Scudder
U.S. Treasury
Money Fund
Annual Report
June 30, 1998
Pure No-Load(TM) Funds
A money market fund investing in short-term U.S. government securities and
repurchase agreements. For investors seeking current income plus safety,
liquidity and stability of capital.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder U.S. Treasury Money Fund
- --------------------------------------------------------------------------------
Date of Inception: 11/23/81 Total Net Assets as of Ticker Symbol: SCGXX
6/30/98: $388.5 million
- --------------------------------------------------------------------------------
o Scudder U.S. Treasury Money Fund provided a total return of 4.83% for the
annual period ended June 30, 1998.
o The Fund's 30-day net annualized yield at the end of June 1998 was 4.87%.
o Despite the stability of interest rates, we gradually shortened the Fund's
average maturity toward the end of the period, in anticipation of possible rate
hikes in the near future given the continuing strength of the U.S. economy.
Table of Contents
3 Letter from the Fund's President 13 Notes to Financial Statements
4 Portfolio Management Discussion 15 Report of Independent Accountants
7 Glossary of Investment Terms 16 Officers and Trustees
8 Investment Portfolio 17 Investment Products and Services
9 Financial Statements 18 Scudder Solutions
12 Financial Highlights
2 - Scudder U.S. Treasury Money Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to present the annual report for Scudder U.S. Treasury Money
Fund for the fiscal year ended June 30, 1998.
During the period covered by this report, the U.S. economy enjoyed ongoing
strength, fueled by a still-climbing stock market, a strong dollar, high
consumer confidence, and low unemployment. Earlier this year the Federal Reserve
worried that the U.S. economy was growing too rapidly, but so far the Fed has
left rates unchanged. Bond prices generally rose during the period and the
30-year Treasury bond yield declined to a new low.
Money market funds generally provided attractive returns during the year
for those investors seeking a stable share price and an interest-paying
alternative to cash. During the 12 months ended June 30, 1998, the Fund provided
a positive total return of 4.83%, and its 30-day net annualized yield at the end
of June was 4.87%. For more detail on the events of the past 12 months and your
managers' outlook for the year ahead, please turn to the discussion beginning on
page 4.
For those of you interested in new Scudder products and services, we would
like to take this opportunity to highlight two upcoming additions to our
international category, both of which are scheduled to begin operations on
September 1st. Scudder International Growth Fund will seek long-term capital
appreciation by investing primarily in the equity securities of non-U.S.
companies with high earnings growth potential, and Scudder International Value
Fund will seek long-term capital appreciation by investing primarily in
undervalued foreign equity securities. For further information on these new
funds, please call 1-800-225-2470.
Thank you for choosing Scudder U.S. Treasury Money Fund to help meet your
investment needs. If you should have any questions regarding your investment, or
any of the Scudder Funds, please do not hesitate to call us at the number above,
or visit our Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder U.S. Treasury Money Fund
3 - Scudder U.S. Treasury Money Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
The U.S. economy continued its lengthy run of prosperity during your Fund's most
recent fiscal year, although toward the end of the period there was some
evidence that perhaps the trend was beginning to weaken. During the year, the
Fund's investments in short-term, high quality securities provided a balance to
more aggressive stock and bond holdings. Scudder U.S. Treasury Money Fund
maintained its $1.00 share price throughout the period and provided a positive
total return of 4.83% for the 12 months ended June 30, 1998. The Fund's 30-day
net annualized yield at the end of June was 4.87%.
U.S. Economy Continues Strong
For the Fund's 1998 fiscal year, the domestic economy was encouraged by a number
of positive fundamentals that bolstered the overall investment environment.
Consumer confidence was very high and employment was strong, with many new jobs
being created during the period. We experienced two back-to-back quarters of
strong GDP growth in the fourth quarter of 1997 and the first quarter of 1998.
Although the numbers for the most recent quarter ended June 30 are likely to be
weaker, we anticipate that growth will be slightly higher again during the
second half of 1998.
The record run in the U.S. stock market, which has now extended over seven
years, showed signs of abating in early 1998, as high valuations and
decelerating corporate profit growth began to be felt. Overseas, Asia's troubles
became more visible, particularly in the world's second-largest economy, Japan,
which is now officially in recession. Concerns over Asia, combined with slowing
profit growth in the United States and high valuations for U.S. equities, seem
to be prompting renewed interest in the relative safety and more reliable
returns of domestic fixed income securities. Bond prices have generally been
rising and the benchmark 30-year Treasury bond yield (which moves in the
opposite direction of bond prices) declined to a new low.
Average Maturity Shortened in
Anticipation of Rising Rates
During the course of the year, we kept a watchful eye on the Federal Reserve
Board, particularly in early 1998 when the possibility of rate increases seemed
likely in view of Fed concerns over the rapidly growing domestic economy. The
strength of the U.S. dollar, however, has eliminated any need for the Fed to
tighten the money supply so far. Short-term interest rates have now been
anchored below 5.5% for over a year and a half, with the last major change
occurring in February of 1997. In this stable environment, we took advantage of
smaller movements in the market, such as those occasioned by tax periods and
quarter ends.
During the first half of the Fund's fiscal year, as inflation fears cooled and
it seemed likely that the Fed would continue to keep rates stable for a while,
we extended average maturities in the portfolio. The average maturity was 57
days at the end of December 1997, and rose to the 70-day range during the first
two of months of 1998. Longer maturities offer the ability to lock in yields
4 - Scudder U.S. Treasury Money Fund
<PAGE>
when interest rates appear unlikely to rise, in exchange for slightly higher
risk.
However, in the second half of the fiscal year, the continued stability of
monetary policy seemed less assured. As a result, we took a more defensive
position, gradually shortening the average maturity to 31 days as of June 30,
1998. Issues with shorter maturities are beneficial in the event of rate hikes,
because principal comes due earlier and may be reinvested at the higher
prevailing rates.
U.S. Treasury Shortage Increases Price
Over the period, the portfolio was invested in a diversified mix of U.S.
government securities, including Treasury bills and notes, repurchase agreements
backed by U.S. Treasury obligations, and U.S.
government-backed corporate securities.
U.S. government issues have been particularly expensive lately, due to a lack of
supply in the Treasury market -- a result of the strong economy allowing the
government to pay down some of its debt. Throughout much of the period, yields
of Treasury securities continued to lag those offered by repurchase agreements.
We have gradually increased our weighting of repurchase agreements since the
third quarter of 1997 to boost the Fund's yield, and increased them even further
this period, so that they accounted for nearly 52% of the portfolio at the end
of June. In addition, we added an investment in U.S. government-backed corporate
securities, which accounted for just over 6% of the portfolio as of June 30th.
Outlook for Increased Volatility Ahead
It is likely that the domestic economy will continue to be strong for the near
term, as it is still supported by a number of positive fundamentals. During the
most recent quarter, we saw the earliest signals that this trend may begin to
wane in the future, possibly owing to the Asian crisis finally impacting the
United States. However, we do anticipate a return to trend growth for the second
half of the year.
Our strategy going forward is to continue monitoring the economic environment,
watch the Fed closely for any indication of a change in monetary policy, and
keep the average maturity of the portfolio defensively short. As this already
prolonged economic boom for the U.S. economy continues, it leaves us wondering
what might happen next and when. This uncertainty has created an outlook that
supports shortening the Fund's maturity, as we believe a rise in rates is most
likely the next move.
More generally, unless you are a long-term investor, we believe there is little
reward for investing in longer-dated fixed income investments, with long-term
Treasuries currently yielding around 5.60%, against money market yields in the
5.10 - 5.20% range. Money market funds have been providing decent returns, and
we believe they are presently very attractive compared to bonds, where we
anticipate seeing more volatility ahead.
5 - Scudder U.S. Treasury Money Fund
<PAGE>
In the months ahead, the Fund's management team will continue to collect
economic data and carefully monitor the investment climate as it positions your
Fund for high current income plus safety, liquidity, and stability of capital.
Sincerely,
Your Portfolio Management Team
/s/Frank J. Rachwalski, Jr. /s/Mitchell W. Wilner
Frank J. Rachwalski, Jr. Mitchell W. Wilner
Scudder U.S. Treasury
Money Fund:
A Team Approach to Investing
Scudder U.S. Treasury Money Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals who each play an important
role in the Fund's management process. Team members work together to develop
investment strategies and select securities for the Fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits Fund investors
by bringing together many disciplines and leveraging our extensive resources.
Lead Portfolio Manager Frank J. Rachwalski joined the Adviser in 1973 as a
money market specialist within the fixed income group and assumed
responsibility for the Fund's day-to-day management and overall investment
strategies on January 1, 1998. Mr. Rachwalski has over 25 years of industry
experience. Portfolio Manager Mitchell W. Wilner joined the Adviser in 1992 to
manage fixed income investments. Mr. Wilner has over 11 years of industry
experience.
6 - Scudder U.S. Treasury Money Fund
<PAGE>
Glossary of Investment Terms
GDP Gross domestic product is a commonly
referenced measure of the health of the U.S.
economy, and refers to the market value of
the goods and services produced by labor and
property in the United States. Too strong
economic growth can lead to accelerating
inflation; weak growth can lead to a
recession.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into
cash within a reasonably short period of
time.
MATURITY Reaching the date at which a debt instrument
is due and payable. A bond due to mature on
January 1, 2010 will return the bondholder's
principal and final interest payment when it
reaches maturity on that date.
MONEY MARKET Market for short-term debt instruments,
including banker's acceptances, commercial
paper, negotiable certificates of deposit,
repurchase agreements, and Treasury bills.
All of these instruments have a high level of
safety and liquidity.
REPURCHASE AGREEMENT ("REPO") Agreement between a seller and a buyer,
usually of U.S. Government securities,
whereby the seller agrees to repurchase the
securities at an agreed-upon price and,
usually, at a stated time.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return --
annualized or compound -- is based on a
combination of share price changes plus
income and capital gain distributions, if
any, expressed as a percentage gain or loss
in value.
TREASURIES Negotiable debt obligations of the U.S.
government, secured by its full faith and
credit and issued at various schedules and
maturities. These include Treasury bills,
notes, and bonds. The income from Treasury
securities is exempt from state and local,
but not federal, taxes.
YIELD The dividends or interest paid on a security,
expressed as a percentage of the security's
current price.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
7 - Scudder U.S. Treasury Money Fund
<PAGE>
Investment Portfolio as of June 30, 1998
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 51.8%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/1998 at 5.75%,
to be repurchased at $18,002,875 on 7/1/1998, collateralized by a $17,885,000
U.S. Treasury Note, 6.75%, 5/31/1999 .................................................. 18,000,000 18,000,000
Repurchase Agreement with J.P. Morgan & Co. dated 6/30/1998 at 5.75%, to be
repurchased at $18,002,875 on 7/1/1998, collateralized by a $12,795,000 U.S.
Treasury Bond, 12.75%, 11/15/2010 ..................................................... 18,000,000 18,000,000
Repurchase Agreement with Morgan Stanley dated 6/30/1998 at 5.68%, to be
repurchased at $18,002,840 on 7/1/1998, collateralized by a $11,190,000 U.S.
Treasury Bond, 11.25%, 2/15/2015 ...................................................... 18,000,000 18,000,000
Repurchase Agreement with Nomura Securities International Inc. dated 6/30/1998
at 5.75%, to be repurchased at $55,008,785 on 7/1/1998, collateralized by a
$34,195,000 U.S. Treasury Bond, 11.25%, 2/15/2015 ..................................... 55,000,000 55,000,000
Repurchase Agreement with Salomon Brothers dated 6/30/1998 at 5.7%, to be
repurchased at $18,002,850 on 7/1/1998, collateralized by a $14,750,000 U.S.
Treasury Bond, 7.50%, 11/15/2024 ...................................................... 18,000,000 18,000,000
Repurchase Agreement with State Street Bank and Trust Company dated 6/30/1998 at
5.75%, to be repurchased at $71,054,347 on 7/1/1998, collateralized by a
$76,370,000 U.S. Treasury Bill, 6/24/1999 ............................................. 71,043,000 71,043,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $198,043,000) 198,043,000
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations 41.6%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 7/23/1998 ........................................................... 10,000,000 9,969,911
U.S. Treasury Bill, 8/20/1998 ........................................................... 70,000,000 69,512,100
U.S. Treasury Bill, 12/10/1998 .......................................................... 20,000,000 19,543,800
U.S. Treasury Note, 4.75%, 8/31/1998 .................................................... 15,000,000 14,988,300
U.S. Treasury Note, 4.75%, 9/30/1998 .................................................... 5,000,000 4,993,750
U.S. Treasury Note, 5.25%, 7/31/1998 .................................................... 25,000,000 25,002,031
U.S. Treasury Note, 5.625%, 11/30/1998 .................................................. 15,000,000 15,018,750
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Treasury Obligations (Cost $159,016,873) 159,028,642
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Backed Securities 6.6%
- ------------------------------------------------------------------------------------------------------------------------------
Overseas Private Invest Corp., 5.5%, 4/2/2007* (Cost $25,000,000) ....................... 25,000,000 25,000,000
-------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $382,059,873) (a) 382,071,642
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $382,059,873. At June 30,
1998, net unrealized appreciation for all securities based on tax cost was
$11,769. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$28,886 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $17,117.
* Floating rate notes are securities whose yields vary with a designated
market index or market rate, such as the coupon-equivalent of the Treasury
bill rate. These securities are shown at their rate as of June 30, 1998.
The accompanying notes are an integral part of the financial statements.
8 - Scudder U.S. Treasury Money Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1998
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (including repurchase agreements of
$198,043,000) (identified cost $382,059,873) ...................... $ 382,071,642
Cash ................................................................ 1,162,006
Receivable on Fund shares sold ...................................... 7,240,534
Interest receivable ................................................. 1,024,750
Other assets ........................................................ 6,867
----------------
Total assets ........................................................ 391,505,799
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed .................................... 2,697,839
Dividends payable ................................................... 64,723
Accrued management fee .............................................. 9,563
Other payables and accrued expenses ................................. 205,471
----------------
Total liabilities ................................................... 2,977,596
-------------------------------------------------------------------------------------------
Net assets, at market $ 388,528,203
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments ........... 11,769
Paid-in capital ..................................................... 388,516,434
-------------------------------------------------------------------------------------------
Net assets, at market $ 388,528,203
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($388,528,203 / 388,514,501 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.
9 - Scudder U.S. Treasury Money Fund
<PAGE>
Statement of Operations
year ended June 30, 1998
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................ $ 21,424,370
----------------
Expenses:
Management fee ...................................................... 1,995,553
Services to shareholders ............................................ 1,642,885
Custodian and accounting fees ....................................... 104,671
Trustees' fees and expenses ......................................... 37,030
Reports to shareholders ............................................. 61,669
Registration fees ................................................... 65,007
Auditing ............................................................ 32,816
Legal ............................................................... 17,000
Other ............................................................... 14,359
----------------
Total expenses before reductions .................................... 3,970,990
Expense reductions .................................................. (1,378,392)
----------------
Expenses, net ....................................................... 2,592,598
-------------------------------------------------------------------------------------------
Net investment income 18,831,772
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments during the period ........... 15,357
Net unrealized appreciation (depreciation) on investments
during the period ................................................. (15,067)
-------------------------------------------------------------------------------------------
Net gain (loss) on investments 290
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 18,832,062
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder U.S. Treasury Money Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended June 30,
Increase (Decrease) in Net Assets 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 18,831,772 $ 18,799,612
Net realized gain from investments ............................ 15,357 --
Net unrealized appreciation (depreciation) on
investments during the period ............................... (15,067) 38,151
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations .................................................. 18,832,062 18,837,763
---------------- ----------------
Distributions to shareholders:
From net investment income .................................... (18,831,772) (18,799,612)
---------------- ----------------
From net realized gains from investment transactions .......... (15,357) (2,458)
---------------- ----------------
Fund share transactions at net asset value of $1.00 per share:
Shares sold ................................................... 865,115,721 846,157,354
Shares issued to shareholders in reinvestment of
distributions ............................................... 17,248,372 16,784,285
Shares redeemed ............................................... (892,417,877) (860,582,122)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ................................................ (10,053,784) 2,359,517
---------------- ----------------
Increase (decrease) in net assets ............................. (10,068,851) 2,395,210
Net assets at beginning of period ............................. 398,597,054 396,201,844
---------------- ----------------
Net assets at end of period ................................... $ 388,528,203 $ 398,597,054
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder U.S. Treasury Money Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended June 30,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
Net asset value, beginning of period ....................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------
Net investment income ...................................... .047 .045 .048 .046 .027
Less distributions from net investment income and net
realized gains on investment transactions (a) ............ (.047) (.045) (.048) (.046) (.027)
------------------------------------------------------------
Net asset value, end of period ............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) ....................................... 4.83 4.58 4.91 4.70 2.74
Ratios and Supplemental Data
Net assets, end of period ($ millions) ..................... 389 399 396 383 383
Ratio of operating expenses, net to average daily net
assets (%) ............................................... .65 .65 .65 .65 .65
Ratio of operating expenses before expense reductions, to
average daily net assets (%) ............................. 1.00 .94 .92 .90 .90
Ratio of net investment income to average daily net
assets (%) ............................................... 4.72 4.49 4.80 4.61 2.75
</TABLE>
(a) Net realized capital gains were less than 6/10 of 1(cent) per share.
(b) Total returns would have been lower had certain expenses not been reduced.
12 - Scudder U.S. Treasury Money Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder U.S. Treasury Money Fund (the "Fund") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Money market instruments purchased with original maturities
of sixty days or less are valued by the amortized cost method permitted in
accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended.
Debt securities for which market quotations are readily available and which have
original maturities of sixty-one days or more from the date of valuation are
valued by pricing agents approved by officers of the Fund, whose quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Other securities are appraised at fair value as determined in good faith by or
on behalf of the Valuation Committee of the Board of Trustees. Repurchase
agreements are valued at cost which, when combined with accrued interest
receivable, approximates market.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund accordingly paid no federal income taxes and no provision
for federal income taxes was required.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of twelve o'clock noon on
each business day and is paid to shareholders monthly. During any particular
year, net realized gains from investment transactions, in excess of available
capital loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Other. Investment security transactions are accounted for on a trade-date basis
(which in most instances, is the same as the settlement date). Interest income
is accrued pro rata to maturity. All premiums and discounts are
amortized/accreted for both tax and financial reporting purposes.
13 - U.S. Treasury Money Fund
<PAGE>
B. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, the Fund agrees to pay the
Adviser a fee equal to an annual rate of 0.50% of its average daily net assets
computed and accrued daily and payable monthly. As manager of the assets of the
Fund, the Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Management Agreement. The Adviser has agreed not to impose all or a
portion of its management fee until October 31, 1998, and during such period to
maintain the annualized expenses of the Fund at not more than 0.65% of average
daily net assets. Accordingly, for the year ended June 30, 1998, the Adviser did
not impose a portion of its fee amounting to $1,378,392, and the portion imposed
amounted to $617,161, of which $9,563 is unpaid at June 30, 1998.
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 June 30, 1998, the amount charged to the Fund by SSC aggregated
$698,152, of which $58,219 is unpaid at June 30, 1998.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended June 30, 1998,
the amount charged to the Fund by STC aggregated $730,475, of which $72,009 is
unpaid at June 30, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
June 30, 1998, the amount charged to the Fund by SFAC aggregated $50,194, of
which $4,172 is unpaid at June 30, 1998.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the year
ended June 30, 1998, Trustees' fees and expenses aggregated $37,030.
14 - U.S. Treasury Money Fund
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders of Scudder U.S. Treasury Money Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 U.S. Treasury Money Fund
(the "Fund") at June 30, 1998, the results of its operations for the year then
ended and the changes in its net assets for each of the two years then ended,
and the financial highlights for each of the five years then ended, in
conformity with generally accepted accounting principles. 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 generally
accepted auditing standards 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 June 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 24, 1998
15 - U.S. Treasury Money Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee; Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Frank J. Rachwalski, Jr.*
Vice President
David B. Wines*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
16 - Scudder U.S. Treasury Money Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++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. #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.
17 - Scudder U.S. Treasury Money Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
18 - Scudder U.S. Treasury Money Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
19 - Scudder U.S. Treasury Money Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
[LOGO]
