SCUDDER
INVESTMENTS
[LOGO]
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MONEY MARKET/TAX FREE
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Scudder Tax Free
Money Fund
Fund #071
Semiannual Report
November 30, 1999
The fund seeks to provide income exempt from regular federal income tax and
stability of principal through investments in municipal securities.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Contents
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4 Letter from the Fund's President
6 Portfolio Management Discussion
10 Glossary of Investment Terms
11 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
23 Officers and Trustees
24 Investment Products and Services
28 Scudder Solutions
2 | Scudder Tax Free Money Fund
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Scudder Tax Free Money Fund
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ticker symbol STFXX fund number 071
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Date of Inception: o Reflecting the rising interest rate environment, the
1/9/80 total return of Scudder Tax Free Money Fund exceeded
the return of the average taxable money market fund
Total Net Assets as for the six- and 12-month periods ended November 30,
of 11/30/99: 1999, according to Lipper Analytical Services, Inc.
$214.9 million
o As of the close of the six-month fiscal period, the
fund was providing a 3.18% 7-day yield, which
translates into a 5.26% taxable equivalent yield for
investors in the 39.6% federal tax bracket.
o Management lengthened the average maturity over the
period to take advantage of rising interest rates.
o The portfolio remained invested in high quality
short-term tax free money market securities rated in
the top two categories.
3 | Scudder Tax Free Money Fund
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Letter from the Fund's President
Dear Shareholders,
In 1999 we witnessed another year of strong performance for the equity markets
as large-cap growth, especially technology stocks, recorded impressive returns.
Against the current backdrop of high consumer confidence, robust economic
growth, and low inflation, these generous returns have had the potential to make
other asset classes seem less important to an investor's overall portfolio.
However, we believe the role of a highly liquid and high quality holding has, in
fact, taken on renewed importance after such a prolonged rise for selected
equities. While we believe that the economy remains healthy overall, strong
gains in certain sectors can have the effect of unintentionally increasing one's
exposure to a particular asset class or industry sector. Given this potential,
we encourage shareholders to carefully review their holdings to ensure
appropriate allocations.
As a shareholder in Scudder Tax Free Money Fund you already hold a key element
of a well-diversified portfolio. The fund's conservative, high quality, and very
liquid investments can provide relative stability, tax free income, and a
short-term parking place for a portion of your investment portfolio. With
short-term interest rates rising and inflation still relatively low, investors
are seeing some of the best real yields for money market funds in years. For a
detailed discussion of the fund's investment strategy and portfolio positioning,
I encourage you to read the
4 | Scudder Tax Free Money Fund
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Portfolio Management Discussion with Frank Rachwalski and Jerri Cohen beginning
on page 6.
For current information on the fund and your account, visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
the most recent performance, the latest news on Scudder products and services,
and the opportunity to perform account transactions. You can also speak with one
of our representatives by calling 1-800-SCUDDER (1-800-728-3337).
In closing, I would like to inform you that Daniel Pierce, president of the
fund, retired in June. At that time I assumed his role and responsibilities. We
are fortunate that Dan's long-standing affiliation with Scudder is ongoing, and
that we will continue to benefit from his counsel. I am pleased to join the
fund's team in this capacity, and look forward to serving your interests.
Thank you for your continued investment in Scudder Tax Free Money Fund.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder Tax Free Money Fund
5 | Scudder Tax Free Money Fund
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Portfolio Management Discussion
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November 30, 1999
In the following interview, portfolio managers Frank Rachwalski and Jerri Cohen
discuss the market environment and their approach to managing the fund.
Q: The Federal Open Market Committee (FOMC), the Federal Reserve Bank's
implementer of economic policy, raised interest rates three times over the
six-month period. How did this affect tax free money market securities?
A: The Fed's rate hikes have resulted in significant increases in the yields for
money market securities, and has contributed to the rise of the fund's yield.
Over the last six months the Fed effectively reversed its three rate cuts of
1998 with three quarter-point rate hikes (see "Changes in the Federal Funds
Rate" below). The reversal primarily reflects the effectiveness of the original
rate cuts, which were intended to stabilize the financial markets in the wake of
the Asian financial market crisis in the third quarter of 1998.
With U.S. economic growth continually exceeding expectations throughout most of
1999 and the financial markets rebounding strongly, Fed policy appeared
successful -- perhaps more successful than anticipated. Gross domestic product,
a measure of U.S. economic growth, grew a strong 4.27% for the 12-month period
ended September 30, 1999. Such strong growth can spark inflation but,
impressively, inflation has remained benign, increasing only 2.32% over the same
12-month period. However, there have been signs that inflationary pressures are
building, including the low levels of unemployment, rising oil prices, and
rising asset prices for real estate and selected stocks. As of the end of the
period, interest rates have returned to -- and exceeded -- levels existing prior
to the Asian crisis.
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Changes in the Federal Funds Rate
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Federal Funds Old rate New rate Change
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June 30 4.75% 5.00% +0.25%
August 24 5.00% 5.25% +0.25%
November 16 5.25% 5.50% +0.25%
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6 | Scudder Tax Free Money Fund
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Q: How did you manage the fund in this environment?
A: Our primary focus has been on maintaining a sufficient level of liquidity
while taking advantage of what the market is offering. As rates rose over the
six-month period we increased the portfolio's average maturity to lock in
attractive yields. We accomplished this by reducing our holdings of
variable-rate demand notes and lengthening the maturity of our holdings of
tax-exempt commercial paper. Over the period, the portfolio's average maturity
rose from 29 days to 46 days. This compares to the 47-day average maturity for
the average first tier tax free money market fund at the end of the period.
Q: How did the fund perform?
A: Reflecting the rising interest rate environment, the Scudder Tax Free Money
Fund's 7-day yield rose from 2.68% to 3.18% over the six months, which translate
into compound effective yields of 2.71% and 3.23%, respectively. For comparison
purposes, we've included a table listing the taxable equivalent yields for the
fund below. From a total return standpoint, the fund exceeded the average return
of tax free money market funds for both the six- and 12-month periods according
to Lipper Analytical Services, Inc.1 The fund returned 1.39% for the six months
and 2.66% for the 12 months, which compares to average tax free money market
fund returns of 1.36% for 133 funds and 2.62% for 134 funds for the same
periods, respectively.
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Taxable Equivalent Yields
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Federal Tax Brackets
28% 31% 36% 39.6%
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7-day yield 4.42% 4.61% 4.97% 5.26%
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The taxable equivalent yield is the tax free yield adjusted for an individual's
tax rate. In effect, an investor in the 39.6% federal tax bracket earns the
taxable equivalent of 5.26%. To the extent that income is derived from municipal
obligations in an investor's state of residency, a portion of the fund's income
may also be exempt from state taxes.
1 Lipper is an independent analyst of investment performance. Performance
includes reinvestment of dividends and capital gains. Past performance
is no guarantee of future results.
7 | Scudder Tax Free Money Fund
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Q: What is the quality of the short-term securities that you buy for the
portfolio?
A: The fund only invests in high quality instruments. By that we mean issues
that are rated in the top two rating categories according to major credit rating
agencies, such as Fitch Investors Service, Moody's Investor Service, or Standard
and Poor's. The top two ratings have the lowest risk of default and, while not
insured by the FDIC or guaranteed, these securities are among the safest
available outside of US Treasury bills. Basically, our philosophy is that we are
not paid to take credit risk. In the case of lower rated securities, the risk of
default is not worth the small yield advantage.
Q: You are able to allocate the portfolio's assets across a variety of tax free
money market instruments. How did you manage diversification?
A: Typically, we maintain exposure to a broad selection of short-term tax free
money market securities, including high quality commercial paper and
variable-rate demand notes. Variable-rate demand notes are securities with
floating rates that are adjusted weekly or daily to capture current yields and
preserve liquidity. Because of attractive characteristics, these securities
continue to comprise a significant portion of the portfolio at 49% of net
assets. Tax-exempt commercial paper, the fund's second largest holding at 43% of
net assets, boosts stability by allowing the fund to lock in relatively
attractive rates over a longer period.
Q: What is your outlook for interest rates?
A: While we did not expect the Fed to raise interest rates again in 1999 (the
Fed left rates unchanged at its December 21 meeting), we are expecting the trend
toward higher short-term rates to continue in early 2000. We think the Fed and
many investors remain concerned about the strong growth of the U.S. economy.
With an acceleration of growth in selected foreign countries and the Fed poised
to snuff out the first hint of higher inflation, we think there
8 | Scudder Tax Free Money Fund
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is a greater than not likelihood of rate increases. From a credit quality
standpoint, we have no concerns right now. Treasury bill yields -- an important
benchmark for short-term tax free money market securities -- are proportional to
longer maturity securities and the market appears to be very liquid. Based on
this outlook, we expect to maintain the portfolio's current positioning while
seeking to capitalize on attractive opportunities as they arise.
9 | Scudder Tax Free Money Fund
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Glossary of Investment Terms
Federal Open The committee that sets interest rate and credit policies
Market for the Federal Reserve System. The committee decides
Committee whether to increase or decrease interest rates through
(FOMC) open-market operations. The committee's actions are
closely watched and interpreted by economists and stock
and bond market analysts, who try to predict whether the
Fed is seeking to tighten credit to reduce inflation or to
loosen credit to stimulate the economy.
Gross Gross domestic product is a commonly referenced measure of
Domestic the health of the U.S. economy and refers to the market
Product (GDP) value of the goods and services produced by labor and
property in the United States. Economic growth that is
overly strong can lead to accelerating inflation;
weakening growth can lead to a recession.
Inflation An overall increase in prices usually measured by the
Consumer Price Index (CPI) and the Producer Price Index
(PPI). CPI is calculated by the U.S. Bureau of Labor
Statistics and measures the cost of a basket of goods and
services over time. The PPI is calculated by the U.S.
Department of Labor and measures the wholesale cost of
goods over a specified period.
Maturity The date a debt instrument is due and payable. For money
market securities, a short maturity provides better
investment flexibility, but tends to provide a lower
yield; a long maturity provides a higher yield, but
requires the investor to tie up money for a longer period
(less flexibility).
Tax-Exempt Short-term debt obligations with maturities ranging from 1
Commercial to 270 days, issued by state and local municipalities.
Paper These instruments are usually backed by a line or letter
of credit from a major bank and liquidity.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
Additional glossary terms are available at our Internet Web site --
www.scudder.com.
10 | Scudder Tax Free Money Fund
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Investment Portfolio as of November 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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Municipal Investments 100.0%
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<S> <C> <C>
Alabama
Birmingham, AL, Special Care Facilities Financing Authority,
Tax Exempt Commercial Paper, 3.8%, 2/16/2000 ............ 1,000,000 1,000,000
Mobile, AL, Special Care Facilities Financing Authority,
Tax Exempt Commercial Paper, 3.8%, 1/26/2000 ............ 2,000,000 2,000,000
Arizona
Apache County, AZ, Industrial Development Revenue,
Tuscan Electric Co., Springerville Project:
Series 1983 B, Weekly Demand Note, 3.95%,
12/15/2018* ......................................... 2,500,000 2,500,000
Series 1985 A, Weekly Demand Note, 4%, 12/1/2020* ..... 1,500,000 1,500,000
Salt River, AZ, Agricultural Improvement and Power District,
Tax Exempt Commercial Paper, 3.85%, 2/14/2000 ........... 3,000,000 3,000,000
Colorado
Colorado Health Facilities Authority, Frasier Meadows
Manor Project, Weekly Demand Note, 3.92%, 6/1/2021* ..... 2,980,000 2,980,000
Colorado Student Loan Revenue Authority,
Weekly Demand Note, AMT, 3.9%, 9/1/2024* ................ 2,700,000 2,700,000
District of Columbia
District of Columbia, General Obligation:
Series A2, Daily Demand Note,
3.85%, 10/1/2007* ..................................... 2,800,000 2,800,000
Series B1, Daily Demand Note, 4%, 6/1/2003* ............. 2,300,000 2,300,000
Florida
Hillsborough, FL, Industrial Development Authority, Tax
Exempt Commercial Paper, AMT, 3.7%, 12/13/1999 .......... 2,400,000 2,400,000
Orange County, FL, Health Facilities Authority, Tax Exempt
Commercial Paper, 3.65%, 2/10/2000 ...................... 3,200,000 3,200,000
Orange County, FL, Health Facilities Authority,
Presbyterian Retirement Communities, Weekly Demand
Note, 3.95%, 11/1/2028* ................................. 2,800,000 2,800,000
Putnam County, FL, Pollution Control Revenue, Seminole
Electric Cooperative Finance Corp.,
Weekly Demand Note, 3.9%, 3/15/2014* .................... 2,390,000 2,390,000
Sunshine State, FL, Governmental Financing Commission:
Tax Exempt Commercial Paper, 3.9%, 2/17/2000 ............ 5,300,000 5,300,000
Tax Exempt Commercial Paper, 3.8%, 3/10/2000 ............ 3,000,000 3,000,000
Georgia
Dekalb County, GA, Industrial Development Authority,
Atlanta Jewish Community Center, Weekly Demand
Note, 3.9%, 9/1/2024* ................................... 1,500,000 1,500,000
The accompanying notes are an integral part of the financial statements.
11 | Scudder Tax Free Money Fund
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Principal
Amount ($) Value ($)
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Georgia, Municipal Electric Authority of Georgia,
Tax Exempt Commercial Paper:
3.7%, 1/12/2000 ...................................... 1,000,000 1,000,000
3.85%, 2/14/2000 ..................................... 3,500,000 3,500,000
Monroe, GA, Industrial Development Authority, Tax
Exempt Commercial Paper, 3.7%, 2/18/2000 ............... 4,000,000 4,000,000
Illinois
Illinois Development Finance Authority, Pollution Control
Revenue, Series 1997B, Weekly Demand Note, AMT,
4%, 4/1/2032 (b)* ...................................... 1,700,000 1,700,000
Illinois Educational Facilities Authority, Tax Exempt
Commercial Paper, 3.75%, 2/15/2000 ..................... 4,125,000 4,125,000
Illinois Health Facilities Authority, Tax Exempt Commercial
Paper, 3.85%, 2/16/2000 ................................ 2,000,000 2,000,000
Indiana
Indiana Health Facilities Financing Authority, Tax Exempt
Commercial Paper, 3.8%, 2/9/2000 ....................... 5,000,000 5,000,000
Jasper City, IN, Pollution Control Revenue, Northern
Indiana Public Service Co, Tax Exempt Commercial Paper,
3.9%, 12/8/1999 ........................................ 2,500,000 2,500,000
Kentucky
Lexington, KY, Industrial Development Authority, YMCA of
Central Kentucky, Weekly Demand Note, 4%,
7/1/2019* .............................................. 2,000,000 2,000,000
Mason County, KY, East Kentucky Power Cooperative,
Pollution Control Revenue, Weekly Demand Note, 3.9%,
10/15/2014* ............................................ 2,900,000 2,900,000
Mayfield, KY, Multi-City Lease Revenue, Kentucky League
of Cities Funding Trust, Series 1996, Weekly Demand
Note, 3.95%, 7/1/2026* ................................. 1,650,000 1,650,000
Pendelton County, KY, Tax Exempt Commercial Paper:
3.8%, 2/8/2000 ......................................... 2,000,000 2,000,000
3.65%, 2/11/2000 ....................................... 3,000,000 3,000,000
Louisiana
West Baton Rouge, LA, Dow Chemical Project, Tax Exempt
Commercial Paper, 3.75%, 2/10/2000 ..................... 1,950,000 1,950,000
Michigan
Michigan State Strategic Fund, Hope Network Project,
Series A, Weekly Demand Note, 3.95%, 9/1/2023* ......... 4,185,000 4,185,000
Wayne County, MI, Detroit Metropolitan County Airport,
Series 1996 B, Weekly Demand Note, AMT, 3.85%,
12/1/2016* ............................................. 2,715,000 2,715,000
Minnesota
Cottage Grove, MN, Environmental Control Revenue,
Minnesota Mining and Manufacturing, Series 1982,
Weekly Demand Note, 4.08%, 8/1/2012* ................... 1,100,000 1,100,000
The accompanying notes are an integral part of the financial statements.
12 | Scudder Tax Free Money Fund
<PAGE>
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Principal
Amount ($) Value ($)
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Mississippi
Clairborne County, MS, Pollution Control Revenue, Tax
Exempt Commercial Paper, 4%, 12/1/1999 ............... 500,000 500,000
Missouri
St. Louis, MO, Airport Revenue Municipal Securities Trust
Receipts, Series SGA 71, Weekly Demand Note, AMT,
4.03%, 7/1/2022 (b)* ................................. 3,000,000 3,000,000
Nebraska
Omaha, NE, Public Power Authority, Tax Exempt
Commercial Paper, 3.85%, 2/11/2000 ................... 1,000,000 1,000,000
Nevada
Las Vegas, NV, Valley Water Authority, Tax Exempt
Commercial Paper, 3.75%, 1/24/2000 ................... 4,000,000 4,000,000
New Hampshire
New Hampshire Business Finance Authority, Pollution
Control Revenue, Tax Exempt Commercial Paper,
3.6%, 2/16/2000 ...................................... 3,000,000 3,000,000
New Jersey
Salem County, NJ, Industrial Pollution Control Financing
Authority, E.I. du Pont de Nemours and Co., Weekly
Demand Note, 3.8%, 3/1/2012* ......................... 9,400,000 9,400,000
New York
Nassau County, NY, Tax Anticipation Note, Series C,
3.5%, 12/22/1999 ..................................... 1,300,000 1,300,290
North Dakota
Mercer County, ND, Pollution Control Revenue,
Cooperative Finance Corp., United Power, Weekly
Demand Note, 3.9%, 8/15/2014* ........................ 2,900,000 2,900,000
Oklahoma
Oklahoma Development Revenue Bonds, LGX Project,
Weekly Demand Note, AMT, 4.1%, 6/1/2018* ............. 3,200,000 3,200,000
Oregon
Clackamas County, OR, Hospital Facilities Authority,
Senior Living Facilities, Marys Woods, Weekly
Demand Note, 4%, 5/15/2029* .......................... 4,000,000 4,000,000
Pennsylvania
Bucks County, PA, Oxford Falls Plaza Project, Weekly
Demand Note, 4.07%, 10/1/2014* ....................... 9,100,000 9,100,000
Pennsylvania Higher Education Assistance Agency, Student
Loan Revenue, Series 1997 A, Weekly Demand Note,
AMT 4%, 3/1/2027* .................................... 2,000,000 2,000,000
Philadelphia, PA, Tax and Revenue Anticipation Notes,
Series A, 4.25%, 6/30/2000 ........................... 1,900,000 1,907,990
The accompanying notes are an integral part of the financial statements.
13 | Scudder Tax Free Money Fund
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Principal
Amount ($) Value ($)
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Tennessee
Maury County, TN, Industrial Development Board,
Water Facility Revenue, Weekly Demand Note, AMT,
4.05%, 6/1/2027* ..................................... 2,880,000 2,880,000
Texas
Brazos River Authority, TX, Pollution Control Revenue,
Daily Demand Note, AMT, 3.9%, 6/1/2030 (b)* .......... 500,000 500,000
Camp County, TX, Industrial Development Authority,
Pollution Control Revenue, Texas Oil & Gas Corp.,
Weekly Demand Note, 3.95%, 12/1/2013* ................ 2,500,000 2,500,000
Harris County, TX, Health Facilities Revenue, Saint Lukes
Episcopal Hospital, Series A, Daily Demand Note
3.7%, 2/15/2027* ..................................... 3,000,000 3,000,000
Houston, TX, Tax Exempt Commercial Paper, 3.8%,
3/12/2000 ............................................ 4,000,000 4,000,000
Houston, TX, Water and Sewer Authority, Tax Exempt
Commercial Paper:
3.85%, 1/20/2000 ..................................... 3,600,000 3,600,000
3.75%, 2/24/2000 ..................................... 3,100,000 3,100,000
North Central, TX, Health Facilities Development Corp.,
Presbyterian Medical Center, Series C, Daily Demand
Note, 3.7%, 12/1/2015 (b)* ........................... 100,000 100,000
Panhandle-Plains, TX, Higher Education Authority,
Student Loan Revenue, Series 1997 Y, Weekly Demand
Note, AMT:
3.85%, 10/1/2002* .................................... 2,500,000 2,500,000
3.85%, 6/1/2025* ..................................... 1,900,000 1,900,000
San Antonio, TX, Electric & Gas Public Services:
Tax Exempt Commercial Paper, 3.75%, 1/24/2000 ........ 5,000,000 5,000,000
SG #79, Weekly Demand Note, 3.98%, 2/1/2018* ......... 2,000,000 2,000,000
SG #48, Weekly Demand Note, 4%, 2/1/2020* ............ 2,000,000 2,000,000
San Antonio, TX, Industrial Development Authority, River
Center Associates Project, Weekly Demand Note, 4%,
12/1/2012* ........................................... 3,000,000 3,000,000
State of Texas, Tax and Revenue Anticipation Notes, 4.5%,
8/31/2000 ............................................ 7,300,000 7,341,541
Utah
UT, Intermountain Power Agency Tax Exempt
Commercial Paper:
3.85%, 3/8/2000 ...................................... 3,000,000 3,000,000
3.85%, 3/9/2000 ...................................... 4,000,000 4,000,000
3.85%, 3/20/2000 ..................................... 1,000,000 1,000,000
Utah Board of Regents, Student Loan Revenue, Series 1988,
Weekly Demand Note AMT, 3.95%, 11/1/2013 (b)* ........ 2,500,000 2,500,000
The accompanying notes are an integral part of the financial statements.
14 | Scudder Tax Free Money Fund
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Principal
Amount ($) Value ($)
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Virginia
Chesterfield, VA, Virginia Energy and Power Co, Tax Exempt
Commercial Paper, 3.9%, 2/8/2000 ....................... 2,300,000 2,300,000
Louisa County, VA, Industrial Development Authority,
Virginia Energy and Power Co, Tax Exempt Commercial
Paper:
3.75%, 12/17/1999 ...................................... 2,000,000 2,000,000
3.85%, 1/19/2000 ....................................... 4,000,000 4,000,000
Virginia, Peninsula Ports Authority, Tax Exempt Commercial
Paper, 3.8%, 1/27/2000 ................................. 4,000,000 4,000,000
Virginia Port Authority Facility, Municipal Trust Receipts,
SG 111, Series 1997, Weekly Demand Note, AMT, 4.03%,
7/1/2024 (b)* .......................................... 2,605,000 2,605,000
West Virginia
Randolph County, WV, Industrial Development
Revenue, Allegheny Woods Products Project, Weekly
Demand Note, AMT, 4.10%, 12/1/2007* .................... 2,760,000 2,760,000
Wisconsin
Eau Claire, WI, Solid Waste Revenue, Pope & Talbot Inc. ...
Weekly Demand Note, AMT, 4.1%, 11/1/2014* .............. 2,400,000 2,400,000
Wausau, WI, Pollution Control Revenue, Minnesota Mining
and Manufacturing:
Series 1982, Weekly Demand Note, 4.08%, 8/1/2017* .... 2,300,000 2,300,000
Series 1983, Weekly Demand Note, 4.08%, 12/1/2001* ... 900,000 900,000
Whitewater, WI, Industrial Development Authority, MacLean
Fogg Project, Weekly Demand Note, 4.05%, 12/1/2009* .... 1,000,000 1,000,000
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Total Investment Portfolio -- 100.0% (Cost $210,189,821) (a) 210,189,821
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</TABLE>
(a) The cost for federal income tax purposes was $210,189,821.
(b) Bond is insured by one of these companies: AMBAC, FGIC, FSA or
MBIA/BIG.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such
as the coupon-equivalent of the U.S. Treasury Bill rate. Variable rate
demand notes are securities whose interest rates are reset periodically
at levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and
normally incorporate an irrevocable letter of credit or line of credit
from a major bank. These notes are carried, for purposes of calculating
average weighted maturity, at the longer of the period remaining until
the next rate change or to the extent of the demand period. These
securities are shown at their current rate as of November 30, 1999.
AMT: Subject to alternative minimum tax.
The accompanying notes are an integral part of the financial statements.
15 | Scudder Tax Free Money Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities as of November 30, 1999 (Unaudited)
Assets
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Investments in securities, at value (cost $210,189,821)....... $ 210,189,821
Cash ......................................................... 1,471,756
Receivable for investments sold .............................. 380,000
Receivable for Fund shares sold .............................. 2,141,796
Interest receivable .......................................... 1,093,032
Other assets .................................................. 13,314
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Total assets ................................................. 215,289,719
Liabilities
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Payable for Fund shares redeemed ............................. 222,504
Dividends payable ............................................ 38,868
Accrued management fee ....................................... 59,858
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Total liabilities ............................................ 321,230
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Net assets, at value $ 214,968,489
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Net Assets
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Net assets consist of:
Accumulated net realized gain (loss) ......................... (702,940)
Paid-in capital .............................................. 215,671,429
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Net assets, at value $ 214,968,489
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Net Asset Value
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Net Asset Value, offering and redemption price per share
($214,968,489 / 214,799,983 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) ..................................... $ 1.00
The accompanying notes are an integral part of the financial statements.
16 | Scudder Tax Free Money Fund
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Statement of Operations for the six months ended November 30, 1999
(Unaudited)
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Investment Income
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Interest ...................................................... $ 3,977,650
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Expenses:
Management fee ................................................ 587,142
Services to shareholders ...................................... 132,192
Custodian and accounting fees ................................. 39,541
Trustees' fees and expenses ................................... 19,241
Reports to shareholders ....................................... 4,772
Auditing ...................................................... 20,027
Registration fees ............................................. 15,130
Legal ......................................................... 4,938
Other ......................................................... 5,696
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Total expenses, before expense reductions ..................... 828,679
Expense reductions ............................................ (65,395)
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Total expenses, after expense reductions ...................... 763,284
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Net investment income 3,214,366
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Net increase (decrease) in net assets resulting from operations $ 3,214,366
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The accompanying notes are an integral part of the financial statements.
17 | Scudder Tax Free Money Fund
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Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Six Months
Ended
November 30, Five Months Year Ended
Increase (Decrease) in Net 1999 Ended May 31, December 31,
Assets (Unaudited) 1999 1998
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Operations:
<S> <C> <C> <C>
Net investment income ........................................ $ 3,214,366 $ 2,612,316 $ 7,403,526
Net realized gain (loss) ..................................... -- -- (3,898)
--------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from operations........................... 3,214,366 2,612,136 7,399,628
--------------- --------------- ---------------
Distributions to shareholders:
From net investment income ................................... (3,214,366) (2,614,750) (7,401,457)
--------------- --------------- ---------------
Fund share transactions at net asset value of $1.00 per share:
Proceeds from shares sold .................................... 642,911,777 702,916,893 1,093,015,777
Reinvestment of distributions ................................ 2,963,771 2,401,066 6,769,820
Cost of shares redeemed ...................................... (688,290,217) (696,770,475) (1,134,001,313)
--------------- --------------- ---------------
Net increase (decrease) in net
assets from Fund share transactions........................ (42,414,669) 8,547,484 (34,215,716)
--------------- --------------- ---------------
Increase (decrease) in net assets ............................ (42,414,669) 8,544,870 (34,217,545)
Net assets at beginning of period ............................ 257,383,158 248,838,288 283,055,833
Net assets at end of period .................................. $ 214,968,489 $ 257,383,158 $ 248,838,288
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 | Scudder Tax Free Money Fund
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1999(a) 1998(b) 1998(c) 1997(c) 1996(c) 1995(c) 1994(c)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------
Income from investment
operations:
Net investment income .014 .010 .029 .031 .029 .032 .022
Less distributions from:
Net investment
income and net
realized gains on
investment
transactions (d) (.014) (.010) (.029) (.031) (.029) (.032) (.022)
Net asset value, end
of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------
Total Return (%) 1.39(e)** 1.03(e)** 2.92(e) 3.10(e) 2.91(e) 3.27 2.26
Ratios to Average Net Assets and Supplemental Data
- ------------------------------------------------------------------------------------------
Net assets, end of
period ($ millions) 215 257 249 283 220 239 257
Ratio of expenses
before expense
reductions (%) .71* .75* .71 .76 .75 .75 .77
Ratio of expenses
after expense
reductions (%) .65* .65* .65 .65 .70 .75 .77
Ratio of net
investment income (%) 2.74* 2.46* 2.87 3.06 2.86 3.21 2.24
</TABLE>
(a) For the six months ended November 30, 1999 (Unaudited).
(b) For the five months ended May 31, 1999. On August 10, 1998, the Board
of Trustees of the Fund changed the fiscal year end from December 31 to
May 31.
(c) Years ended December 31.
(d) Net realized capital gains (losses) were 6/10 of 1(cent) per share.
(e) Total returns may have been lower had certain expenses not been
reduced.
* Annualized
** Not annualized
19 | Scudder Tax Free Money Fund
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
A. Significant Accounting Policies
Scudder Tax Free Money Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company organized as a Massachusetts business trust. On
August 10, 1998, the Fund changed its year end for financial reporting and
federal income tax purposes to May 31 from December 31.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. The Fund values all portfolio securities utilizing the
amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act
and pursuant to which the Fund must adhere to certain conditions. Under this
method, which does not take into account unrealized gains or losses on
securities, an instrument is initially valued at its cost and thereafter assumes
a constant accretion/amortization to maturity of any discount/premium.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. Accordingly, the Fund paid no federal income taxes and no
federal income tax provision was required.
At May 31, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $703,000, which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until May 31, 2000
($7,000), May 31, 2001 ($29,000), May 31, 2002 ($38,000), May 31, 2003
($78,000), May 31, 2004 ($544,000), May 31, 2005 ($3,000) and May 31, 2006
(4,000) the respective expiration dates, whichever occurs first.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. Net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not
20 | Scudder Tax Free Money Fund
<PAGE>
distributed, and, therefore, will be distributed to shareholders at least
annually.
The timing and characterization of certain income and capital gains distribution
are determined annually in accordance with federal tax regulations which may
differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
B. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with these agreements. The management fee
payable under the Agreement is equal to an annual rate of 0.50% on the first
$500,000,000 of average daily net assets, and 0.48% of such net assets in excess
of $500,000,000, computed and accrued daily and payable monthly. The Adviser has
agreed to maintain the annualized expenses of the Fund at not more than 0.65% of
average daily net assets until September 30, 2000. For the six months ended
November 30, 1999, the Adviser did not impose a portion of its fee, amounting to
$59,042, and the portion imposed amounted to $528,100, which was equivalent to
an annualized effective rate of 0.45% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended November 30, 1999, the amount charged to the Fund by SSC
aggregated $75,047, of which $28,721 is unpaid at November 30, 1999.
21 | Scudder Tax Free Money Fund
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended November 30, 1999, the amount charged to the Fund by SFAC aggregated
$22,242, of which $7,120 is unpaid at November 30, 1999.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended November 30, 1999, Trustees' fees and expenses aggregated $19,241.
C. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $4,814 and $1,539, respectively, under
these arrangements.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
22 | Scudder Tax Free Money Fund
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Kathryn L. Quirk*
o President and Trustee o Trustee, Vice President and
Assistant Secretary
Henry P. Becton, Jr.
o Trustee; President and Jean C. Tempel
General Manager, WGBH Educational o Trustee; Venture Partner,
Foundation Internet Capital Group
Dawn-Marie Driscoll Ann M. McCreary*
o Trustee; Executive Fellow, Center o Vice President
for Business Ethics, Bentley
College; President, Driscoll Frank J. Rachwalski, Jr.*
Associates o Vice President
Peter B. Freeman John Millette*
o Trustee; Corporate Director o Vice President and Secretary
and Trustee
John R. Hebble*
George M. Lovejoy, Jr. o Treasurer
o Trustee; President and Director,
Fifty Associates; Chairman Caroline Pearson*
Emeritus, Meredith and Grew, Inc. o Assistant Secretary
Wesley W. Marple, Jr. *Scudder Kemper Investments, Inc.
o Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
23 | Scudder Tax Free Money Fund
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
24 | Scudder Tax Free Money Fund
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
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**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
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.
25 | Scudder Tax Free Money Fund
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
26 | Scudder Tax Free Money Fund
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
27 | Scudder Tax Free Money Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
INVESTMENTS
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
