premium Money Market Shares' year-to-date total return as of 3/31/99 was 1.20%.
To obtain the current 7-day yield please call 1-800-343-2890.
Average annual total returns
For periods ended Premium Money Market
December 31, 1998 Shares
- --------------------------------------------------------------------------------
One Year 5.46%
Since Inception (7/7/97) 5.46%
- --------------------------------------------------------------------------------
14
<PAGE>
Prime Reserve Money Market Shares
Fee and expense information
This information is designed to help you understand the estimated fees and
expenses that you may pay if you buy and hold Prime Reserve Money Market Shares
of the fund.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as % of offering price) NONE
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) NONE
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends/distributions NONE
- --------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE*
- --------------------------------------------------------------------------------
Exchange fee NONE
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):
- --------------------------------------------------------------------------------
Management fee 0.25%**
- --------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- --------------------------------------------------------------------------------
Other expenses 0.20%
- --------------------------------------------------------------------------------
Total annual fund operating expenses 0.45%**
- --------------------------------------------------------------------------------
Expense reimbursement 0.05%
- --------------------------------------------------------------------------------
Net expenses 0.40%**
- --------------------------------------------------------------------------------
* You may redeem by writing or calling the fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "About Your Investment --
Exchanges and redemptions."
** The inception date of the fund's Prime Reserve Money Market Shares is
10/15/98. Accordingly, "Other expenses" are estimated based on amounts
incurred by the fund during the fiscal year ended 12/31/98, prior to the
creation of Prime Reserve Money Market Shares. Through April 30, 2000, the
Adviser has contractually agreed to waive 0.05% of its management fee. In
addition, from time to time, the Adviser may voluntarily waive an
additional portion of its management fee.
Example
This example is to help you compare the cost of investing in Prime Reserve Money
Market Shares of the fund with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the estimated expenses shown
above. It assumes a 5% annual return, the reinvestment of all dividends and
distributions and "Total annual fund operating expenses" remaining the same each
year except the first year. The first year of your investment will take into
account the fund's "Net expenses" as shown above. The expenses would be the same
whether you sold your shares at the end of each period or continued to hold
them. Actual fund expenses and return vary from year to year, and may be higher
or lower than those shown.
15
<PAGE>
- --------------------------------------------------------------------------------
One Year $ 41
- --------------------------------------------------------------------------------
Three Years $ 139
- --------------------------------------------------------------------------------
Five Years $ 247
- --------------------------------------------------------------------------------
Ten Years $ 562
- --------------------------------------------------------------------------------
Premium Money Market Shares
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold Premium Money Market Shares of the fund.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as % of offering price) NONE
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) NONE
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends/distributions NONE
- --------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE*
- --------------------------------------------------------------------------------
Exchange fee NONE
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):
- --------------------------------------------------------------------------------
Management fee 0.25%**
- --------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- --------------------------------------------------------------------------------
Other expenses 0.10%
- --------------------------------------------------------------------------------
Total annual fund operating expenses 0.35%**
- --------------------------------------------------------------------------------
Expense reimbursement 0.05%
- --------------------------------------------------------------------------------
Net expenses 0.30%**
- --------------------------------------------------------------------------------
* You may redeem by writing or calling the fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "About Your Investment --
Exchanges and redemptions."
** Through April 30, 2000, the Adviser has contractually agreed to waive
0.05% of its management fee. In addition, from time to time, the Adviser
may voluntarily waive an additional portion of its management fee.
16
<PAGE>
Example
This example is to help you compare the cost of investing in Premium Money
Market Shares of the fund with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "Total annual fund operating expenses" remaining the same for each year
except the first year. The first year of your investment will take into account
the fund's "Net expenses" as shown above. The expenses would be the same whether
you sold your shares at the end of each period or continued to hold them. Actual
fund expenses and return vary from year to year, and may be higher or lower than
those shown.
- --------------------------------------------------------------------------------
One Year $ 31
- --------------------------------------------------------------------------------
Three Years $ 107
- --------------------------------------------------------------------------------
Five Years $ 191
- --------------------------------------------------------------------------------
Ten Years $ 438
- --------------------------------------------------------------------------------
17
<PAGE>
Financial highlights
The financial highlights table for each fund or class is intended to help you
understand financial performance for the periods indicated. Certain information
reflects financial results for a single fund or class share. The total return
figures represent the rate that an investor would have earned (or lost) on an
investment in a fund or class assuming reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP
whose report, along with financial statements, is included in each annual
report, which is available upon request by calling Scudder Investor Relations at
1-800-225-2470, or, for existing investors, call the Scudder Automated
Information Line (SAIL) at 1-800-343-2890.
Scudder Cash Investment Trust
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Six Months
Ended
December
31, Years Ended June 30,
1998(a) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net investment income ....... .023 .048 .046 .048 .048 .027
Less distributions
from net investment
income and net realized
capital gains (b) ......... (.023) (.048) (.046) (.048) (.048) (.027)
Net asset value, end
of period ................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............ 2.37**(c) 4.92(c) 4.73 4.89 4.90 2.77
Ratios and
Supplemental Data
Net assets, end of
period ($ millions) ....... 1,170 1,182 1,431 1,387 1,520 1,430
Ratio of operating
expenses, net to
average daily net
assets (%) ................ .85* .85 .86 .83 .78 .82
Ratio of operating
expenses before
expense reduction,
to average daily
net assets (%) ............ 1.01* .95 .86 .83 .78 .82
Ratio of net
investment income
to average daily net
assets (%) ................ 4.65* 4.82 4.63 4.79 4.84 2.78
</TABLE>
(a) Unaudited
(b) Net realized capital gains were less than 6/10 of $.01 per share.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
- --------------------------------------------------------------------------------
18
<PAGE>
Scudder U.S. Treasury Money Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Six
Months
Ended
December
31, Years Ended June 30,
1998(a) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net investment
income ................... .023 .047 .045 .048 .046 .027
Less distributions
from net investment
income and net
realized gains on
investment
transactions (b) ......... (.023) (.047) (.045) (.048) (.046) (.027)
Net asset value,
end of period ............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------
Total Return (%) (c) ....... 2.33** 4.83 4.58 4.91 4.70 2.74
Ratios and
Supplemental Data
Net assets, end of
period ($ millions) ...... 419 389 399 396 383 383
Ratio of operating
expenses, net to
average daily net
assets (%) ............... .65* .65 .65 .65 .65 .65
Ratio of operating
expenses before
expense reductions, to
average daily net
assets (%) ............... 1.07* 1.00 .94 .92 .90 .90
Ratio of net investment
income to average
daily net assets (%) ..... 4.56* 4.72 4.49 4.80 4.61 2.75
</TABLE>
(a) Unaudited
(b) Net realized capital gains were less than 6/10 of 1(cent) per share.
(c) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
- --------------------------------------------------------------------------------
19
<PAGE>
Scudder Tax Free Money Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $1.000 $1.000 $1.000 $1.000 $1.000
Net investment income ............ .029 .031 .029 .032 .022
Less distributions from net
investment income (a) .......... (.029) (.031) (.029) (.032) (.022)
Net asset value, end of period ... $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------------
Total Return (%) ................. 2.92(b) 3.10(b) 2.91(b) 3.27 2.26
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................... 249 283 220 239 257
Ratio of operating expenses net,
to average daily net
assets (%) ..................... .65 .65 .70 .75 .77
Ratio of operating expenses
before expense reductions to
average daily net assets ....... .71 .76 .75 .75 .77
Ratio of net investment income
to average daily net
assets (%) ..................... 2.87 3.06 2.86 3.21 2.24
</TABLE>
(a) Net realized capital gains (losses) were less than 6/10 of 1 cent per
share.
(b) Total returns may have been lower had certain expenses not been reduced.
- --------------------------------------------------------------------------------
20
<PAGE>
Scudder Money Market Series
Prime Reserve Money Market Shares
- --------------------------------------------------------------------------------
For the Period October 15,
1998 (commencement of sale
of Prime Reserve Money
Market Shares) to
December 31,
1998
- --------------------------------------------------------------------------------
Net asset value, beginning of period .............. $1.000
Net investment income ............................. .011
Distributions from net investment income .......... (.011)
Net asset value, end of period .................... $1.000
- --------------------------------------------------------------------------------
Total Return (%) (a) .............................. 1.06**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............ 12
Ratio of operating expenses, net to average
daily net assets (%) ............................ .31*
Ratio of operating expenses before expense
reductions, to average daily net assets (%) ..... .45*
Ratio of net investment income to average
daily net assets (%) ............................ 4.95*
(a) Total return is higher due to maintenance of the fund's expenses.
* Annualized
** Not annualized
- --------------------------------------------------------------------------------
21
<PAGE>
Scudder Money Market Series
Premium Money Market Shares
- --------------------------------------------------------------------------------
For the Period
July 7, 1997
(commencement of
sale of Premium
Money Market
Year Ended Shares) to
December 31, December 31,
1998 1997
- --------------------------------------------------------------------------------
Net asset value, beginning of period ........... $1.000 $1.000
Net investment income .......................... .053 .026
Distributions from net investment income ....... (.053) (.026)
Net asset value, end of period ................. $1.000 $1.000
- --------------------------------------------------------------------------------
Total Return (%) (a) ........................... 5.46 2.62**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......... 808 335
Ratio of operating expenses, net
to average daily net assets (%) ................ .24 .38*
Ratio of operating expenses before expense
reductions, to average daily net assets (%) .... .35 .43*
Ratio of net investment income to
average daily net assets (%) ................... 5.31 5.50*
(a) Total return is higher due to maintenance of the fund's expenses.
* Annualized
** Not annualized
- --------------------------------------------------------------------------------
22
<PAGE>
A message from the President
[PHOTO]
Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.
Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide, managing more than $280 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts.
We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 50 no-load mutual fund portfolios or classes of
shares. We also manage mutual funds in a special program for the American
Association of Retired Persons, as well as the fund options available through
Scudder Horizon Plan, a tax-advantaged variable annuity. We also advise The
Japan Fund and numerous other open- and closed-end funds that invest in this
country and other countries around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds: IRAs, 401(k)s,
Keoghs and other retirement plans are also available.
Services available to shareholders include toll-free access to professional
representatives, easy exchange among the Scudder Family of Funds, shareholder
reports, informative newsletters and the walk-in convenience of Scudder Investor
Centers.
Funds or fund classes in the Scudder Family of Funds are offered without
commissions to purchase or redeem shares or to exchange from one fund to
another. There are no distribution (12b-1) fees either, which many other funds
now charge to support their marketing efforts. All of your investment goes to
work for you. We look forward to welcoming you as a shareholder.
/s/ Edmond D. Villani
23
<PAGE>
Investment adviser
Each fund retains the investment management firm of Scudder Kemper Investments,
Inc., the ("Adviser") Two International Place, Boston, MA, to manage each fund's
daily investment and business affairs subject to the policies established by
each fund's Board. The Adviser actively manages each fund's investment.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities.
Scudder Cash Investment Trust
The Adviser has contractually agreed to maintain the annualized expenses of the
fund at no more than 0.85% of the average daily net assets of the fund through
September 30, 1999. As a result, the Adviser received an investment management
fee of 0.32% of the fund's average daily net assets on an annual basis for the
fiscal year ended June 30, 1998.
Scudder U.S. Treasury Money Fund
The Adviser has contractually agreed to maintain the annualized expenses of the
fund at no more than 0.65% of the average daily net assets of the fund through
September 30, 1999. As a result, the Adviser received an investment management
fee of 0.15% of the fund's average daily net assets on an annual basis for the
fiscal year ended June 30, 1998.
Scudder Tax Free Money Fund
The Adviser has contractually agreed to maintain the annualized expenses of the
fund at no more than 0.65% of the average daily net assets of the fund through
September 30, 1999. As a result, the Adviser received an investment management
fee of 0.43% of the fund's average daily net assets on an annual basis for the
fiscal year ended December 31, 1998.
Scudder Money Market Series:
Prime Reserve Money Market Shares
Premium Money Market Shares
The Adviser has contractually agreed to waive 0.05% of its management fee from
Scudder Money Market Series through April 30, 2000. In addition, from time to
time, the Adviser may voluntarily waive an additional portion of its management
fee. As a result, for Prime Reserve Money Market Shares, the Adviser received a
management fee of 0.11% of the average daily net assets of the fund for the
fiscal year ended December 31, 1998. For Premium Money Market Shares the Adviser
received a management fee of 0.14% of the average daily net assets on an annual
basis of the fund for the fiscal year ended
24
<PAGE>
December 31, 1998. The effective management fee rate differs for the two classes
based on the October 15, 1998 inception date of Prime Reserve Money Market
Shares.
Portfolio management
Each fund is managed by a team of investment professionals each of whom plays an
important role in a fund's management process. Team members work together to
develop investment strategies and select securities for a fund's portfolio. They
are supported by the Adviser's large staff of economists, research analysts,
traders and other investment specialists who work in the Adviser's offices
across the United States and abroad. The Adviser believes its team approach
benefits fund investors by bringing together many disciplines and leveraging its
extensive resources.
The following investment professionals are associated with each fund as
indicated:
Scudder Cash Investment Trust
Name and Title Joined the Fund Responsibilities and Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1998 Joined the Adviser in 1973 as a
Lead Manager money market specialist and began
his investment career at that
time. He has been responsible for
the trading and portfolio
management of money market funds
since 1974.
Dean Meddaugh 1999 Joined the Adviser in 1996 as a
Manager money market trader, and in 1998
became a money market manager. He
began his investment career in
1994 as an accountant for an
unaffiliated investment
management firm.
- --------------------------------------------------------------------------------
25
<PAGE>
Scudder U.S. Treasury Money Fund
Name and Title Joined the Fund Responsibilities and Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1998 Joined the Adviser in 1973 as a
Lead Manager money market specialist and began
his investment career at that
time. He has been responsible for
the trading and portfolio
management of money market funds
since 1974.
Dean Meddaugh 1999 Joined the Adviser in 1996 as a
Manager money market trader, and in 1998
became a money market manager. He
began his investment career in
1994 as an accountant for an
unaffiliated investment
management firm.
- --------------------------------------------------------------------------------
Scudder Tax Free Money Fund
Name and Title Joined the Fund Responsibilities and Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1998 Joined the Adviser in 1973 as a
Lead Manager money market specialist and began
his investment career at that
time. He has been responsible for
the trading and portfolio
management of money market funds
since 1974.
Jerri I. Cohen 1998 Joined the Adviser in 1981 as an
Manager accountant and began her
investment career in 1992 as a
money market trader.
- --------------------------------------------------------------------------------
Scudder Money Market Series
Name and Title Joined the Fund Responsibilities and Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1998 Joined the Adviser in 1973 as a
Lead Manager money market specialist and began
his investment career at that
time. He has been responsible for
the trading and portfolio
management of money market funds
since 1974.
Dean Meddaugh 1999 Joined the Adviser in 1996 as a
Manager money market trader, and in 1998
became a money market manager. He
began his investment career in
1994 as an accountant for an
unaffiliated investment
management firm.
- --------------------------------------------------------------------------------
26
<PAGE>
Year 2000 readiness
Like other mutual funds and financial and business organizations worldwide, the
funds could be adversely affected if computer systems on which a fund relies,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. The risk is commonly called the Year 2000 issue.
Failure to successfully address the Year 2000 issue could result in
interruptions to and other material adverse effects on the funds' business and
operations, such as problems with calculating net asset value and difficulties
in implementing the funds' purchase and redemption procedures. The Adviser has
commenced a review of the Year 2000 issue as it may affect the funds and is
taking steps it believes are reasonably designed to address the Year 2000 issue,
although there can be no assurances that these steps will be sufficient. In
addition, there can be no assurances that the Year 2000 issue will not have an
adverse effect on the issuers whose securities are held by a fund or on global
markets or economies generally.
Distributions
The funds' dividends are declared daily and distributed monthly to shareholders.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such month and paid during the following January
will be treated by shareholders for federal income tax purposes as if received
on December 31 of the calendar year declared.
Dividends ordinarily will vary from one class of Scudder Money Market Series to
another.
A shareholder may choose to receive distributions in cash or have them
reinvested in additional shares of a fund. If an investment is in the form of a
retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholders' account. Distributions are generally taxable,
whether received in cash or reinvested. Exchanges among funds are also taxable
events.
Taxes
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have owned shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. Distributions of tax-exempt
interest income from Scudder Tax Free Money Fund are expected to be exempt from
federal income taxation, except for the possible applicability of the
alternative minimum tax. Scudder Tax Free Money Fund may invest a limited
portion of its assets in securities that do not generate tax-exempt income.
27
<PAGE>
Unless your investment is in a tax-deferred account, you may want to avoid
investing a large amount shortly before the date of a distribution because you
may receive part of your investment back as a taxable distribution.
A sale or exchange of shares is a taxable event and may result in a capital gain
or loss, which may be long-term or short-term, generally depending on how long
you owned the shares.
Each fund sends detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Each fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Any such withheld amounts may be credited against the
shareholder's U.S. federal income tax liability.
Shareholders may be subject to state, local and foreign taxes on fund
distributions and dispositions of fund shares. You should consult your tax
advisor regarding the particular consequences of an investment in a fund.
About Your Investment
Transaction information
Share price
Scudder Fund Accounting Corporation determines the net asset value per share for
all funds as of the close of regular trading on the New York Stock Exchange,
normally 4 p.m. eastern time, on each day the New York Stock Exchange is open
for trading. For Scudder Cash Investment Trust, Scudder U.S. Treasury Money Fund
and Scudder Tax Free Money Fund, Scudder Fund Accounting Corporation also
determines net asset value per share as of noon, eastern time, on each day the
New York Stock Exchange is open for trading.
Net asset value per share is calculated by dividing the value of total fund
assets attributable to the applicable fund or class, less all liabilities
attributable to that fund or class, by the total number of shares outstanding of
that fund or class. In calculating the net asset value per share, each fund uses
the amortized cost value.
28
<PAGE>
Processing time
For Scudder Cash Investment Trust, Scudder U.S. Treasury Money Fund and Scudder
Tax Free Money Fund, purchases made by wire and received by the funds' transfer
agent before noon on any business day are executed at noon on that day. All
other purchase and redemption requests received in good order at each fund's
transfer agent by the close of regular trading on the New York Stock Exchange
are executed at the net asset value per share calculated at the close of trading
that day. All other requests that are in good order will be executed the
following business day.
If you wish to make a purchase of $500,000 or more you should notify the funds'
transfer agent of such a purchase by calling 1-800-225-5163.
Signature guarantees
A signature guarantee is required when you sell more than $100,000 worth of
shares. You can obtain a guarantee from most brokerage houses and financial
institutions, although not from a notary public. The fund will normally send
redemption proceeds within one business day following the redemption request,
but may take up to seven business days (or longer in the case of shares recently
purchased by check). For more information, please call 1-800-225-5163.
Purchase restrictions
Scudder Cash Investment Trust, Scudder U.S. Treasury Money Fund, Scudder Tax
Free Money Fund and Scudder Fund, Inc., on behalf of Scudder Money Market Series
and the classes of shares of Scudder Money Market Series, and Scudder Investor
Services, Inc. each reserves the right to reject or limit purchases of shares
(including exchanges) for any reason.
Minimum balances -- Scudder U.S. Treasury Money Fund, Scudder Cash Investment
Trust and Scudder Tax Free Money Fund
Generally, shareholders who maintain a non-fiduciary account balance of less
than $2,500 in the fund and have not established an automatic investment plan
will be assessed an annual $10.00 per fund charge; this fee is paid to the fund.
The fund reserves the right, following 60 days written notice to shareholders,
to redeem all shares in accounts that have a value below $1,000 where such a
reduction in value has occurred due to a redemption, exchange or transfer out of
the account.
Minimum balances -- Prime Reserve Money Market Shares
Initial minimum investment in these shares is $10,000. Shareholders should
maintain a share balance worth at least $7,500. Account balances will be
reviewed periodically and the Adviser reserves the right, following 60 days
written notice to shareholders, to redeem all shares in accounts that have a
value below $7,500 where such a reduction in value has occurred due to a
redemption, exchange or transfer out of the account.
29
<PAGE>
Minimum balances -- Premium Money Market Shares
Initial minimum investment in these shares is $25,000. Shareholders should
maintain a share balance worth at least $20,000. Account balances will be
reviewed periodically and the Adviser reserves the right, following 60 days
written notice to shareholders, to redeem all shares in accounts that have a
value below $20,000 where such a reduction in value has occurred due to a
redemption, exchange or transfer out of the account.
Checkwriting
You may redeem shares of Scudder Cash Investment Trust, Scudder U.S. Treasury
Money Fund and Scudder Tax Free Money Fund by writing checks against your
account for at least $100 and no more than $5,000,000 for each fund. You may
redeem shares of Prime Reserve Money Market Shares and Premium Money Market
Shares by writing checks against your account for at least $1,000 and no more
than $5,000,000 for each class of shares of the fund.
Third party transactions
If you buy and sell shares of a fund through a member of the National
Association of Securities Dealers, Inc. (other than Scudder Investor Services,
Inc.), that member may charge a fee for that service.
Buying and selling shares
Please refer to the following charts for information on how to buy and sell fund
shares. Additional information, including special investment features, may be
found in the Shareholder Services Guide. For information about No-Fee IRAs, Roth
IRAs and other retirement options, call Scudder Investor Relations at
1-800-225-2470. For information on establishing 401(k) and 403(b) plans, call
Scudder Defined Contribution Services at 1-800-323-6105.
Purchases
To open an account
Minimum initial investments:
o Scudder Cash Investment Trust and Scudder U.S. Treasury Money Fund:
$2,500; IRAs: $1,000
o Scudder Tax Free Money Fund: $2,500
o Prime Reserve Money Market Shares: $10,000; IRAs $10,000
o Premium Money Market Shares: $25,000; IRAs $25,000
30
<PAGE>
- --------------------------------------------------------------------------------
By Mail Send your completed and signed application and check
by regular mail to: The Scudder Funds
P.O. Box 2291
Boston, MA 02107-2291
or by express, registered, The Scudder Funds
or certified mail to: 66 Brooks Drive
Braintree, MA 02184
- --------------------------------------------------------------------------------
By Wire Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
In Person Visit one of our Investor Centers to complete your
application with the help of a Scudder representative.
Investor Centers are located in Boca Raton, Boston,
Chicago, New York and San Francisco.
- --------------------------------------------------------------------------------
To buy additional shares
Minimum additional investments:
o Scudder Cash Investment Trust and Scudder U.S. Treasury Money Fund: $100;
IRAs: $50
o Scudder Tax Free Money Fund: $100
o Prime Reserve Money Market Shares: $1,000; IRAs $1,000
o Premium Money Market Shares: $1,000; IRAs $1,000
- --------------------------------------------------------------------------------
By Mail Send a check with a Scudder investment slip, or with a
letter of instruction including your account number and
the complete fund name, to the appropriate address listed
above.
- --------------------------------------------------------------------------------
By Wire Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed above.
- --------------------------------------------------------------------------------
By Telephone Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
By Automatic You may arrange to make investments of $50 or more on a
Investment Plan regular basis through automatic deductions from your bank
checking account. Please call 1-800-225-5163 for more
information and an enrollment form.
- --------------------------------------------------------------------------------
31
<PAGE>
Exchanges and redemptions
To exchange shares
Minimum initial investments:
o Scudder Cash Investment Trust, Scudder U.S. Treasury Money Fund and
Scudder Tax Free Money Fund: $2,500 to establish a new account; $100 to
exchange among existing accounts
o Prime Reserve Money Market Shares: $10,000 to establish a new account;
$1,000 to exchange among existing accounts
o Premium Money Market Shares: $25,000 to establish a new account; $1,000 to
exchange among existing accounts
- --------------------------------------------------------------------------------
By Telephone To speak with a service representative, call 1-800-225-5163
from 8 a.m. to 8 p.m. eastern time. To access SAIL(TM), the
Scudder Automated Information Line, call 1-800-343-2890 (24
hours a day).
- --------------------------------------------------------------------------------
By Mail or Fax Print or type your instructions and include:
- the name of the fund and class and the account number you
are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to
exchange;
- the name of the fund and class you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions The Scudder Funds
by regular mail to: P.O. Box 2291
Boston, MA 02107-2291
or by express, registered, The Scudder Funds
or certified mail to: 66 Brooks Drive
Braintree, MA 02184
or by fax to: 1-800-821-6234
- --------------------------------------------------------------------------------
32
<PAGE>
To sell shares
- --------------------------------------------------------------------------------
By Telephone To speak with a service representative, call 1-800-225-5163
from 8 a.m. to 8 p.m. eastern time. To access SAIL(TM), the
Scudder Automated Information Line, call 1-800-343-2890 (24
hours a day). You may have redemption proceeds sent to your
predesignated bank account, or redemption proceeds of up to
$100,000 sent to your address of record.
- --------------------------------------------------------------------------------
By Mail or Fax Send your instructions for redemption to the appropriate
address or fax number above and include:
- the name of the fund and class and account number you are
redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
- --------------------------------------------------------------------------------
By Checkwriting You may redeem shares of Scudder Cash Investment Trust,
Scudder U.S. Treasury Money Fund and Scudder Tax Free Money
Fund by writing checks against your account balance for at
least $100, but not more than $5,000,000. You may redeem
shares of Prime Reserve Money Market Shares and Premium Money
Market Shares by writing checks against your account for at
least $1,000, but not more than $5,000,000.
- --------------------------------------------------------------------------------
By Automatic You may arrange to receive automatic cash payments
Withdrawal Plan periodically. Call 1-800-225-5163 for more information and an
enrollment form.
- --------------------------------------------------------------------------------
33
<PAGE>
Investment products and services
The Scudder Family of Funds[
- --------------------------------------------------------------------------------
Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series -- Managed Shares*
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series -- Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
34
<PAGE>
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
- ------------------- ------------------
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**[[
Scudder Horizon Advantage**[[[
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
- -----------
[ Funds within categories are listed in order from expected least risk to
most risk. Certain Scudder funds or classes thereof may not be available
for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to federal,
state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family of
Funds.
++ Only the International Shares of the fund are part of the Scudder Family
of Funds.
[[ A no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance
agencies, 1-800-225-2470.
[[[ A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by
Scudder's insurance agencies, 1-800-225-2470.
# These funds, advised by Scudder Kemper Investments, Inc., are traded on
the New York Stock Exchange and, in some cases, on various other stock
exchanges.
35
<PAGE>
Trustees and Officers of Scudder Cash Investment Trust, Scudder Tax Free Money
Fund and Scudder U.S. Treasury Money Fund
- --------------------------------------------------------------------------------
Daniel Pierce* Kathryn L. Quirk*
President and Trustee Trustee; Vice President
and Assistant Secretary
Henry P. Becton, Jr.
Trustee; President Jean C. Tempel
and General Manager, Trustee; Venture Partner, Internet
WGBH Educational Foundation Capital Corporation
Dawn-Marie Driscoll Thomas W. Joseph*
Trustee; President, Driscoll Vice President
Associates; Executive Fellow,
Center for Business Ethics, Ann M. McCreary*
Bentley College Vice President
Peter B. Freeman Frank J. Rachwalski, Jr.*
Trustee; Corporate Director Vice President
and Trustee
John R. Hebble*
George M. Lovejoy, Jr. Treasurer
Trustee; President and Director,
Fifty Associates Caroline Pearson*
Assistant Secretary
Wesley W. Marple, Jr.
Trustee; Professor of
Business Administration,
Northeastern University,
College of Business Administration
- -----------
* Scudder Kemper Investments, Inc.
36
<PAGE>
Directors and Officers of Scudder Fund Inc.
- --------------------------------------------------------------------------------
Daniel Pierce* Peter B. Freeman
President Director; Corporate Director
and Trustee
Dr. Rosita P. Chang
Director; Professor of Finance, Thomas W. Joseph*
University of Rhode Island Vice President and
Assistant Secretary
Dr. J.D. Hammond
Director; Dean, Smeal College of Ann M. McCreary*
Business Administration, Pennsylvania Vice President
State University
Kathryn L. Quirk*
Richard M. Hunt Vice President
Director; University Marshal and Senior
Lecturer, Harvard University Frank J. Rachwalski, Jr.*
Vice President
Edgar R. Fiedler
Director; Senior Fellow and Economic John R. Hebble*
Counsellor, The Conference Board, Inc. Treasurer
Caroline Pearson*
Assistant Secretary
- -----------
* Scudder Kemper Investments, Inc.
37
<PAGE>
Additional information about each fund may be found in the Statements of
Additional Information, the Shareholder Services Guide and in shareholder
reports. Shareholder inquiries may be made by calling the toll-free number
listed below. The Statements of Additional Information contain more detailed
information on fund investments and operations. The Shareholder Services Guide
contains more detailed information about purchases and sales of fund shares. The
semiannual and annual shareholder reports contain a discussion of the market
conditions and the investment strategies that significantly affected a fund's
performance during the last fiscal year, as well as a listing of portfolio
holdings and financial statements. These and other fund documents may be
obtained without charge from the following sources:
- --------------------------------------------------------------------------------
By Telephone Call Scudder Investor Relations at 1-800-225-2470
or
For existing Scudder investors, call the Scudder Automated
Information Line (SAIL) at 1-800-343-2890 (24 hours a day).
- --------------------------------------------------------------------------------
By Mail Scudder Investor Services, Inc.
Two International Place
Boston, MA 02110-4103
or
Public Reference Section
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(a duplication fee is charged)
- --------------------------------------------------------------------------------
In Person Public Reference Room
Securities and Exchange Commission,
Washington, D.C.
(Call 1-800-SEC-0330 for more information.)
- --------------------------------------------------------------------------------
By Internet http://www.sec.gov
http://www.scudder.com
- --------------------------------------------------------------------------------
The Statements of Additional Information are incorporated by reference into this
prospectus (are legally a part of this prospectus).
Investment Company Act file numbers
Scudder Cash Investment Trust 811-2613
Scudder U.S. Treasury Money Fund 811-3043
Scudder Tax Free Money Fund 811-2959
Scudder Fund, Inc. 811-3495
[SOY INK LOGO] PRINTED WITH [RECYCLE LOGO] Printed on recycled paper
SOY INK
MM-2-59
PRC065599
<PAGE>
SCUDDER CASH INVESTMENT TRUST
A No-load (No Sales Charges) Mutual Fund Seeking to
Maintain the Stability of Capital and, consistent therewith,
to Maintain the Liquidity of Capital and to Provide Current Income.
The Fund Seeks to Achieve Its Objective by
Investing in High Quality, Short-Term Securities.
and
SCUDDER U.S. TREASURY MONEY FUND
A No-load (No Sales Charges) Money Market Fund Seeking Safety, Liquidity
and Stability of Capital and, consistent therewith, to Provide Current Income.
The Fund Seeks to Achieve Its Objective by Investing in
Short-Term U.S. Government Securities and Repurchase Agreements.
and
SCUDDER TAX FREE MONEY FUND
A No-Load (No Sales Charges) Money Market Fund Seeking to Provide
Income Exempt from Regular Federal Income Tax and Stability of Principal.
The Fund Seeks to Achieve Its Objective by Investing in
Municipal Securities .
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
- --------------------------------------------------------------------------------
This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the combined prospectus of Scudder Cash
Investment Trust, Scudder U.S. Treasury Money Fund , Scudder Tax Free Money Fund
and Scudder Money Market Series -- Scudder Prime Reserve Money Market Shares and
Scudder Premium Money Market Shares dated May 1, 1999, as may be amended from
time to time, copies of which may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place, Boston, Massachusetts
02110-4103.
The Annual Reports to Shareholders for Scudder Cash Investment Trust and
Scudder U.S. Treasury Money Fund dated June 30, 1998 and the Annual Report to
Shareholders for Scudder Tax Free Money Fund dated December 31, 1998, are
incorporated by reference and is hereby deemed to be part of this Statement of
Additional Information.
<PAGE>
TABLE OF CONTENTS
Page
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES..................................1
General Investment Objectives and Policies...............................1
Scudder Cash Investment Trust............................................1
Scudder U.S. Treasury Money Fund.........................................3
Scudder Tax Free Money Fund..............................................4
Specialized Investment Techniques of the Funds...........................9
Trustees' Power to Change Objectives and Policies.......................13
Investment Restrictions.................................................13
Master/feeder structure.................................................15
PURCHASES.....................................................................15
Additional Information About Opening an Account.........................15
Minimum balances........................................................16
Checks..................................................................16
Wire Transfer of Federal Funds..........................................16
Additional Information About Making Subsequent Investments by QuickBuy..17
Share Price.............................................................17
Share Certificates......................................................17
Other Information.......................................................17
EXCHANGES AND REDEMPTIONS.....................................................18
Exchanges...............................................................18
Redemption by Telephone.................................................19
Redemption By QuickSell.................................................19
Redemption by Mail or Fax...............................................20
Redemption by Checkwriting..............................................20
Other Information.......................................................20
FEATURES AND SERVICES OFFERED BY THE FUNDS....................................21
The No-Load Concept.....................................................21
Internet access.........................................................22
Dividends and Capital Gains Distribution Options........................22
Scudder Investor Centers................................................23
Reports to Shareholders.................................................23
Transaction Summaries...................................................23
THE SCUDDER FAMILY OF FUNDS...................................................23
SPECIAL PLAN ACCOUNTS.........................................................28
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension
Plans for Corporations and Self-Employed Individuals....................29
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations
and Self-Employed Individuals...........................................29
Scudder IRA: Individual Retirement Account.............................29
Scudder Roth IRA: Individual Retirement Account........................30
Scudder 403(b) Plan.....................................................30
Automatic Withdrawal Plan...............................................30
Group or Salary Deduction Plan..........................................31
Automatic Investment Plan...............................................31
Uniform Transfers/Gifts to Minors Act...................................31
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.....................................31
PERFORMANCE INFORMATION.......................................................33
Yield...................................................................33
Effective Yield.........................................................33
Tax-Equivalent Yield -- Scudder Tax Free Money Fund.....................33
Average Annual Total Return.............................................34
Cumulative Total Return.................................................35
Total Return............................................................35
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
Comparison of Fund Performance..........................................36
ORGANIZATION OF THE FUNDS.....................................................39
INVESTMENT ADVISER............................................................39
Personal Investments by Employees of the Adviser.......................43
TRUSTEES AND OFFICERS.........................................................43
REMUNERATION..................................................................45
Responsibilities of the Board -- Board and Committee Meetings...........45
Compensation of Officers and Trustees...................................46
DISTRIBUTOR...................................................................46
TAXES.........................................................................47
PORTFOLIO TRANSACTIONS........................................................50
Brokerage Commissions...................................................50
NET ASSET VALUE...............................................................50
ADDITIONAL INFORMATION........................................................51
Experts.................................................................51
Shareholder Indemnification.............................................51
Other Information.......................................................51
FINANCIAL STATEMENTS..........................................................53
Scudder Cash Investment Trust...........................................53
Scudder U.S. Treasury Money Fund........................................53
Scudder Tax Free Money Fund.............................................53
APPENDIX
Ratings of Municipal Obligations
Commercial Paper Ratings
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See "About the Funds" in the Funds' combined prospectus.)
Scudder Cash Investment Trust is sometimes referred to herein as "SCIT."
Scudder U.S. Treasury Money Fund is sometimes referred to herein as "Treasury
Fund." Scudder Tax Free Money Fund is sometimes referred to herein as STFMF.
SCIT, Treasury Fund and STFMF are sometimes jointly referred to herein as the
"Funds" or "Scudder Money Market Funds."
General Investment Objectives and Policies
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Fund may engage or a financial
instrument which a Fund may purchase (such as options, forward foreign currency
contracts, etc.) are meant to describe the spectrum of investments that Scudder
Kemper Investments, Inc. ("the Adviser"), in its discretion, might, but is not
required to, use in managing each Fund's portfolio assets. The Adviser may, in
its discretion, at any time employ such practice, technique or instrument for
one or more funds but not for all funds advised by it. Furthermore, it is
possible that certain types of financial instruments or investment techniques
described herein may not be available, permissible, economically feasible or
effective for their intended purposes in all markets. Certain practices,
techniques, or instruments may not be principal activities of a Fund, but, to
the extent employed, could from time to time have a material impact on a Fund's
performance.
Scudder Cash Investment Trust
Scudder Cash Investment Trust is a no-load, open-end, diversified
management investment company. SCIT's investment objectives are to maintain
stability of capital and, consistent therewith, to maintain liquidity of capital
and to provide current income. SCIT seeks to maintain a constant net asset value
of $1.00 per share, although in certain circumstances this may not be possible.
SCIT's management seeks to improve investment income by keeping money at work in
what it considers to be the most attractive short-term debt investments
consistent with the Fund's objectives of maintaining the stability and liquidity
of capital. There is no assurance that SCIT's investment objectives will be
achieved. Unless otherwise stated, the investment objectives and policies of
SCIT are nonfundamental and may be changed by the Trustees without a vote of a
majority of the outstanding voting securities of the Fund, as that term is
defined below in "Investment Restrictions." All of the securities in which SCIT
may invest are U.S. dollar-denominated. Shares of the Fund are not insured or
guaranteed by an agency of the U.S. Government.
SCIT may invest in short-term securities consisting of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities;
obligations of supranational organizations such as those listed below;
obligations of domestic banks and foreign branches of domestic banks, including
bankers' acceptances, certificates of deposit, deposit notes and time deposits;
and obligations of savings and loan institutions.
SCIT may also invest in: instruments whose credit has been enhanced by
banks (letters of credit), insurance companies (surety bonds) or other corporate
entities (corporate guarantees); corporate obligations and obligations of
trusts, finance companies and other entities, including commercial paper, notes,
bonds, loans and loan participations; securities with variable or floating
interest rates; when-issued securities; asset-backed securities, including
certificates, participations and notes; municipal securities, including notes,
bonds and participation interests, either taxable or tax free; and illiquid or
restricted securities. Securities and instruments in which the Fund may invest
may be issued by the U.S. Government, its agencies and instrumentalities,
corporations, trusts, banks, finance companies and other business entities.
In addition, SCIT may invest in repurchase agreements and securities with
put features. Obligations which are subject to repurchase agreements will be
limited to those of the type and quality described below. The Fund may also hold
cash.
Investments in municipal securities will be limited to those which are
rated at the time of purchase by Moody's Investors Service, Inc. ("Moody's")
within its two highest rating categories for municipal obligations -- Aaa and
Aa, or within Moody's short-term municipal obligations top rating categories of
MIG 1 and MIG 2 -- or are rated at the time of purchase by Standard & Poor's
Corporation ("S&P") within S&P's two highest rating categories for municipal
obligations AAA/AA and SP-1+/SP-1, or are rated at the time of purchase by Fitch
Investors Service, Inc. ("Fitch") within Fitch's two highest rating categories
for municipal obligations -- AAA/AA or within Fitch's highest short term
<PAGE>
rating categories of F-1 and F-2, all in such proportions as management will
determine. SCIT also may invest in securities rated within the two highest
rating categories by only one of those rating agencies if no other rating agency
has rated the security. In some cases, short-term municipal obligations are
rated using the same categories as are used for corporate obligations. In
addition, unrated municipal securities will be considered as being within the
foregoing quality ratings if the issuer, or other equal or junior municipal
securities of the same issuer, has a rating within the foregoing ratings of
Moody's, S&P or Fitch. SCIT may also invest in municipal securities which are
unrated if, in the opinion of the Adviser, such securities possess
creditworthiness comparable to those rated securities in which the Fund may
invest.
For purposes of determining the percentage of the Fund's total assets
invested in securities of issuers having their principal business activities in
a particular industry, asset backed securities will be classified separately,
based on the nature of the underlying assets, according to the following
categories: captive auto, diversified, retail and consumer loans, captive
equipment and business, business trade receivables, nuclear fuel and capital and
mortgage lending.
Foreign Securities. Supranational entities are international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Examples include the International Bank for Reconstruction
and Development (the World Bank), the European Coal and Steel Community, The
Asian Development Bank and the InterAmerican Development Bank. Obligations of
supranational entities are backed by the guarantee of one or more foreign
governmental parties which sponsor the entity.
Municipal Securities. Municipal Securities are issued by or on behalf of states,
territories and possessions of the U.S. and their political subdivisions,
agencies and instrumentalities to obtain funds for various public purposes. The
interest on these obligations is generally exempt from federal income tax in the
hands of most investors, except for the possible applicability of the
alternative minimum tax. The two principal classifications of municipal
securities are "Notes" and "Bonds." Municipal Notes are generally used to
provide for short-term capital needs and generally have maturities of one year
or less. Municipal Notes include: Tax Anticipation Notes; Revenue Anticipation
Notes; Bond Anticipation Notes; and Construction Loan Notes. Municipal Bonds,
which meet longer term capital needs and generally have maturities of more than
one year when issued, have two principal classifications: "General Obligation"
Bonds and "Revenue" Bonds.
Industrial Development and Pollution Control Bonds (which are types of
private activity bonds), although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but are secured by
the revenues of the authority derived from payments by the industrial user.
Under Federal tax legislation, certain types of Industrial Development Bonds and
Pollution Control Bonds may no longer be issued on a tax-exempt basis, although
previously-issued bonds of these types and certain refundings of such bonds are
not affected.
Bank and Savings and Loan Obligations. These obligations include negotiable
certificates of deposit, bankers' acceptances, deposit notes, fixed time
deposits or other short-term bank obligations. Certificates of deposit are
negotiable certificates evidencing the obligations of a bank to repay funds
deposited with it for a specified period of time. SCIT may invest in
certificates of deposit of large domestic banks (i.e., banks which at the time
of their most recent annual financial statements show total assets in excess of
$1 billion), and of smaller banks as described below. The Fund does not invest
in certificates of deposit of foreign banks. Although the Fund recognizes that
the size of a bank is important, this fact alone is not necessarily indicative
of its creditworthiness. Investment in certificates of deposit issued by foreign
branches of domestic banks involves investment risks that are different in some
respects from those associated with investment in certificates of deposit issued
by domestic branches of domestic banks, including the possible imposition of
withholding taxes on interest income, the possible adoption of foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such certificates of deposit, or other adverse political or
economic developments. In addition, it might be more difficult to obtain and
enforce a judgment against a foreign branch of a domestic bank.
SCIT may also invest in certificates of deposit issued by banks and
savings and loan institutions which had, at the time of their most recent annual
financial statements, total assets of less than $1 billion, provided that (i)
the principal amounts of such certificates of deposit are insured by an agency
of the U.S. Government, (ii) at no time will the Fund hold more than $100,000
principal amount of certificates of deposit of any one such bank, and (iii) at
the time of acquisition, no more than 10% of the Fund's assets (taken at current
value) are invested in certificates of deposit of such banks having total assets
not in excess of $1 billion.
2
<PAGE>
Banker's acceptances are credit instruments evidencing the obligations of
a bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by SCIT will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund administered by the
Federal Deposit Insurance Corporation. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties that
vary with market conditions and the remaining maturity of the obligation. Fixed
time deposits subject to withdrawal penalties maturing in more than seven
calendar days are subject to the Fund's limitation on investments in illiquid
securities.
Eurodollar Obligations. Eurodollar bank obligations are dollar-denominated
certificates of deposit and time deposits issued outside the U.S. capital
markets by foreign branches of U.S. banks and U.S. branches of foreign banks.
Eurodollar obligations are subject to the same risks that pertain to domestic
issues, notably credit risk, market risk and liquidity risk. Additionally,
Eurodollar obligations are subject to certain sovereign risks.
Commercial Paper. Commercial paper consists of short-term, unsecured promissory
notes issued to finance short-term credit needs. The commercial paper purchased
by SCIT will consist only of direct obligations issued by domestic and foreign
entities. The other corporate obligations in which the Fund may invest consist
of high quality short term bonds and notes (including variable amount master
demand notes) issued by domestic and foreign corporations, including banks.
Participation Interests. SCIT may purchase from financial institutions
participation interests in securities in which the Fund may invest. A
participation interest gives the Fund an undivided interest in the security in
the proportion that the Fund's participation interest bears to the principal
amount of the security. These instruments may have fixed, floating or variable
interest rates, with remaining maturities of 397 days or less. If the
participation interest is unrated, or has been given a rating below that which
is permissible for purchase by the Fund, the participation interest will be
backed by an irrevocable letter of credit or guarantee of a bank, or the payment
obligation otherwise will be collateralized by U.S. Government securities, or,
in the case of unrated participation interest, determined by the Adviser to be
of comparable quality to those instruments in which the Fund may invest. For
certain participation interests, the Fund will have the right to demand payment,
on not more than seven days' notice, for all or any part of the Fund's
participation interests in the security, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand payment only upon
a default under the terms of the security.
Asset-backed securities. Asset backed securities may include pools of mortgages,
loans, receivables or other assets. Payment of principal and interest may be
largely dependent upon the cash flows generated by the assets backing the
securities.
Scudder U.S. Treasury Money Fund
Scudder U.S. Treasury Money Fund is a no- load, open-end, diversified
management investment company. Treasury Fund's investment objectives are to
provide safety, liquidity and stability of capital, and consistent therewith, to
provide current income. The Fund seeks to maintain a constant net asset value of
$1.00 and declares dividends daily. There can be no assurance that the Fund's
objectives will be met.
The Fund seeks to achieve its objective by investing in short-term U.S.
Government securities and repurchase agreements. The Fund is a "fixed-price"
fund; that is, it seeks to maintain a constant share price of $1.00, although
under certain circumstances this may not be possible. The Fund's price stability
makes it so that it may be suitable for investors who are seeking current income
and who are unwilling to accept stock or bond market risk. The Fund is also
designed to minimize credit risk. It invests exclusively in short-term
securities unconditionally guaranteed by the U.S. Government (as to payment of
both principal and interest) and repurchase agreements backed fully by U.S.
Treasury obligations. The Fund invests without limitation in short-term
securities consisting of U.S. Treasury notes, bonds, bills and in other
securities issued or guaranteed by the U.S. Government and thus backed by the
full faith and credit of the United States. The Fund may invest its assets, when
conditions are appropriate, in repurchase agreements, but only if they are fully
collateralized by the U.S. Treasury obligations. At least 80% of the Fund's
total assets will be invested in either U.S. Treasury securities or in
repurchase agreements collateralized by U.S. Treasury obligations. All of the
securities in which the Fund may invest are U.S. dollar-denominated. The Fund
may also invest in when-issued securities whose market value may involve an
unrealized gain or loss prior to settlement. In addition, the Fund may invest in
illiquid securities.
3
<PAGE>
The Fund invests in U.S. Government securities whose interest is
specifically exempted from state and local income taxes under federal law; the
interest is not exempt from federal income tax. Most, but not all, states allow
this tax-exempt character of the Fund's income to pass through to its
shareholders, so that distributions from the Fund, to the extent derived from
interest that is exempt from state and local income taxes, are exempt from such
taxes when earned by a shareholder of the Fund. Shareholders should, however,
contact their own tax advisers regarding the possible exclusion for state and
local income tax purposes of the portion of distributions received from the Fund
which is attributable to interest from U.S. Government securities. Income earned
by the Fund from U.S. Treasury-backed repurchase agreements generally is not
exempt from state and local tax.
The Fund's investments in U.S. Government securities may have maturities
of up to 762 calendar days; all other portfolio securities will have maturities
of up to 397 calendar days. The dollar-weighted average maturity of the Fund's
portfolio investments varies with money market conditions, but is always 90 days
or less. As a money market fund with a short-term maturity, the Fund's income
fluctuates with changes in interest rates but its price is expected to remain
fixed at $1.00 per share.
For purposes of determining the percentage of the fund's total assets
invested in securities of issuers having their principal business activities in
a particular industry, asset backed securities will be classified separately,
based on the nature of the underlying assets, according to the following
categories: captive auto, diversified, retail and consumer loans, captive
equipment and business, business trade receivables, nuclear fuel and capital and
mortgage lending.
Scudder Tax Free Money Fund
Scudder Tax Free Money Fund, a diversified open-end management investment
company, seeks to provide income exempt from regular federal income tax and
stability of principal through investments in municipal securities. All of the
Fund's investments are high quality, have a remaining maturity of 397 calendar
days or less and have minimal credit risk as determined by the Adviser. The
dollar-weighted average maturity of the Fund's portfolio is 90 days or less.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
although in extreme circumstances this may not be possible. A small portion of
the income may be subject to regular federal, alternative minimum, state and
local income taxes.
All of the Fund's municipal securities must meet certain quality criteria
at the time of purchase. Generally, the Fund may purchase only securities which
are rated, or issued by an issuer rated, within the two highest quality rating
categories of two or more of the following rating agencies: Moody's (Aaa and Aa,
MIG 1 and MIG 2, and P1 and P-2), S&P (AAA and AA, SP1+ and SP1, A1+ and A1 and
A-2) and Fitch (AAA and AA, F1 and F2). Where only one rating agency has rated a
security (or its issuer), the Fund generally may purchase that security as long
as the rating falls within the categories described above. Where a security (or
its issuer) is unrated, the Fund may purchase that security if, in the judgment
of the Adviser, it is comparable in quality to securities described above. All
of the securities in which the Fund may invest are dollar-denominated and must
meet credit standards applied by the Adviser pursuant to procedures established
by the Trustees. Should an issue of municipal securities cease to be rated or if
its rating is reduced below the minimum required for purchase by the Fund, the
Adviser will dispose of any such security unless the Trustees of the Fund
determine that such disposal would not be in the best interests of the Fund.
The Fund may also invest in when-issued securities, whose market value may
involve an unrealized gain or loss prior to settlement. In addition the Fund may
invest, to a limited extent, in illiquid or restricted securities.
Municipal securities in which the Fund may invest include municipal notes,
short-term municipal bonds, variable rate demand instruments and tax-exempt
commercial paper. Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less. Examples
include tax anticipation and revenue anticipation notes, which are generally
issued in anticipation of various seasonal revenues, bond anticipation notes,
and construction loan notes. Short-term municipal bonds may include general
obligation bonds, which are secured by the issuer's pledge of its faith, credit
and taxing power for payment of principal and interest, and revenue bonds, which
are generally paid from the revenues of a particular facility or a specific
excise tax or other source. Examples of taxable investments in which the Fund
may invest include obligations of corporate issuers, U.S. Treasury obligations,
U.S. Government obligations, money market instruments and repurchase agreements.
The Fund may invest more than 25% of its assets in industrial development
or other private activity bonds, subject to the Fund's fundamental investment
policies, and also subject to the Fund's 20% limitation on investing in
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securities whose investment income is subject to the alternative minimum tax
("AMT" bonds) and the Fund's current intention not to invest in municipal
securities whose investment income is subject to regular federal income tax. For
purposes of the Fund's investment limitation regarding concentration of
investments in any one industry, industrial development or other private
activity bonds ultimately payable by companies within the same industry will be
considered as if they were issued by issuers in the same industry. The Fund's
distributions from interest on AMT bonds may be taxable depending upon an
investor's particular situation. (For more information please see the Statement
of Additional Information.)
It is a fundamental policy, which may not be changed without a vote of
shareholders, that at least 80% of the Fund's assets will normally be invested
in short-term municipal securities.
Under normal market conditions the Fund expects to invest 100% of its
portfolio securities in municipal securities. The Fund may, on a temporary
basis, hold and invest up to 20% of its assets in cash and cash equivalents and
in temporary investments of taxable securities with remaining maturities of 397
calendar days or less. For temporary defensive purposes the Fund may invest more
than 20% in such investments or may otherwise vary from its investment policies
during periods when the Adviser determines that it is advisable to do so because
of conditions in the securities markets or other economic or political
conditions. It is impossible to accurately predict how long such alternative
strategies may be utilized. In 1998, all the Fund's dividends were 100%
federally tax-exempt. The Fund may also invest in stand-by commitments and other
puts, repurchase agreements, participation interests and when-issued or forward
delivery securities. See "Additional information about policies and investments"
for more information about these investment techniques.
Municipal Securities. Municipal Securities are issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities to obtain funds for various public
purposes. The interest on these obligations is generally exempt from federal
income tax in the hands of most investors, except for the possible applicability
of the alternative minimum tax. The two principal classifications of municipal
securities are "Notes" and "Bonds."
1. Municipal Notes. Municipal Notes are generally used to provide for
short-term capital needs and generally have maturities of one year or less.
Municipal notes include: Tax Anticipation Notes; Revenue Anticipation Notes;
Bond Anticipation Notes; and Construction Loan Notes.
Tax anticipation notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue such as Federal revenues
available under the Federal Revenue Sharing Program. Tax anticipation notes and
revenue anticipation notes are generally issued in anticipation of various
seasonal revenues such as income, sales, use, and business taxes. Bond
anticipation notes are sold to provide interim financing. These notes are
generally issued in anticipation of long-term financing in the market. In most
cases, these monies provide for the repayment of the notes. Construction loan
notes are sold to provide construction financing. After the projects are
successfully completed and accepted, many projects receive permanent financing
through the Federal Housing Administration under "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association). There are, of course, a number of other types of notes issued for
different purposes and secured differently from those described above.
2. Municipal Bonds. Municipal bonds, which meet longer term capital needs
and generally have maturities of more than one year when issued, have two
principal classifications: "General Obligation" Bonds and "Revenue" Bonds.
Issuers of General Obligation Bonds include states, counties, cities,
towns and regional districts. The proceeds of these obligations are used to fund
a wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of General Obligation Bonds is the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. The taxes that can be levied for the payment of debt service may
be limited or unlimited as to rate or amount or special assessments.
The principal security for a Revenue Bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
Bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water and sewer systems; highways, bridges and tunnels; port and
airport facilities; colleges and universities; and hospitals. Although the
principal
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security behind these bonds varies widely, many provide additional security in
the form of a debt service reserve fund whose monies may also be used to make
principal and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security including partially or fully insured,
rent subsidized and/or collateralized mortgages, and/or the net revenues from
housing or other public projects. In addition to a debt service reserve fund,
some authorities provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service reserve fund.
Lease rental revenue bonds issued by a state or local authority for capital
projects are secured by annual lease rental payments from the state or locality
to the authority sufficient to cover debt service on the authority's
obligations.
Industrial Development and Pollution Control Bonds (which are types of
private activity bonds), although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but are secured by
the revenues of the authority derived from payments by the industrial user.
Under federal tax legislation, certain types of Industrial Development Bonds and
Pollution Control Bonds may no longer be issued on a tax-exempt basis, although
previously-issued bonds of these types and certain refundings of such bonds are
not affected. STFMF may invest more than 25% of its assets in industrial
development or other private activity bonds, subject to the Fund's fundamental
investment policies, and also subject to the Fund's current intention not to
invest in municipal securities whose investment income is taxable or AMT bonds.
For the purposes of the Fund's investment limitation regarding concentration of
investments in any one industry, industrial development or other private
activity bonds ultimately payable by companies within the same industry will be
considered as if they were issued by issuers in the same industry.
3. Municipal Lease Obligations and Participation Interests. A municipal
lease obligation may take the form of a lease, installment purchase contract or
conditional sales contract which is issued by a state or local government and
authorities to acquire land, equipment and facilities. Income from such
obligations is generally exempt from state and local taxes in the state of
issuance. Municipal lease obligations frequently involve special risks not
normally associated with general obligations or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title in the leased asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt issuance limitations are deemed to be inapplicable because of
the inclusion in many leases or contracts of "non-appropriation" clauses that
relieve the governmental issuer of any obligation to make future payments under
the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. In addition,
such leases or contracts may be subject to the temporary abatement of payments
in the event the issuer is prevented from maintaining occupancy of the leased
premises or utilizing the leased equipment. Although the obligations may be
secured by the leased equipment or facilities, the disposition of the property
in the event of nonappropriation or foreclosure might prove difficult, time
consuming and costly, and result in a delay in recovery or the failure to fully
recover the Fund's original investment.
Participation interests represent undivided interests in municipal leases,
installment purchase contracts, conditional sales contracts or other
instruments. These are typically issued by a trust or other entity which has
received an assignment of the payments to be made by the state or political
subdivision under such leases or contracts.
Certain municipal lease obligations and participation interests may be
deemed illiquid for the purpose of the Fund's limitation on investments in
illiquid securities. Other municipal lease obligations and participation
interests acquired by the Fund may be determined by the Adviser to be liquid
securities for the purpose of such limitation. In determining the liquidity of
municipal lease obligations and participation interests, the Adviser will
consider a variety of factors including: (1) the willingness of dealers to bid
for the security; (2) the number of dealers willing to purchase or sell the
obligation and the number of other potential buyers; (3) the frequency of trades
or quotes for the obligation; and (4) the nature of the marketplace in which the
security trades. In addition, the Adviser will consider factors unique to
particular lease obligations and participation interests affecting the
marketability thereof. These include the general creditworthiness of the issuer,
the importance to the issuer of the property covered by the lease and the
likelihood that the marketability of the obligation will be maintained
throughout the time the obligation is held by the Fund.
The Fund may purchase participation interests in municipal lease
obligations held by a commercial bank or other financial institution. Such
participations provide the Fund with the right to a pro rata undivided interest
in the underlying municipal lease obligations. In addition, such participations
generally provide the Fund with the right to demand payment, on not more than
seven days' notice, of all or any part of the Fund's participation interest in
the underlying municipal lease obligation, plus accrued interest. The Fund will
only invest in such participations if, in the opinion of bond counsel, counsel
for the issuers of such participations or counsel selected by the Adviser, the
interest from such participations is exempt from regular federal income tax and
state income tax, if applicable.
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4. Other Municipal Securities. There is, in addition, a variety of hybrid
and special types of municipal securities as well as numerous differences in the
security of municipal securities both within and between the two principal
classifications above.
The Fund may purchase variable rate demand instruments that are tax-exempt
municipal obligations providing for a periodic adjustment in the interest rate
paid on the instrument according to changes in interest rates generally. These
instruments also permit the Fund to demand payment of the unpaid principal
balance plus accrued interest upon a specified number of days' notice to the
issuer or its agent. The demand feature may be backed by a bank letter of credit
or guarantee issued with respect to such instrument. The Fund intends to
exercise the demand only (1) upon a default under the terms of the municipal
obligation, (2) as needed to provide liquidity to the Fund, or (3) to maintain a
high quality investment portfolio or (4) to maximize the Fund's yield. A bank
that issues a repurchase commitment may receive a fee from the Fund for this
arrangement. The issuer of a variable rate demand instrument may have a
corresponding right to prepay in its discretion the outstanding principal of the
instrument plus accrued interest upon notice comparable to that required for the
holder to demand payment.
The variable rate demand instruments that the Fund may purchase are
payable on demand on not more than seven calendar days' notice. The terms of the
instruments provide that interest rates are adjustable at intervals ranging from
daily up to six months, and the adjustments are based upon the current interest
rate environment as provided in the respective instruments. The Fund will
determine the variable rate demand instruments that they will purchase in
accordance with procedures approved by the Trustees to minimize credit risks.
The Adviser may determine that an unrated variable rate demand instrument meets
the Fund's quality criteria by reason of being backed by a letter of credit or
guarantee issued by a bank that meets the quality criteria for the Fund. Thus,
either the credit of the issuer of the municipal obligation or the guarantor
bank or both will meet the quality standards of the Fund. The Adviser will
reevaluate each unrated variable rate demand instrument held by the Fund on a
quarterly basis to determine that it continues to meet the Fund's quality
criteria.
The interest rate of the underlying variable rate demand instruments may
change with changes in interest rates generally, but the variable rate nature of
these instruments should decrease changes in value due to interest rate
fluctuations. Accordingly, as interest rates decrease or increase, the potential
for capital gain and the risk of capital loss on the disposition of portfolio
securities are less than would be the case with a comparable portfolio of fixed
income securities. The Fund may purchase variable rate demand instruments on
which stated minimum or maximum rates, or maximum rates set by state law, limit
the degree to which interest on such variable rate demand instruments may
fluctuate; to the extent it does, increases or decreases in value of such
variable rate demand notes may be somewhat greater than would be the case
without such limits. Because the adjustment of interest rates on the variable
rate demand instruments is made in relation to movements of the applicable rate
adjustment index, the variable rate demand instruments are not comparable to
long-term fixed interest rate securities. Accordingly, interest rates on the
variable rate demand instruments may be higher or lower than current market
rates for fixed rate obligations of comparable quality with similar final
maturities.
The maturity of the variable rate demand instruments held by the Fund will
ordinarily be deemed to be the longer of (1) the notice period required before
the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment.
5. General Considerations. An entire issue of Municipal Securities may be
purchased by one or a small number of institutional investors such as the Fund.
Thus, the issue may not be said to be publicly offered. Unlike securities which
must be registered under the Securities Act of 1933, as amended (the "1933 Act")
prior to offer and sale unless an exemption from such registration is available,
municipal securities which are not publicly offered may nevertheless be readily
marketable. A secondary market exists for municipal securities which were not
publicly offered initially.
Securities purchased for the Fund are subject to the limitations on
holdings of securities which are not readily marketable contained in the Fund's
investment restrictions. The Adviser determines whether a municipal security is
readily marketable based on whether it may be sold in a reasonable time
consistent with the customs of the municipal markets (usually seven days) at a
price (or interest rate) which accurately reflects its value. The Adviser
believes that the quality standards applicable to the Fund's investments enhance
marketability. In addition, Stand-by Commitments and demand obligations also
enhance marketability.
For the purpose of the Fund's investment restrictions, the identification
of the "issuer" of municipal securities which are not General Obligation Bonds
is made by the Adviser on the basis of the characteristics of the
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obligation as described above, the most significant of which is the source of
funds for the payment of principal of and interest on such obligations.
The Fund expects that it will not invest more than 25% of its total assets
in municipal securities whose issuers are located in the same state or more than
25% of its total assets in municipal securities the security of which is derived
from any one of the following categories: hospitals and health facilities;
turnpikes and toll roads; ports and airports; or colleges and universities. The
Fund may invest more than 25% of its total assets in municipal securities of one
or more of the following types: public housing authorities; general obligations
of states and localities; lease rental obligations of states and local
authorities; state and local housing finance authorities; municipal utilities
systems; bonds that are secured or backed by the Treasury or other U.S.
Government guaranteed securities; or industrial development and pollution
control bonds. There could be economic, business or political developments,
which might affect all municipal securities of a similar type. However, the Fund
believes that the most important consideration affecting risk is the quality of
particular issues of municipal securities rather than factors affecting all, or
broad classes of, municipal securities.
Stand-by Commitments. The Fund may engage in Stand-by Commitments. STFMF has
received an order from the SEC which will enable it to improve its portfolio
liquidity by making available same-day settlements on portfolio sales (and thus
facilitate the same-day payments of redemption proceeds in federal funds)
through the acquisition of "Stand-by Commitments." A Stand-by Commitment is a
right acquired by a Fund, when it purchases a municipal security from a broker,
dealer or other financial institution ("seller"), to sell up to the same
principal amount of such securities back to the seller, at that Fund's option,
at a specified price. Stand-by Commitments are also known as "puts." STFMF's,
investment policies permit the acquisition of Stand-by Commitments solely to
facilitate portfolio liquidity. The acquisition of or the power to exercise a
Stand-by Commitment will not affect the valuation or maturity of STFMF's
underlying portfolio, which will be valued in accordance with the order of the
SEC. The exercise by a Fund of a Stand-by Commitment is subject to the ability
of the other party to fulfill its contractual commitment.
Stand-by Commitments acquired by the Fund will have the following
features: (1) they will be in writing and will be physically held by a Fund's
custodian; (2) a Fund's rights to exercise them will be unconditional and
unqualified; (3) they will be entered into only with sellers which in the
Adviser's opinion present a minimal risk of default; (4) although Stand-by
Commitments will not be transferable, municipal securities purchased subject to
such commitments may be sold to a third party at any time, even though the
commitment is outstanding; and (5) their exercise price will be (i) a Fund's
acquisition cost (excluding the cost, if any, of the Stand-by Commitment) of the
municipal securities which are subject to the commitment (excluding any accrued
interest which a Fund paid on their acquisition), less any amortized market
premium or plus any amortized market or original issue discount during the
period a Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date. Since STFMF will value
municipal securities on an amortized cost basis, the amount receivable upon
exercise of a Stand-by Commitment will be substantially the same as the value
assigned by that Fund to the underlying securities. Moreover, while there is
little risk of an event occurring which would make amortized cost valuation of
its portfolio securities inappropriate, if such condition developed, the
securities may, in the discretion of the Trustees, be valued on the basis of
available market information and held to maturity. The Fund expects to refrain
from exercising a Stand-by Commitment in the event that the amount receivable
upon exercise of the Stand-by Commitment is significantly greater than the then
current market value of the underlying municipal securities in order to avoid
imposing a loss on a seller and thus jeopardizing the Fund's business
relationship with that seller.
The Fund expects that Stand-by Commitments generally will be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund will pay for Stand-by Commitments, either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitments. As a matter of policy, the total amount
"paid" by the Fund in either manner for outstanding Stand-by Commitments will
not exceed 1/2 of 1% of the value of total assets of the Fund calculated
immediately after any Stand-by Commitment is acquired.
It is difficult to evaluate the likelihood of use or the potential benefit
of a Stand-by Commitment. Therefore, it is expected that the Fund's Trustees
will determine that Stand-by Commitments ordinarily have a "fair value" of zero,
regardless of whether any direct or indirect consideration was paid. When the
Fund has paid for a Stand-by Commitment, its cost will be reflected as
unrealized depreciation for the period during which the commitment is held. In
addition, for purposes of complying with the condition of the SEC's amortized
cost Rule that the dollar-weighted average maturity of its portfolio shall not
exceed 90 days, the maturity of a portfolio security of STFMF shall not be
considered shortened or otherwise affected by any Stand-by Commitment to which
such security is subject.
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Management of the Fund understands that the Internal Revenue Service (the
"Service") has issued a favorable revenue ruling to the effect that, under
specified circumstances, a registered investment company will be the owner of
tax-exempt municipal obligations acquired subject to a put option. The Service
has also issued private letter rulings to certain taxpayers (which do not serve
as precedent for other taxpayers) to the effect that tax-exempt interest
received by a regulated investment company with respect to such obligations will
be tax-exempt in the hands of the company and may be distributed to its
shareholders as exempt-interest dividends. The Service has subsequently
announced that it will not ordinarily issue advance ruling letters as to the
identity of the true owner of property in cases involving the sale of securities
or participation interests therein if the purchaser has the right to cause the
security, or the participation interest therein, to be purchased by either the
seller or a third party. The Fund intends to take the position that it owns any
municipal obligations acquired subject to a Stand-by Commitment and that
tax-exempt interest earned with respect to such municipal obligations will be
tax-exempt in its hands. There is no assurance that the Service will agree with
such position in any particular case. There is no assurance that Stand-by
Commitments will be available to the Fund nor has the Fund assumed that such
commitments would continue to be available under all market conditions.
Third Party Puts. These long-term fixed rate bonds coupled with puts may present
the same tax issues as are associated with Stand-by Commitments discussed above.
As with any Stand-by Commitments acquired by the Fund, the Fund intends to take
the position that it is the owner of any municipal obligation acquired subject
to a third-party put, and that tax-exempt interest earned with respect to such
municipal obligations will be tax-exempt in its hands. There is no assurance
that the Service will agree with such position in any particular case.
Additionally, the federal income tax treatment of certain other aspects of these
investments, including the treatment of tender fees and swap payments, in
relation to various regulated investment company tax provisions is unclear.
However, the Adviser intends to manage the Fund's portfolio in a manner designed
to minimize any adverse impact from these investments.
Participation Interests. STFMF may purchase from banks participation interests
in all or part of specific holdings of municipal securities. Each participation
is backed by an irrevocable letter of credit or guarantee of the selling bank
that the Adviser has determined meets the prescribed quality standards of the
Fund. Thus, even if the credit of the issuer of the municipal security does not
meet the quality standards of STFMF, the credit of the selling bank will. STFMF
has the right to sell the participation back to the bank after seven days'
notice for the full principal amount of the Fund's interest in the municipal
security plus accrued interest, but only (1) as required to provide liquidity to
the Fund, (2) to maintain a high quality investment portfolio or (3) upon a
default under the terms of the municipal security. The selling bank may receive
a fee from STFMF in connection with the arrangement. STFMF will not purchase
participation interests unless it receives an opinion of counsel or a ruling of
the Internal Revenue Service satisfactory to the Trustees of the Fund that
interest earned by the Fund on municipal obligations in which it holds
participation interests is exempt from federal income tax. An opinion of counsel
is not binding on the Service and there is no assurance that the Service will
agree with any opinion of counsel.
Specialized Investment Techniques of the Funds
Floating and Variable Rate Instruments. Certain of the obligations that each
Fund may purchase have a floating or variable rate of interest. Such obligations
bear interest at rates that are not fixed, but which vary with changes in
specified market rates or indices, such as the Prime Rate, and at specified
intervals.
Municipal Obligations. Municipal obligations, which are debt obligations issued
by or on behalf of states, cities, municipalities and other public authorities,
and may be general obligation, revenue, or industrial development bonds, include
municipal bonds, municipal notes and municipal commercial paper.
Each Fund's investments in municipal notes will be limited to notes that
are rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in
the case of an issue having a variable rate demand feature) by Moody's, "SP-1"
or "SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of
270 days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. Each Fund may invest
in municipal commercial paper that is rated at the date of purchase "P-1" or
"P-2" by Moody's, "A-1" or "A-2" or "A-" by S&P or "F-1" by Fitch. If a
municipal obligation is not rated, each Fund may purchase the obligation if, in
the opinion of the Adviser, it is of investment quality comparable to other
rated investments that are permitted in each Fund.
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Letters of Credit. Municipal obligations, including certificates of
participation, commercial paper and other short-term obligations may be backed
by an irrevocable letter of credit of a bank which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Only
banks which, in the opinion of the adviser, are of investment quality comparable
to other permitted investments of each Fund may be used for letter of credit
backed investments.
Securities with Put Rights. Each Fund may enter into put transactions with
respect to obligations held in its portfolio with broker/dealers pursuant to a
rule under the Investment Company Act of 1940, as amended (the "1940 Act"), and
with commercial banks.
The right of each Fund to exercise a put is unconditional and unqualified.
A put is not transferable by the Funds, although each Fund may sell the
underlying securities to a third party at any time. If necessary and advisable,
each Fund may pay for certain puts either separately in cash or by paying a
higher price for portfolio securities that are acquired subject to such a put
(thus reducing the yield to maturity otherwise available for the same
securities). Each Fund expects, however, that puts generally will be available
without the payment of any direct or indirect consideration.
Each Fund may enter into puts only with banks or broker/dealers that, in
the opinion of the Adviser, present minimal credit risks. The ability of each
Fund to exercise a put will depend on the ability of the bank or broker/dealer
to pay for the underlying securities at the time the put is exercised. In the
event that a bank or broker/dealer should default on its obligation to
repurchase an underlying security, the Funds, might be unable to recover all or
a portion of any loss sustained from having to sell the security elsewhere.
Each Fund intends to enter into puts solely to maintain liquidity and does
not intend to exercise its rights thereunder for trading purposes. The puts will
only be for periods of substantially less than the life of the underlying
security. The acquisition of a put will not affect the valuation by the Funds of
the underlying security. The actual put will be valued at zero in determining
net asset value of each Fund. Where the Funds pay directly or indirectly for a
put, its cost will be reflected in realized gain or loss when the put is
exercised or expires. If the value of the underlying security increases the
potential for unrealized or realized gain is reduced by the cost of the put. The
maturity of a municipal obligation purchased by each Fund will not be considered
shortened by any put to which such obligation is subject.
Third Party Puts. The Funds may also purchase long-term fixed rate bonds that
have been coupled with an option granted by a third party financial institution
allowing the Funds at specified intervals (not exceeding 397 calendar days) to
tender (or "put") the bonds to the institution and receive the face value
thereof (plus accrued interest). These third party puts are available in several
different forms, may be represented by custodial receipts or trust certificates
and may be combined with other features such as interest rate swaps. The Funds
receive a short-term rate of interest (which is periodically reset), and the
interest rate differential between that rate and the fixed rate on the bond is
retained by the financial institution. The financial institution granting the
option does not provide credit enhancement, and in the event that there is a
default in the payment of principal or interest, or downgrading of a bond to
below investment grade, or a loss of the bond's tax-exempt status, the put
option will terminate automatically, the risk to the Funds will be that of
holding such a long-term bond and the dollar-weighted average maturity of each
Fund's portfolio would be adversely affected.
Maintenance of $1.00 Net Asset Value and Credit Quality. Pursuant to a Rule of
the Securities and Exchange Commission (the "SEC"), each Fund effects sales,
redemptions and repurchases at the net asset value per share, normally $1.00. In
fulfillment of their responsibilities under that Rule, the Trustees of each Fund
have approved policies established by the Funds' Adviser reasonably calculated
to prevent each Fund's net asset value per share from deviating from $1.00
except under unusual or extraordinary circumstances and the Trustees of each
Fund will periodically review the Adviser's operations under such policies at
regularly scheduled Trustees' meetings. Those policies include a weekly
monitoring by the Adviser of unrealized gains and losses in each Fund's
portfolio, and when necessary, in an effort to avoid deviation, taking
corrective action, such as adjusting the maturity of the portfolio, or, if
possible, realizing gains or losses to offset in part unrealized losses or
gains. The result of those policies may be that the yield on shares of each Fund
will be lower than would be the case if the policies were not in effect. Such
policies also provide for certain action to be taken with respect to portfolio
securities which experience a downgrade in rating or suffer a default.
Securities eligible for investment by the Funds are those securities which
are generally rated (or issued by an issuer with comparable securities rated) in
the highest short-term rating category by at least two rating services (or by
one rating service, if no other rating agency has issued a rating with respect
to that security). These securities are known as "first tier securities."
Securities generally rated (or issued by an issuer with comparable securities
rated) in the top
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two categories by at least two rating agencies (or one, if only one rating
agency has rated the security) which do not qualify as first tier securities are
known as "second tier securities." To ensure diversity of a Fund's investments,
as a matter of non-fundamental policy, each Fund will not invest more than 5% of
its total assets in the securities of a single issuer, other than the U.S.
Government. Each Fund may, however, invest more than 5% of its total assets in
the first tier securities of a single issuer for a period of up to three
business days after purchase, although a Fund may not make more than one such
investment at any time during such period. Each Fund may not invest more than 5%
of its total assets in securities which were second tier securities when
acquired by the Fund. Further, each Fund may not invest more than the greater of
(1) 1% of its total assets, or (2) one million dollars, in the securities of a
single issuer which were second tier securities when acquired by the Fund.
Portfolio Maturity. The assets of each Fund consist entirely of cash items and
investments having a stated maturity date of 397 calendar days or less (except
in the case of Government securities, 762 calendar days) from date of purchase
(including investment in repurchase agreements, in which case maturity is
measured by the repurchase date, without respect to the maturity of the
obligation). The term "Government securities," as used herein, means securities
issued or guaranteed as to principal or interest by the U.S. Government, its
agencies or instrumentalities. The portfolio of each Fund will be managed so
that the average maturity of all instruments (on a dollar-weighted basis) will
be 90 days or less. The average maturity of the two portfolios will vary
according to the management's appraisal of money market conditions. Each Fund
will invest only in securities determined by or under the direction of the
Trustees to be of high quality with minimal credit risks.
Portfolio Turnover. The Funds may sell portfolio securities to take advantage of
investment opportunities arising from changing market levels or yield
relationships. Although such transactions involve additional costs in the form
of spreads, they will be undertaken in an effort to improve a Fund's overall
investment return, consistent with its objectives.
U.S. Government Securities. U.S. Government Securities are securities issued or
guaranteed by the U.S. Treasury, by federal agencies, or by instrumentalities
established or sponsored by the U.S. Government. Obligations issued by the U.S.
Treasury are backed by the full faith and credit of the U.S. Government. They
include Treasury bills, notes and bonds, which differ in their interest rates,
maturities and times of issuance. Obligations guaranteed by the U.S. Treasury
include Government National Mortgage Association participation certificates.
Obligations of a federal agency or U.S. Government instrumentality may be
supported in various ways, including the limited authority of the issuer to
borrow from the U.S. Treasury, such as securities of the Federal Home Loan Bank;
the discretionary authority of the U.S. Government to purchase obligations of
the agency or instrumentality, such as Federal National Mortgage Association
bonds; or the credit only of the issuing agency or instrumentality, such as
Student Loan Marketing Association. In the case of obligations not backed by the
full faith and credit of the U.S. Government, the Fund must look principally to
the agency issuing or guaranteeing the obligations for ultimate repayment, which
agency may be privately owned. These securities may bear fixed, floating or
variable rates of interest. Interest may fluctuate based on generally recognized
reference rates or the relationship of rates.
When-issued and Forward Delivery Securities. Government securities are
frequently offered on a "when-issued" or "forward delivery" basis. When so
offered, the price, which is generally expressed in yield terms, is fixed at the
time the commitment to purchase is made, but delivery and payment for the
when-issued or forward delivery securities take place at a later date normally
within 45 days after the date of the commitment to purchase. During the period
between purchase and settlement, no payment is made by the Funds to the issuer
and no interest accrues to the Funds. To the extent that assets of the Funds are
not invested prior to the settlement of a purchase of securities, the Funds will
earn no income; however, it is intended that the Funds will be fully invested to
the extent practicable and subject to the policies stated herein. When-issued or
forward delivery purchases are negotiated directly with the other party and are
not traded on an exchange. While when-issued or forward delivery securities may
be sold prior to the settlement date, it is intended that the Funds will
purchase such securities with the purpose of actually acquiring them unless a
sale appears desirable for investment reasons. At the time a Fund makes the
commitment to purchase securities on a when-issued or forward delivery basis, it
will record the transaction and reflect the value of the security in determining
its respective net asset values. None of the Funds believes that their net asset
value or income will be adversely affected by their purchase of securities on a
when-issued or forward delivery basis. Each Fund will establish a segregated
account in which to maintain cash or liquid assets equal in value to commitments
for when-issued or forward delivery securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.
Each Fund will not enter into such transactions for leverage purposes.
Repurchase Agreements. Each Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System or any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other
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obligations the Funds may purchase or to be at least equal to that of issuers of
commercial paper rated within the two highest ratings categories assigned by
Moody's, S&P or Fitch.
A repurchase agreement provides a means for a Fund to earn income on funds
for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., a Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and, as described in more detail below, the value of such securities is
kept at least equal to the repurchase price on a daily basis. The repurchase
price may be higher than the purchase price, the difference being income to a
Fund, or the purchase and repurchase prices may be the same, with interest at a
stated rate due to a Fund together with the repurchase price upon repurchase. In
either case, the income to a Fund is unrelated to the interest rate on the
Obligation itself. Obligations will be held by the custodian or in the Federal
Reserve Book Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from a Fund to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to each Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by a Fund subject to a repurchase agreement as being owned
by that Fund or as being collateral for a loan by that Fund to the seller. In
the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, a Fund may encounter delay and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the Obligation. If the court characterizes the transaction as a loan
and a Fund has not perfected a security interest in the Obligation, that Fund
may be required to return the Obligation to the seller's estate and be treated
as an unsecured creditor of the seller. As an unsecured creditor, a Fund would
be at risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt Obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case a Fund may incur a loss if the proceeds to that Fund of the sale to a third
party are less than the repurchase price. However, if the market value
(including interest) of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including interest), a Fund will direct
the seller of the Obligation to deliver additional securities so that the market
value (including interest) of all securities subject to the repurchase agreement
will equal or exceed the repurchase price.
Illiquid Securities. Each Fund may occasionally purchase securities other than
in the open market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open market, the
securities so purchased are often "restricted securities", i.e., securities
which cannot be sold to the public without registration under the Securities Act
of 1933 or the availability of an exemption from registration (such as Rules 144
or 144A), or which are "not readily marketable" because they are subject to
other legal or contractual delays in or restrictions on resale.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the Securities Act of 1933. Each Fund may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933 when selling restricted
securities to the public, and in such event each Fund may be liable to
purchasers of such securities if the registration statement prepared by the
issuer, or the prospectus forming a part of it, is materially inaccurate or
misleading.
The Adviser will monitor the liquidity of such restricted securities
subject to the supervision of each Fund's Board of Trustees. In reaching
liquidity decisions, the Adviser will consider the following factors: (1) the
frequency of trades and quotes for the security, (2) the number of dealers
wishing to purchase or sell the security and the number of their potential
purchasers, (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the nature of the marketplace trades (i.e. the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
The conclusions and investment decisions of the Adviser with respect to
each Fund are based primarily on the analyses of its own research specialists.
While these specialists have the major responsibility for doing research on debt
securities, they receive the support of the Adviser's general economics
department for studies on interest rate trends and of the Adviser's stock
research analysts for consultation on the qualitative aspects of credit analysis
which enable the Adviser to establish its own credit ratings for issuers of
senior securities. The Adviser believes it is important to have this combination
of specialized skills available for developing the proper investment strategies
for the Funds. The
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Adviser subscribes to leading bond information services and receives directly
published reports and statistical compilations of the issuers themselves, as
well as analyses from brokers and dealers who may execute portfolio transactions
for the Adviser's clients. However, the Adviser regards this information and
material as an adjunct to its own research activities.
Borrowing. As a matter of fundamental policy, each Fund will not borrow money,
except as permitted under the 1940 Act, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time. While the Trustees
do not currently intend to borrow for investment leverage purposes, if such a
strategy were implemented in the future it would increase the Funds' volatility
and the risk of loss in a declining market. Borrowing by the each Fund will
involve special risk considerations. Although the principal of each Fund's
borrowings will be fixed, each Fund's assets may change in value during the time
a borrowing is outstanding, thus increasing exposure to capital risk.
Trustees' Power to Change Objectives and Policies
The objectives and policies of the Funds described above may be changed,
unless expressly stated to the contrary, by their respective Trustees without a
vote of their shareholders.
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information, means the lesser of (1) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of a Fund.
Any investment restrictions herein which involve a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, a Fund.
As a matter of fundamental policy, SCIT will not:
1. borrow money, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
2. issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
3. concentrate its investments in a particular industry, as that term
is used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time ( except SCIT reserves the freedom of action to
concentrate its investments in instruments issued by domestic
banks);
4. engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;
5. purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities;
6. purchase physical commodities or contracts relating to physical
commodities; or
7. make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
In addition, although not a matter of fundamental policy, SCIT does not
currently intend to:
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1. borrow money in an amount greater than 5% of its total assets,
except for temporary or emergency purposes;
2. lend portfolio securities in an amount greater than 5% of its total
assets.
As a matter of fundamental policy Treasury Fund may not:
1. borrow money, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
2. issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
3. concentrate its investments in a particular industry, as that term
is used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
4. engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;
5. purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities;
6. purchase physical commodities or contracts relating to physical
commodities; or
7. make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
Treasury Fund has undertaken that if the Fund obtains an exemptive order
of the SEC which would permit the taking of action in contravention of any
policy which may not be changed without a shareholder vote, the Fund will not
take such action unless either (i) the applicable exemptive order permits the
taking of such action without a shareholder vote or (ii) the staff of the SEC
has issued to the Fund a "no action" or interpretive letter to the effect that
the Fund may proceed without a shareholder vote.
Although not a matter of fundamental policy Treasury Fund may not:
1. borrow money in an amount greater than 5% of its total assets,
except for temporary or emergency purposes;
2. lend portfolio securities in an amount greater than 5% of its total
assets.
As a matter of fundamental policy, Scudder Tax Free Money may not:
1. borrow money, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
2. issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
3. concentrate its investments in a particular industry, as that term
is used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
4. engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;
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5. purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities;
6. purchase physical commodities or contracts relating to physical
commodities;
7. make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
In addition, as a matter of fundamental policy, Scudder Tax Free Money
Fund will:
1. have at least 80% of its net assets invested in short-term municipal
securities during periods of normal market conditions.
As a matter of non-fundamental policy, Scudder Tax Free Money Fund may
not:
1. borrow money in an amount greater than 5% of its total assets,
except for temporary or emergency purposes; and
2. lend portfolio securities in an amount greater than 5% of its total
assets.
Master/feeder structure
The Board of Trustees of each Fund has the discretion to retain the
current distribution arrangement for the Funds while investing in a master fund
in a master/feeder structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests most or all
of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
PURCHASES
(See "Purchases" and "Transaction information" in
the Funds' combined prospectus.)
Additional Information About Opening an Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified tax identification number, clients having a
regular investment counsel account with Scudder or its affiliates and members of
their immediate families, officers and employees of the Adviser or of any
affiliated organization and their immediate families, members of the NASD and
banks may open an account by wire. These investors must call 1-800-225-5163 to
get an account number. During the call the investor will be asked to indicate
the Fund name, amount to be wired ($2,500 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the tax identification number or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, Boston, MA 02110, ABA Number 011000028, Account
Number: 9903-5552. The investor must give the Scudder fund name, account name
and the new account number. Finally, the investor must send the completed and
signed application to the Fund promptly.
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The minimum initial purchase amount is less than $2,500 under certain
special plan accounts.
Minimum balances
Shareholders should maintain a share balance worth at least $2,500 ($1,000
for fiduciary accounts such as IRAs, and custodial accounts such as Uniform Gift
to Minor Act, and Uniform Trust to Minor Act accounts), which amount may be
changed by the Board of Trustees A shareholder may open an account with at least
$1,000 ($500 for fiduciary/custodial accounts), if an automatic investment plan
(AIP) of $100/month ($50/month for fiduciary/custodial accounts) is established.
Scudder group retirement plans and certain other accounts have similar or lower
minimum share balance requirements.
The Fund reserves the right, following 60 days' written notice to
applicable shareholders, to:
o assess an annual $10 per Fund charge (with the Fee to be paid to the
Fund) for any non-fiduciary/non-custodial account without an
automatic investment plan (AIP) in place and a balance of less than
$2,500; and
o redeem all shares in Fund accounts below $1,000 where a reduction in
value has occurred due to a redemption, exchange or transfer out of
the account. The Fund will mail the proceeds of the redeemed account
to the shareholder.
Reductions in value that result solely from market activity will not
trigger an involuntary redemption. Shareholders with a combined household
account balance in any of the Scudder Funds of $100,000 or more, as well as
group retirement and certain other accounts will not be subject to a fee or
automatic redemption.
Fiduciary (e.g., IRA or Roth IRA) and custodial accounts (e.g., UGMA or
UTMA) with balances below $100 are subject to automatic redemption following 60
days' written notice to applicable shareholders.
Checks
A certified check is not necessary, but checks are only accepted subject
to collection at full face value in U.S. funds and must be drawn on or payable
through a United States bank.
If shares of a Fund are purchased with a check which proves to be
uncollectible, that Fund reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by that Fund or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, such Fund will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from or restricted in placing future orders in any of the Scudder
funds.
Wire Transfer of Federal Funds
To purchase shares of a Fund and obtain the same day's dividend you must
have your bank forward federal funds by wire transfer and provide the required
account information so as to be available to a Fund prior to twelve o'clock noon
eastern time on that day. If you wish to make a purchase of $500,000 or more,
you should notify the Fund's transfer agent, Scudder Service Corporation (the
"Transfer Agent") of such a purchase by calling 1-800-225-5163. If either the
federal funds or the account information is received after twelve o'clock noon
eastern time, but both the funds and the information are made available before
the close of regular trading on the New York Stock Exchange (the "Exchange")
(normally 4 p.m. eastern time) on any business day, shares will be purchased at
net asset value determined on that day but will not receive the dividend; in
such cases, dividends commence on the next business day.
The bank sending an investor's federal funds by bank wire may charge for
the service. Presently, each Fund pays a fee for receipt by State Street Bank
and Trust Company (the "Custodian") of "wired funds," but the right to charge
investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may be
open. These holidays include Columbus Day (the 2nd Monday in October) and
Veterans' Day (November 11). Investors are not able to purchase
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<PAGE>
shares by wiring federal funds on such holidays because the Custodian is not
open to receive such federal funds on behalf of either Fund.
Additional Information About Making Subsequent Investments by QuickBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
Exchange, normally 4 p.m. eastern time. Proceeds in the amount of your purchase
will be transferred from your bank checking account two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. QuickBuy requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day. If you purchase shares by QuickBuy and redeem them within seven
days of the purchase, the Fund may hold the redemption proceeds for a period of
up to seven business days. If you purchase shares and there are insufficient
funds in your bank account the purchase will be canceled and you will be subject
to any losses or fees incurred in the transaction. QuickBuy transactions are not
available for most retirement plan accounts. However, QuickBuy transactions are
available for Scudder IRA accounts.
In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Share Price
Purchases made by check will be filled without sales charge at the close
of regular trading on the Exchange on the day the check is received by the
Transfer Agent in good order. Net asset value of each Fund normally is computed
twice a day, as of twelve o'clock noon and the close of regular trading on the
Exchange on each day when the Exchange is open for trading.
Share Certificates
Due to the desire of each Fund's management to afford ease of redemption,
certificates will not be issued to indicate ownership in either Fund. Share
certificates now in a shareholder's possession may be sent to the Transfer Agent
for cancellation and credit to such shareholder's account. Shareholders who
prefer may hold the certificates in their possession until they wish to exchange
or redeem such shares.
Other Information
The Funds have authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Funds' shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on each Fund's behalf. Orders for purchase or redemption will be deemed
to have been received by a Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between a Fund and the
broker, ordinarily orders will be priced at that Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of a Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Trustees and the Distributor, also the Funds' principal underwriter,
each has the right to limit the amount of purchases of each Fund by, and to
refuse to sell to, any person. The Trustees and the Distributor may suspend or
terminate the offering of shares of a Fund at any time for any reason.
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The "Tax Identification Number" section of the application must be
completed when opening an account. Applications and purchase orders without a
correct certified tax identification number and certain other certified
information (e.g. from exempt investors a certification of exempt status) will
be returned to the investor. The Funds reserve the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing a Fund with a tax identification number during the
30-day notice period.
The Funds may issue shares at net asset value in connection with any
merger or consolidation with, or acquisition of the assets of, any investment
company (or series thereof) or personal holding company, subject to the
requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction
information" in the Funds' prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL(TM)) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges into a new fund account must be for a minimum of $2,500. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration, tax
identification number, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more. If the
account receiving the exchange proceeds is to be different in any respect, the
exchange request must be in writing and must contain an original signature
guarantee as described under "Transaction information -- Redeeming shares --
Signature guarantees" in each Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Trusts and the Transfer Agent each reserve the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above. An
exchange into another Scudder fund is a redemption of shares, and therefore may
result in tax consequences (gain or loss) to the shareholder, and the proceeds
of such an exchange may be subject to backup withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. The Trusts employ
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trusts do not follow such
procedures, they may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trusts will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine. The Trusts and the Transfer Agent each reserve the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the
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Scudder fund into which the exchange is being contemplated. The exchange
privilege may not be available for certain Scudder funds or classes thereof. For
more information, please call 1-800-225-5163.
Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.
Redemption by Telephone
In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
Shareholders currently receive the right to redeem up to $100,000 to their
address of record automatically, without having to elect it. Shareholders may
also request to have the proceeds mailed or wired to their pre-designated bank
account.
(a) NEW INVESTORS wishing to establish telephone redemption to a
pre-designated bank account must complete the appropriate section on
the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
pre-designated bank account or who want to change the bank account
previously designated to receive redemption payments should either
return a Telephone Redemption Option Form (available upon request)
or send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. A signature and a
signature guarantee are required for each person in whose name the
account is registered.
Telephone redemption is not available with respect to shares represented
by share certificates or shares held in certain retirement accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a
participant in the Federal Reserve System, redemption proceeds must
be wired through a commercial bank which is a correspondent of the
savings bank. As this may delay receipt by the shareholder's
account, it is suggested that investors wishing to use a savings
bank discuss wire procedures with their bank and submit any special
wire transfer information with the telephone redemption
authorization. If appropriate wire information is not supplied,
redemption proceeds will be mailed to the designated bank.
The Funds employ procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Funds do
not follow such procedures, they may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine.
Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption By QuickSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the QuickSell program may sell shares of a Fund by telephone. Redemptions must
be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account in two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. QuickSell requests
received after the close of regular trading on the Exchange will begin their
processing and
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be redeemed at the net asset value calculated the following business day.
QuickSell transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which redemption proceeds will be credited. New
investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Funds employ procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signatures guaranteed as explained in each
Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
any redemptions to ensure that all necessary documents accompany the request.
When shares are held in the name of a corporation, trust, fiduciary, agent,
attorney or partnership, the Transfer Agent requires, in addition to the stock
power, certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within five days after receipt
by the Transfer Agent of a request for redemption that complies with the above
requirements. Delays of more than seven business days of payment for shares
tendered for repurchase or redemption may result, but only until the purchase
check has cleared.
The requirements for IRA redemptions are different from those for regular
accounts. For more information call 1-800-225-5163.
Redemption by Checkwriting
All new investors and existing shareholders who apply to State Street Bank
and Trust Company for checks may use them to pay any person, provided that each
check is for at least $100 and not more than $5 million. By using the checks,
the shareholder will receive daily dividend credit on his or her shares until
the check has cleared the banking system. Investors who purchased shares by
check may write checks against those shares only after they have been on a
Fund's book for seven business days. Shareholders who use this service may also
use other redemption procedures. No shareholder may write checks against
certificated shares. The Funds pay the bank charges for this service. However,
each Fund will review the cost of operation periodically and reserve the right
to determine if direct charges to the persons who avail themselves of this
service would be appropriate. Each Fund, Scudder Service Corporation and State
Street Bank and Trust Company reserve the right at any time to suspend or
terminate the Checkwriting procedure.
Other Information
If a shareholder redeems all shares in the account, the shareholder will
receive, in addition to the net asset value thereof, all declared but unpaid
dividends thereon. None of the Funds impose a redemption or repurchase charge,
although a wire charge may be applicable for redemption proceeds wired to an
investor's bank account. Redemptions of shares, including redemptions undertaken
to effect an exchange for shares of another Scudder fund or portfolio, and
including exchanges and redemptions by Checkwriting, may result in tax
consequences (gain or loss) to the shareholder and the proceeds of such
redemptions may be subject to backup withholding (see "TAXES").
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<PAGE>
Shareholders who wish to redeem shares from Special Plan Accounts should
contact the employer, trustee or custodian of the Plan for the requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) during which the Exchange is closed, other than customary
weekend and holiday closings, (b) during which trading on the Exchange is
restricted for any reason, (c) during which an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practicable
or it is not reasonably practicable for a Fund fairly to determine the value of
its net assets, or (d) during which the SEC by order permits suspension of the
right of redemption or a postponement of the date of payment or of redemption;
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether the conditions prescribed in
(b), (c) or (d) exist.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in each Fund's prospectus.)
The No-Load Concept
Investors are encouraged to be aware of the full ramifications of mutual
fund fee structures, and of how Scudder distinguishes its Scudder Family of
Funds from the vast majority of mutual funds available today. The primary
distinction is between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for the
sale and distribution of fund shares. There are three types of loads: front-end
loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of the
amount invested. A back-end load is a contingent deferred sales charge, which
can be as high as 8.50% of either the amount invested or redeemed. The maximum
front-end or back-end load varies, and depends upon whether or not a fund also
charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers' Conduct Rules, a mutual fund can
call itself a "no-load" fund only if the 12b-1 fee and/or service fee does not
exceed 0.25% of a fund's average annual net assets.
Because funds in the Scudder Family of Funds do not pay any asset-based
sales charges or service fees, Scudder uses the phrase no-load to distinguish
Scudder funds and classes from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of investing
$10,000 in a Scudder Family of Funds pure no-load fund over investing the same
amount in a load fund that collects an 8.50% front-end load, a load fund that
collects only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only
a 0.25% 12b-1 and/or service fee. The hypothetical figures in the chart show the
value of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
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================================================================================
No-Load Fund
Scudder 8.50% Load Load Fund with with 0.25%
YEARS No-Load Fund Fund 0.75% 12b-1 Fee 12b-1 Fee
- --------------------------------------------------------------------------------
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
- --------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
================================================================================
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://www.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
The site is designed for interactivity, simplicity and maneuverability. A
section entitled "Planning Resources" provides information on asset allocation,
tuition, and retirement planning to users who fill out interactive "worksheets."
Investors can easily establish a "Personal Page," that presents price
information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
The Adviser has communicated with shareholders and other interested
parties on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- The Adviser is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
The Adviser's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions for
an account, with trade dates, type and amount of transaction, share price and
number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call Me(TM) feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
Dividends and Capital Gains Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of a Fund. A change of instructions for the method of
payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders also may change their dividend option either
by calling 1-800-225-5163 or by sending written instructions
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<PAGE>
to the Transfer Agent. Please include your account number with your written
request. See "Purchases" in the Funds' prospectuses for the address.
Reinvestment is usually made at the closing net asset value determined on
the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of a Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal Plan
must reinvest any dividends or capital gains. For most retirement plan accounts,
the reinvestment of dividends and capital gains is also required.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by the
Distributor listed in the Funds' prospectuses. The Centers are designed to
provide individuals with services during any business day. Investors may pick up
literature or obtain assistance with opening an account, adding monies or
special options to existing accounts, making exchanges within the Scudder Family
of Funds, redeeming shares or opening retirement plans. Checks should not be
mailed to the "The Scudder Funds" at the address listed under "Purchases" in the
prospectuses.
Reports to Shareholders
The Trust issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Trust presently intends to
distribute to shareholders informal quarterly reports during the intervening
quarters, containing a statement of the investments of the Funds.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available to
shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Funds' combined prospectus.)
The Scudder Family of Funds is America's first family of mutual funds and
the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current income.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible, and declares
dividends daily.
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability of
capital and, consistent therewith, to maintain the liquidity of capital
and to provide current income. SCIT seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may not
be possible, and declares dividends daily.
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Scudder Money Market Series+ seeks to provide investors with as high a
level of current income as is consistent with its investment polices and
with preservation of capital and liquidity. The Fund seeks to maintain a
constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.
Scudder Government Money Market Series+ seeks to provide investors with as
high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of shares
of this Fund is not within the Scudder Family of Funds.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt from
regular federal income tax and stability of principal through investments
primarily in municipal securities. STFMF seeks to maintain a constant net
asset value of $1.00 per share, although in extreme circumstances this may
not be possible.
Scudder Tax Free Money Market Series+ seeks to provide investors with as
high a level of current income that cannot be subjected to federal income
tax by reason of federal law as is consistent with its investment policies
and with preservation of capital and liquidity. The Fund seeks to maintain
a constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.
Scudder California Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value will
be maintained.
Scudder New York Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There can
be no assurance that the stable net asset value will be maintained.
TAX FREE
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a high
degree of principal stability.
Scudder Medium Term Tax Free Fund seeks to provide a high level of income
free from regular federal income taxes and to limit principal fluctuation.
The Fund will invest primarily in high-grade, intermediate-term bonds.
Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.
Scudder High Yield Tax Free Fund seeks to provide a high level of interest
income, exempt from regular federal income tax, from an actively managed
portfolio consisting primarily of investment-grade municipal securities.
Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and regular
federal income tax. The Fund is a professionally managed portfolio
consisting primarily of California municipal securities.
- --------
+ The institutional class of shares is not part of the Scudder Family of
Funds.
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.
Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.
Scudder New York Tax Free Fund* seeks to provide New York taxpayers with
income exempt from New York State and New York City personal income taxes
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of New York municipal securities.
Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income tax.
The Fund is a professionally managed portfolio consisting primarily of
investment-grade municipal securities.
Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.
U.S. INCOME
Scudder Short Term Bond Fund seeks to provide high income while managing
its portfolio in a way that is consistent with maintaining a high degree
of stability of shareholders' capital. It does this by investing mainly in
bonds with short remaining maturities.
Scudder GNMA Fund seeks to provide high income. It does this by investing
mainly in "Ginnie Maes": mortgage-backed securities that are issued or
guaranteed by the Government National Mortgage Association
(GNMA).
Scudder Income Fund seeks to provide high income while managing its
portfolio in a way that is consistent with the prudent investment of
shareholders' capital. It does this by using a flexible investment program
that emphasizes high-grade bonds.
Scudder Corporate Bond Fund seeks to provide high income. It does this by
investing mainly in corporate bonds.
Scudder High Yield Bond Fund seeks to provide high income and,
secondarily, capital appreciation . It does this by investing mainly in
lower rated, higher yielding corporate bonds, often called junk bonds.
GLOBAL INCOME
Scudder Global Bond Fund seeks to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in
foreign currencies and the U.S. dollar. As a secondary objective, the Fund
will seek capital appreciation.
Scudder International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. As a
secondary objective, the Fund seeks protection and possible enhancement of
principal value by actively managing currency, bond market and maturity
exposure and by security selection.
Scudder Emerging Markets Income Fund seeks to provide high current income
and, secondarily, long-term capital appreciation through investments
primarily in high-yielding debt securities issued by governments and
corporations in emerging markets.
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ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will invest
substantially in a select mix of Scudder bond mutual funds, but will have
some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks to provide investors with
a balance of growth and income by investing in a select mix of Scudder
money market, bond and equity mutual funds.
Scudder Pathway Series: Growth Portfolio seeks to provide investors with
long-term growth of capital. In pursuing this objective, the Portfolio
will, under normal market conditions, invest predominantly in a select mix
of Scudder equity mutual funds designed to provide long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total return
for investors. Total return consists of any capital appreciation plus
dividend income and interest. To achieve this objective, the Portfolio
invests in a select mix of established international and global Scudder
funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund also
seeks long-term preservation of capital through a quality-oriented
investment approach that is designed to reduce risk.
Scudder Dividend & Growth Fund seeks high current income and long-term
growth of capital through investment in income paying equity securities.
Scudder Growth and Income Fund seeks long-term growth of capital, current
income, and growth of income.
Scudder Select 500 Fund seeks to provide long-term growth and income
through investment in selected stocks of companies in the S&P 500 Index.
Scudder 500 Index Fund seeks to provide investment results that, before
expenses, correspond to the total return of common stocks publicly traded
in the United States, as represented by the Standard & Poor's 500
Composite Stock Price Index.
Scudder Real Estate Investment Fund seeks long-term capital growth and
current income by investing primarily in equity securities of companies in
the real estate industry.
U.S. GROWTH
Value
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.
Scudder Value Fund** seeks long-term growth of capital through investment
in undervalued equity securities.
Scudder Small Company Value Fund invests for long-term growth of capital
by seeking out undervalued stocks of small U.S. companies.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.
- ----------
** Only the Scudder Shares are part of the Scudder Family of Funds.
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<PAGE>
Growth
Scudder Classic Growth Fund** seeks to provide long-term growth of capital
with reduced share price volatility compared to other growth mutual funds.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of seasoned,
financially strong U.S. growth companies.
Scudder Select 1000 Growth Fund seeks to provide long-term growth of
capital through investment in selected stocks of companies in the Russell
1000 Growth Index.
Scudder Development Fund seeks long-term growth of capital by investing
primarily in medium-size companies with the potential for sustainable
above-average earnings growth.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies poised
to be leaders in the 21st century.
GLOBAL EQUITY
Worldwide
Scudder Global Fund seeks long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt securities
convertible into common stocks.
Scudder International Value Fund seeks long-term capital appreciation
through investment primarily in undervalued foreign equity securities.
Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.
Scudder International Fund*** seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity securities.
Scudder International Growth Fund seeks long-term capital appreciation
through investment primarily in the equity securities of foreign companies
with high growth potential.
Scudder Global Discovery Fund** seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.
Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the globe.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity securities
and gold.
Regional
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
- ----------
*** Only the International Shares are part of the Scudder Family of Funds.
** Only the Scudder Shares are part of the Scudder Family of Funds.
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<PAGE>
Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.
The Japan Fund, Inc. seeks long-term capital appreciation by investing
primarily in equity securities (including American Depository Receipts) of
Japanese companies.
INDUSTRY SECTOR FUNDS
Choice Series
Scudder Financial Services Fund seeks long-term growth of capital
primarily through investment in equity securities of financial services
companies.
Scudder Health Care Fund seeks long-term growth of capital primarily
through investment in securities of companies that are engaged in the
development, production or distribution of products or services related to
the treatment or prevention of diseases and other medical problems.
Scudder Technology Fund seeks long-term growth of capital primarily
through investment in securities of companies engaged in the development,
production or distribution of technology-related products or services.
SCUDDER PREFERRED SERIES
Scudder Tax Managed Growth Fund seeks long-term growth of capital on an
after-tax basis by investing primarily in established, medium- to
large-sized U.S. companies with leading competitive positions.
Scudder Tax Managed Small Company Fund seeks long-term growth of capital
on an after-tax basis through investment primarily in undervalued stocks
of small U.S. companies.
The net asset values of most Scudder funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor .
SPECIAL PLAN ACCOUNTS
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. The
discussions of the plans below describe only certain aspects of the federal
income tax treatment of the plan. The state tax treatment may be different and
may vary from state to state. It is advisable for an investor considering the
funding of the investment plans described below to consult with an attorney or
other investment or tax adviser with respect to the suitability requirements and
tax aspects thereof.
Shares of the Funds may also be a permitted investment under profit
sharing and pension plans and IRAs other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
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Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Funds may be purchased as the investment medium under a plan
in the form of a Scudder Profit-Sharing Plan (including a version of the Plan
which includes a cash-or-deferred feature) or a Scudder Money Purchase Pension
Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code as to form.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the Funds may be purchased as the investment medium under a plan
in the form of a Scudder 401(k) Plan adopted by a corporation, a self-employed
individual or a group of self-employed individuals (including sole proprietors
and partnerships), or other qualifying organization. This plan has been approved
as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Funds may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples, even if only one spouse
has earned income). All income and capital gains derived from IRA investments
are reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- -------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------
Contributions 5% 10% 15%
- -------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
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Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- -------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------
Contributions 5% 10% 15%
- -------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
Scudder Roth IRA: Individual Retirement Account
Shares of the Funds may be purchased as the underlying investment for a
Roth Individual Retirement Account which meets the requirements of Section 408A
of the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000 per
year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions of earnings from a Roth IRA
are taxable and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, certain medical expenses, the
purchase of health insurance for an unemployed individual and education
expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.
Scudder 403(b) Plan
Shares of the Funds may also be purchased as the underlying investment for
tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Shareholders may designate
which day they want the automatic withdrawal to be processed. The check amounts
may be based on the redemption of a fixed dollar amount, fixed share amount,
percent of account value or declining balance. The Plan provides for income
dividends and capital gains distributions, if any, to be reinvested in
additional shares. Shares are then liquidated as necessary to provide for
withdrawal payments. Since the withdrawals are in amounts selected by the
investor and have no relationship to yield or income, payments received cannot
be considered as yield or income on the investment and the
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resulting liquidations may deplete or possibly extinguish the initial investment
and any reinvested dividends and capital gains distributions. Requests for
increases in withdrawal amounts or to change the payee must be submitted in
writing, signed exactly as the account is registered, and contain signature
guarantee(s) as described under "Transaction information -- Redeeming shares --
Signature guarantees" in the Funds' prospectus. Any such requests must be
received by the applicable Funds' transfer agent ten days prior to the date of
the first automatic withdrawal. An Automatic Withdrawal Plan may be terminated
at any time by the shareholder, the Trust or its agent on written notice, and
will be terminated when all shares of the Fund under the Plan have been
liquidated or upon receipt by the applicable Trust of notice of death of the
shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where satisfactory
arrangements have been made with Scudder Investor Services, Inc. for forwarding
regular investments through a single source. The minimum annual investment is
$240 per investor which may be made in monthly, quarterly, semiannual or annual
payments. The minimum monthly deposit per investor is $20. Except for trustees
or custodian fees for certain retirement plans, at present there is no separate
charge for maintaining group or salary deduction plans; however, each Trust and
its agents reserve the right to establish a maintenance charge in the future
depending on the services required by the investor.
Each Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
Each Trust reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distributions" in the Funds' combined prospectus.)
The net income of each Fund is determined as of the close of regular
trading on the Exchange, usually 4 p.m. eastern time on each day the Exchange is
open for trading.
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All the net investment income and all net realized short-term capital
gains and net realized short and long-term capital losses of SCIT so determined
normally will be declared as a dividend to shareholders of record as of
determination of the net asset value at twelve o'clock noon after the purchase
and redemption of shares. Any losses may be included in the daily dividend for
such number of days as is deemed appropriate in order to avoid a
disproportionate impact on holders of shares of beneficial interest of the Fund
on any one day on which a dividend is declared. All the net investment income
and all realized capital gains and losses on securities held for one year or
less (short-term capital gain/loss) of Treasury Fund so determined normally will
be declared as a dividend to shareholders of record as of determination of the
net asset value at twelve o'clock noon after the purchase and redemption of
shares. All the investment income of STFMF so determined normally will be
declared as a dividend to shareholders of record as of determination of the net
asset value at twelve o'clock noon after the purchase and redemption of shares.
Shares purchased as of the determination of net asset value made as of the
regular close of the Exchange will not participate in that day's dividend; in
such cases dividends commence on the next business day. Checks will be mailed to
shareholders electing to take dividends in cash, and confirmations will be
mailed to shareholders electing to invest dividends in additional shares for the
month's dividends within four business days after the dividend is calculated.
Dividends will be invested at the net asset value per share, normally $l.00,
determined as of the close of regular trading on the Exchange on the last
business day of each month.
Dividends are declared daily on each day on which the Exchange is open for
business. The dividends for a business day immediately preceding a weekend or
holiday will normally include an amount equal to the net income for the
subsequent days on which dividends are not declared. However, no daily dividend
will include any amount of net investment income in respect of a subsequent
semiannual accounting period.
Net investment income (from the time of the immediately preceding
determination thereof) consists of all interest income accrued on the portfolio
assets of a Fund, less all actual and accrued expenses. Interest income included
in the daily computation of net investment income is comprised of original issue
discount earned on discount paper accrued to the date of maturity as well as
accrued interest. Expenses of each Fund, including the management fee payable to
the Adviser, are accrued each day.
Normally, each Fund will have a positive net investment income at the time
of each determination thereof. Net investment income may be negative if an
unexpected liability must be accrued or a loss realized. If the net investment
income of a Fund determined at any time is a negative amount, the net asset
value per share will be reduced below $l.00 unless one or more of the following
steps are taken: the Trustees have the authority (1) to reduce the number of
shares in each shareholder's account, (2) to offset each shareholder's pro rata
portion of negative net investment income from the shareholder's accrued
dividend account or from future dividends, or (3) to combine these methods in
order to seek to maintain the net asset value per share at $1.00. Each Fund may
endeavor to restore the net asset value per share to $l.00 by not declaring
dividends from net investment income on subsequent days until restoration, with
the result that the net asset value per share will increase to the extent of
positive net investment income which is not declared as a dividend.
Because the net investment income of each Fund is declared as a dividend
each time the net investment income of the Fund is determined, the net asset
value per share of each Fund (i.e., the fair value of the net assets of the Fund
divided by the number of shares of the Fund outstanding) will remain at $l.00
per share immediately after each such determination and dividend declaration,
unless (i) there are unusual or extended fluctuations in short-term interest
rates or other factors, such as unfavorable changes in the creditworthiness of
issuers affecting the value of securities in the Fund's portfolio, or (ii) net
income is a negative amount.
Should a Fund incur or anticipate any unusual or unexpected significant
expense or loss which would affect disproportionately that Fund's income for a
particular period, the Trustees would at that time consider whether to adhere to
the dividend policy described above or to revise it in the light of the then
prevailing circumstances in order to ameliorate to the extent possible the
disproportionate effect of such expense, loss or depreciation on then existing
shareholders. Such expenses or losses may nevertheless result in a shareholder's
receiving no dividends for the period during which the shares are held and in
receiving upon redemption a price per share lower than that which was paid.
Distributions of realized capital gains, if any, are paid in November or
December of STFMF's taxable year, although the Fund may make an additional
distribution within three months of the Fund's fiscal year end of December 31.
STFMF expects to follow the practice of distributing all net realized capital
gains to shareholders and expects to distribute realized capital gains at least
annually. However, if any realized capital gains are retained by STFMF for
reinvestment and federal income taxes are paid thereon by the Fund, the Fund
will elect to treat such capital gains as having been distributed to
shareholders; as a result, shareholders would be able to claim their share of
the taxes paid by the Fund on such gains as a credit against their individual
federal income tax liability.
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Each Fund does not anticipate realizing any long-term capital gains.
PERFORMANCE INFORMATION
From time to time, quotations of each Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures may be calculated in the following manner:
Yield
For SCIT, Treasury Fund and STFMF, yield is the net annualized yield based
on a specified 7 calendar days calculated at simple interest rates. Yield is
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return.
The yield is annualized by multiplying the base period return by 365/7. The
yield figure is stated to the nearest hundredth of one percent. For SCIT and
Treasury Fund, the yields for the seven-day period ended June 30, 1998 were
4.81% and 4.91% respectively. If SCIT's Adviser had not absorbed a portion of
the Fund's expenses and had imposed a full management fee, the Fund's yield for
the seven-day period ended June 30, 1998 would have been 4.58%. If Treasury
Fund's Adviser had not absorbed a portion of the Fund's expenses and had imposed
a full management fee, the Fund's yield for the seven-day period ended June 30,
1998 would have been 4.36%. For STFMF, the yield for the seven-day period ended
December 31, 1998 was 2.94%. If STFMF's Adviser had not absorbed a portion of
the Fund's expenses and had imposed a full management fee, the Fund's yield for
the seven-day period ended December 31, 1998 would have been 2.89% .
Effective Yield
Effective yield is the net annualized yield for a specified 7 calendar
days assuming a reinvestment of the income or compounding. Effective yield is
calculated by the same method as yield except the effective yield figure is
compounded by adding 1, raising the sum to a power equal to 365 divided by 7,
and subtracting 1 from the result, according to the following formula:
Effective yield = [(Base Period Return + 1)^365/7] - 1.
The effective yield for the seven-day period ended June 30, 1998 was 4.92%
for SCIT and 5.03% for Treasury Fund. If SCIT's Adviser had not absorbed a
portion of the Fund's expenses and had imposed a full management fee, the Fund's
yield for the seven-day period ended June 30, 1998 would have been 4.69%. If
Treasury Fund's Adviser had not absorbed a portion of the Fund's expenses and
had imposed a full management fee, the Fund's yield for the seven-day period
ended June 30, 1998 would have been 4.48%. The effective yield for STFMF for the
seven-day period ended December 31, 1998 was 2.99%. If STFMF's Adviser had not
absorbed a portion of the Fund's expenses and had imposed a full management fee,
the Fund's yield for the seven-day period ended December 31, 1998 would have
been 2.94%.
Tax-Equivalent Yield -- Scudder Tax Free Money Fund
For STFMF, the tax-equivalent yield is the net annualized taxable yield
needed to produce a specified tax-exempt yield at a given tax rate based on a
specified 7-day period assuming a reinvestment of all dividends paid during such
period. Tax-equivalent yield is calculated by dividing that portion of the
Fund's yield (as computed in the yield description in A. above) which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the yield of the Fund that is not tax-exempt. Thus,
taxpayers with effective federal income tax rates of 36% and 39.6% would need to
earn a taxable yield of 4.13% and 4.37% respectively, to receive after-tax
income equal to the 2.64% 30-day tax-free yield of Scudder Tax Free Money Fund
on December 31, 1998.
Yield, effective yield and tax-equivalent yield are historical, show the
performance of a hypothetical investment and are not intended to indicate future
performance. Yield, effective yield and, tax-equivalent yield will vary based on
changes in market conditions and the level of the Fund's expenses.
In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to other
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unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
From time to time, in marketing pieces and other fund literature, the
Fund's yield and performance over time may be compared to the performance of
broad groups of comparable mutual funds, bank money market deposit accounts and
fixed-rate insured certificates of deposit (CDs), or unmanaged indices of
securities that are comparable to money market funds in their terms and intent,
such as Treasury bills, bankers' acceptances, negotiable order of withdrawal
accounts, and money market certificates. Most bank CDs differ from money market
funds in several ways: the interest rate is fixed for the term of the CD, there
are interest penalties for early withdrawal of the deposit, and the deposit
principal is insured by the FDIC.
Quotations of each Fund's performance are based on historical earnings and
are not intended to indicate future performance. An investor's shares when
redeemed may be worth more or less than their original cost. Performance of the
Fund will vary based on changes in market conditions and the level of each
Fund's expenses.
Average Annual Total Return
Average annual total return is the average annual compound rate of return
for the periods of one year, five years and ten years, all ended on the last day
of a recent calendar quarter. Average annual total return quotations reflect
changes in the price of a Fund's shares, if any, and assume that all dividends
and capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by finding the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.
Average Annual Total Return for periods ended June 30, 1998
One Five Ten
Year Years Years
---- ----- -----
SCIT* 4.92% 4.44% 5.34%
Treasury Fund** 4.83% 4.35% 5.10%
* If the Adviser had not absorbed a portion of SCIT expenses and had imposed
a full management fee, the average annual total return for the one year,
five year and ten year periods ended June 30, 1998, would have been lower.
** If the Adviser had not absorbed a portion of Treasury Fund expenses and
had imposed a full management fee, the average annual total return for the
one year, five year and ten year periods ended June 30, 1998, would have
been lower.
Average Annual Total Return for periods ended December 31, 1998
One Five Ten
Year Years Years
STFMF* 2.92% 2.89% 3.42%
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* If the Adviser had not absorbed a portion of STFMF expenses and had
imposed a full management fee, the average annual total return for the one
year, five year and ten year periods ended December 31, 1998, would have
been lower.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect the change in the price of a Fund's shares and assume that
all dividends and capital gains distributions during the period were reinvested
in Fund shares. Cumulative total return is calculated by finding the cumulative
rates of return of a hypothetical investment over such periods, according to the
following formula (cumulative total return is then expressed as a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 investment
made at the beginning of the applicable period.
Cumulative Total Return for periods ended June 30, 1998
One Five Ten
Year Years Years
---- ----- -----
SCIT* 4.92% 24.27% 68.26%
Treasury Fund** 4.83% 23.72% 64.38%
* If the Adviser had not absorbed a portion of SCIT's expenses and had
imposed a full management fee, the cumulative total return for the one
year, five year and ten year periods ended June 30, 1998, would have been
lower.
** If the Adviser had not absorbed a portion of Treasury Fund's expenses and
had imposed a full management fee, the cumulative total return for the one
year, five year and ten year periods ended June 30, 1998, would have been
lower.
Cumulative Total Return for periods ended December 31, 1998
One Five Ten
Year Years Years
STFMFF* 2.92% 15.31% 40.03%
* If the Adviser had not absorbed a portion of STFMF's expenses and had imposed
a full management fee, the cumulative total return for the one year, five
year and ten year periods ended December 31, 1998, would have been lower.
Total Return
Total return is the rate of return on an investment for a specified period
of time calculated in the manner as cumulative total return.
Quotations of the Funds' performance are historical, show the performance
of a hypothetical investment and are not intended to indicate future
performance. Average annual total return, cumulative total return and yield for
a Fund will vary based on changes in market conditions and the level of each
Fund's expenses. An investor's shares when redeemed may be worth more or less
than their original cost.
Investors should be aware that the principal of each Fund is not insured.
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Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
unmanaged indices which may assume reinvestment of dividends or interest but
generally do not reflect deductions for administrative and management costs.
Examples include, but are not limited to the Dow Jones Industrial Average, the
Consumer Price Index, Standard & Poor's 500 Composite Stock Price Index (S&P
500), the Nasdaq OTC Composite Index, the Nasdaq Industrials Index, the Russell
2000 Index, the Wilshire Real Estate Securities Index and statistics published
by the Small Business Administration.
From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature, Trustees and
officers of the Fund, the Fund's portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Fund. In addition, the amount of assets that the Adviser has under management in
various geographical areas may be quoted in advertising and marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment and
money market funds seek stability of principal, these investments are considered
to be less risky than investments in either bond or equity funds, which may
involve the loss of principal. However, all long-term investments, including
investments in bank products, may be subject to inflation risk, which is the
risk of erosion of the value of an investment as prices increase over a long
time period. The risks/returns associated with an investment in bond or equity
funds depend upon many factors. For bond funds these factors include, but are
not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
36
<PAGE>
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both domestic
and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical information
made by independent sources may also be used in advertisements concerning the
Fund, including reprints of, or selections from, editorials or articles about
this Fund. Sources for Fund performance information and articles about the Fund
include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC's Government
Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
37
<PAGE>
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas
for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news weekly that periodically reports
mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication issued 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
38
<PAGE>
ORGANIZATION OF THE FUNDS
Scudder Cash Investment Trust is a Massachusetts business trust
established under a Declaration of Trust dated December 12, 1975. Treasury Fund
is a Massachusetts business trust established under a Declaration of Trust dated
April 4, 1980. On February 12, 1991, the Board of Trustees of Treasury Fund
approved the change in name from Scudder Government Money Fund to Scudder U.S.
Treasury Money Fund. Scudder Tax Free Money Fund is a Massachusetts business
trust established under a Declaration of Trust dated October 5, 1979, as
amended. Each Fund's authorized capital consists of an unlimited number of
shares of beneficial interest, par value $.01 per share, all of which are one
class and have equal rights as to voting, dividends and liquidation.
Shareholders have one vote for each share held. All shares issued and
outstanding will be fully paid and non-assessable by the Funds, and redeemable
as described in this combined Statement of Additional Information and in the
Funds' prospectus. The Trustees of the Funds have the authority to issue more
than one series of shares, but have no present intention to do so. If more than
one series of shares were issued and a series were unable to meet its
obligations, the remaining series might have to assume the unsatisfied
obligations of that series.
Each Fund's activities are supervised by a Board of Trustees. Each Fund is
not required to and has no current intention of holding annual shareholder
meetings, although special meetings may be called for purposes such as electing
or removing Trustees, changing fundamental investment policies or approving an
investment management agreement. Shareholders will be assisted in communicating
with other shareholders in connection with removing a Trustee as if Section
16(c) of the 1940 Act were applicable.
The Trustees of Treasury Fund and STFMF, in their discretion, may
authorize the division of shares of each of their respective Funds (or shares of
a series) into different classes, permitting shares of different classes to be
distributed by different methods. Although shareholders of different classes
would have an interest in the same portfolio of assets, shareholders of
different classes may bear different expenses in connection with different
methods of distribution. The Trustees have no present intention of taking the
action necessary to change the method of distribution of shares of the Funds.
Each Fund has a Declaration of Trust which provides that obligations of
the Fund involved are not binding upon the Trustees individually but only upon
the property of that Fund, that the Trustees and officers will not be liable for
errors of judgment or mistakes of fact or law, and that the Fund involved will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Fund involved except if it is determined in the manner provided
in the Declarations of Trust that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Fund
involved. However, nothing in the Declarations of Trust protects or indemnifies
a Trustee or officer against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her office.
INVESTMENT ADVISER
(See "Investment adviser" in the Funds' combined prospectus.)
Scudder Kemper Investments, Inc., an investment counsel firm, acts as
investment adviser to each Fund. This organization, the predecessor of which is
Scudder, Stevens & Clark, Inc., is one of the most experienced investment
counsel firms in the U.S. It was established as a partnership in 1919 and
pioneered the practice of providing investment counsel to individual clients on
a fee basis. In 1928 it introduced the first no-load mutual fund to the public.
In 1953 the Adviser introduced Scudder International Fund, Inc., the first
mutual fund available in the U.S. investing internationally in securities of
issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, Scudder,
Stevens & Clark, Inc. ("Scudder") entered into an agreement with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich agreed to form
an alliance. On December 31, 1997, Zurich acquired a majority interest in
Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance
39
<PAGE>
Group"). Zurich and the Zurich Insurance Group provide an extensive range of
insurance products and services and have branch offices and subsidiaries in more
than 40 countries throughout the world.
The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Value Equity Trust, Scudder Fund,
Inc., Scudder Funds Trust, Global/International Fund, Inc., Scudder Global High
Income Fund, Inc., Scudder GNMA Fund, Scudder Portfolio Trust, Scudder
International Fund, Inc., Investment Trust, Scudder Municipal Trust, Scudder
Mutual Funds, Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc.,
Scudder Pathway Series, Scudder Securities Trust, Scudder State Tax Free Trust,
Scudder Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money
Fund, Scudder Variable Life Investment Fund, The Argentina Fund, Inc., The
Brazil Fund, Inc., The Korea Fund, Inc. and The Japan Fund, Inc. Some of the
foregoing companies or trusts have two or more series.
The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.
Pursuant to an Agreement between the Adviser and AMA Solutions, Inc., a
subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997,
the Adviser has agreed, subject to applicable state regulations, to pay AMA
Solutions, Inc. royalties in an amount equal to 5% of the management fee
received by the Adviser with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLinkSM Program. The Adviser
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLinkSM Program will be a customer of the Adviser (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA InvestmentLinkSM
is a service mark of AMA Solutions, Inc.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a variety of sources, including
brokers and dealers who may execute portfolio transactions for the Fund and for
clients of the Adviser, but conclusions are based primarily on investigations
and critical analyses by its own research specialists.
Certain investments may be appropriate for more than one of the Funds and
also for other clients advised by the Adviser. Investment decisions for the
Funds and other clients are made with a view to achieving their respective
investment objectives and after consideration of such factors as their current
holdings, availability of cash for investment and the size of their investments
generally. Frequently, a particular security may be bought or sold for only one
client or in different amounts and at different times for more than one but less
than all clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security. In addition,
purchases or sales of the same security may be made for two or more clients on
the same day. In such event, such transactions will be allocated among the
clients in a manner believed by the Adviser to be equitable to each. In some
cases, this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by the Funds. Purchase and sales orders for each
Fund may be combined with those of other clients of the Adviser in the interest
of achieving the most favorable net results to the Funds.
The transaction between Scudder and Zurich resulted in the assignment of
each Funds' investment management agreements with Scudder and those agreements
were deemed to be automatically terminated at the consummation of the
transaction. In anticipation of the transaction, however, new investment
management agreements between the Funds and the Adviser were approved by the
Trustees on August 6, 1997. At the special meeting of the Funds' shareholders
held on October 24, 1997, the shareholders also approved the new investment
management agreements. The new investment management agreements (the
"Agreements") became effective as of December 31, 1997 .
On September 7, 1998, the businesses of Zurich (including Zurich's 70%
interest in Scudder Kemper) and the financial services businesses of B.A.T
Industries p.l.c. ("B.A.T") were combined to form a new global insurance and
financial services company known as Zurich Financial Services Group. By way of a
dual holding company structure,
40
<PAGE>
former Zurich shareholders initially owned approximately 57% of Zurich Financial
Services Group, with the balance initially owned by former B.A.T shareholders.
Upon consummation of this transaction, each Fund's existing investment
management agreement with Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board approved new investment management agreements
(the "Agreements") with Scudder Kemper, which are substantially identical to the
former investment management agreements, except for the dates of execution and
termination. These agreements became effective September 7, 1998, upon the
termination of the then current investment management agreements, and were
approved at a shareholder meeting held on December 15, 1998.
The Agreements dated September 7, 1998 were last approved by the Trustees
of the Funds on August 10, 1998. The Agreements will continue in effect until
September 30, 1999 and from year to year thereafter only if their continuance is
approved annually by the vote of a majority of those Trustees who are not
parties to such Agreements or interested persons of the Adviser or the Fund,
cast in person at a meeting called for the purpose of voting on such approval,
and either by a vote of the Trust's Trustees or of a majority of the outstanding
voting securities of the respective Fund. The Agreements may be terminated at
any time without payment of penalty by either party on sixty days' written
notice, and automatically terminate in the event of their reassignment.
Under each Agreement, the Adviser regularly provides a Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objectives, policies and restrictions set forth, and
determines what securities shall be purchased for the portfolio of the Fund,
what portfolio securities shall be held or sold by the Fund, and what portion of
the Fund's assets shall be held uninvested, subject always to the provisions of
the Trust's Declaration of Trust and By-Laws, and of the 1940 Act and the Code
and to the Fund's investment objectives, policies and restrictions, and subject
further to such policies and instructions as the Trustees of the Trust may from
time to time establish. The Adviser also advises and assists the officers of the
Trust in taking such steps as are necessary or appropriate to carry out the
decisions of its Trustees and the appropriate committees of the Trustees
regarding the conduct of the business of the Trust.
Under each Agreement, the Adviser also renders significant administrative
services (not otherwise provided by third parties) necessary for a Fund's
operations as an open-end investment company including, but not limited to,
preparing reports and notices to the Trustees and shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring various third-party service providers to a Fund (such as a Fund's
transfer agent, pricing agents, custodian, accountants and others); preparing
and making filings with the SEC and other regulatory agencies; assisting in the
preparation and filing of a Fund's federal, state and local tax returns;
preparing and filing a Fund's federal excise tax returns; assisting with
investor and public relations matters; monitoring the valuation of securities
and the calculation of net asset value; monitoring the registration of shares of
a Fund under applicable federal and state securities laws; maintaining or
causing to be maintained for a Fund all books, record and reports to the extent
not otherwise maintained by a third party; assisting in establishing accounting
policies of a Fund; assisting in the resolution of accounting and legal issues;
establishing and monitoring a Fund's operating budget; processing the payment of
a Fund's bills; assisting a Fund in, and otherwise arranging for, the payment of
distributions and dividends, and otherwise assisting a Fund in the conduct of
its business, subject to the direction and control of the Trustees.
The Adviser pays the compensation and expenses of all affiliated Trustees
and executive employees of the Trust and makes available, without expense to the
Funds, the services of such Trustees, officers and employees as may duly be
elected Trustees, officers or employees of a Fund, subject to their individual
consent to serve and to any limitations imposed by law, and provides the Funds'
office space and facilities.
Under the Investment Management Agreement between SCIT and the Adviser
(the "Agreement"), the Fund agrees to pay the Adviser a fee equal to an annual
rate of 0.50% of the first $250,000,000 of the Fund's average daily net assets,
0.45% of the next $250,000,000 of such net assets, 0.40% of the next
$500,000,000 of such net assets and 0.35% of such net assets in excess of
$1,000,000,000 computed and accrued daily. The fee is payable monthly, provided
the Fund will make such interim payments as may be requested by the Adviser not
to exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. As manager of the assets of the Fund, 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. In
addition, the Adviser has agreed to maintain the annualized expenses of the Fund
at not more than 0.85% of average daily net assets until September 30, 1999. For
the fiscal years ended June 30, 1996, 1997
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<PAGE>
and 1998 the investment advisory fee was $5,898,959, $5,944,464 and $5,260,517,
respectively, and the fees not imposed in 1996, 1997 and 1998 amounted to $0,
$2,420 and $1,289,666, respectively.
Under the Investment Management Agreement between Treasury Fund and the
Adviser (the "Agreement"), the Fund agrees to pay the Adviser a fee equal to an
annual rate of 0.50% of its average daily net assets computed and accrued daily
and payable monthly. As manager of the assets of the Fund, 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 Adviser has agreed not to impose all or a portion of its
management fee until September 30, 1999, and during such period to maintain the
annualized expenses of the Fund at not more than 0.65% of average daily net
assets.
For these services, Treasury Fund pays the Adviser a fee equal to 0.50 of
1% of the Fund's average daily net assets. The fee is payable monthly, provided
the Fund will make such interim payments as may be requested by the Adviser not
to exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. For the fiscal years ended June 30, 1996, 1997 and 1998 the investment
advisory fee was $1,968,151, $2,095,848, and $1,995,553, respectively and the
fees not imposed amounted to $1,077,479, $1,202,181 and $1,378,392,
respectively. For the fiscal year ended June 30, 1998, $9,563 of Treasury Fund's
investment advisory fee was unpaid at June 30, 1998.
Under the Investment Management Agreement between STFMF and the Adviser
(the "Agreement"), the Fund agrees to pay the Adviser a fee equal to an annual
rate of 0.50% of the first $500 million of the Fund's average daily net assets
and 0.48% of such net assets over $500 million, payable monthly, provided the
Fund will make such interim payments as may be requested by the Adviser not to
exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. As manager of the assets of the Fund, the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies
and restrictions. The Adviser determines the securities, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. In addition, the
Adviser has agreed to maintain the annualized expenses of the Fund at not more
than 0.65% of average daily net assets until September 30, 1999. For the fiscal
years ended December 31, 1996, 1997 and 1998 the investment advisory fee was
$1,134,327, $1,120,092, and $1,284,548, respectively and the fees not imposed
amounted to $103,572, $238,094 and $167,229, respectively.
Under the Agreements, the Funds are responsible for all their other
expenses, including fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payments for portfolio
pricing services to a pricing agent, if any; legal, auditing and accounting
expenses; taxes and governmental fees; the fees and expenses of the Transfer
Agent; the cost of preparing share certificates or any other expenses, including
expenses of issuance, sale, redemption or repurchase of shares of beneficial
interest; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of Trustees, officers and employees of the Funds who
are not affiliated with the Adviser; the cost of printing and distributing
reports and notices to shareholders; and the fees and disbursements of
custodians. The Funds may arrange to have third parties assume all or part of
the expense of sale, underwriting and distribution of shares of the Funds. Each
Fund is also responsible for its expenses of shareholder meetings and expenses
incurred in connection with litigation, proceedings and claims and the legal
obligation it may have to indemnify its officers and Trustees with respect
thereto.
The expense ratios for SCIT for the fiscal years ended June 30, 1996, 1997
and 1998 were 0.83%, 0.86% and 0.85%, respectively. The ratios of expenses to
annual investment income for SCIT for the same years were 14.75%, 15.63% and
15.00%, respectively. The expense ratios for Treasury Fund for the fiscal years
ended June 30, 1996, 1997 and 1998 were 0.65%, 0.65% and 0.65%, respectively.
The ratios of expenses to annual investment income for the same periods were
11.94%, 12.65% and 12.10%, respectively. The expense ratios for STFMF for the
fiscal years ended December 31, 1996, 1997 and 1998 were 0.70%, 0.65% and 0.65%,
respectively. The ratios of expenses to annual investment income for STFMF for
the same years were 19.71%, 17.53% and 18.41%, respectively. If reimbursement is
required, it will be made as promptly as practicable after the end of a Fund's
fiscal year. However, no fee payment will be made to the Adviser during any
fiscal year which will cause year-to-date expenses to exceed the cumulative pro
rata expense limitation at the time of such payment.
Each Management Agreement identifies the Adviser as the exclusive licensee
of the rights to use and sublicense the names "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." (together, the "Scudder
Marks"). Under this license, the Trust, with respect to the Fund, has the
non-exclusive right to use and sublicense the
42
<PAGE>
Scudder name and marks as part of its name, and to use the Scudder Marks in the
Trust's investment products and services.
In reviewing the terms of the Agreements and in discussions with the
Adviser concerning the Agreements, Trustees of each Fund who are not "interested
persons" of the Fund or the Adviser are represented by independent counsel at
that Fund's expense. Dechert Price & Rhoads acts as general counsel for SCIT and
Treasury Fund. Willkie, Farr & Gallagher acts as general counsel for STFMF.
Each Agreement provides that the Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with matters to which the Agreements relate, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the Agreement.
Any person, even though also employed by Scudder, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as an agent of Scudder.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions were not
influenced by existing or potential custodial or other Fund relationships.
The Adviser may serve as adviser to other funds with investment objectives
and policies similar to those of the Funds that may have different distribution
arrangements or expenses, which may affect performance.
None of the Trustees or officers of a Fund may have dealings with that
Fund as principals in the purchase or sale of securities, except as individual
subscribers to or holders of shares of the Fund.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Principal
Occupation** Position with
Position with and Underwriter, Scudder
Name, Age and Address Fund Affiliations Investor Services, Inc.
- --------------------- ------------- ------------ -----------------------
<S> <C> <C> <C>
Daniel Pierce (65)*#@ President and Managing Director Vice President,
Trustee of Scudder Kemper Director and Assistant
Investments, Inc. Treasurer
Henry P. Becton, Jr. Trustee President and --
(55)# General Manager,
WGBH WGBH Educational
125 Western Avenue Foundation
Allston, MA 02134
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Principal
Occupation** Position with
Position with and Underwriter, Scudder
Name, Age and Address Fund Affiliations Investor Services, Inc.
- --------------------- ------------- ------------ -----------------------
<S> <C> <C> <C>
Dawn-Marie Driscoll Trustee Executive Fellow, --
(52)# Center for
4909 SW 9th Place Business Ethics;
Cape Coral, FL 33914 President,
Driscoll
Associates
(consulting firm)
Peter B. Freeman (66)# Trustee Corporate Director --
100 Alumni Avenue and Trustee
Providence, RI 02906
George M. Lovejoy, Jr. Trustee President and --
(69)# Director, Fifty
50 Congress Street, Associates (real
Ste. 43 estate corporation)
Boston, MA 02109
Dr. Wesley W. Marple, Trustee Professor of --
Jr. (67) Business
Northeastern University Administration,
360 Huntington Avenue Northeastern
Boston, MA 02115 University
Kathryn L. Quirk (46)*#+ Trustee, Vice Managing Director --
President and of Scudder Kemper
Assistant Investments, Inc.
Secretary
Jean C. Tempel (56) Trustee Venture --
10 Post Office Square Partner,
Suite 1325 Internet Capital
Boston, MA 02109-4603 Corporation
Thomas W. Joseph (60)@ Vice President Senior Vice Vice President,
President of Treasurer and
Scudder, Kemper Assistant Clerk
Investments, Inc.
Ann M. McCreary(42)+ Vice President Managing Director --
of Scudder Kemper
Investments, Inc.
Frank J. Rachwalski, Vice Managing --
Jr. (54) +++ President Director of
Scudder Kemper
Investments, Inc.
John R. Hebble (40)@ Treasurer Senior Vice --
President of
Scudder Kemper
Investments, Inc.
Caroline Pearson (37)@ Assistant Senior Vice Clerk
Secretary President of
Scudder Kemper
Investments, Inc.;
Associate, Dechert
Price & Rhoads
(law firm) 1989 to
1997.
</TABLE>
* Mr. Pierce and Ms. Quirk are considered by the Funds and their counsel to
be Trustees who are "interested persons" of the Adviser of the Fund,
within the meaning of the 1940 Act, as amended.
44
<PAGE>
** Unless otherwise stated, all officers and Trustees have been associated
with their respective companies for more than five years, but not
necessarily in the same capacity.
# Messrs. Becton, Lovejoy and Pierce and Ms. Quirk are members of the
Executive Committee for Scudder Cash Investment Trust. Messrs. Lovejoy and
Pierce and Mses. Driscoll and Quirk are members of the Executive Committee
for the Scudder U.S. Treasury Money Fund. Messrs. Freeman, Lovejoy and
Pierce and Ms. Quirk are members of the Executive Committee for Scudder
Tax Free Money Fund. The Executive Committee has the power to declare
dividends from ordinary income and distributions of realized capital gains
to the same extent as the Board is so empowered.
@ Address: Two International Place, Boston, Massachusetts 02110
+ Address: 345 Park Avenue, New York, New York 10154
++ Address: 333 South Hope Street, 37th floor, Los Angeles, CA 90071
+++ Address: 222 South Riverside Plaza, Chicago, IL
As of March 31, 1999, all Trustees and officers as a group owned
beneficially (as that term is defined under Section 13(d) of the Securities
Exchange Act of 1934) 14,772.91 shares, or 1.26%, of the shares of Scudder Cash
Investment Trust outstanding on such date.
As of March 31, 1999, all Trustees and officers as a group owned
beneficially (as that term is defined under Section 13(d) of the Securities
Exchange Act of 1934) less than 1% of the shares of Scudder U.S. Treasury Money
Fund outstanding on such date.
As of March 31, 1999, all Trustees and officers as a group owned
beneficially (as the term is defined in Section 13 (d) of the Securities
exchange Act of 1934) less than 1% of the Tax Free Money Fund outstanding on
such date.
Certain accounts for which the Adviser acts as investment adviser owned
14, 093,473 shares in the aggregate, or 5.12% of the outstanding shares of the
Tax Free Money Fund on March 31, 1999. The Adviser may be deemed to be the
beneficial owner of such shares but disclaims any beneficial ownership in such
shares.
As of March 31, 1999, 52,179,947 shares in the aggregate, 18.95% of the
outstanding shares of the Tax Free Money Fund, were held in the name of Scudder
Trust Company, Disbursement Account, c/o Laurie Clifford, 5 Industrial Way,
Salem, NH, 03079 who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
To the best of each Fund's knowledge as of March 31, 1999, no person owned
beneficially more than 5% of the Fund's outstanding shares, except as stated
above.
The Trustees and officers of each Fund also serve in similar capacities
with respect to other Scudder Funds.
REMUNERATION
Responsibilities of the Board -- Board and Committee Meetings
Each Fund's Board of Trustees is responsible for the general oversight of
each Fund's business. A majority of each Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that each Fund is managed in the best interests of
its shareholders.
The Board of Trustees for each Fund meets at least quarterly to review the
investment performance of each Fund and other operational matters, including
policies and procedures designed to ensure compliance with various regulatory
requirements. At least annually, the Independent Trustees review the fees paid
to the Adviser and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, each Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by each Fund's independent
public accountants and by independent legal counsel selected by the Independent
Trustees.
All the Independent Trustees serve on each Fund's respective Committee on
Independent Trustees, which nominates Independent Trustees and considers other
related matters, and the respective Audit Committee, which selects
45
<PAGE>
each Fund's independent public accountants and reviews accounting policies and
controls. In addition, Independent Trustees from time to time have established
and served on task forces and subcommittees focusing on particular matters such
as investment, accounting and shareholder service issues.
Compensation of Officers and Trustees
The Independent Trustees receive the following compensation from each of
SCIT, STFMF and Treasury Fund: an annual trustee's fee of $7,200 for SCIT and
$4,800 for STFMF and Treasury Fund; a fee of $150 for attendance at each Board
Meeting, Audit Committee Meeting or other meeting held for the purposes of
considering arrangements between the Trust on behalf of each Fund and the
Adviser or any affiliate of the Adviser; $150 for Audit Committee and Contract
Meetings and $75 for all other committee meetings; and reimbursement of expenses
incurred for travel to and from Board Meetings. The Independent Trustee who
serves as lead or liaison Trustee receives an additional annual retainer fee of
$500 from each Fund. No additional compensation is paid to any Independent
Trustee for travel time to meetings, attendance at directors' educational
seminars or conferences, service on industry or association committees,
participation as speakers at directors' conferences or service on special
trustee task forces or subcommittees. Independent Trustees do not receive any
employee benefits such as pension or retirement benefits or health insurance.
Notwithstanding the schedule of fees, the Independent Trustees have in the past
and may in the future waive a portion of their compensation.
In 1998, the Trustees of SCIT, STFMF and Treasury Fund met eight times in
combined Board Meetings.
The Independent Trustees also serve in the same capacity for other funds
managed by the Adviser. These funds differ broadly in type and complexity and in
some cases have substantially different Trustee fee schedules. The following
table shows the aggregate compensation received by each Independent Trustee
during 1998 from the Trusts and from all of the Scudder funds as a group.
<TABLE>
<CAPTION>
Scudder U.S.
Scudder Cash Scudder Tax Treasury
Name Investment Trust Free Money Fund Money Fund All Scudder Funds
- ---- ---------------- --------------- ---------- -----------------
<S> <C> <C> <C> <C>
Henry P. Becton, Jr.,
Trustee $7,823 $6,023 $6,023 $135,000(28)
Dawn-Marie Driscoll,
Trustee $8,249 $6,449 $6,449 $145,000(28)
Peter B. Freeman,
Trustee $8,062 $6,070 $6,070 $172,425(46)
George M. Lovejoy,
Jr., Trustee $7,823 $6,023 $6,023 $148,600(29)
Dr. Wesley W. Marple,
Jr., Trustee $7,823 $6,023 $6,023 $135,000(28)
Jean C. Temple,
Trustee $7,833 $6,033 $6,033 $135,000(29)
</TABLE>
Members of each Board of Trustees who are employees of the Adviser or its
affiliates receive no direct compensation from either Fund, although they are
compensated as employees of the Adviser, or its affiliates, as a result of which
they may be deemed to participate in fees paid by each Fund.
DISTRIBUTOR
Each Fund has an underwriting agreement with Scudder Investor Services,
Inc. Two International Place, Boston, MA 02110 (the "Distributor"), a
Massachusetts corporation, which is a wholly-owned subsidiary of the Adviser, a
Delaware corporation.
As agent, the Distributor currently offers shares of the Funds on a
continual basis to investors in all states in which the Funds may from time to
time be registered or where permitted by applicable law. The underwriting
agreement provides that the Distributor accept orders for shares at net asset
value as no sales commission or load is charged the investor. The Distributor
has made no firm commitment to acquire shares of either Fund.
46
<PAGE>
Each Fund's underwriting agreement dated September 7, 1998 will remain in
effect until September 30, 1999 and from year to year only if its continuance is
approved annually by a majority of the respective Board of Trustees who are not
parties to such agreement or "interested persons" of any such party and either
by vote of a majority of the Trustees or a majority of the outstanding voting
securities of the Fund. Each Fund has agreed to pay all expenses in connection
with registration of its shares with the SEC and auditing and filing fees in
connection with registration of its shares under the various state "blue-sky"
laws and to assume the cost of preparation of prospectuses and other expenses.
The Distributor pays all expenses of printing prospectuses used in offering
shares (other than prospectuses used by the Funds for transmission to
shareholders, for which the Funds pay printing expenses), expenses, other than
filing fees, of qualification of the respective Fund's shares in various states,
including registering each Fund as a dealer, and all other expenses in
connection with the offer and sale of shares which are not specifically
allocated to the Funds. Each Fund's underwriting agreement was approved by the
respective Fund's Trustees on August 10, 1998.
Under the underwriting agreements, each Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering each Fund as a broker or dealer; the
fees and expenses of preparing, printing and mailing prospectuses, notices,
proxy statements, reports or other communications (including newsletters) to
shareholders of each Fund; the cost of printing and mailing confirmations of
purchases of shares and the prospectuses accompanying such confirmations; any
issuance taxes or any initial transfer taxes; a portion of shareholder toll-free
telephone charges and expenses of customer service representatives; the cost of
wiring funds for share purchases and redemptions (unless paid by the shareholder
who initiates the transaction); the cost of printing and postage of business
reply envelopes; and a portion of the cost of computer terminals used by both
the Fund and the Distributor. Although each Fund does not currently have a 12b-1
Plan and shareholder approval would be required in order to adopt one, each Fund
will also pay those fees and expenses permitted to be paid or assumed by the
Fund pursuant to a 12b-1 Plan, if any, adopted by each Fund, notwithstanding any
other provision to the contrary in the underwriting agreement and each Fund or a
third party will pay those fees and expenses not specifically allocated to the
Distributor in the underwriting agreement.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the shares to
the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of each Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
customer service representatives, a portion of the cost of computer terminals,
and of any activity which is primarily intended to result in the sale of shares
issued by each Fund, unless a 12b-1 Plan is in effect which provides that the
Fund shall bear some or all of such expenses.
TAXES
(See "Distributions" and "Taxes" in the Funds' combined prospectus)
Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code, or a predecessor statute and has qualified as
such since its inception. Such qualification does not involve governmental
supervision or management of investment practices or policy.
A regulated investment company qualifying under Subchapter M of the Code
is required to distribute to its shareholders at least 90 percent of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code.
If for any taxable year a Fund does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions, would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.
Each Fund is subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires
payment to shareholders during a calendar year of distributions representing at
least 98% of a Fund's ordinary income for the calendar year, at least 98% of the
excess of its capital gains over capital losses (adjusted for certain ordinary
losses) realized during the one-year period ending October 31 during such year,
and all ordinary income and capital gains for prior years that were not
previously distributed.
47
<PAGE>
Investment company taxable income generally is made up of dividends,
interest and net short-term capital gains in excess of net long-term capital
losses, less expenses. Net realized capital gains for a fiscal year are computed
by taking into account any capital loss carryforward of a Fund.
Presently, each Fund has no capital loss carryforwards.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by each Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, each Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a proportionate share of federal income taxes paid
by each Fund on such gains as a credit against the shareholder's federal income
tax liability, and will be entitled to increase the adjusted tax basis of the
shareholder's Fund shares by the difference between such reported gains and the
shareholder's tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are not expected to comprise a
substantial part of each Fund's gross income. If any such dividends constitute a
portion of the Fund's gross income, a portion of the income distributions of the
Fund may be eligible for the 70% deduction for dividends received by
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares of
a Fund with respect to which the dividends are received are treated as
debt-financed under federal income tax law and is eliminated if either those
shares or the shares of a Fund are deemed to have been held by the Fund or the
shareholders, as the case may be, for less than 46 days during the 90-day period
beginning 45 days before the shares become ex-dividend.
Properly designated distributions of the excess of net long-term capital
gain over net short-term capital loss are taxable to shareholders as long-term
capital gains, regardless of the length of time the shares of a Fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional Shares will have a cost basis for federal income tax purposes in each
Share so received equal to the net asset value of a Share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date in such a month will be deemed
to have been received by shareholders on December 31, if paid during January of
the following year. Redemptions of shares, including exchanges for shares of
another Scudder Fund, may result in tax consequences (gain or loss) to the
shareholder and are also subject to these reporting requirements.
An individual may make a deductible IRA contribution of up to $2,000 or,
if less, the amount of the individual's earned income for any taxable year only
if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,000 per individual for married couples if only one spouse has earned income)
for that year. There are special rules for determining how withdrawals are to be
taxed if an IRA contains both deductible and nondeductible amounts. In general,
a proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.
Distributions by a Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution.
48
<PAGE>
Those purchasing just prior to a distribution will then receive a partial return
of capital upon the distribution, which will nevertheless be taxable to them.
Over-the-counter options on debt securities written or purchased by each
Fund will be subject to tax under Section 1234 of the Code. In general, no loss
will be recognized by a Fund upon payment of a premium in connection with the
purchase of a put or call option. The character of any gain or loss recognized
(i.e. long-term or short-term) will generally depend, in the case of a lapse or
sale of the option, on a Fund's holding period for the option, and in the case
of the exercise of a put option, on a Fund's holding period for the underlying
property. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of any stock in
a Fund's portfolio similar to the stocks on which the index is based. If a Fund
writes an option, no gain is recognized upon its receipt of a premium. If the
option lapses or is closed out, any gain or loss is treated as short-term
capital gain or loss. If a call option is exercised, the character of the gain
or loss depends on the holding period of the underlying stock.
Many futures and forward contracts entered into by each Fund and listed
nonequity options written or purchased by each Fund (including options on debt
securities, options on futures contracts, options on securities indices and
options on currencies), will be governed by Section 1256 of the Code. Absent a
tax election to the contrary, gain or loss attributable to the lapse, exercise
or closing out of any such position generally will be treated as 60% long-term
and 40% short-term, and on the last trading day of each Fund's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e., treated as if
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term.
Notwithstanding any of the foregoing, each Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if the Fund enters into a short sale, offsetting notional principal contract,
futures or forward contract transaction with respect to the appreciated position
or substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment of appreciated financial positions does not apply to certain
transactions closed in the 90-day period ending with the 30th day after the
close of a Fund's taxable year, if certain conditions are met.
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will recognize gain at that time as though it
had closed the short sale. Future regulations regulatories may apply similar
treatment to other transactions with respect to property that becomes
substantially worthless.
Each Fund will be required to report to the IRS all distributions of
investment company taxable income , capital gains and (should the Fund fail to
maintain a constant net asset value) as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if a Fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of each Fund may be subject to state and local taxes on
distributions received from a Fund and on redemptions of a Fund's shares.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of each Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.
49
<PAGE>
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for a Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by a Fund to reported commissions paid by others.
The Adviser routinely reviews commission rates, execution and settlement
services performed and makes internal and external comparisons.
The Funds' purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by a Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or a
Fund. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for a
Fund to pay a brokerage commission in excess of that which another broker might
charge for executing the same transaction on account of execution services and
the receipt of research services. The Adviser has negotiated arrangements, which
are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services,
to the Adviser or a Fund in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser will not place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of a Fund. In effecting transactions in
over-the-counter securities, orders are placed with the principal market makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker/dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Funds with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Funds for this service.
Although certain research services from broker/dealers may be useful to a
Fund and to the Adviser, it is the opinion of the Adviser that such information
only supplements the Adviser's own research effort since the information must
still be analyzed, weighed, and reviewed by the Adviser's staff. Such
information may be useful to the Adviser in providing services to clients other
than a Fund, and not all such information is used by the Adviser in connection
with a Fund. Conversely, such information provided to the Adviser by
broker/dealers through whom other clients of the Adviser effect securities
transactions may be useful to the Adviser in providing services to a Fund.
The Trustees review, from time to time, whether the recapture for the
benefit of the Funds of some portion of the brokerage commissions or similar
fees paid by the Funds on portfolio transactions is legally permissible and
advisable.
NET ASSET VALUE
The net asset value per share of each Fund is determined by Scudder Fund
Accounting Corporation twice daily as of twelve o'clock noon and the close of
regular trading on the Exchange on each day when the Exchange is open for
trading. The Exchange normally is closed on the following national holidays: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Net asset value per share is determined by
dividing the total assets of each Fund, less all of its liabilities, by the
total
50
<PAGE>
number of shares of each Fund outstanding. The valuation of each Fund's
portfolio securities is based upon their amortized cost which does not take into
account unrealized securities gains or losses. This method involves initially
valuing an instrument at its cost and thereafter amortizing to maturity any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price each Fund would receive if it
sold the instrument. During periods of declining interest rates, the quoted
yield on shares of each Fund may tend to be higher than a like computation made
by a fund with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by each Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in each
Fund would be able to obtain a somewhat higher yield if he purchased shares of
each Fund on that day than would result from investment in a fund utilizing
solely market values, and existing investors in each Fund would receive less
investment income. The converse would apply in a period of rising interest
rates. Other securities and assets for which market quotations are not readily
available are valued in good faith at fair value using methods determined by the
Trustees and applied on a consistent basis. For example, securities with
remaining maturities of more than 60 days for which market quotations are not
readily available are valued on the basis of market quotations for securities of
comparable maturity, quality and type. The Trustees review the valuation of each
Fund's securities through receipt of regular reports from the Adviser at each
regular Trustees' meeting. Determinations of net asset value made other than as
of the close of the Exchange may employ adjustments for changes in interest
rates and other market factors.
ADDITIONAL INFORMATION
Experts
The financial highlights of each Fund included in the Funds' prospectus
and the Financial Statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference in
reliance on the report of PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts 02109, independent accountants, and given on the authority
of that firm as experts in accounting and auditing. PricewaterhouseCoopers LLP
is responsible for performing annual audits of the financial statements and
financial highlights of each Fund in accordance with generally accepted auditing
standards and the preparation of federal tax returns.
Shareholder Indemnification
The Funds are organizations of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of that trust. The Declarations of Trust of each Fund contain an
express disclaimer of shareholder liability in connection with the Funds'
property or the acts, obligations or affairs of the Funds. The Declarations of
Trust also provide for indemnification out of the Funds' property of any
shareholder held personally liable for the claims and liabilities to which a
shareholder may become subject by reason of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations.
Other Information
Dechert Price & Rhoads acts as general counsel for SCIT and Treasury Fund.
Willkie, Farr & Gallagher acts as general counsel for STFMF.
SCIT and Treasury Fund each have a fiscal year end of June 30 . The
fiscal year end for STFMF is December 31 .
Portfolio securities of each Fund are held separately, pursuant to
separate custodian agreements, by State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02101 as custodian.
The CUSIP number of Scudder Cash Investment Trust is 811118-10-8.
The CUSIP number of Scudder Tax Free Money Fund is 811235-10-0.
The CUSIP number of Scudder U.S. Treasury Money Fund is 81123P-10-6.
51
<PAGE>
The name "Scudder Cash Investment Trust" is the designation of the Fund
for the time being under a Declaration of Trust dated December 12, 1975, the
name "Scudder U.S. Treasury Money Fund" is the designation of the Fund for the
time being under a Declaration of Trust dated April 4, 1980 and the name
"Scudder Tax Free Money Fund" is the designation of the Fund for the time being
under a Declaration of Trust dated December 9,1987, each as amended from time to
time, and all persons dealing with a Fund must look solely to the property of
that Fund for the enforcement of any claims against that Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of a Fund. Upon the initial purchase of
shares, the shareholder agrees to be bound by a Fund's Declaration of Trust, as
amended from time to time. No series is liable for the obligations of any other
series. The Declaration of Trust of each Fund is on file at the Massachusetts
Secretary of State's Office in Boston, Massachusetts.
Scudder Fund Accounting Corporation (SFAC), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes the
Funds' net asset value. Each Fund pays SFAC an annual fee equal to 0.02% of the
first $150 million of average daily net assets, 0.006% of such assets in excess
of $150 million, 0.0035% of such assets in excess of $1 billion, plus holding
and transaction charges for this service. For the fiscal years ended June 30,
1997 and 1996, SFAC charged SCIT aggregate fees of $105,874 and $104,207. For
the fiscal year ended June 30, 1998, the amount charged to SCIT by SFAC
aggregated $98,059, of which $7,867 was unpaid at June 30, 1998. For the fiscal
years ended June 30, 1997 and 1996, SFAC charged Treasury Fund aggregate fees of
$50,134 and $49,647. For the year ended June 30, 1998, the amount charged to
Treasury Fund by SFAC aggregated $50,194, of which $4,172 was unpaid at June 30,
1998. For the fiscal years ended December 31, 1997 and 1996, SFAC charged STFMF
aggregate fees of $44,913 and $45,463. For the year ended December 31, 1998, the
amount charged to STFMF by SFAC aggregated $46,090, of which $3,764 was unpaid
at December 31, 1998.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer
and dividend disbursing agent for both funds. Service Corporation also serves as
shareholder service agent for the Funds and provides subaccounting and
recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. The Funds each pay Service Corporation an annual fee of
$31.50 for each regular account and $34.50 for each retirement account
maintained for a participant. For the fiscal years ended June 30, 1997 and 1996,
Service Corporation charged SCIT aggregate fees of $2,907,025 and $2,884,988.
For the year ended June 30, 1998, the amount charged to SCIT aggregated
$3,099,779, of which $264,502 was unpaid at June 30, 1998. For the fiscal years
ended June 30, 1997 and 1996, Service Corporation charged Treasury Fund
aggregate fees of $710,792 and $682,565. For the year ended June 30, 1998, the
amount charged to Treasury Fund by SSC aggregated $698,152, of which $58,219 was
unpaid at June 30, 1998. For the fiscal years ended December 31, 1997 and 1996,
Service Corporation charged STFMF an aggregate fee of $204,129 and $221,703. For
the fiscal year ended December 31, 1998, Service Corporation charged STFMF
aggregate fees of $201,755, of which $15,635 was unpaid at December 31, 1998.
The Funds, or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are generally
held in an omnibus account.
Scudder Trust Company, Two International Place, Boston, MA 02110-4103, an
affiliate of the Adviser provides services for certain retirement plan accounts.
The Funds each pay Scudder Trust Company an annual fee of $34.50 for each
account maintained for a participant. For the fiscal years ended June 30, 1997
and 1996, Scudder Trust Company's fees amounted to $1,699,834 and $1,431,726 for
SCIT and $525,821 and $447,05 for Treasury Fund. For the year ended June 30,
1998, the amount charged to SCIT by STC aggregated $1,883,755, of which $165,923
was unpaid at June 39, 1998. For the year ended June 30, 1998, the amount
charged Treasury Fund by STC aggregated $730,475, of which $72,009 was unpaid at
June 30, 1998.
This Statement of Additional Information contains the information of
Scudder Cash Investment Trust, Scudder Tax Free Money Fund and Scudder U.S.
Treasury Money Fund. Each Fund, through its combined prospectus, offers only its
own shares, yet it is possible that one Fund might become liable for a
misstatement regarding the other Fund. The Trustees of each Fund have considered
this, and have approved the use of this Statement of Additional Information.
The Funds' combined prospectus and this combined Statement of Additional
Information omit certain information contained in the Registration Statements
which the Funds have filed with the SEC under the Securities Act of 1933 and
reference is hereby made to the Registration Statements for further information
with respect to the Funds
52
<PAGE>
and the securities offered hereby. These Registration Statements are available
for inspection by the public at the offices of the SEC in Washington, D.C.
FINANCIAL STATEMENTS
Scudder Cash Investment Trust
The financial statements, including the investment portfolio, of Scudder
Cash Investment Trust, together with the Financial Highlights and notes to
financial statements in the Semiannual Report to the Shareholders of the Fund
dated December 31, 1998, are incorporated herein by reference and are hereby
deemed to be a part of this combined Statement of Additional Information.
Scudder U.S. Treasury Money Fund
The financial statements, including the investment portfolio, of Scudder
U.S. Treasury Money Fund, together with the Financial Highlights and notes to
financial statements in the Semiannual Report to the Shareholders of the Fund
dated December 31, 1998, are incorporated herein by reference and are hereby
deemed to be a part of this combined Statement of Additional Information.
Scudder Tax Free Money Fund
The financial statements, including the investment portfolio, of Scudder
Tax Free Money Fund, together with the Report of Independent Accountants,
Financial Highlights and notes to financial statements in the Annual Report to
the Shareholders of the Fund dated December 31, 1998, are incorporated herein by
reference and are hereby deemed to be a part of this combined Statement of
Additional Information.
53
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Ratings of Municipal Obligations
The six highest ratings of Moody's for municipal bonds are Aaa, Aa, A,
Baa, Ba and B. Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards. Together with
the Aaa group, they comprise what are generally known as high-quality bonds.
Moody's states that Aa bonds are rated lower than the best bonds because margins
of protection or other elements make long-term risks appear somewhat larger than
for Aaa municipal bonds. Municipal bonds which are rated A by Moody's possess
many favorable investment attributes and are considered "upper medium grade
obligations." Factors giving security to principal and interest of A rated
municipal bonds are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future. Securities rated
Baa are considered medium grade, with factors giving security to principal and
interest adequate at present but may be unreliable over any period of time. Such
bonds have speculative elements as well as investment-grade characteristics.
Securities rated Ba or below by Moody's are considered below investment grade,
with factors giving security to principal and interest inadequate and
potentially unreliable over any period of time. Such securities are commonly
referred to as "junk" bonds and as such they carry a high margin of risk.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG2 are of high quality, with margins of protection ample although
not as large as in the preceding group.
The six highest ratings of S&P for municipal bonds are AAA (Prime), AA
(High-grade), A (Good-grade), BBB (Investment-grade) and BB and B (Below
investment-grade). Bonds rated AAA have the highest rating assigned by S&P to a
municipal obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree. Bonds
rated A have a strong capacity to pay principal and interest, although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions. Bonds rated BBB have an adequate capacity to pay principal
and interest. Adverse economic conditions or changing circumstances are likely
to lead to a weakened capacity to pay interest and repay principal for bonds of
this category than for bonds of higher rated categories. Securities rated BB or
below by S&P are considered below investment grade, with factors giving security
to principal and interest inadequate and potentially unreliable over any period
of time. Such securities are commonly referred to as "junk" bonds and as such
they carry a high margin of risk.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. The designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added for those issues determined to possess overwhelming
safety characteristics. An "SP-2" designation indicates a satisfactory capacity
to pay principal and interest.
The six highest ratings of Fitch for municipal bonds are AAA, AA, A, BBB,
BB and B. Bonds rated AAA are considered to be investment-grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated `AAA.'
Because bonds rated in the `AAA' and `AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated `f-1+.' Bonds rated A are considered to be investment grade
and of high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with higher rates.
Bonds rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse effects on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with greater ratings. Securities
rated BB or below by Fitch are considered below investment grade, with factors
giving security to principal and interest inadequate and potentially unreliable
over any period of time. Such securities are commonly referred to as "junk"
bonds and as such they carry a high margin of risk.
<PAGE>
Commercial Paper Ratings
Commercial paper rated A-1 or better by S&P has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; the issuer has access to at least two additional
channels of borrowing; and basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's industry
is well established and the issuer has a strong position within the industry.
The reliability and quality of management are unquestioned.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
The rating F-1+ is the highest rating assigned by Fitch. Among the factors
considered by Fitch in assigning this rating are: (1) the issuer's liquidity;
(2) its standing in the industry; (3) the size of its debt; (4) its ability to
service its debt; (5) its profitability; (6) its return on equity; (7) its
alternative sources of financing; and (8) its ability to access the capital
markets. Analysis of the relative strength or weakness of these factors and
others determines whether an issuer's commercial paper is rated F-1+.
Relative strength or weakness of the above factors determine how the
issuer's commercial paper is rated within the above categories.
<PAGE>
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
-------- ---------
<S> <C> <C>
(a) (1) Amended and Restated Declaration of Trust dated December 9, 1987.
(Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement.)
(2) Amendment to the Amended and Restated Declaration of Trust dated December
11, 1990.
(Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement.)
(b) (1) By-Laws dated October 5, 1979 as amended through December 19, 1979.
(Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement.)
(2) Amendment to the By-Laws dated August 13, 1991.
(Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement.)
(3) Amendment to the By-Laws dated December 10, 1991.
(Incorporated by reference to Post-Effective Amendment No. 23 to the Registration
Statement.)
(c) Inapplicable.
(d) Investment Management Agreement between the Registrant and Scudder Kemper
Investments, Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(e) Underwriting Agreement between the Registrant and Scudder Investor Services,
Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(f) Inapplicable.
(g) (1) Custodian Contract with State Street Bank and Trust Company dated December
31, 1979.
(Incorporated by reference to Post-Effective amendment No. 23 to the
Registration Statement.)
(2) Amendment to the Custodian Contract with State Street Bank and Trust Company
dated December 11, 1990.
(Incorporated by reference to Post-Effective amendment No. 23 to the
Registration Statement.)
(3) Fee schedule for Exhibit (g)(1).
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(4) Subcustodian Agreement between State Street Bank and Morgan Guaranty Trust
Company of New York dated November 25, 1985.
(Incorporated by reference to Post-Effective amendment No. 23 to the
<PAGE>
Registration Statement.)
(5) Subcustodian Agreement between State Street Bank and Irving Trust Company
dated November 30, 1987.
(Incorporated by reference to Post-Effective amendment No. 23 to the
Registration Statement.)
(6) Subcustodian Agreement between State Street Bank and Chemical Bank dated May
31, 1988.
(Incorporated by reference to Post-Effective amendment No. 23 to the
Registration Statement.)
(7) Subcustodian Agreement between State Street Bank and Security Pacific
National Trust Company (New York) dated February 18, 1988.
(Incorporated by reference to Post-Effective amendment No. 23 to the
Registration Statement.)
(8) Subcustodian Agreement between State Street Bank and Bankers Trust Company
dated August 15, 1989.
(Incorporated by reference to Post-Effective amendment No. 23 to the
Registration Statement.)
(h) (1) Transfer Agency and Service Agreement with Scudder Service Corporation dated
October 2, 1989.
(Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement.)
(2) Fee schedule for Exhibit (h)(1).
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(3) Fund Accounting Services Agreement between the Registrant and Scudder Fund
Accounting Corporation dated September 27, 1994.
(Incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement.)
(j) Consent of Legal Counsel.
Filed herein.
(j) Consent of Independent Accountants.
Filed herein.
(k) Inapplicable.
(l) Inapplicable.
(m) Inapplicable.
(n) Article 6 Financial Data schedules.
Filed herein.
(o) Inapplicable.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
2
<PAGE>
Item 25. Indemnification.
- -------- ----------------
A policy of insurance covering Scudder Kemper Investments,
Inc., its subsidiaries including Scudder Investor Services,
Inc., and all of the registered investment companies advised
by Scudder Kemper Investments, Inc. insures the Registrant's
trustees and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
act, error or accidental omission in the scope of their
duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration
of Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust. No Trustee,
officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to
the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only that arising
from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person;
and all such Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability
of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses
reasonably incurred by him in connection with any such claim
or liability. The indemnification and reimbursement required
by the preceding sentence shall be made only out of the assets
of the one or more Series of which the Shareholder who is
entitled to indemnification or reimbursement was a Shareholder
at the time the act or event occurred which gave rise to the
claim against or liability of said Shareholder. The rights
accruing to a Shareholder under this Section 4.1 shall not
impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not
specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure
to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust shall be indemnified by the Trust to the fullest extent
permitted by law against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, administrative or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
3
<PAGE>
(i) against any liability to the Trust, a Series thereof, or
the Shareholders by reason of a final adjudication by a court or other
body before which a proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or
(b)(ii) resulting in a payment by a Trustee or officer, unless there
has been a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (x) vote of a
majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then
in office act on the matter) or (y) written opinion of
independent legal counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust,
shall be severable, shall not affect any other rights
to which any Trustee or officer may now or hereafter
be entitled, shall continue as to a person who has
ceased to be such Trustee or officer and shall insure
to the benefit of the heirs, executors,
administrators and assigns of such a person. Nothing
contained herein shall affect any rights to
indemnification to which personnel of the Trust other
than Trustees and officers may be entitled by
contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense
to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section
4.3 may be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by
or on behalf of the recipient to repay such amount if
it is ultimately determined that he is not entitled
to indemnification under this Section 4.3, provided
that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act on
the matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one
who is not (i) an "Interested Person" of the Trust (including anyone
who has been exempted from being an "Interested Person" by any rule,
regulation or order of the Commission), or (ii) involved in the claim,
action, suit or proceeding.
Item 26. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
4
<PAGE>
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
5
<PAGE>
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporationoo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other
funds managed by Scudder Kemper Investments, Inc.
(b)
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 27.
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
<S> <C> <C>
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154
Mary Elizabeth Beams Vice President None
Two International Place
Boston, MA 02110
Mark S. Casady Director, President and Assistant None
Two International Place Treasurer
Boston, MA 02110
6
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154
Philip S. Fortuna Vice President None
101 California Street
San Francisco, CA 94111
William F. Glavin Vice President None
Two International Place
Boston, MA 02110
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
John R. Hebble Assistant Treasurer Treasurer
Two International Place
Boston, MA 02110
Thomas W. Joseph Director, Vice President, Treasurer Vice President
Two International Place and Assistant Clerk
Boston, MA 02110
James J. McGovern Chief Financial Officer None
345 Park Avenue
New York, NY 10154
Lorie C. O'Malley Vice President None
Two International Place
Boston, MA 02110
Caroline Pearson Clerk Assistant Secretary
Two International Place
Boston, MA 02110
Daniel Pierce Director, Vice President President and Trustee
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President, Chief Trustee, Vice President
345 Park Avenue Legal Officer and Assistant Clerk and Assistant Secretary
New York, NY 10154
7
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Robert A. Rudell Director and Vice President None
Two International Place
Boston, MA 02110
William M. Thomas Vice President None
Two International Place
Boston, MA 02110
Benjamin Thorndike Vice President None
Two International Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President and Chief Compliance None
Two International Place Officer
Boston, MA 02110
</TABLE>
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage
Underwriter Commissions and Repurchases Commissions Other Compensation
----------- ----------- --------------- ----------- ------------------
<S> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 28. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder Kemper
Investments Inc., Two International Place, Boston, MA
02110-4103. Records relating to the duties of the Registrant's
custodian are maintained by State Street Bank and Trust
Company, Heritage Drive, North Quincy, Massachusetts. Records
relating to the duties of the Registrant's transfer agent are
maintained by Scudder Service Corporation, Two International
Place, Boston, Massachusetts.
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
Inapplicable.
8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 27th of April, 1999.
SCUDDER TAX FREE MONEY FUND
By /s/Daniel Pierce
------------------------------------
Daniel Pierce, President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Daniel Pierce
- --------------------------------------
Daniel Pierce* President (Principal Executive April 22, 1999
Officer) and Trustee
/s/Henry P. Becton, Jr.
- --------------------------------------
Henry P. Becton, Jr.* Trustee April 22, 1999
- --------------------------------------
Dawn-Marie Driscoll Trustee April 22, 1999
- --------------------------------------
Peter B. Freeman Trustee April 22, 1999
- --------------------------------------
George M. Lovejoy, Jr. Trustee April 22, 1999
/s/Wesley W. Marple, Jr.
- --------------------------------------
Wesley W. Marple, Jr.* Trustee April 22, 1999
/s/Jean C. Tempel
- --------------------------------------
Jean C. Tempel Trustee April 22, 1999
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
- --------------------------------------
Kathryn L. Quirk Trustee, Vice President & Assistant April 22, 1999
Secretary
/s/John R. Hebble
- --------------------------------------
John R. Hebble Treasurer (Principal Financial April 22, 1999
Officer)
</TABLE>
*By: /s/Sheldon Jones
----------------------------------
Sheldon Jones, Esq.
Attorney-in-fact pursuant to powers of attorney
contained in the signature pages of Post-Effective
Amendment No. 23 to the Registration Statement filed on
December 29, 1997.
2
<PAGE>
File No. 2-65669
File No. 811-2959
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 26
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 28
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER TAX FREE MONEY FUND
9
<PAGE>
SCUDDER TAX FREE MONEY FUND
EXHIBIT INDEX
(i)
(j)
(n)
10
April 28, 1999
Scudder Tax Free Money Fund
Two International Place
Boston, Massachusetts 02110
Re: Post-Effective Amendment No. 26 to Registration Statement
(Securities Act File No. 2-65669; Investment Company Act
File No. 811-2959)
---------------------------------------------------------
Ladies and Gentlemen:
You have requested us, as counsel to Scudder Tax Free Money Fund (the "Trust"),
a business trust organized under the laws of the Commonwealth of Massachusetts,
to furnish you with this opinion in connection with the Trust's filing of
Post-Effective Amendment No. 26 to its Registration Statement on Form N-1A (the
"Amendment").
As to the various questions of fact material to the opinion expressed herein we
have relied upon and assumed the genuineness of the signatures on, the
conformity to originals of, and the authenticity of, all documents, including
but not limited to certificates of officers of the Trust, submitted to us as
originals or copies, which facts we have not independently verified. We have
also examined such other records, documents, papers, statutes and authorities as
we have deemed necessary to form a basis for the opinion hereinafter expressed.
Capitalized terms used herein but not otherwise defined have the meanings
ascribed to them in the Amendment.
Based on the foregoing, we are of the opinion that the shares of beneficial
interest of the Trust, when duly sold, issued and paid for in accordance with
the laws of applicable jurisdictions and the terms of the Trust's Prospectus and
Statement of Additional Information included as part of the Amendment, and
assuming at the time of sale such shares will be sold at a sales price in each
case in excess of their par value, will be valid, legally issued, fully paid and
non-assessable. We note, however, that shareholders of a Massachusetts business
trust may under certain circumstances be subject to assessment at the instance
of creditors to pay the obligations of such trust in the event that its assets
are insufficient for the purpose.
<PAGE>
Scudder Tax Free Money Fund
April 28, 1999
Page 2
We are members of the Bar of the State of New York and do not hold ourselves out
as being conversant with the laws of any jurisdiction other than those of the
United States of America and the State of New York. We note that we are not
licensed to practice law in the Commonwealth of Massachusetts, and to the extent
that any opinion expressed herein involves the law of the Commonwealth of
Massachusetts, such opinion should be understood to be based solely upon our
review of the documents referred to above, the published statutes of the
Commonwealth of Massachusetts, and where applicable, published cases, rules or
regulations of regulatory bodies of the Commonwealth of Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the Amendment.
Very truly yours,
/s/Willkie Farr & Gallagher
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Prospectus and
Statement of Additional Information constituting the Post-Effective Amendment
No. 26 to the Registration Statement on Form N-1A (the "Registration Statement")
of Scudder Tax Free Money Fund, of our report dated February 9, 1999, on the
financial statements and financial highlights appearing in the December 31, 1998
Annual Report to the Shareholders of Scudder Tax Free Money Fund, which is also
incorporated by reference into the Registration Statement. We further consent to
the references to our Firm under the headings "Financial Highlights," in the
Prospectus and "Experts" in the Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Tax Free Money Fund Annual Report for the fiscal year ended 12/31/98 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 0
<NAME> Scudder Tax Free Money Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 245,583,812
<INVESTMENTS-AT-VALUE> 245,583,812
<RECEIVABLES> 5,222,070
<ASSETS-OTHER> 1,092,865
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 251,898,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,060,459
<TOTAL-LIABILITIES> 3,060,459
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 249,541,228
<SHARES-COMMON-STOCK> 248,667,568
<SHARES-COMMON-PRIOR> 282,883,282
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (702,940)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 248,838,288
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,075,116
<OTHER-INCOME> 0
<EXPENSES-NET> 1,671,590
<NET-INVESTMENT-INCOME> 7,403,526
<REALIZED-GAINS-CURRENT> (3,898)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,399,628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,401,457)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,093,015,777
<NUMBER-OF-SHARES-REDEEMED> (1,134,001,313)
<SHARES-REINVESTED> 6,769,820
<NET-CHANGE-IN-ASSETS> (34,217,545)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (699,042)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,284,548
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,838,819
<AVERAGE-NET-ASSETS> 257,549,081
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
