SCUDDER
INVESTMENTS(SM)
[LOGO]
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MONEY MARKET/TAX FREE
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Scudder Tax Free
Money Fund
Fund #071
Annual Report
May 31, 2000
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
12 Investment Portfolio
18 Financial Statements
21 Financial Highlights
22 Notes to Financial Statements
25 Report of Independent Accountants
26 Tax Information
27 Officers and Trustees
28 Investment Products and Services
30 Scudder Solutions
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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 Short-term interest rates continued to rise over the
1/9/80 12-month period, directly benefiting money market
securities.
o As of May 31, 2000, Scudder Tax Free Money Fund was
Total Net Assets providing a 3.64% 7-day yield, which translates into
as of 5/31/00: a 6.03% taxable equivalent yield for investors in the
$267.2 million 39.6% federal tax bracket.
o An opportunistic strategy and commitment to high
quality money market securities resulted in a total
return of 3.09%, which ranked the fund in the top third
of 137 tax free money market funds for the 12-month
period ended May 31, 2000.^1
o Management maintained a shorter average maturity than
that of its peers over most of the period, providing
liquidity and the flexibility to reinvest in higher
yielding securities, especially toward the end of
the period.
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and is no guarantee of future results. For the period ended May 31,
2000, Scudder Tax Free Money Fund's Lipper ranking was 45 out of 137
funds for the one-year period, 62 out of 124 funds for the three-year
period, 65 out of 115 funds for the five-year period, and 44 out of 73
funds for the ten-year period.
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Letter from the Fund's President
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Dear Shareholders,
Until March 10 the great bull market for "new economy" stocks seemed
unstoppable. However, rising interest rates eventually proved too much, as many
stocks with high valuations and little or no earnings experienced sharp
declines. While we believe the economy is being transformed by a technological
revolution, the now lower valuations have helped reduce the level of market
risk.
This kind of economic revolution combined with wide market swings can be
unnerving for investors. Yet, experience tells us that the best approach during
such periods is to take a step back and review one's long term investment goals.
It is easy to get caught up in the quickly shifting winds, especially when it
has become only more convenient and economical to move from one investment to
the next. While adjusting your investment portfolio by adding new investments
and harvesting others should be a regular ritual, I encourage you to remain
focused on your original purposes for investing.
If you are investing for retirement in 20 years and are seeking long-term gains,
you should continue to invest in funds that will help you best achieve those
ends, such as domestic and international equity funds. If you are investing for
the short-term (1-2 years) and don't want to risk your principal, you should not
be considering technology or other narrowly focused funds for a substantial
portion of your portfolio. Stick to your plan, stay focused, and avoid the
latest fad. Unless you plan to devote your full time energies to investing every
day, we think you will be
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better served by taking a long-term approach that includes exposure to several
asset classes. This includes domestic and international stock, small-cap, fixed
income, and money market funds.
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 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 moderate, investors are seeing some of the
best real yields for money market funds in years. For a detailed discussion of
management's investment strategy and portfolio positioning, I encourage you to
read the 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).
Thank you for your continued investment in Scudder Tax Free Money Fund.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President,
Scudder Tax Free Money Fund
5
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Portfolio Management Discussion
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May 31, 2000
In the following interview, portfolio managers Frank J. Rachwalski, Jr. and
Jerri I. Cohen discuss the market environment and their approach to managing the
fund.
Q: The U.S. stock and bond markets winced with each increase in short-term
interest rates by the Federal Reserve. How did the rate increases affect money
market securities over the 12-month period?
A: Money market securities are directly impacted by changes in short-term rates,
especially the federal funds rate, an important benchmark that is widely watched
by fixed income investors. With the U.S. economy strong, unemployment near an
all time low, and consumer confidence high, concerns over an acceleration of the
inflation rate took center stage. Since the Federal Reserve ("the Fed") has the
responsibility to conduct the nation's monetary policy and maintain stability of
the financial system, it continued to raise the federal funds rate in response
to these trends (see Changes in the Federal Funds Rate below).
Despite raising rates six times and one-and-three-quarters percentage points
over the 12 months in attempts to slow growth, the resiliency of the U.S.
economy continued to be impressive.
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Changes in the Federal Funds Rate
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Federal Funds New rate Change
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June 30, 1999 5.00% +0.25%
August 24 5.25% +0.25%
November 16 5.50% +0.25%
February 2, 2000 5.75% +0.25%
March 21 6.00% +0.25%
May 16 6.50% +0.50%
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The federal funds rate is the interest rate charged by banks with excess
reserves at the Federal Reserve district bank to banks needing overnight loans
to meet reserve requirements. The federal funds rate is the most sensitive
indicator of the direction of interest rates, since it is set daily by the
market and represents a very short maturity -- an overnight loan.
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In the first quarter of this year, gross domestic product grew 5.5%. Reflecting
signs that inflationary pressures have been building, the consumer price index
rose 3.1%, up significantly from the beginning of the 12-month period.
While we think the Fed is closer to achieving its objectives of slowing the
economy and controlling inflation, another rate hike is likely. With recent
consumer confidence numbers suggesting that consumers are not afraid and are
continuing their buying spree, we think the Fed will have to pursue a policy of
raising interest rates for the near term. However, the Fed may take a cautious
approach to raising rates prior to the November elections.
Q: How did you manage the portfolio in this environment?
A: We pursued two strategies, reflecting the two distinct environments over the
12 months -- the period leading up to the end of 1999 and the year-to-date
period. Toward the end of 1999, we focused on maintaining a sufficient level of
liquidity in the portfolio while taking advantage of what the market was
offering. Generally, this meant maintaining a shorter average maturity than our
peers. This strategy was driven by our cautionary approach to the Y2K
changeover, which some had speculated might result in a shift to short-term
money market instruments at year-end. We maintained a higher than normal level
of liquidity in the portfolio in order to be prepared for potentially high
investor demand for cash. By maintaining a shorter maturity in the rising rate
environment, our existing holdings matured more quickly, which enabled us to
invest in higher yielding securities sooner than if we had maintained a longer
average maturity. A limitation of this strategy is that we gave up a small
amount of current yield by maintaining a shorter maturity.
As it turned out, the Fed pumped a great deal of money into the financial system
by allowing monetary reserves to grow rapidly in the fourth quarter of 1999.
Some speculated that this super-liquid market helped to fuel the
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strong stock market rally. We think that remaining very liquid (by maintaining a
relatively short maturity at year-end) was the right approach. If we were
invested in longer term securities and there had been a high demand for cash by
investors, it could have been costly to raise cash at that time.
Q: How did the environment change at the beginning of 2000?
A: Y2K concerns essentially evaporated at the beginning of this year, and it
appeared likely that the Fed would begin reducing the excess market liquidity.
However, the portfolio's average maturity still remained shorter than its peers,
given our expectations that rates would continue to rise. At the end of the
period, the portfolio had an average maturity of 22 days, which compares to
about 35 days for the average tax free money market fund.
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Portfolio Maturity
(Average number of days)
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
5/99 29
6/99 19
7/99 21
8/99 26
9/99 36
10/99 42
11/99 46
12/99 38
1/00 28
2/00 27
3/00 23
4/00 19
5/00 22
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Q: How did the fund perform?
A: Reflecting the rising interest rate environment, the fund's yield rose.
Scudder Tax Free Money Fund's 7-day yield increased from 2.68% to 3.64% over the
12 months, which translated into compound effective yields of 2.71% and 3.70%,
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's one year return ranked among the top
one-third of 137 tax free money market funds as of May 31, 2000 according to
Lipper Analytical Services, Inc.
Q: What is the quality of the short-term securities that you buy for the
portfolio?
A: We only invest in "first-tier" short-term securities in the portfolio. By
that we mean issues that are rated in the top rating categories according to
major credit rating agencies, such as Fitch Investors Service, Moody's Investors
Service, or Standard and Poor's. The top 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 U.S. Treasury bills. Basically, our philosophy is
that it does not pay to take on additional credit risk given the relatively
small yield advantage.
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Taxable Equivalent Yields on May 31, 2000
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Federal Tax Brackets
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28% 31% 36% 39.6%
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7-day yield 5.06% 5.28% 5.69% 6.03%
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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
equivalent of 6.03% from a taxable investment. 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.
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Q: The fund can invest in a variety of short-term securities. How did you
allocate the fund's assets?
A: The fund's allocation of investments tends to remain about the same over
time. Typically, we maintain exposure to a broad selection of short-term tax
free money market securities, including variable-rate demand notes and high
quality commercial paper. Variable-rate demand notes are securities with
floating rates that are adjusted weekly or daily to capture current yields and
preserve liquidity. Because of their attractive characteristics, these
securities comprised a significant portion of the portfolio at 59% of assets.
Tax-exempt commercial paper, the fund's second largest holding at 37% of assets,
boosts stability by allowing the fund to lock in relatively attractive rates
over a period of one to three months.
Q: What is your outlook for interest rates?
A: As we mentioned earlier, we think the Fed will raise rates at least one more
time before the November elections. However, we think the Fed may eventually be
able to ease off its current policy of raising short-term interest rates because
of recent signs that the economy may be slowing in reaction to the higher rate
environment. Knowing when to stop raising rates is a tough job for the Fed since
the rate increases take time to work their way through the economy. Typically it
takes six months for the effects to begin showing up, so the braking effects on
growth of this year's rate hikes are still yet to come. In any event, this is a
great environment for tax free money market fund investors because interest
rates are rising and real yields (after subtracting inflation and adjusting for
one's tax bracket) are still providing investors with very attractive returns.
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Scudder Tax Free Money Fund:
A Team Approach to Investing
Scudder Tax Free Money Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals, each of whom plays an important role in the
fund's management process. Team members work together to develop investment
strategies and select securities for the fund's portfolio. They are supported by
the Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in offices across the United States and abroad.
The Adviser believes that a team approach benefits fund investors by bringing
together many disciplines and leveraging the firm's extensive resources.
Lead portfolio manager Frank J. Rachwalski, Jr. joined the Adviser in 1973 and
has over 26 years of experience in short-term fixed income investing and
research. Mr. Rachwalski assumed responsibility for the fund's investment
strategy and operations in January 1998.
Portfolio manager Jerri I. Cohen joined the Adviser in 1981 and has 18 years of
investment industry experience. Ms. Cohen joined the team in 1998.
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Investment Portfolio as of May 31, 2000
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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<S> <C> <C>
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Municipal Investments 100.0%
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Alabama
Mobile, AL, Special Care Facilities Financing Authority,
Series B, Weekly Demand Note, 4.55%, 11/15/2039* ...... 3,000,000 3,000,000
Alaska
City of Valdez, AK, Marine Terminal Revenue
Bonds, ARCO Transmission Project,
Tax Exempt Commercial Paper:
4.5%, 6/9/2000 ...................................... 3,000,000 3,000,000
5.55%, 6/9/2000 ..................................... 2,500,000 2,500,000
Arizona
Salt River, AZ, Agricultural Improvement and Power
District, Tax Exempt Commercial Paper:
4.05%, 6/12/2000 .................................... 2,000,000 2,000,000
4.05%, 6/13/2000 .................................... 3,000,000 3,000,000
Colorado
Colorado Student Loan Revenue Authority, Series 1990,
Weekly Demand Note, AMT, 4.2%, 9/1/2024* .............. 2,700,000 2,700,000
District of Columbia
District of Columbia, General Fund Recovery Series B-3,
Daily Demand Note, 4.5%, 6/1/2003* .................... 2,500,000 2,500,000
Florida
Florida Housing Finance Agency, Multi-family-- Hampton
Lakes, Weekly Demand Note, 4.35%, 7/1/2008* ........... 4,000,000 4,000,000
Gainesville, FL, Utility System, Tax Exempt Commercial
Paper, 4.7%, 8/11/2000 ................................ 3,000,000 3,000,000
Hillsborough County, FL, Industrial Development Authority,
Exempt Facilities Revenue, Series A, AMT, Monthly
Demand Note, 4.45%, 4/1/2030* ......................... 4,300,000 4,300,000
Jacksonville, FL, Industrial Development Authority
Revenue, Airport Hotel Project, Weekly Demand Note,
4.15%, 7/1/2013* ...................................... 3,000,000 3,000,000
Miami-Dade County, FL, Industrial Development Authority
Revenue, Weekly Demand Note, 4.45%, 9/1/2029* ......... 4,000,000 4,000,000
Sarasota County, FL, Public Hospitals, Variable Rate
Demand Hospital Revenue Bonds, Sarasota Hospital
Project, Tax Exempt Commercial Paper, 5.5%,
6/8/2000 .............................................. 4,800,000 4,800,000
Sunshine State Governmental Financing Commission of
Florida, Weekly Demand Note, 4.3%, 7/1/2016* (b) ...... 4,000,000 4,000,000
Georgia
Fulton County, GA, Development Authority Pollution
Control Revenue, General Motors Corp. Project, Weekly
Demand Note, 4.1%, 12/1/2001* ......................... 2,000,000 2,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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<S> <C> <C>
Municipal Electric Authority of Georgia, Tax Exempt
Commercial Paper:
4.1%, 6/13/2000 ...................................... 3,000,000 3,000,000
4.15%, 6/13/2000 ..................................... 2,000,000 2,000,000
Willacoochie, GA, Pollution Control Authority Revenue,
Weekly Demand Note, 4.45%, 5/1/2021* ................... 2,000,000 2,000,000
Illinois
Du Page County, IL, Benet Academy Capital Building,
Weekly Demand Note, 4.35%, 4/1/2030* ................... 2,000,000 2,000,000
Illinois Development Finance Authority, Pollution Control
Revenue, Weekly Demand Note, AMT, Series 1997B,
4.35%, 4/1/2032* (b) ................................... 1,700,000 1,700,000
Illinois Health Facilities Authority, Tax Exempt Commercial
Paper, 4.05%, 6/14/2000 ................................ 2,000,000 2,000,000
Indiana
Indiana Health Facilities Financing Authority Revenue,
Ascension Health Credit, Series B, Weekly Demand
Note, 4.55%, 11/15/2039* ............................... 2,000,000 2,000,000
Jasper County, IN, Pollution Control Revenue Bonds,
Northern Indiana Public Service Project, Tax Exempt
Commercial Paper, 4.45%, 6/20/2000 ..................... 4,000,000 4,000,000
Portage, IN, Economic Development Revenue,
Breckenridge Apartments Project, Weekly Demand
Note, AMT, 4.55%, 5/1/2025* ............................ 3,850,000 3,850,000
Rockport, IN, Pollution Control Revenue, Indiana &
Michigan Electric Co., Series A, Weekly Demand Note,
4.35%, 8/1/2014* ....................................... 3,000,000 3,000,000
Sullivan, IN, Pollution Control Revenue Bonds, Hoosier
Energy Rural Electric Cooperative, Tax Exempt
Commercial Paper, 4.7%, 9/7/2000 ....................... 2,000,000 2,000,000
Kentucky
Danville, KY, Multi Lease Revenue, Multi-City Lease
Revenue Bonds, Muni-League Pooled Lease Finance
Program, Tax Exempt Commercial Paper:
4.15%, 6/12/2000 ..................................... 4,000,000 4,000,000
4.6%, 6/12/2000 ...................................... 50,000 50,000
Lexington, KY, Industrial Development Authority, YMCA
of Central Kentucky, Weekly Demand Note, 4.35%,
7/1/2019* .............................................. 2,000,000 2,000,000
Mason County, KY, East Kentucky Power Cooperative,
Pollution Control Revenue, Weekly Demand Note,
4.35%, 10/15/2014* ..................................... 4,900,000 4,900,000
Pendleton County, KY, Multi-County Lease Revenue Bonds,
Tax Exempt Commercial Paper:
4.05%, 6/13/2000 ....................................... 2,000,000 2,000,000
4.05%, 6/14/2000 ....................................... 2,000,000 2,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
---------------------------------------------------------------------------------
<S> <C> <C>
Louisiana
West Baton Rouge, LA, Dow Chemical Project, Pollution
Control Revenue Bonds, Tax Exempt Commercial
Paper, 4.75%, 8/10/2000 .............................. 1,950,000 1,950,000
Maryland
Anne Arundle County, MD, General Obligation Bond
Anticipation Notes, Tax Exempt Commercial Paper,
4.7%, 9/7/2000 ....................................... 2,200,000 2,200,000
Michigan
Delta County, MI, Economic Development Corp.,
Environmental Impact Revenue, AMT, Monthly Demand
Note, 4.4%, 12/1/2023* ............................... 1,300,000 1,300,000
Michigan State Job Development Authority Revenue,
Gordon Food Services Project, Weekly Demand Note,
4.45%, 8/1/2015* ..................................... 4,000,000 4,000,000
Michigan State Strategic Fund, Obligation Revenue,
Weekly Demand Note, AMT, 4.45%, 11/1/2019* ........... 2,200,000 2,200,000
Michigan Strategic Fund, Tax Exempt Commercial
Paper, 4.1%, 6/22/2000 ............................... 2,000,000 2,000,000
Oakland County, MI, Economic Development Corp.,
Limited Obligation Revenue, Weekly Demand Note,
AMT, 4.45%, 5/1/2012* ................................ 3,000,000 3,000,000
University of Michigan, University Revenue, Series 1995A,
Daily Demand Bond, 4.35%, 12/1/2027* ................. 4,900,000 4,900,000
Minnesota
Cottage Grove, MN, Environmental Control Revenue,
Minnesota Mining and Manufacturing, Series 1982,
Weekly Demand Note, 4.64%, 8/1/2012* ................. 1,100,000 1,100,000
Mississippi
Claiborne County, MS, Pollution Control Revenue Bonds,
Tax Exempt Commercial Paper, 4.25%, 6/14/2000 ........ 1,300,000 1,300,000
Missouri
Missouri State Development & Finance Board, Cargo
Facilities Revenue, Weekly Demand Note, AMT, 4.54%,
3/1/2030* ............................................ 2,000,000 2,000,000
St. Louis, MO, Airport Revenue Municipal Securities Trust
Receipts, AMT, Weekly Demand Note, 4.22%,
7/1/2022* (b) ........................................ 3,000,000 3,000,000
Nevada
Las Vegas, NV, Valley Water Authority, Tax Exempt
Commercial Paper, 4.05%, 6/12/2000 ................... 3,000,000 3,000,000
New Hampshire
New Hampshire General Obligation, Tax Exempt
Commercial Paper, 4.7%, 8/14/2000 .................... 2,000,000 2,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
-----------------------------------------------------------------------------------
<S> <C> <C>
New Jersey
Salem County, NJ, Industrial Pollution Control Financing
Authority, E.I. du Pont de Nemours and Co., Weekly
Demand Note, 4.5%, 3/1/2012* ........................... 7,900,000 7,900,000
New York
Long Island, NY, Power Authority, Electric System
Subordinated Revenue Bond, Tax Exempt Commercial
Paper, 4.4%, 7/11/2000 ................................. 2,700,000 2,700,000
Nassau County, NY, Tax Anticipation Note, Series C,
4.75%, 12/21/2000 ...................................... 1,000,000 1,003,726
New York City, NY, General Obligation Unlimited, Daily
Demand Note, 4.3%, 8/15/2005* (b) ...................... 1,800,000 1,800,000
New York City, NY, Municipal Water, Tax Exempt
Commercial Paper, 4.75%, 8/31/2000 ..................... 3,300,000 3,300,000
Ohio
Ohio State Higher Educational Facilities Commission
Revenue, Series B, Weekly Demand Note, 4.35%,
9/1/2020* .............................................. 1,840,000 1,840,000
Oklahoma
Oklahoma City, OK, Industrial and Cultural Facilities Trust
Revenue Bonds, Tax Exempt Commercial Paper, 4.65%,
8/14/2000 .............................................. 2,000,000 2,000,000
Oklahoma Development Revenue Bonds, LGX Project 1998,
AMT, Weekly Demand Note, 4.45%, 6/1/2018* .............. 3,095,000 3,095,000
Oregon
Clackamas County, OR, Hospital Facilities Authority, Senior
Living Facilities, Marys Woods, Weekly Demand Note,
4.45%, 5/15/2029* ...................................... 4,000,000 4,000,000
Pennsylvania
Bucks County, PA, Oxford Falls Plaza Project, Weekly
Demand Note, 4.53%, 10/1/2014* ......................... 7,600,000 7,600,000
Dallastown, PA, Area School District, General Obligation,
Weekly Demand Note, 4.38%, 2/1/2018* (b) ............... 4,000,000 4,000,000
Delaware County, PA, Tax Exempt Commercial Paper,
4.05%, 6/12/2000 ....................................... 2,800,000 2,800,000
Emmaus, PA, General Authority Revenue, Series A, Weekly
Demand Note, 4.38%, 3/1/2030* (b) ...................... 5,000,000 5,000,000
Lancaster County, PA, Hospital Authority Revenue,
Healthcenter-Luthercare Project, Weekly Demand Note,
4.4%, 2/15/2029* ....................................... 1,025,000 1,025,000
Pennsylvania Higher Education Assistance Agency, Student
Loan Revenue, Series 1997 A, Weekly Demand Note,
4.4%, 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 1,901,093
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
-----------------------------------------------------------------------------------
<S> <C> <C>
South Carolina
South Carolina Public Service Authority, Tax Exempt
Commercial Paper, 4.75%, 7/13/2000 .................... 3,000,000 3,000,000
Tennessee
Maury County, TN, Industrial Development Board, Water
Facility Revenue, Saturn Corp. Project, Weekly
Demand Note, AMT, 4.35%, 6/1/2027* .................... 4,630,000 4,630,000
Texas
Brazos River, TX, Harbor NAV, Adjustable Tender Pollution
Control Revenue Bonds, Tax Exempt Commercial Paper,
4.55%, 7/19/2000 ...................................... 2,000,000 2,000,000
Harris County, TX, Tax Exempt Commercial Paper, 4.65%,
9/7/2000 .............................................. 3,335,000 3,335,000
Houston, TX, Water and Sewer Authority, Tax Exempt
Commercial Paper, 4.65%, 8/14/2000 .................... 3,600,000 3,600,000
San Antonio, TX, Electric & Gas Municipal Securities Trust
Receipts, SG #79, Series 1996, Weekly Demand Note,
4.38%, 2/1/2018* ...................................... 2,000,000 2,000,000
San Antonio, TX, Tax Exempt Commercial Paper, 4.1%,
6/22/2000 ............................................. 3,000,000 3,000,000
State of Texas, Tax and Revenue Anticipation Note,
4.5%, 8/31/2000 ....................................... 7,300,000 7,313,797
Tarrant County, TX, Health Facilities Development Corp. ..
Revenue, Weekly Demand Note, 4.35%, 11/15/2027* ....... 3,200,000 3,200,000
Texas Municipal Power Agency, Tax-Exempt
Commercial Paper:
4.15%, 6/19/2000 .................................... 2,000,000 2,000,000
4.55%, 8/23/2000 .................................... 5,000,000 5,000,000
Texas Small Business Industrial Development Corp.,
Industrial Development Revenue, Texas Public Facilities
Cap Access, Monthly Demand Note, 4.35%, 7/1/2026* ..... 8,100,000 8,100,000
University of Texas, Permanent University Fund Bonds,
Tax Exempt Commercial Paper, 4.5%, 7/12/2000 .......... 4,000,000 4,000,000
Waco, TX, Industrial Development Corp., Economic
Development Revenue, Patriot Homes of Texas Project,
Weekly Demand Note, AMT, 4.45%, 6/1/2014* ............. 4,700,000 4,700,000
Utah
Salt Lake County, UT, Pollution Control Revenue, British
Petroleum Service Station Holdings Project, Series
1994-B, Daily Demand Note, 4.3%, 8/1/2007* ............ 1,000,000 1,000,000
Intermountain Power Agency, Tax Exempt Commercial
Paper, 4.7%, 8/24/2000 ................................ 5,000,000 5,000,000
Vermont
Vermont Educational & Health Buildings Finance Agency,
Weekly Demand Note, 4.05%, 12/1/2030* (b) ............. 3,000,000 3,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------------
<S> <C> <C>
Virginia
Chesterfield County, VA, Industrial Development Authority
Pollution Control Revenue Bonds, Tax Exempt
Commercial Paper, 4.05%, 6/13/2000 ..................... 1,700,000 1,700,000
Louisa County, VA, Industrial Development Authority
Pollution Control Revenue Bonds, Virginia Electric and
Power Co. Project, Tax Exempt Commercial Paper,
4.4%, 6/27/2000 ........................................ 2,700,000 2,700,000
Virginia Port Authority Facility, Municipal Trust Receipts,
SG 111, Series 1997, Weekly Demand Note, AMT, 4.4%,
7/1/2024* (b) .......................................... 2,605,000 2,605,000
West Virginia
Randolph County, WV, Industrial Development Revenue,
Allegheny Wood Products Project, Weekly Demand
Note, AMT, 4.45%, 12/1/2007* ........................... 2,570,000 2,570,000
Wisconsin
Eau Claire, WI, Solid Waste Revenue, Pope & Talbot Inc.
Project, Weekly Demand Note, AMT, 4.55%,
11/1/2014* ............................................. 2,400,000 2,400,000
Franklin, WI, Industrial Development Revenue, All Glass
Aquarium Co. Project, Weekly Demand Note, AMT,
4.45%, 9/1/2018* ....................................... 2,000,000 2,000,000
Wausau, WI, Pollution Control Revenue, Minnesota
Mining and Manufacturing:
Series 1982, Weekly Demand Note, 4.64%,
8/1/2017* .......................................... 2,800,000 2,800,000
Series 1983, Weekly Demand Note, 4.64%,
12/1/2001* ......................................... 900,000 900,000
Whitewater, WI, Industrial Development Authority,
MacLean Fogg Project, Weekly Demand Note, 4.4%,
12/1/2009* ............................................. 1,000,000 1,000,000
Wisconsin State Health & Educational Facilities Authority
Revenue, Monthly Demand Note, 3.95%, 5/1/2030* ......... 4,900,000 4,900,000
--------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $264,668,616) (a) 264,668,616
--------------------------------------------------------------------------------------
</TABLE>
* 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 May
31, 2000.
(a) The cost for federal income tax purposes was $264,668,616.
(b) Bond is insured by one of these companies: AMBAC, FGIC, FSA or
MBIA/BIG.
AMT: Subject to alternative minimum tax.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of May 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-----------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $264,668,616) ................. $ 264,668,616
Cash .................................................................... 829,418
Receivable for investments sold ......................................... 490,000
Interest receivable ..................................................... 1,545,327
Receivable for Fund shares sold ......................................... 669,770
Other assets ............................................................ 198,869
---------------
Total assets ............................................................ 268,402,000
Liabilities
-----------------------------------------------------------------------------------------
Dividends payable ....................................................... 72,527
Payable for Fund shares redeemed ........................................ 823,397
Accrued management fee .................................................. 228,632
Accrued reorganization costs ............................................ 871
Accrued Trustees' fees and expenses ..................................... 56,161
Other accrued expenses and payables ..................................... 23,916
---------------
Total liabilities ....................................................... 1,205,504
-----------------------------------------------------------------------------------------
Net assets, at value $ 267,196,496
-----------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized gain (loss) .................................... (696,122)
Paid-in capital ......................................................... 267,892,618
-----------------------------------------------------------------------------------------
Net assets, at value $ 267,196,496
-----------------------------------------------------------------------------------------
Net Asset Value
-----------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($267,196,496 /
267,041,131 outstanding shares of beneficial interest, $.01 par value, -------------
unlimited number of shares authorized) ............................... $ 1.00
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended May 31, 2000
--------------------------------------------------------------------------------
Investment Income
-----------------------------------------------------------------------------
Income:
Interest ...................................................... $ 8,440,756
---------------
Expenses:
Management fee ................................................ 1,139,085
Services to shareholders ...................................... 277,942
Custodian and accounting fees ................................. 58,583
Auditing ...................................................... 46,092
Legal ......................................................... 19,767
Trustees' fees and expenses ................................... 96,505
Reports to shareholders ....................................... 6,373
Registration fees ............................................. 38,682
Reorganization ................................................ 871
Other ......................................................... 18,912
---------------
Total expenses, before expense reductions ..................... 1,702,812
Expense reductions ............................................ (188,084)
---------------
Total expenses, after expense reductions ...................... 1,514,728
-----------------------------------------------------------------------------
Net investment income 6,926,028
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 6,926,028
-----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Months Year Ended
Year Ended May Ended May 31, December 31,
Increase (Decrease) in Net Assets 31, 2000 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income .............. $ 6,926,028 $ 2,612,316 $ 7,403,526
Net realized gain (loss) on
investment transactons .......... -- -- (3,898)
---------------- ---------------- ---------------
Net increase (decrease) in net
assets resulting from
operations ...................... 6,926,028 2,612,136 7,399,628
---------------- ---------------- ---------------
Distributions to shareholders
from:
Net investment income .............. (6,926,028) (2,614,750) (7,401,457)
---------------- ---------------- ---------------
Fund share transactions at net asset
value of $1.00 per share:
Proceeds from shares sold .......... 974,856,271 702,916,893 1,093,015,777
Reinvestment of distributions ...... 6,376,478 2,401,066 6,769,820
Cost of shares redeemed ............ (971,419,411) (696,770,475) (1,134,001,313)
---------------- ---------------- ---------------
Net increase (decrease) in net
assets from Fund share
transactions .................... 9,813,338 8,547,484 (34,215,716)
---------------- ---------------- ---------------
Increase (decrease) in net assets .. 9,813,338 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 ........ $ 267,196,496 $ 257,383,158 $ 248,838,288
---------------- ---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<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>
------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c)
------------------------------------------------------------------------------------
<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
------------------------------------------------------
------------------------------------------------------------------------------------
Income from investment
operations:
------------------------------------------------------------------------------------
Net investment income .030 .010 .029 .031 .029 .032
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income and
net realized gains on
investment transactions (d) (.030) (.010) (.029) (.031) (.029) (.032)
------------------------------------------------------------------------------------
Net asset value, end
of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------------------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) 3.09(e) 1.03(e)** 2.92(e) 3.10(e) 2.91(e) 3.27
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 267 257 249 283 220 239
------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) .75(f) .75* .71 .76 .75 .75
------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .66(f) .65* .65 .65 .70 .75
------------------------------------------------------------------------------------
Ratio of net investment
income (%) 3.04 2.46* 2.87 3.06 2.86 3.21
------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(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 less than 6/10 of 1(cent)per
share.
(e) Total returns may have been lower had certain expenses not been
reduced.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .73%
and .65%, respectively.
* Annualized
** Not annualized
21
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
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 accounting
principles generally accepted in the United States, 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 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, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $696,000, which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until 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 distributed, and, therefore,
will be distributed to shareholders at least annually.
22
<PAGE>
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 Investment 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. Certain expenses incurred in
connection with the reorganization are excluded from the expense limitation. For
the year ended May 31, 2000, the Adviser did not impose a portion of its fee,
amounting to $141,565, and the portion imposed amounted to $997,520, which was
equivalent to an annualized effective rate of 0.44% of the Fund's average daily
net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended May 31, 2000, the amount charged to the Fund by SSC aggregated
$213,923, of which $18,866 is unpaid at May 31, 2000.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended May
31, 2000, the amount charged to the Fund by SFAC aggregated $47,976, of which
$3,970 is unpaid at May 31, 2000.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended May 31, 2000, Trustees' fees and expenses aggregated $40,493. In addition,
a one-time fee of $56,012 was accrued for payment to those Trustees
23
<PAGE>
not affiliated with the Adviser who are not standing for re-election, under the
reorganization discussed in Note E. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $28,006 of such costs.
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 year ended May 31, 2000, the
Fund's custodian and transfer agent fees were reduced by $11,757 and $6,756,
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 based upon net assets, 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.
E. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
24
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees and Shareholders of Scudder Tax Free Money Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Tax Free Money Fund (the
"Fund") at May 31, 2000, the results of its operations, the changes in its net
assets, and the financial highlights for each of the periods indicated therein,
in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 2000 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 14, 2000
25
<PAGE>
Tax Information
--------------------------------------------------------------------------------
Of the dividends paid from net investment income for the taxable year ended May
31, 2000, 100% are designated as exempt interest dividends for federal income
tax purposes.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
26
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* Ann M. McCreary*
o President and Trustee o Vice President
Henry P. Becton, Jr. Frank J. Rachwalski, Jr.*
o Trustee; President and General o Vice President
Manager, WGBH Educational
Foundation John Millette*
o Vice President and Secretary
Dawn-Marie Driscoll
o Trustee; Executive Fellow, Center John R. Hebble*
for Business Ethics, Bentley o Treasurer
College; President, Driscoll
Associates Caroline Pearson*
o Assistant Secretary
Peter B. Freeman
o Trustee; Corporate Director *Scudder Kemper Investments, Inc.
and Trustee
George M. Lovejoy, Jr.
o Trustee; President and Director,
Fifty Associates; Chairman
Emeritus, Meredith and Grew, Inc.
Wesley W. Marple, Jr.
o Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
o Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
o Trustee; Managing Director,
First Light Capital
27
<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
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Scudder Tax Free Money Fund+ Growth
Scudder Classic Growth Fund***
Tax Free+ Scudder Large Company Growth Fund***
Scudder Limited Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Medium Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder 21st Century Growth Fund***
Scudder High Yield Tax Free Fund***
Scudder California Tax Free Fund** Global Equity
Scudder Massachusetts Limited Term Worldwide
Tax Free Fund** Scudder Global 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 Global Discovery Fund***
U.S. Income Scudder Emerging Markets Growth Fund
Scudder Short Term Bond Fund Scudder Gold Fund
Scudder GNMA 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 Health Care Fund
Asset Allocation Scudder Technology Fund
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio Preferred Series
Scudder Pathway Growth Portfolio Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
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
</TABLE>
28
<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 IRA for Minors
Inherited 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 Class S 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
Kemper Investment'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 Kemper Investment'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.
29
<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.
30
<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
31
<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 over 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(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
