As filed with the Securities and Exchange Commission on
November 24, 1999
1933 Act Registration No. 2-51992
1940 Act Registration No. 811-2527
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
-------
Post-Effective Amendment No. 48
--------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 48
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ZURICH MONEY FUNDS
------------------
(formerly named Kemper Money Funds)
(Exact name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora, Secretary With a copy to:
Zurich Money Funds Cathy G. O'Kelly
222 South Riverside Plaza David A. Sturms
Chicago, Illinois 60606-5808 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
It is proposed that this filing will become effective
Immediately upon filing pursuant to paragraph (b)
--------
X on December 1, 1999 pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(1)
--------
on _________________ pursuant to paragraph (a)(1)
--------
75 days after filing pursuant to paragraph (a)(2)
--------
on ____________, 1999 pursuant to paragraph (a)(2) of Rule 485
--------
If appropriate, check the following:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
<PAGE>
[LOGO]
ZURICH
Zurich Money Funds
prospectus
December 1, 1999
Zurich Money Market Fund
Zurich Government
Money Fund
Zurich Tax-Free Money Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
table of contents
how the funds work
2 Zurich Money Market Fund
6 Zurich Government Money Fund
10 Zurich Tax-Free Money Fund
14 Other Policies
15 Who Manages the Funds
16 Financial Highlights
how to invest in the funds
20 How to Buy Shares
22 How to Sell Shares
23 Policies You Should Know About
29 Understanding Distributions and Taxes
<PAGE>
how the funds work
These funds are money market funds, meaning that they seek to maintain a stable
$1.00 share price in order to preserve the value of your investment.
Each fund takes its own approach to money market investing. Zurich Money Market
Fund emphasizes yield through a more diverse universe of investments, while
Zurich Government Money Fund emphasizes government securities. Zurich Tax-Free
Money Fund invests for income that is free from federal income taxes.
Remember that money funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their $1.00
share prices aren't guaranteed, so be aware that you could lose money.
<PAGE>
TICKER SYMBOL o KMMXX
Zurich Money Market Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
Investment Approach
The fund pursues its goal by investing exclusively in high quality short-term
securities, as well as repurchase agreements that are backed by these
securities.
The fund may buy securities from many types of issuers, including the U.S.
government and corporations. The fund may invest in obligations of foreign
banks, and may invest more than 25% of total assets in obligations of U.S.
banks. However, everything the fund buys must meet the rules for money market
fund investments (see sidebar). In addition, the fund currently intends to only
buy securities that are in the top credit grade for short-term securities and
securities whose remaining maturities are no more than 12 months.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook and possible interest rate movements. The managers may adjust the fund's
exposure to interest rate risk, typically seeking to take advantage of possible
rises in interest rates and to preserve yield when interest rates appear likely
to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable share price, these rules limit
money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
- --------------------------------------------------------------------------------
2
<PAGE>
[ICON] This fund, a broadly diversified money fund with an equal emphasis
on credit quality, yield and stability, could serve investors who want
a versatile money fund that's suited to a range of purposes.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting the fund's
performance is market interest rates. The fund's yield tends to reflect current
interest rates, which means that when these rates fall, the fund's yield
generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors. For
example, banks' repayment abilities could be compromised by broad economic
declines or sharp rises in interest rates. Securities from foreign banks may
have greater credit risk than comparable U.S. securities, for reasons ranging
from political and economic uncertainties to less stringent banking regulations.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o securities that rely on outside insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
3
<PAGE>
The Fund's Track Record
The bar chart shows how the fund's total returns have varied from year to year,
which may give some idea of risk. The table shows how the fund's returns over
different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich Money Market Fund
ANNUAL TOTAL RETURNS (%)
- -----------------------------------------------------
as of 12/31 each year
- -----------------------------------------------------
'89 9.25
'90 8.21
'91 6.01
'92 3.49
'93 2.89
'94 3.99
'95 5.67
'96 5.23
'97 5.36
'98 5.27
Best quarter: 2.38%, Q2 1989
Worst quarter: 0.69%, Q2 1993
YTD total return: 3.55%, as of 9/30/1999
AVERAGE ANNUAL TOTAL RETURNS (%)
- ---------------------------------------------------
as of 12/31/1998
- ---------------------------------------------------
Since
1 Year 5 Years 10 Years inception
- ---------------------------------------------------
5.27 5.10 5.52 7.68*
* Inception: 11/25/1974
[ICON] To find out the fund's current seven-day yield, call 1-800-537-6001
or visit the Zurich Funds Web site at www.zurichfunds.com.
4
<PAGE>
How Much Investors Pay
This is a no-load fund. It has no sales charges or other shareholder fees. The
fund does have annual operating expenses, and as a shareholder you pay them
indirectly.
Zurich Money Market Fund
FEE TABLE
- ---------------------------------------------------
Shareholder Fees (%) None
(paid directly from your investment)
- ---------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- ---------------------------------------------------
Management Fee 0.27
- ---------------------------------------------------
Distribution (12b-1) Fee None
- ---------------------------------------------------
Other Expenses* 0.19
----
- ---------------------------------------------------
Total Annual Operating Expenses 0.46
* Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
EXAMPLE
- -----------------------------------------------------
Based on the costs in the fee table, the example is designed to help you compare
this fund's expenses to those of other funds. The example assumes operating
expenses remain the same and that you invested $10,000, earned 5% annual
returns, reinvested all dividends and sold your shares at the end of each
period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------
$47 $148 $258 $579
5
<PAGE>
TICKER SYMBOL o KEGXX
Zurich Government Money Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
Investment Approach
The fund pursues its goal by investing at least 65% of its total assets in:
o short-term securities that are issued or guaranteed by the U.S. government
or its agencies or instrumentalities
o repurchase agreements backed by these securities
The securities the fund may buy range from U.S. Treasury obligations, which are
backed by the full faith and credit of the U.S. government, to securities of
issuers such as the Federal Home Loan Bank that carry no formal government
guarantees. Everything the fund buys must meet the rules for money market fund
investments (see sidebar). In addition, the fund currently intends to only buy
securities that are in the top credit grade for short-term securities and
securities whose remaining maturities are no more than 12 months.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlook and
possible interest rate movements. The managers may adjust the fund's exposure to
interest rate risk, typically seeking to take advantage of possible rises in
interest rates and to preserve yield when interest rates appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable share price, these rules limit
money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
6
<PAGE>
[ICON] Investors whose primary concerns are credit quality, liquidity and
stability may want to consider this fund.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting the fund's
performance is market interest rates. The fund's yield tends to reflect current
interest rates, which means that when these rates fall, the fund's yield
generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. While the
risk of default is generally considered remote for any securities guaranteed by
the U.S. government, not all of the fund's securities carry this guarantee; some
are guaranteed only by the agency or instrumentality that issues them. Also,
bear in mind that any guarantees on securities the fund owns do not extend to
shares of the fund itself.
Because of the fund's high credit standards, its yield may be lower than the
yields of money funds that don't limit their investments to U.S. government and
agency securities.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
7
<PAGE>
The Fund's Track Record
The bar chart shows how the fund's total returns have varied from year to year,
which may give some idea of risk. The table shows how the fund's returns over
different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich Government Money Fund
ANNUAL TOTAL RETURNS (%)
- -----------------------------------------------------
as of 12/31 each year
- -----------------------------------------------------
'89 9.19
'90 8.11
'91 5.86
'92 3.57
'93 2.92
'94 3.97
'95 5.71
'96 5.21
'97 5.32
'98 5.18
Best quarter: 2.36%, Q2 1989
Worst quarter: 0.71%, Q2 1993 and Q3 1993
YTD total return: 3.48%, as of 9/30/1999
AVERAGE ANNUAL TOTAL RETURNS (%)
- -----------------------------------------------------
as of 12/31/1998
- -----------------------------------------------------
Since
1 Year 5 Years 10 Years inception
- ---------------------------------------------------
5.18 5.08 5.48 6.57*
* Inception: 11/30/1981
[ICON] To find out the fund's current seven-day yield, call 1-800-537-6001 or
visit the Zurich Funds Web site at www.zurichfunds.com.
8
<PAGE>
How Much Investors Pay
This is a no-load fund. It has no sales charges or other shareholder fees. The
fund does have annual operating expenses, and as a shareholder you pay them
indirectly.
Zurich Government Money Fund
FEE TABLE
- -----------------------------------------------------
Shareholder Fees (%) None
(paid directly from your investment)
- ---------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- ---------------------------------------------------
Management Fee 0.27
- ---------------------------------------------------
Distribution (12b-1) Fee None
- ---------------------------------------------------
Other Expenses* 0.16
----
- ---------------------------------------------------
Total Annual Operating Expenses 0.43
* Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
EXAMPLE
- -----------------------------------------------------
Based on the costs in the fee table, the example is designed to help you compare
this fund's expenses to those of other funds. The example assumes operating
expenses remain the same and that you invested $10,000, earned 5% annual
returns, reinvested all dividends and sold your shares at the end of each
period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------
$44 $138 $241 $542
9
<PAGE>
TICKER SYMBOL o KXMXX
Zurich Tax-Free Money Fund
The fund seeks maximum current income that is exempt from federal income taxes
to the extent consistent with stability of principal.
Investment Approach
The fund pursues its goal by investing at least 80% of total assets in high
quality short-term municipal securities. The income from these securities is
free from regular federal income tax and from alternative minimum tax (AMT). The
fund may buy many types of municipal securities, including industrial
development bonds. The fund may invest more than 25% of its total assets in
industrial development bonds. However, everything the fund buys must meet the
rules for money market fund investments (see sidebar). In addition, the fund
currently intends to only buy securities that are in the top credit grade for
short-term securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook and possible interest rate movements. The managers may adjust the fund's
exposure to interest rate risk, typically seeking to take advantage of possible
rises in interest rates and to preserve yield when interest rates appear likely
to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable share price, these rules limit
money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
- --------------------------------------------------------------------------------
10
<PAGE>
[ICON] This fund is designed for investors in a moderate to high tax bracket
who are looking for federally tax-free income along with the liquidity
and stability that a money fund is designed to offer.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting the fund's
performance is market interest rates. The fund's yield tends to reflect current
interest rates, which means that when these rates fall, the fund's yield
generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain geographic regions or sectors of the
short-term securities market, the fund increases its exposure to factors
affecting these regions or sectors. For example, industrial development bonds
are typically backed by revenues from a given facility and by the credit of a
private company, but are not backed by the taxing power of a municipality.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality or other matters
o securities that rely on outside insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
11
<PAGE>
The Fund's Track Record
The bar chart shows how the fund's total returns have varied from year to year,
which may give some idea of risk. The table shows how the fund's returns over
different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich Tax-Free Money Fund
ANNUAL TOTAL RETURNS (%)
- -----------------------------------------------------
as of 12/31 each year
- -----------------------------------------------------
'89 6.33
'90 5.80
'91 4.46
'92 2.86
'93 2.28
'94 2.71
'95 3.74
'96 3.33
'97 3.44
'98 3.31
Best quarter: 1.69%, Q2 1989
Worst quarter: 0.54%, Q1 1994
YTD total return: 2.14%, as of 9/30/1999
---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (%)
-----------------------------------------------------
as of 12/31/1998
-----------------------------------------------------
Since
1 Year 5 Years 10 Years inception
---------------------------------------------------
3.31 3.31 3.81 3.96*
* Inception: 9/10/1987
[ICON] To find out the fund's current seven-day yield, call 1-800-537-6001 or
visit the Zurich Funds Web site at www.zurichfunds.com.
12
<PAGE>
How Much Investors Pay
This is a no-load fund. It has no sales charges or other shareholder fees. The
fund does have annual operating expenses, and as a shareholder you pay them
indirectly.
Zurich Tax-Free Money Fund
FEE TABLE
- -----------------------------------------------------
Shareholder Fees (%) None
(paid directly from your investment)
- ---------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- ---------------------------------------------------
Management Fee 0.27
- ---------------------------------------------------
Distribution (12b-1) Fee None
- ---------------------------------------------------
Other Expenses* 0.09
----
- ---------------------------------------------------
Total Annual Operating Expenses 0.36
* Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
EXAMPLE
- -----------------------------------------------------
Based on the costs in the fee table, the example is designed to help you compare
this fund's expenses to those of other funds. The example assumes operating
expenses remain the same and that you invested $10,000, earned 5% annual
returns, reinvested all dividends and sold your shares at the end of each
period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------
$37 $116 $202 $456
13
<PAGE>
other policies
While the fund-by-fund sections on the previous pages describe the main points
of each fund's strategy and risks, there are a few other issues to know about:
o As a temporary defensive measure, Zurich Tax-Free Money Fund could shift up
to 100% of assets into cash or into investments such as taxable money
market securities. In such a case, the fund would not be pursuing its
objective.
o The funds' investment advisor establishes a security's credit grade at the
time it buys securities, using independent ratings or, for unrated
securities, its own credit ratings. When ratings don't agree, a fund may
use the higher rating. If a security's credit quality falls, the advisor
will determine whether selling it would be in the shareholders' best
interests.
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder approval.
Year 2000 Readiness
Like all mutual funds, these funds could be affected by the inability of some
computer systems to recognize the year 2000. The investment advisor has a year
2000 readiness program designed to address this problem, and has researched the
readiness of suppliers and business partners as well as issuers of securities
the funds own. Still, there's some risk that the year 2000 problem could
materially affect a fund's operations (such as its ability to calculate net
asset value and process purchases and redemptions), its investments, or
securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
For More Information
This prospectus doesn't tell you about every policy or risk of investing in the
funds.
If you want more information on a fund's allowable securities and investment
practices and the characteristics and risks of each type of security, you may
want to request a copy of the Statement of Additional Information (the back
cover has information on how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
- --------------------------------------------------------------------------------
14
<PAGE>
who manages the funds
The Investment Advisor
The investment advisor for these funds is Scudder Kemper Investments, Inc., 345
Park Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds, and currently has more than $290 billion in
assets under management.
Each fund is managed by a team of investment professionals, who individually
represent different areas of expertise and who together develop investment
strategies and make buy and sell decisions. Supporting the fund managers are
Scudder Kemper's many economists, research analysts, traders and other
investment specialists, located in offices across the United States and around
the world.
As payment for serving as investment advisor, Scudder Kemper receives a
management fee from each fund. Below are the actual rates paid by each fund for
the 12 months through the most recent fiscal year end, as a percentage of
average daily net assets:
Fund Name Fee Paid
- --------------------------------------------------------------
Zurich Money Market Fund 0.27%
- --------------------------------------------------------------
Zurich Government Money Fund 0.27%
- --------------------------------------------------------------
Zurich Tax-Free Money Fund 0.27%
The Portfolio Manager
The portfolio managers handle the day-to-day management of the funds. The lead
manager for each of these funds is Frank Rachwalski, Jr. Mr. Rachwalski, who
began his investment career when he joined the advisor in 1973, has managed each
of the funds since its inception.
[ICON] Scudder Kemper, the company with overall responsibility for managing
the funds, takes a team approach to asset management.
15
<PAGE>
financial highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with each fund's financial statements, is
included in that fund's annual report (see "Shareholder reports" on the back
cover).
Zurich Money Market Fund
Per Share Operating Performance
Year ended July 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, $1.00 1.00 1.00 1.00 1.00
beginning of year
- --------------------------------------------------------------------------------
Net investment income .05 .05 .05 .05 .05
- --------------------------------------------------------------------------------
Less dividends declared .05 .05 .05 .05 .05
- --------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Total Return 4.89% 5.38 5.27 5.34 5.34
Ratios to Average Net Assets
- --------------------------------------------------------------------------------
Expenses .46% .48 .45 .50 .52
- --------------------------------------------------------------------------------
Net investment income 4.78% 5.24 5.14 5.20 5.19
Supplemental Data
- --------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $5,109,531 4,538,627 4,361,935 4,225,775 4,025,098
NOTE: Zurich Money Market Fund's total return for the year ended July 31, 1995
includes the effect of a capital contribution from the investment manager.
Without the capital contribution, the total return would have been 4.62%.
16
<PAGE>
Zurich Government Money Fund
Per Share Operating Performance
Year ended July 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
Net asset value, $1.00 1.00 1.00 1.00 1.00
beginning of year
- -------------------------------------------------------------------------------
Net investment income .05 .05 .05 .05 .05
- -------------------------------------------------------------------------------
Less dividends declared .05 .05 .05 .05 .05
- -------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------
Total Return 4.78% 5.33 5.26 5.34 5.36
Ratios to Average Net Assets
- -------------------------------------------------------------------------------
Expenses .43% .43 .44 .46 .46
- -------------------------------------------------------------------------------
Net investment income 4.67% 5.20 5.13 5.20 5.21
Supplemental Data
- -------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $711,784 686,871 671,139 672,041 603,601
17
<PAGE>
Zurich Tax-Free Money Fund
Per Share Operating Performance
Year ended July 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
Net asset value, $1.00 1.00 1.00 1.00 1.00
beginning of year
- -------------------------------------------------------------------------------
Net investment income .03 .03 .03 .03 .03
- -------------------------------------------------------------------------------
Less dividends declared .03 .03 .03 .03 .03
- -------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------
Total Return 2.97% 3.46 3.39 3.44 3.53
Ratios to Average Net Assets
- -------------------------------------------------------------------------------
Expenses .36% .36 .37 .39 .40
- -------------------------------------------------------------------------------
Net investment income 2.93% 3.39 3.33 3.38 3.46
Supplemental Data
- -------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $796,059 815,894 771,315 729,018 760,143
18
<PAGE>
how to invest in the funds
The following pages tell you how to invest in these funds and what to expect as
a shareholder. If you're investing directly with Zurich, all of this information
applies to you.
If you're investing through a "third party provider" -- for example, a financial
advisor or workplace retirement plan -- your provider may have its own policies
or instructions, and you should follow those.
Different terms also apply to investors who are using one of these funds as the
core account for a Zurich MoneyPLUS Account(SM). Check your informational
brochure or your account services guide.
19
<PAGE>
how to buy shares
INITIAL INVESTMENT
--------------------------------------------------------------
$1,000 or more for regular accounts
$250 or more for IRAs
$10,000 for a Zurich MoneyPLUS Account(SM)
$50 or more with an Automatic Investment Plan ($1,500 a month
for a Zurich MoneyPLUS Account(SM))
Make out your check to "Zurich Money Funds"
- --------------------------------------------------------------------------------
By mail o Fill out and sign an application
o Send the application and an investment check to: Kemper
Service Company, P.O. Box 219356, Kansas City, MO
64121-9356
- --------------------------------------------------------------------------------
By wire o Call 1-800-537-6001
o Give your account registration instructions to the
representative, who will give you a new account number
o Have your bank wire your investment to: Zurich Money
Funds, UMB Bank of Kansas City, N.A. ABA# 1010-0069-5
o You will also need to provide your name and account
number, along with the name and routing number for the
fund of your choice:
o Zurich Money Market Fund: 98-0103-346-8
o Zurich Government Money Fund: 98-0116-259-4
o Zurich Tax-Free Money Fund: 98-0001-577-6
- --------------------------------------------------------------------------------
With an o For investing directly from your bank account, paycheck
automatic or government check
investment plan
o Call 1-800-537-6001 to set up a plan or get instructions
- --------------------------------------------------------------------------------
By exchange o To invest in one of these funds by selling shares in a
Kemper fund or another Zurich fund, call 1-888-987-4241
- --------------------------------------------------------------------------------
On the o If you are a current Zurich shareholder, see the
Internet instructions at www.zurichfunds.com
- --------------------------------------------------------------------------------
Through o Contact your representative using the method that's most
a financial convenient for you
advisor
[ICON] Zurich telephone representatives are available on business days from 7
a.m. to 6 p.m. Central time and on Saturdays from 8 a.m. to 3 p.m.
Call toll-free 1-888-987-4241 (1-888-ZURICH-1).
20
<PAGE>
ADDITIONAL INVESTMENT
--------------------------------------------------------------
$100 or more for regular accounts
$50 or more for IRAs
$50 or more a month with an Automatic Investment Plan
Make out your check to "Zurich Money Funds"
- --------------------------------------------------------------------------------
By mail o Send a check and a Zurich investment slip to:
Kemper Service Company, P.O. Box 219154,
Kansas City, MO 64121-9154
o No investment slip? Enclose a letter with your name, fund
and account number and your investment instructions
- --------------------------------------------------------------------------------
By wire o Wire your investment using the wire instructions for
initial investments on the previous page
- --------------------------------------------------------------------------------
By EZ-Transfer o Call 1-888-987-4241 to make sure EZ-Transfer is
set up on your account; if it is, you can request a
transfer from your bank account of any amount between
$100 and $50,000
- --------------------------------------------------------------------------------
By Zurich o Call 1-888-987-8678 and follow the instructions
InfoLine
- --------------------------------------------------------------------------------
With an o For investing directly from your bank account, pay check
automatic or government check
investment plan
o Call 1-888-987-4241 to set up a plan
- --------------------------------------------------------------------------------
By exchange o To invest in one of these funds by selling shares in a
Kemper fund or another Zurich fund, call 1-888-987-4241
- --------------------------------------------------------------------------------
On the o See the instructions at www.zurichfunds.com
Internet
o Click on "Account Access"
- --------------------------------------------------------------------------------
Through o Contact your representative using the method that's most
a financial convenient for you
advisor
[ICON] Sending an investment by express, registered, or certified mail?
Use this address: Kemper Service Company, 811 Main Street, Kansas
City, MO 64105-2005
21
<PAGE>
how to sell shares
SELLING SHARES
--------------------------------------------------------------
Some transactions, including most for over $50,000, can only
be ordered in writing; for more information, see page 26
- --------------------------------------------------------------------------------
By check o Write a check on your account for at least $500
- --------------------------------------------------------------------------------
By phone o Call 1-888-987-4241 for instructions; a check will be
mailed to the address of record
- --------------------------------------------------------------------------------
By wire o Call 1-888-987-4241 to make sure that wire transfer is
set up on your account; if it is, you can request a wire
to your bank account
- --------------------------------------------------------------------------------
By EZ-Transfer o Call 1-888-987-4241 to make sure that EZ-Transfer is set
up on your account; if it is, you can request a transfer
to your bank account of any amount between $100 and
$50,000
- --------------------------------------------------------------------------------
By exchange o To sell shares in a Kemper fund or another Zurich fund
and invest in one of these funds, call 1-888-987-4241
- --------------------------------------------------------------------------------
By mail o Write a letter that includes:
o the fund and account number from which you want to
sell shares
o the dollar amount you want to sell
o your name(s), signature(s), and address, exactly as
on your account
o Send the letter to: Kemper Service Company, P.O. Box
219557, Kansas City, MO 64121-9557
- --------------------------------------------------------------------------------
With an o To set up regular exchanges or withdrawals among Kemper
automatic or Zurich funds, call 1-888-987-4241
exchange or
withdrawal plan
- --------------------------------------------------------------------------------
In a Zurich o To add unlimited checkwriting and a VISA(R) Check Card to
MoneyPLUS your account, call 1-800-537-6001 (annual fee and some
Account(SM) transaction fees apply)
- --------------------------------------------------------------------------------
On the o Follow the instructions at www.zurichfunds.com
Internet
o Click on "Account Access"
- --------------------------------------------------------------------------------
Through o Contact your representative using the method that's most
a financial convenient for you
advisor
[ICON] Zurich telephone representatives are available on business days from 7
a.m. to 6 p.m. Central time and on Saturdays from 8 a.m. to 3 p.m.
Call toll-free 1-888-987-4241 (1-888-ZURICH-1).
22
<PAGE>
policies you should know about
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through a third party provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that a
third party provider may charge its own fees.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Zurich Money Market Fund and Zurich Government Money Fund calculate their share
price three times every business day, first at 11 a.m. Central time, then at 1
p.m. Central time, and again as of the close of regular trading on the Exchange
(typically 3 p.m. Central time, but sometimes earlier, as in the case of
scheduled half-day trading or unscheduled suspensions of trading). Zurich
Tax-Free Money Fund calculates its share price at 11 a.m. and again as of the
close of regular trading on the Exchange.
Although shares trade during business hours, you can place orders anytime. Once
an order is received by Kemper Service Company, and they have determined that it
is a "good order," it will be processed at the next share price calculated.
Because orders placed through third party providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your third party provider should be able to tell you when your
order will be processed.
23
<PAGE>
Wire transactions that arrive by 1 p.m. Central time (11 a.m. for Zurich
Tax-Free Money Fund) will receive that day's dividend. Wire transactions
received between 1 p.m. (11 a.m. for Zurich Tax-Free Money Fund) and 3 p.m.
Central time will start to accrue dividends the next business day. Investments
by check will be effective at 3 p.m. Central time on the business day following
receipt and will earn dividends the following calendar day. Orders processed
through dealers or other financial services firms via Fund/SERV will be effected
at the 3 p.m. Central time net asset value effective on the trade date. These
purchases will begin earning dividends the calendar day following the payment
date.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11 a.m. Central time
and the request calls for proceeds to be sent out by wire, we will normally wire
you the proceeds on the same day. However, you won't receive that day's
dividend.
Zurich InfoLine, the Zurich automated telephone service, is available 24 hours a
day by calling 1-888-987-8678. You can use Zurich InfoLine to get information on
Zurich funds generally and on accounts held directly at Zurich. You can also use
it to make exchanges and to buy and sell shares.
EZ-Transfer lets you set up a link between a Zurich account and a bank account.
Once this link is in place, you can move money between the two with a phone call
or on the Internet at www.zurichfunds.com. You'll need to make sure your bank
has Automated Clearing House (ACH) services. Transactions take two to three days
to be completed, and there is a $100 minimum. To set up EZ-Transfer on a new
account, see the account application, which can also be downloaded from our Web
site; to add it to an existing account, call 1-888-987-4241.
24
<PAGE>
[ICON] If you ever have difficulty placing an order by phone, you can always
send us your order in writing.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because your shares can only
be sold by mailing them in, and if they're ever lost they're difficult and
expensive to replace.
If you are investing in these funds through a Zurich MoneyPLUS AccountSM, you
have access to a number of different features and your policies and fees are
different in some cases. For example, there is no minimum dollar amount on
checks you write, and you can access your account using a VISA(R) Check Card (a
debit card). For more information on the Zurich MoneyPLUS Account, its cash
management features and its policies and fees, call 1-800-537-6001.
Checkwriting lets you sell fund shares by writing a check. Your investment keeps
earning dividends until your check clears. Please note that you'll be charged a
$10 service fee when you write a check for less than $500. You'll also be
charged a $10 service fee when you write a check that's larger than your
available balance at the time the check is presented to us, and we will not be
able to honor the check. We also cannot honor any check for more than
$5,000,000, or any check written on an account on which there is a Power of
Attorney. It's not a good idea to close out an account using a check because the
account balance could change between the time you write the check and the time
it is processed.
When you call us to sell or exchange shares, we may record the call, ask you for
certain information, or take other steps designed to prevent fraudulent orders.
It's important to understand that, with respect to certain pre-authorized
privileges, as long as we take reasonable steps to ensure that an order appears
genuine, we are not responsible for any losses that may occur.
25
<PAGE>
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only send wires
of $1,000 or more.
Exchanges between these funds and other Zurich funds, as well as most Kemper
funds, are an option for most shareholders. Exchanges are a shareholder
privilege, not a right: we may reject any exchange order, particularly when
there appears to be a pattern of "market timing" or other frequent purchases and
sales. We may also reject purchase orders, for these or other reasons.
When you want to sell more than $50,000 worth of shares, or send the proceeds to
a third party or a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
Money from shares you sell is normally sent out within one business day of when
your order is received in good order, although it could be delayed for up to
seven days. There are also two circumstances when it could be longer: when you
are selling shares you bought recently by check or EZ-Transfer, in which case
your check will be held for ten days and you cannot use our telephone, Internet
or checkwriting privileges, or when unusual circumstances prompt the SEC to
allow further delays.
26
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the share price is the net asset value per
share, or NAV. To calculate NAV, the funds use the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
As noted earlier, each fund seeks to maintain a stable $1.00 share price.
In valuing securities, we use the amortized cost method (the method used by most
money market funds).
27
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o charge you $3 a month if your account balance is below $1,000 for the last
30 days; this policy doesn't apply to retirement accounts, or to funds with
an automatic investment plan
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; in most cases, a fund won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the fund's assets, whichever is less
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
o reject or limit purchases of shares for any reason
28
<PAGE>
understanding distributions
and taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The funds intend to declare income dividends daily, and pay them monthly. Zurich
Tax-Free Money Fund may make short- or long-term capital gains distributions in
November or December. The taxable money funds may take into account capital
gains and losses (other than net long-term capital gains) in their daily
dividend declarations. The funds may make additional distributions for tax
purposes if necessary.
You can choose how to receive your dividends and distributions. You can have
them automatically reinvested in fund shares or sent to you by check. Tell us
your preference on your application. If you don't indicate a preference, your
dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
Dividends from Zurich Money Market Fund and Zurich Government Money Fund are
generally taxed at ordinary income rates. Any long-term capital gains
distributions are generally taxed at capital gains rates, although the funds
typically don't expect to make long-term capital gains distributions. Also,
because each fund seeks to maintain a stable share price, you are unlikely to
have a capital gain or loss when you sell fund shares. For tax purposes, an
exchange is the same as a sale.
29
<PAGE>
Dividends from Zurich Tax-Free Money Fund are generally free from federal income
tax for most shareholders, and a portion of dividends from Zurich Government
Money Fund are generally free from state and local income tax. However, there
are a few exceptions:
o a portion of a fund's dividends may be taxable as ordinary income if it
came from investments in taxable securities, tax-exempt market discount
bonds, or as the result of short-term capital gains
o with Zurich Tax-Free Money Fund, because the fund can invest in securities
whose income is subject to the federal alternative minimum tax (AMT), you
may owe taxes on a portion of your dividends if you are among those
investors who must pay AMT
o with Zurich Government Money Fund, shareholders who live in certain states
and localities may not be eligible for the tax exemptions that shareholders
in most locations are
Each fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
30
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
to get more information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call 1-888-987-4241 (1-888-ZURICH-1) or visit our
Web site at www.zurichfunds.com.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Zurich or the SEC (see below). Materials you
get from Zurich are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC 450 Fifth Street, N.W., Washington, DC 20549-6009, www.sec.gov,
1-800-SEC-0330
Fund Name SEC File #
- -----------------------------------------------------------
Zurich Money Market Fund 333-21187
- -----------------------------------------------------------
Zurich Government Money Fund 333-21187
- -----------------------------------------------------------
Zurich Tax-Free Money Fund 333-21187
[LOGO]
ZURICH
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.zurichfunds.com
1-800-537-6001
<PAGE>
ZURICH MONEY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1999
Zurich Money Market Fund
Zurich Government Money Fund
Zurich Tax-Free Money Fund
222 South Riverside Plaza, Chicago, Illinois 60606-5808
(800) 537-6001
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Zurich Money Funds (the "Trust") dated
December 1, 1999. The prospectus may be obtained without charge by calling or
writing Zurich Money Funds, and is also available along with other related
materials on the SEC's internet web site (http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS........................................................2
INVESTMENT STRATEGIES AND RISKS................................................4
Money Market Fund..............................................................5
Government Money Fund..........................................................6
Tax-Free Money Fund............................................................6
Additional Investment Information About the Funds..............................9
CAPITAL STRUCTURE.............................................................10
INVESTMENT ADVISOR............................................................11
PORTFOLIO TRANSACTIONS........................................................13
PURCHASE AND REDEMPTION OF SHARES.............................................15
DIVIDENDS, NET ASSET VALUE AND TAXES..........................................17
PERFORMANCE...................................................................20
OFFICERS AND TRUSTEES.........................................................24
SPECIAL FEATURES..............................................................26
SHAREHOLDER RIGHTS............................................................26
APPENDIX --RATINGS OF INVESTMENTS.............................................28
The financial statements appearing in the Funds' Annual Report to Shareholders
dated July 31, 1999 are incorporated herein by reference. The Funds' Annual
Report accompanies this Statement of Additional Information and may be obtained
without charge by calling toll-free
1-888-987-4241.
<PAGE>
INVESTMENT RESTRICTIONS
Zurich Money Market Fund (the "Money Market Fund"), Zurich Government Money Fund
(the "Government Money Fund") and Zurich Tax-Free Money Fund (the "Tax-Free
Money Fund") have adopted certain investment restrictions which cannot be
changed without approval by holders of a majority of such Fund's outstanding
voting shares. As defined in the Investment Company Act of 1940, as amended (the
"1940 Act") this means the lesser of the vote of (a) 67% of the shares of the
Fund present at a meeting where more than 50% of the outstanding shares of the
Fund are present in person or by proxy; or (b) more than 50% of the outstanding
shares of the Fund.
As a matter of fundamental policy, each Fund may not:
(1) Borrow money, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(2) Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
(3) Concentrate its investments in a particular industry, as the term is
used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time (Money Market Fund's concentration in the banking
industry is described on page 5);
(4) Engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter
in connection with the disposition of portfolio securities;
(5) Purchase or sell real estate, which does not include securities of
companies which deal in real estate or mortgages or investments secured
by real estate or interests therein, except that the Fund reserves
freedom of action to hold and to sell real estate acquired as a result
of the Fund's ownership of securities;
(6) Purchase physical commodities or contracts relating to physical
commodities;
(7) Make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
With regard to restriction (3) for Money Market Fund, for purposes of
determining the percentage of Money Market Fund's total assets invested in
securities of issuers having their principal business activities in a particular
industry, asset backed securities will be classified separately, based on the
nature of the underlying assets. Currently, the following categories are used:
captive auto, diversified, retail and consumer loans, captive equipment and
business, business trade receivables, nuclear fuel and capital and mortgage
lending.
Government Money Fund and the Tax Free Money Fund have no current intention of
making loans as permitted in investment restriction (7) noted above.
If a Fund adheres to a percentage restriction at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Funds did
not borrow money, as permitted by fundamental investment restriction number 1 in
the latest fiscal year; and they have no present intention of borrowing during
the coming year. In any event, borrowings would only be as permitted by such
restriction. Tax-Free Money Fund may invest more than 25% of its total assets in
industrial development bonds.
2
<PAGE>
The Funds have adopted the following non-fundamental restrictions which may be
changed or eliminated by the Board of Trustees without shareholder approval:
Money Market Fund may not:
(1) Purchase common stocks, preferred stocks, warrants, other
equity securities, state bonds, municipal bonds or industrial
revenue bonds (except through the purchase of debt obligations
in accordance with its investment objective and policies);
(2) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the United States Government, its agencies
or instrumentalities) if, as a result, more than 5% of the
value of the Fund's assets would be invested in securities of
that issuer;
(3) Purchase more than 10% of any class of securities of any
issuer. All debt securities and all preferred stocks are each
considered as one class.
(4) Invest more than 5% of the Fund's total assets in securities
of issuers which with their predecessors have a record of less
than three years continuous operation, and equity securities
of issuers which are not readily marketable;
(5) Enter into repurchase agreements if, as a result thereof, more
than 10% of the Fund's total assets valued at the time of the
transaction would be subject to repurchase agreements maturing
in more than seven days;
(6) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions;
(7) Write, purchase or sell puts, calls or combinations thereof;
(8) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
advisor owns beneficially more than1/2of 1% of the securities
of such issuer and together own more than 5% of the securities
of such issuer;
(9) Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the
Securities Act of 1933);
(10) Invest for the purpose of exercising control or management of
another issuer;
(11) Invest in interests in oil, gas or other mineral exploration
or development programs, although it may invest in the
securities of issuers which invest in or sponsor such
programs.
(12) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
Government Money Fund may not:
(1) Purchase securities or make investments other than in
accordance with its investment objective and policies;
3
<PAGE>
(2) Enter into repurchase agreements if, as a result thereof, more
than 10% of the Fund's total assets valued at the time of the
transaction would be subject to repurchase agreements maturing
in more than seven days;
(3) Make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
Tax-Free Money Fund may not:
(1) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the Fund's assets would be invested in the securities of such
issuer. For purposes of this limitation, the Fund will regard
the entity which has the primary responsibility for the
payment of interest and principal as the issuer;
(2) Invest more than 5% of the Fund's total assets in industrial
development bonds sponsored by companies which with their
predecessors have less than three years' continuous operation;
(3) Make short sales of securities or purchase securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions;
(4) Write, purchase or sell puts, calls or combinations thereof,
although the Fund may purchase Municipal Securities subject to
Standby Commitments in accordance with its investment
objective and policies;
(5) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
advisor owns beneficially more than1/2of 1% of the securities
of such issuer and together own more than 5% of the securities
of such issuer;
(6) Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the
Securities Act of 1933);
(7) Invest for the purpose of exercising control or management of
another issuer;
(8) Invest in interests in oil, gas or other mineral exploration
or development programs, although it may invest in Municipal
Securities of issuers which invest in or sponsor such
programs;
(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
INVESTMENT STRATEGIES AND RISKS
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Fund may engage or a financial
instrument which a Fund may purchase are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Advisor"), in its
discretion, might, but is not required to, use in managing a Fund's assets. The
Advisor may, in its discretion, at any time, employ such practice, technique or
instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
a Fund, but, to the extent employed, could, from time to time, have a material
impact on the Fund's performance.
4
<PAGE>
The Funds described in this Statement of Additional Information seek to maintain
a net asset value of $1.00 per share.
Money Market Fund
Money Market Fund seeks maximum current income to the extent consistent with
stability of principal. The Fund pursues its objective by investing exclusively
in the following types of U.S. Dollar denominated money market instruments that
mature in 12 months or less:
o Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.
o Bank certificates of deposit (including time deposits) or bankers'
acceptances of U.S. banks (including their foreign branches) and
Canadian chartered banks having total assets in excess of $1 billion.
o Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
o Commercial paper obligations rated A-1 or A-2 by Standard & Poor's
Corporation ("S&P") or Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") or issued by companies with an unsecured debt issue
outstanding currently rated Aa by Moody's or AA by S&P or higher and
investments in other corporate obligations such as publicly traded
bonds, debentures and notes rated Aa by Moody's or AA by S&P or higher.
For a description of these ratings, see "Appendix -- Ratings of
Investments" herein.
o Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
To the extent Money Market Fund purchases Eurodollar certificates of deposit
issued by London branches of U.S. banks, or commercial paper issued by foreign
entities, consideration will be given to their marketability, to possible
restrictions on international currency transactions and to regulations imposed
by the domicile country of the foreign issuer. Eurodollar certificates of
deposit are not subject to the same regulatory requirements as certificates
issued by U.S. banks and associated income may be subject to the imposition of
foreign taxes.
Money Market Fund may invest in commercial paper which is issued by major
corporations without registration under the Securities Act of 1933 in reliance
on the exemption from registration afforded by Section 3(a)(3) thereof. Such
commercial paper may be issued only to finance current transactions and must
mature in nine months or less. Trading of such commercial paper is conducted
primarily by institutional investors through investment dealers, and individual
investor participation in the commercial paper market is very limited.
Money Market Fund may also invest in commercial paper issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws, and generally is
sold to institutional investors such as the Fund who agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. The Fund's investment advisor
considers the legally restricted but readily saleable Section 4(2) paper to be
liquid; however, pursuant to procedures approved by the Board of Trustees of the
Trust, if a particular investment in Section 4(2) paper is not determined to be
liquid, that investment will be included within the 10% limitation on illiquid
securities discussed under "Additional Investment Information About the Funds"
below. The Fund's investment advisor monitors the liquidity of its investments
in Section 4(2) paper on a continuous basis.
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Money Market Fund may concentrate more than 25% of its assets in bank
certificates of deposit or banker's acceptances of U.S. banks in accordance with
its investment objective and policies. Accordingly, the Fund may be more
adversely affected by changes in market or economic conditions and other
circumstances affecting the banking industry than it would be if the Fund's
assets were not so concentrated. The Fund will not change this policy without a
vote of shareholders.
Government Money Fund
Government Money Fund seeks maximum current income to the extent consistent with
stability of principal. The Fund pursues its objective by investing exclusively
in the following securities that mature in 12 months or less.
o U.S. Treasury bills, notes, bonds and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
o Repurchase agreements of the obligations described above.
Some securities issued by U.S. Government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Bank, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Fannie Mae, Farm
Credit System and Student Loan Marketing Association. Short-term U.S. Government
obligations generally are considered to be the safest short-term investment. The
U.S. Government guarantee of the securities owned by the Fund, however, does not
guarantee the net asset value of its shares, which the Fund seeks to maintain at
$1.00 per share. Also, with respect to securities supported only by the credit
of the issuing agency or instrumentality or by an additional line of credit with
the U.S. Treasury, there is no guarantee that the U.S. Government will provide
support to such agencies or instrumentalities and such securities may involve
risk of loss of principal and interest.
Tax-Free Money Fund
Tax-Free Money Fund seeks maximum current income that is exempt from federal
income taxes to the extent consistent with stability of principal. The Fund
pursues its objective primarily through a professionally managed, diversified
portfolio of short-term high quality tax-exempt municipal obligations.
Under normal market conditions at least 80% of the Fund's total assets will, as
a fundamental policy, be invested in obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, the
income from which is exempt from federal income tax ("Municipal Securities"). In
compliance with the position of the staff of the Securities and Exchange
Commission, the Fund does not consider "private activity" bonds as described in
"Dividends, Net Asset Value and Taxes -- Taxes" as Municipal Securities for
purposes of the 80% limitation. This is a fundamental policy so long as the
staff maintains its position, after which it would become non-fundamental.
Dividends representing net interest income received by Tax-Free Money Fund on
Municipal Securities will be exempt from federal income tax when distributed to
the Fund's shareholders. Such dividend income may be subject to state and local
taxes. See "Dividends, Net Asset Value and Taxes -- Taxes." The Fund's assets
will generally consist of Municipal Securities, temporary investments as
described below and cash. The Fund considers short-term Municipal Securities to
be those that mature in 12 months or less.
Tax-Free Money Fund will invest only in Municipal Securities which at the time
of purchase:
o are rated within the two highest ratings for Municipal Securities (Aaa
or Aa) assigned by Moody's, (AAA or AA) assigned by S&P, (AAA or AA)
assigned by Fitch, or (AAA or AA) assigned by Duff, or any other
nationally recognized statistical rating organization ("NRSRO") as
determined by the Securities and
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Exchange Commission are rated within the two highest ratings for
Municipal Securities (Aaa or Aa) assigned by Moody's or (AAA or AA)
assigned by S&P;
o are guaranteed or insured by the U.S. Government as to the payment of
principal and interest;
o are fully collateralized by an escrow of U.S. Government securities
acceptable to the Fund's investment advisor;
o have at the time of purchase a Moody's short-term municipal securities
rating of MIG-2 or higher or a municipal commercial paper rating of P-2
or higher, or S&P's municipal commercial paper rating of A-2 or higher,
or Fitch's municipal commercial paper rating of F-2 or higher, or
Duff's municipal commercial paper rating of Duff-2 or higher, or a
rating within the two highest categories of any other NRSRO as
determined by the Securities and Exchange Commission;
o are unrated, if longer term Municipal Securities of that issuer are
rated within the two highest rating categories by Moody's, S&P, Fitch,
Duff or any other NRSRO as determined by the Securities and Exchange
Commission; are unrated, if longer term Municipal Securities of that
issuer are rated within the two highest rating categories by Moody's or
S&P; or
o are determined to be at least equal in quality to one or more of the
above ratings in the discretion of the Fund's investment Advisor.
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Fund may purchase tax-exempt
commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. As discussed below
under "Dividends, Net Asset Value and Taxes -- Taxes," the Fund may invest in
"private activity" bonds.
Tax-Free Money Fund may purchase securities which provide for the right to
resell them to an issuer, bank or dealer at an agreed upon price or yield within
a specified period prior to the maturity date of such securities. Such a right
to resell is referred to as a "Standby Commitment." Securities may cost more
with Standby Commitments than without them. Standby Commitments will be entered
into solely to facilitate portfolio liquidity. A Standby Commitment may be
exercised before the maturity date of the related Municipal Security if the
Fund's investment advisor revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The Fund's
policy is to enter into Standby Commitments only with issuers, banks or dealers
that are determined by the Fund's investment advisor to present minimal credit
risks. If an issuer, bank or dealer should default on its obligation to
repurchase an underlying security, the Fund might be unable to recover all or a
portion of any loss sustained from having to sell the security elsewhere. For
purposes of valuing the Fund's securities at amortized cost, the stated maturity
of Municipal Securities subject to Standby Commitments is not changed.
Tax-Free Money Fund may purchase high quality Certificates of Participation in
trusts that hold Municipal Securities. A Certificate of Participation gives the
Fund an undivided interest in the Municipal Security in the proportion that the
Fund's interest bears to the total principal amount of the Municipal Security.
These Certificates of Participation may be variable rate or fixed rate with
remaining maturities of one year or less. A Certificate of Participation may be
backed by an irrevocable letter of credit or guarantee of a financial
institution that satisfies rating agencies as to the credit quality of the
Municipal Security supporting the payment of principal and interest on
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the Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the issue. The Fund's investment advisor considers these factors as
well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a Certificate of
Participation and in determining whether the Certificate of Participation is
appropriate for investment by the Fund. It is anticipated by the Fund's
investment advisor that, for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Fund to readily sell its Certificates of Participation
prior to maturity to the issuer or a third party. As to those instruments with
demand features, the Fund intends to exercise its right to demand payment from
the issuer of the demand feature only upon a default under the terms of the
Municipal Security, as needed to provide liquidity to meet redemptions, or to
maintain a high quality investment portfolio.
In seeking to achieve its investment objective, Tax-Free Money Fund may invest
all or any part of its assets in Municipal Securities that are industrial
development bonds. Moreover, although the Fund does not currently intend to do
so on a regular basis, it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment is deemed necessary or
appropriate by the Fund's investment advisor. To the extent that the Fund's
assets are concentrated in Municipal Securities payable from revenues on
economically related projects and facilities, the Fund will be subject to the
risks presented by such projects to a greater extent than it would be if the
Fund's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, Tax-Free Money Fund may invest in
taxable "temporary investments" which include:
o obligations of the U.S. Government, its agencies or instrumentalities;
o debt securities rated within the two highest grades by Moody's or S&P;
o commercial paper rated in the two highest grades by either of such
rating services;
o certificates of deposit of domestic banks with assets of $1 billion or
more; and
o repurchase agreements of the obligations described above (Repurchase
agreements are discussed below).
Interest income from temporary investments is taxable to shareholders as
ordinary income. Although the Fund is permitted to invest in taxable securities,
it is the Fund's primary intention to generate income dividends that are not
subject to federal income taxes. See "Dividends, Net Asset Value and Taxes." For
a description of the ratings, see "Appendix -- Ratings of Investments."
Municipal Securities that Tax-Free Money Fund may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the
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interest paid thereon qualifies as exempt from federal income tax. Other types
of industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
federal tax laws place substantial limitations on the size of such issues.
Examples of Municipal Securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds which are
not yet refundable, but for which securities have been placed in escrow to
refund an original municipal bond issue when it becomes refundable. Tax-free
commercial paper is an unsecured promissory obligation issued or guaranteed by a
municipal issuer. Tax-Free Money Fund may purchase other Municipal Securities
similar to the foregoing, which are or may become available, including
securities issued to pre-refund other outstanding obligations of municipal
issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states, and legislation has been introduced to effect changes in public school
finances in some states. In other instances there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or federal law which ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
Additional Investment Information About the Funds
In addition to the specific investment objective and policies listed above, each
Fund limits its investments to securities that meet the requirements of Rule
2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act"). See
"Dividends, Net Asset Value and Share Price -- Net Asset Value."
Each Fund may invest in instruments that have interest rates that adjust
periodically or that "float" continuously according to formulae intended to
minimize fluctuation in values of the instruments ("Variable Rate Securities").
The interest rate on a Variable Rate Security is ordinarily determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Securities reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission rules which allow the Fund to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
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Each Fund may invest in repurchase agreements, which are instruments under which
a Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which price
is higher than the purchase price), thereby determining the yield during the
Fund's holding period. Maturity of the securities subject to repurchase may
exceed one year. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund might incur expenses in enforcing its rights, and
could experience losses, including a decline in the value of the underlying
securities and loss of income.
Each Fund may purchase and sell securities on a when-issued or delayed delivery
basis. A when-issued or delayed delivery transaction arises when securities are
bought or sold for future payment and delivery to secure what is considered to
be an advantageous price and yield to the Fund at the time it enters into the
transaction. In determining the maturity of portfolio securities purchased on a
when-issued or delayed delivery basis, the Fund will consider them to have been
purchased on the date when it committed itself to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Funds, is subject to changes in market value based upon changes in the level of
interest rates and investors' perceptions of the creditworthiness of the issuer.
Generally such securities will appreciate in value when interest rates decline
and decrease in value when interest rates rise. Therefore if, in order to
achieve higher interest income, a Fund remains substantially fully invested at
the same time that it has purchased securities on a when-issued basis, there
will be a greater possibility that the market value of the Fund's assets will
vary from $1.00 per share, since the value of a when-issued security is subject
to market fluctuation and no interest accrues to the purchaser prior to
settlement of the transaction. See "Determining Share Price."
The Funds will only make commitments to purchase securities on a when-issued or
delayed delivery basis with the intention of actually acquiring the securities,
but the Funds reserve the right to sell these securities before the settlement
date if deemed advisable. The sale of these securities may result in the
realization of gains that are not exempt from federal income tax.
A Fund will not purchase illiquid securities, including time deposits and
repurchase agreements maturing in more than seven days, if, as a result thereof,
more than 10% of such Fund's net assets valued at the time of the transaction
would be invested in such securities. If a Fund holds a material percentage of
its assets in illiquid securities, there may be a question concerning the
ability of such Fund to make payment within seven days of the date its shares
are tendered for redemption. Securities and Exchange Commission guidelines
provide that the usual limit on aggregate holdings by a money market fund of
illiquid assets is 10% of its net assets. Each Fund's investment advisor
monitors holdings of illiquid securities on an ongoing basis and will take such
action as it deems appropriate to help maintain adequate liquidity.
CAPITAL STRUCTURE
Zurich Money Funds is an open-end, diversified, management investment company,
organized as a business trust under the laws of Massachusetts on August 9, 1985.
Effective February 1, 1996, the name of the Trust was changed from Kemper Money
Market Fund to Kemper Money Funds, and effective April 14, 1997, the name of the
Trust was changed from Kemper Money Funds to Zurich Money Funds. Effective
November 29, 1985, Money Market Fund, pursuant to a reorganization, succeeded to
the assets and liabilities of Kemper Money Market Fund, Inc., a Maryland
corporation organized on September 19, 1974. Effective November 14, 1986,
Government Money Fund succeeded to the assets and liabilities of Kemper
Government Money Market Fund, a business trust organized under the laws of
Massachusetts on August 9, 1985. Effective November 29, 1985, Kemper Government
Money Market Fund succeeded to the assets and liabilities of Kemper Government
Money Market Fund, Inc., a Maryland corporation organized November 3, 1981.
Tax-Free Money Fund commenced public offering of its shares on September 10,
1987. The Trust may issue an unlimited number of shares of beneficial interest,
all having no par value, which may be divided by the Board of Trustees into
classes of shares, subject to compliance with the Securities and Exchange
Commission regulations permitting the creation of separate classes of shares.
The Trust's shares are not currently divided into classes. While only shares of
the three previously described Funds are presently
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being offered, the Board of Trustees may authorize the issuance of additional
series if deemed desirable, each with its own investment objective, policies and
restrictions. Since the Trust may offer multiple series, it is known as a
"series company." Shares of a Fund have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation of such Fund
subject to any preferences, rights or privileges of any classes of shares within
the Fund. Generally, each class of shares issued by a particular Fund would
differ as to the allocation of certain expenses of the Fund, such as
distribution and administrative expenses, permitting, among other things,
different levels of services or methods of distribution among various classes.
Shares are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Trust is not
required to hold annual shareholders' meetings and does not intend to do so.
However, it will hold special meetings as required or deemed desirable for such
purposes as electing trustees, changing fundamental policies or approving an
investment management agreement. Subject to the Agreement and Declaration of
Trust of the Trust, shareholders may remove trustees. Shareholders will vote by
Fund and not in the aggregate except when voting in the aggregate is required
under the 1940 Act, such as for the election of trustees.
INVESTMENT ADVISOR
Investment Advisor. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Advisor"), 345 Park Avenue, New York, New York 10154-0010 is the Funds'
investment advisor. Scudder Kemper is approximately 70% owned by Zurich
Financial Services, Inc. a newly formed global insurance and financial services
company. The balance of the Advisor is owned by its officers and employees.
Pursuant to an investment management agreement, Scudder Kemper acts as each
Fund's investment advisor, manages its investments, administers its business
affairs, furnishes office facilities and equipment, provides clerical, and
administrative services, and permits any of its officers or employees to serve
without compensation as trustees or officers of the Trust if elected to such
positions. The Trust pays the expenses of its operations, including the fees and
expenses of independent auditors, counsel, custodian and transfer agent and the
cost of share certificates, reports and notices to shareholders, costs of
calculating net asset value and maintaining all accounting records thereto,
brokerage commissions or transaction costs, taxes, registration fees, the fees
and expenses of qualifying the Fund and its shares for distribution under
federal and state securities laws and membership dues in the Investment Company
Institute or any similar organization. Trust expenses generally are allocated
among the Funds on the basis of relative net assets at the time of allocation,
except that expenses directly attributable to a particular Fund are charged to
that Fund.
The investment management agreement provides that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by the
Funds in connection with the matters to which the agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Scudder Kemper in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.
The investment management agreement continues in effect from year to year for
each Fund so long as its continuation is approved at least annually (a) by a
majority of the trustees who are not parties to such agreement or interested
persons of any such party except in their capacity as trustees of the Trust and
(b) by the shareholders of each Fund or the Board of Trustees. If continuation
is not approved for a Fund, the investment management agreement nevertheless may
continue in effect for the Funds for which it is approved and Scudder Kemper may
continue to serve as investment advisor for the Fund for which it is not
approved to the extent permitted by the Investment Company Act of 1940. The
agreement may be terminated at any time upon 60 days notice by either party, or
by a majority vote of the outstanding shares of a Fund with respect to that
Fund, and will terminate automatically upon assignment. Shareholders of each
Fund will vote separately upon continuation of the investment management
agreement and upon other matters affecting only an individual Fund. Additional
Funds may be subject to a different agreement.
On September 7, 1998, Zurich Insurance Company ("Zurich") the majority owner of
the Advisor, entered into an agreement with B.A.T. Industries p.l.c. ("B.A.T."),
pursuant to which the financial services business of B.A.T. were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich
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Financial Services. Upon consummation of the transaction, each Fund's investment
management agreement with the Advisor was deemed to have been assigned and,
therefore, terminated. The Board of Trustees of each Fund and the shareholders
of each Fund have approved a new investment management agreement with the
Advisor, which is substantially identical to the former investment management
agreement, except for the dates of execution and termination.
For the services and facilities furnished, the Trust pays an annual investment
management fee, payable monthly, on a graduated basis of .50% of the first $215
million of average daily net assets of the Trust, 0.375% on the next $335
million, 0.30% on the next $250 million and 0.25% of average daily net assets of
the Trust over $800 million. Scudder Kemper has agreed to reimburse the Trust
should all operating expenses of the Trust, including the investment management
fee of Scudder Kemper but excluding taxes, interest, extraordinary expenses and
brokerage commissions or transaction costs, exceed 1 1/2% of the first $30
million of average net assets of the Trust and 1% of average net assets over $30
million on an annual basis. The investment management fee and the expense
limitation are computed based upon the combined average daily net assets of the
Funds and are allocated among such Funds based upon the relative net assets of
each Fund. For its services as investment advisor and for facilities furnished
during the fiscal years ended July 31 indicated, the Funds incurred investment
management fees as shown.
Fund 1999 1998 1997
---- ---- ---- ----
Money Market $13,105,647 $12,086,000 $11,666,000
Government Money $1,973,045 $ 1,815,000 $ 1,894,000
Tax-Free Money $2,167,131 $ 2,156,000 $ 2,068,000
For Money Market Fund, during the fiscal years ended July 31, 1999, July 31,
1998 and July 31, 1997, the investment advisor waived fees in the amounts of $0,
$0 and $0, respectively.
For Government Money Market Fund, during the fiscal years ended July 31, 1999,
July 31, 1998 and July 31, 1997, the investment advisor waived fees in the
amounts of $0, $0 and $0, respectively.
For Tax-Free Money Market Fund, during the fiscal years ended July 31, 1999,
July 31, 1998 and July 31, 1997, the investment advisor waived fees in the
amounts of $0, $0 and $0, respectively.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Advisor,
is responsible for determining the daily net asset value per share of the Funds
and maintaining all accounting records related thereto. Currently, SFAC receives
no fee for its services to the Funds, however, subject to Board approval, at
some time in the future, SFAC may seek payment for its services under this
agreement.
Principal Underwriter. Kemper Distributors, Inc. ("KDI"), 222 South Riverside
Plaza, Chicago, Illinois, an affiliate of Scudder Kemper, is the principal
underwriter for shares of the Funds and acts as agent of the Funds in the sale
of their shares. The Funds pay the cost for the prospectus and shareholder
reports to be set in type and printed for existing shareholders, and KDI pays
for the printing and distribution of copies thereof used in connection with the
offering of shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs. Terms of continuation, termination and
assignment under the underwriting agreement are identical to those described
above with regard to the investment management agreement, except that
termination other than upon assignment requires six months notice and shares are
voted in the aggregate and not by Fund whenever shareholders vote with respect
to such agreement. KDI receives no compensation from the Funds as principal
underwriter for the Funds' shares and pays all expenses of distribution of the
Funds' shares.
Certain officers or trustees of the Trust are also directors or officers of
Scudder Kemper and KDI as indicated under "Officers and Trustees."
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Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, as custodian, has custody of all securities and cash of the Funds. State
Street attends to the collection of principal and income, and payment for and
collection of proceeds bought and sold by the Funds. Investors Fiduciary Trust
Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, is the
Funds' transfer agent. Pursuant to a services agreement with IFTC, Kemper
Service Company ("KSvC"), an affiliate of the Advisor, serves as "Shareholder
Service Agent." Prior to January 1, 1999, IFTC received, as transfer agent, and
paid to KSvC annual account fees of a maximum of $8 per account plus
out-of-pocket expense reimbursement. Effective January 1, 1999, this schedule
was amended to include a $10 annual account fee, a $5 new account set up fee, an
annual asset based fee of 0.06% of average daily net assets and out-of-pocket
expense reimbursement. During the fiscal year ended July 31, 1999, IFTC remitted
shareholder service fees for Money Market Fund in the amount of $3,215,000, for
Government Money Fund in the amount of $938,000, and for Tax-Free Money Fund in
the amount of $574,000 to KSvC as Shareholder Service Agent.
Independent Auditors and Reports to Shareholders. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.
PORTFOLIO TRANSACTIONS
Brokerage
Allocation of brokerage is supervised by the Advisor.
Portfolio transactions are undertaken principally to pursue the objective of
each Fund in relation to movements in the general level of interest rates, to
invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Fund depending upon management's ability to
correctly time and execute such transactions. Since a Fund's assets are invested
in securities with short maturities, its portfolio will turn over several times
a year. Securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, so each Fund's portfolio turnover
rate for reporting purposes is zero.
The primary objective of the Advisor in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Advisor seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through SIS's familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Advisor
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Advisor's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Advisor is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of receipt of the research,
market or statistical information. In effecting transactions in over-the-
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counter securities, orders are placed with the principal market makers for the
security being traded unless, after exercising care, it appears that more
favorable results are available elsewhere.
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Advisor may give consideration to those firms that have sold or
are selling shares of a fund managed by the Advisor.
To the maximum extent feasible, it is expected that the Advisor will place
orders for a portfolio transactions through SIS, a corporation registered as a
broker-dealer and a subsidiary of the Advisor. SIS will place orders on behalf
of a fund with issuers, underwriters or other brokers and dealers. SIS will not
receive any commission, fee or other remuneration from a fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Advisor, it is the opinion of
the Advisor that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Advisor's
staff. Such information may be useful to the Advisor in providing services to
clients other than the Fund and not all such information is used by the Advisor
in connection with the Fund. Conversely, such information provided to the
Advisor by broker/dealers through whom other clients of the Advisor effect
securities transactions may be useful to the Advisor in providing services to a
Fund.
The trustees review from time to time whether the recapture for the benefit of a
Fund of some portion of the brokerage commissions or similar fees paid by a Fund
on portfolio transaction is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Funds for such purchases. During the
last three fiscal years the Funds paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
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<PAGE>
PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of each Fund are sold at their net asset value next determined after an
order and payment are received in the form described in the Funds' prospectus.
There is no sales charge. The minimum initial investment in any Fund is $1,000
($250 for IRAs) and the minimum subsequent investment is $100 ($50 for IRAs) but
such minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. The Funds may waive the minimum for purchases by
trustees, directors, officers or employees of the Trust or Scudder Kemper and
its affiliates and the $3 monthly fee assessed on accounts below $1,000. Since
each Fund will be investing in instruments that normally require immediate
payment in Federal Funds (monies credited to a bank's account with its regional
Federal Reserve Bank), each Fund has adopted procedures for the convenience of
its shareholders and to ensure that each Fund receives investable funds. An
order for the purchase of shares that is accompanied by a check drawn on a
foreign bank (other than a check drawn on a Canadian bank in U.S. Dollars) will
not be considered in proper form and will not be processed unless and until the
Fund determines that it has received payment of the proceeds of the check. The
time required for such a determination will vary and cannot be determined in
advance.
If shares of a Fund to be redeemed were purchased by check or through certain
Automated Clearing House ("ACH") transactions, the Fund may delay transmittal of
redemption proceeds until it has determined that collected funds have been
received for the purchase of such shares, which will be up to 10 days from
receipt by the Fund of the purchase amount. Shareholders may not use expedited
redemption procedures (wire transfer or Redemption Check) until the shares being
redeemed have been owned for at least 10 days, and shareholders may not use such
procedures to redeem shares held in certificated form. There is no delay when
shares being redeemed were purchased by wiring Federal Funds.
Orders for purchase of shares of a Fund received by wire transfer in the form of
Federal Funds will be effected at the next determined net asset value. Shares
purchased by wire will receive (i) that day's dividend if effected at or prior
to the 1:00 p.m. Central time net asset value determination for Money Market
Fund and Government Money Fund and at or prior to the 11:00 a.m. Central time
net asset value determination for Tax-Free Money Fund otherwise the dividend for
the next calendar day if effected at the 3:00 p.m. Central time net asset value
determination. Orders processed through dealers or other financial services
firms via Fund/SERV will be effected at the 3:00 p.m. Central time net asset
value effective on the trade date. These purchases will begin earning dividends
the calendar day following the payment date.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central time on the next business day
following receipt and such shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before shares will be purchased.
If payment is wired in Federal Funds, the payment should be directed to Zurich
Money Funds: United Missouri Bank of Kansas City, N.A. (ABA #1010-0069-5) Zurich
Money Market Fund: #98-0103-346-8, or Zurich Government Money Fund:
98-0116-259-4 or, Zurich Tax-Free Money Fund:98-0001-577-6
Redemption of Shares
Upon receipt by the Shareholder Service Agent of a request for redemption in
proper form, shares will be redeemed by a Fund at the applicable net asset value
as described in the Funds' prospectus. If processed at 3:00 p.m. Central time,
the shareholders will receive that day's dividend. A shareholder may elect to
use either the regular or expedited redemption procedures. Shareholders who
redeem shares of a Fund will receive the net asset value of such shares and all
declared but unpaid dividends on such shares.
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<PAGE>
The Funds may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Funds' shareholders.
Although it is each Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Trust will pay
the redemption price in part by a distribution of portfolio securities in lieu
of cash, in conformity with the applicable rules of the Securities and Exchange
Commission, taking such securities at the same value used to determine net asset
value, and selecting the securities in such manner as the Board of Trustees may
deem fair and equitable. If such a distribution occurs, shareholders receiving
securities and selling them could receive less than the redemption value of such
securities and in addition could incur certain transaction costs. Such a
redemption would not be as liquid as a redemption entirely in cash. The Trust
has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which
the Trust is obligated to redeem shares of a Fund solely in cash up to the
lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period
for any one shareholder of record.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
Each Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Central time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability. A Portfolio is not responsible
16
<PAGE>
for the efficiency of the federal wire system or the account holder's financial
services firm or bank. Each Portfolio currently does not charge the account
holder for wire transfers. The account holder is responsible for any charges
imposed by the account holder's firm or bank. There is a $1,000 wire redemption
minimum. To change the designated account to receive wire redemption proceeds,
send a written request to the Shareholder Service Agent with signatures
guaranteed as described above, or contact the firm through which shares of a
Portfolio were purchased. Shares purchased by check or through certain ACH
transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
shares held in certificate form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. Each Portfolio reserves the right
to terminate or modify this privilege at any time.
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on a Portfolio ("Redemption Checks"). These Redemption Checks may be
made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $1,000
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption Check. This will enable
the shareholder to continue earning dividends until a Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Application which is available from each Fund or
firms through which shares were purchased. Redemption Checks should not be used
to close an account since the account normally includes accrued but unpaid
dividends. Each Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of each Fund. In addition, firms may impose minimum balance requirements
in order to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by each
Fund.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on a Portfolio's books for at least
10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. Each Fund reserves the right to terminate or modify this
privilege at any time.
A Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Portfolio shares in excess of the value of a Fund account or in an amount less
than $1,000; when a Redemption Check is presented that would require redemption
of shares that were purchased by check or certain ACH transactions within 10
days; or when "stop payment" of a Redemption Check is requested.
Special Features. Certain firms that offer Shares of a Fund also provide special
redemption features through charge or debit cards and checks that redeem Fund
Shares. Various firms have different charges for their services. Shareholders
should obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares of the same Fund unless they elect to
receive cash. Dividends will be reinvested monthly at the net asset value
normally on the 25th of each month if a business day, otherwise on the prior
business day. The Funds will pay shareholders who redeem their entire accounts
all unpaid dividends at the time of redemption not later than the next dividend
payment date.
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<PAGE>
Each Fund calculates its dividends based on its daily net investment income. For
this purpose, the net investment income of a Fund consists of (a) accrued
interest income plus or minus amortized discount or premium (excluding market
discount for Tax-Free Money Fund), (b) plus or minus all short-term realized
gains and losses on portfolio assets and (c) minus accrued expenses allocated to
the Fund. Expenses of the Funds are accrued each day. While each Fund's
investments are valued at amortized cost, there will be no unrealized gains or
losses on portfolio securities. However, should the net asset value of a Fund
deviate significantly from market value, the Board of Trustees could decide to
value the portfolio securities at market value and then unrealized gains and
losses would be included in net investment income above.
Net Asset Value. As described in the prospectus, each Fund values its portfolio
instruments at amortized cost, which does not take into account unrealized
capital gains or losses. This involves initially valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
Calculations are made to compare the value of a Fund's investments valued at
amortized cost with market values. Market valuations are obtained by using
actual quotations provided by market makers, estimates of market value, or
values obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of of 1% or more were to occur between the net
asset value per share calculated by reference to market values and a Fund's
$1.00 per share net asset value, or if there were any other deviation that the
Board of Trustees of the Trust believed would result in a material dilution to
shareholders or purchasers, the Board of Trustees would promptly consider what
action, if any, should be initiated. If a Fund's net asset value per share
(computed using market values) declined, or were expected to decline, below
$1.00 (computed using amortized cost), the Board of Trustees of the Trust might
temporarily reduce or suspend dividend payments in an effort to maintain the net
asset value at $1.00 per share. As a result of such reduction or suspension of
dividends or other action by the Board of Trustees, an investor would receive
less income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividends for
the period during which they held shares and receiving, upon redemption, a price
per share lower than that which they paid. On the other hand, if a Fund's net
asset value per share (computed using market values) were to increase, or were
anticipated to increase, above $1.00 (computed using amortized cost), the Board
of Trustees of the Trust might supplement dividends in an effort to maintain the
net asset value at $1.00 per share.
Taxes. Taxable Portfolios. Money Market Fund and Government Money Fund each
intend to continue to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code (the "Code") and, if so qualified, will not be
subject to Federal income taxes to the extent its earnings are distributed.
Dividends derived from interest and short-term capital gains are taxable as
ordinary income whether received in cash or reinvested in additional shares.
Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares.
Dividends from these Portfolios do not qualify for the dividends received
deduction available to corporate shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Portfolio may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
Tax-Free Money Fund intends to continue to qualify under the Code as a regulated
investment company and, if so qualified, will not be liable for Federal income
taxes to the extent its earnings are distributed. This Portfolio also intends to
meet the requirements of the Code applicable to regulated investment companies
distributing tax-exempt interest dividends and, accordingly, dividends
representing net interest received on Municipal Securities will not be included
by shareholders in their gross income for Federal income tax purposes, except to
the extent such interest is subject to the alternative minimum tax as discussed
below. Dividends representing taxable net investment income
18
<PAGE>
(such as net interest income from temporary investments in obligations of the
U.S. Government) and net short-term capital gains, if any, are taxable to
shareholders as ordinary income. Net interest on certain "private activity
bonds" issued on or after August 8,1986 is treated as an item of tax preference
and may, therefore, be subject to both the individual and corporate alternative
minimum tax. To the extent provided by regulations to be issued by the Secretary
of the Treasury, exempt-interest dividends from Tax-Free Money are to be treated
as interest on private activity bonds in proportion to the interest income the
Fund receives from private activity bonds, reduced by allowable deductions. For
the 1998 calendar year 19% of the net interest income was derived from "private
activity bonds. "
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from Tax-Free Money Fund.
Individuals whose modified income exceeds a base amount will be subject to
Federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from Tax-Free Money Fund, and 50% of Social Security
benefits.
The tax exemption of dividends from Tax-Free Money Fund for Federal income tax
purposes does not necessarily result in exemption under the income or other tax
laws of any state or local taxing authority. The laws of the several states and
local taxing authorities vary with respect to the taxation of such income and
shareholders of the Fund are advised to consult their own tax advisers as to the
status of their accounts under state and local tax laws.
Each Fund is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals, a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Further, Tax-Free Money
Fund may not be an appropriate investment for persons who are `substantial
users' of facilities financed by industrial development bonds held by Tax-Free
Money Fund or are `related persons' to such users; such persons should consult
their tax advisers before investing in Tax-Free Money Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from Tax-Free Money
Fund, may be includible in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect to
the consequences of the Superfund Act.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually.
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<PAGE>
Shareholders are encouraged to retain copies of their account confirmation
statements or year-end statements for tax reporting purposes. However, those who
have incomplete records may obtain historical account transaction information at
a reasonable fee.
PERFORMANCE
From time to time, the Trust may advertise several types of performance
information for the Portfolio, including "yield", "effective yield" and, for
Tax-Free Money Fund only, "tax equivalent yield." Each of these figures is based
upon historical earnings and is not representative of the future performance of
the Fund. The yield of the Fund refers to the net investment income generated by
a hypothetical investment in the Portfolio over a specific seven-day period.
This net investment income is then annualized, which means that the net
investment income generated during the seven-day period is assumed to be
generated each week over an annual period and is shown as a percentage of the
investment. The effective yield is calculated similarly, but the net investment
income earned by the investment is assumed to be compounded when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect.
Each Fund's seven-day yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
the Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium, less accrued expenses. This number is then
divided by the price per share (expected to remain constant at $1.00) at the
beginning of the period ("base period return"). The result is then divided by 7
and multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculations. Each Fund's effective yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period return
+ 1)365/7-1.
Each Fund's seven-day effective yield is determined by taking the base period
return (computed as described above) and calculating the effect of assumed
compounding. The formula for the seven-day effective yield is: (seven-day base
period return +1)365/7 - 1. Each Fund may also advertise a thirty-day effective
yield in which case the formula is (thirty-day base period return +1)365/30 - 1.
The tax equivalent yield of Tax-Free Money Fund is computed by dividing that
portion of the Portfolio's yield (computed as described above) which is
tax-exempt by (one minus the stated Federal income tax rate) and adding the
product to that portion, if any, of the yield of the Portfolio that is not
tax-exempt.
Average annual total return ("AATR") is found for a specific period by first
taking a hypothetical $1,000 investment ("initial investment") on the first day
of the period and computing the "redeemable value" of that investment at the end
of the period. The redeemable value is then divided by the initial investment,
and this quotient is taken to the Nth root (N representing the number of years
in the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all dividends have been reinvested at
net asset value on the reinvestment dates.
Total return is not calculated according to a standard formula, except when
calculated for the "Financial Highlights" table in the financial statements.
Total return is calculated similarly to AATR but is not annualized. It may be
shown as a percentage or the increased dollar value of the hypothetical
investment over the period.
All performance information shown below is for periods ended July 31,
1999.
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<PAGE>
<TABLE>
<CAPTION>
*Tax-
Effective Equivalent Total Total Total
Yield Yield Yield AATR AATR AATR Return Return Return
Fund 7 days 7 days 7 days 1 yr. 5 yrs. 10 yrs. 1 yr. 5 yrs. 10 yrs.
---- ------ ------ ------ ----- ------ -------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 4.70% 4.81% N/A 4.88% 5.24% 5.24% 4.89% 29.12% 66.70%
Government Money 4.57% 4.67% N/A 4.77% 5.22% 5.20% 4.78% 28.94% 66.08%
Tax-Free Money 2.81% 2.85% 4.53% 2.96% 3.36% 3.59% 2.97% 17.97% 42.32%
</TABLE>
* Based upon a marginal federal income tax rate of 37.1%.
The tax equivalent yield of Tax-Free Money Fund is computed by dividing that
portion of the Fund's yield (computed as described above) which is tax-exempt by
(one minus the stated federal income tax rate) and adding the result to that
portion, if any, of the yield of the Fund that is not tax-exempt. For additional
information concerning tax-exempt yields, see "Tax-Free versus Taxable Yield"
below.
Each Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in a Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in a Fund is held, but also on such matters as Fund
expenses.
Money market mutual funds allow smaller investors to participate in the money
market and to receive money market yields that previously were available only to
those investors with large sums of money. Prior to the introduction of the first
money market mutual funds, small investors wanting to manage their cash reserves
had a limited choice of bank products available with a predetermined set of
interest rates such as passbook savings accounts and checking accounts.
Currently, there are hundreds of money market funds managing billions of dollars
for millions of investors. Zurich Money Funds is one of the largest money market
funds.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of Money Market Fund, Government Money Fund and
Tax-Free Money Fund with that of their competitors. Past performance cannot be a
guarantee of future results.
The performance of the Funds may be compared to that of other mutual funds
tracked by Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations include the reinvestment of all capital gain and income dividends
for the periods covered by the calculations. A Fund's performance also may be
compared to other money market funds reported by IBC Financial Data, Inc.'s
Money Fund Report(R), or Money Market Insight(R), reporting services on money
market funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and one
year investment results are effective annual yields assuming reinvestment of
dividends. From time to time the Funds may include in their sales communications
ranking and rating information received from various organizations, to include
but not be limited to, ratings from Morningstar, Inc. and rankings from Lipper.
A Fund's performance also may be compared on a before or after-tax basis to
various bank products, including the average rate of bank and thrift institution
money market deposit accounts, interest bearing checking accounts and
certificates of deposit as reported in the BANK RATE MONITOR National Index(TM)
of 100 leading bank and thrift institutions as published by the BANK RATE
MONITOR(TM), N. Palm Beach, Florida 33408. The rates published by the BANK RATE
MONITOR National Index(TM) are averages of the personal account rates offered on
the Wednesday prior to the date of publication by 100 large banks and thrifts in
the top ten Consolidated Standard Metropolitan Statistical Areas.
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<PAGE>
With respect to money market deposit accounts and interest bearing checking
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Interest bearing checking accounts generally offer
unlimited check writing while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Generally, the rates
offered for these products take market conditions and competitive product yields
into consideration when set. Bank products represent a taxable alternative
income producing product. Bank and thrift institution deposit accounts may be
insured. Shareholder accounts in the Funds are not insured. Bank passbook
savings accounts compete with money market mutual fund products with respect to
certain liquidity features but may not offer all of the features available from
a money market mutual fund, such as check writing. Bank passbook savings
accounts normally offer a fixed rate of interest while the yield of the Funds
fluctuates. Bank checking accounts normally do not pay interest but compete with
money market mutual fund products with respect to certain liquidity features
(e.g., the ability to write checks against the account). Bank certificates of
deposit may offer fixed or variable rates for a set term. (Normally, a variety
of terms are available.) Withdrawal of these deposits prior to maturity will
normally be subject to a penalty. In contrast, shares of the Funds are
redeemable at the net asset value (normally, $1.00 per share) next determined
after a request is received, without charge.
Investors may also want to compare a Fund's performance to that of U.S. Treasury
bills or notes because such instruments represent alternative income producing
products. Treasury obligations are issued in selected denominations. Rates of
U.S. Treasury obligations are fixed at the time of issuance and payment of
principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. Each Fund's yield will
fluctuate. Also, while each Fund seeks to maintain a net asset value per share
of $1.00, there is no assurance that it will be able to do so.
Tax-Free versus Taxable Yield. You may want to determine which investment --
tax-free or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-free investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-free yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that
Tax-Free Money Fund may generate. Both tables are based upon current law as to
the 1999 federal tax rate schedules.
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Under
$126,600
<TABLE>
<CAPTION>
Your
Marginal A Tax-Exempt Yield of:
Taxable Income Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,350-$61,400 $42,350-$102,300 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72%
- ---------------------------------------------------------------------------------------------------------------
Over $61,400 Over $102,300 31.0 2.90% 4.35% 5.80% 7.25% 8.70% 10.14%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Over
$126,600*
<TABLE>
<CAPTION>
Your
Marginal A Tax-Exempt Yield of:
Taxable Income Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$61,400-$128,100 $102,300-$155,950 31.9% 2.94% 4.41% 5.87% 7.34% 8.81% 10.28%
- ---------------------------------------------------------------------------------------------------------------
$128,100-$278,450 $155,950-$278,450 37.1 3.18% 4.77% 6.36% 7.95% 9.54% 11.13%
- ---------------------------------------------------------------------------------------------------------------
Over $278,450 Over $278,450 40.8 3.38% 5.07% 6.67% 8.45% 10.14% 11.82%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
o This table assumes a decrease of $3.00 of itemized deductions for each
$100 of adjusted gross income over $126,600. For a married couple with
adjusted gross income between $186,800 and $309,300 (single between
$126,600 and $247,000), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency exemption. The taxable equivalent
yield is the tax-exempt yield divided by: 100% minus the adjusted tax
rate. For example, if the table tax rate is 37.1% and you are married
with no dependents, the adjusted tax rate is 38.5% (37.1% + 0.7% +
0.7%). For a tax-exempt yield of 6%, the taxable equivalent yield is
about 9.8% (6% / (100% - 38.5%)).
23
<PAGE>
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Advisor and KDI, the
principal underwriter, or their affiliates, are as follows:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A.O. Smith Corporation (diversified
manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Advisor; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General (Tax), U.S. Department of Justice; Director, Bethlehem Steel
Corp.
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Advisor.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto,
President and Chief Executive Officer, SRI International (research and
development); prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton Inc. (management consulting
firm); Director, PSI Inc., Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Advisor; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Advisor.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Advisor.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Advisor; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
24
<PAGE>
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Advisor.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Advisor.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Advisor; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Advisor; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
* Interested persons of the Funds as defined in the Investment Company Act of
1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's 1999 fiscal year except that the information in the last column is for
calendar year 1998.
Total Compensation
From Trust and
Aggregate Compensation Fund Complex
Name of Trustee From Trust Paid to Trustees**
- --------------- ---------- ------------------
John W. Ballantine(1) $1,700 $0
Lewis A. Burnham 6,900 126,100
Donald L. Dunaway* 7,300 135,000
Robert B. Hoffman 6,500 116,100
Donald R. Jones 6,300 129,600
Shirley D. Peterson 6,500 108,800
William P. Sommers 6,800 108,800
- -------------------
(1) Appointed to the Board May 18, 1999.
* Includes deferred fees. Pursuant to deferred compensation agreements with
the Trust, deferred amounts accrue interest monthly at a rate equal to the
yield of Zurich Money Funds -- Zurich Money Market Fund. Total deferred
fees (including interest thereon) accrued through July 31, 1999 and payable
from the Trust to Mr. Dunaway are $55,000.
** Includes compensation during 1998 for service on 25 funds managed by
Scudder Kemper with 43 fund portfolios. Each trustee currently serves as a
trustee of 26 funds managed by Scudder Kemper with 48 fund portfolios.
25
<PAGE>
As of October 31, 1999, the officers and trustees of the Trust, as a group,
owned less than 1% of the outstanding shares of each Fund and no person owned of
record 5% or more of the outstanding shares of any Fund.
SPECIAL FEATURES
Automatic Withdrawal Program. If you own $5,000 or more of a Fund's shares you
may provide for the payment from your account of any requested dollar amount to
be paid to you or your designated payee monthly, quarterly, semi-annually or
annually. The $5,000 minimum account size is not applicable to Individual
Retirement Accounts. Dividend distributions will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested, redemptions for the purpose of making such payments may reduce or
even exhaust the account. The program may be amended on thirty days notice by
the Fund and may be terminated at any time by the shareholder or the Funds. The
minimum automatic withdrawal amount is $1,000 and the shareholder will be
charged a $5.00 fee for each withdrawal.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and can establish your account in any of
the following types of retirement plans:
o Individual Retirement Accounts (IRAs) with IFTC as custodian. This includes
Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE"),
IRA accounts and Simplified Employee Pension Plan (SEP) IRA accounts and
prototype documents.
o 403(b) Custodial Accounts with IFTC as custodian. This type of plan is
available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum contribution per participant is the lesser of 25% of
compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and
materials for establishing them are available from the Shareholder Service Agent
upon request. The brochures for plans with IFTC as custodian describe the
current fees payable to IFTC for its services as custodian. Investors should
consult with their own tax advisers before establishing a retirement plan.
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees, if a meeting is called for
such purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Trust, a Fund or a class to the extent and as provided in the Declaration
of Trust; (d) any amendment of the Declaration of Trust (other than amendments
changing the name of the Trust, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); ; and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Trust, or any registration of the Trust
with the Securities and Exchange Commission or any state, or as the trustees may
consider necessary or desirable. The shareholders also would vote upon changes
in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of his
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
26
<PAGE>
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Trust could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Trust and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any Fund or class) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
Master/Feeder Structure. The Board of Trustees has the discretion to retain the
current distribution arrangement for the Funds while investing in a master fund
in a master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss. Shareholders
of each Fund will be given at least 30 days' prior notice of any such
investment, although they will not be entitled to vote on the action. Such
investment would be made only if the Trustees determine it to be in the best
interests of the respective Fund and its shareholders.
27
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2 and Prime-1, Prime-2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by it
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
MIG-1 and MIG-2 Municipal Notes
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Loans designated MIG-1 are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both. Loans designated MIG-2 are of high quality, with margins
of protection ample although not so large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
28
<PAGE>
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
29
<PAGE>
ZURICH MONEY FUNDS
PART C.
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
<S> <C> <C> <C>
(a) (a)(1) Declaration of Trust is incorporated herein by reference to
Amendment No. 41 on Form N-1A filed on November 16, 1995.
(a)(2) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 41 on Form N-1A filed on November 16,
1995
(a)(3) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 41 on Form N-1A filed on November 16,
1995
(a)(4) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 42 on Form N-1A filed on or about
November 6, 1996.
(a)(5) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 43 on Form N-1A filed on or about
November 14, 1997.
(a)(6) Amended and Restated Declaration of Trust is incorporated herein
by reference to Post Effective Amendment No. 45 filed on November
25, 1998.
(b) By-Laws are incorporated herein by reference to Post-Effective
Amendment No. 41 to the Registration Statement filed on November,
16, 1995.
(c ) Specimen Share Certificate is incorporated herein by to
Post-Effective Amendment No. 41 to the Registration Statement filed
on November, 16, 1995.
(d) Investment Management Agreement for Zurich Money Market Fund,
Zurich Government Money Fund and Zurich Tax Free Money Fund is
incorporated herein by to Post-Effective Amendment No. 46 to the
Registration Statement filed on September 28, 1999.
(e) Underwriting Agreement for Zurich Money Market Fund, Zurich
Government Money Fund and Zurich Tax Free Money Fund is
incorporated herein by reference to Post-Effective Amendment No. 45
filed on November 25, 1998.
(f) Inapplicable.
(g) Custodian Agreement for Zurich Money Market Fund, Zurich Government
Money Fund and Zurich Tax Free Money Fund is incorporated herein by
to Post-Effective Amendment No. 46 to the Registration Statement
filed on September 28, 1999.
<PAGE>
(h) (h)(1) Fund Accounting and Services Agreement for Money Market Fund is
incorporated herein by reference to Post-Effective Amendment No.
45, filed on November 25, 1998.
(h)(2) Fund Accounting and Services Agreement for Government Money Fund is
incorporated herein by reference to Post-Effective Amendment No.
45, filed on November 25, 1998.
(h)(3) Fund Accounting and Services Agreement for Tax Free Money Fund is
incorporated herein by reference to Post-Effective Amendment No.
45, filed on November 25, 1998.
(i) Legal Opinion and Consent of Counsel is filed herein.
(j) Consent of Independent Auditors is filed herein.
(k) Inapplicable.
(l) Inapplicable.
(m) Inapplicable.
(n) Inapplicable.
(o) Inapplicable.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 25. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 26. Business or Other Connections of Investment Adviser
<PAGE>
Scudder Kemper Investments, Inc. has stockholders and employees who are
denominated officers but do not as such have corporation-wide responsibilities.
Such persons are not considered officers for the purpose of this Item 26.
<TABLE>
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
<PAGE>
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Financial Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Item 27. Principal Underwriters
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Funds.
(b) Information on the officers and directors of Kemper Distributors,
Inc., principal underwriter for the Registrant is set forth below. The principal
business address is 222 South Riverside Plaza, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer & Vice President
James J. McGovern Chief Financial Officer & Vice None
President
Linda J. Wondrack Vice President & Chief Compliance None
Officer
Paula Gaccione Vice President None
<PAGE>
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and
Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston Massachusetts 02110 or, in
the case of records concerning transfer agency functions, at the offices of IFTC
and of the shareholder service agent, Kemper Service Company, 811 Main Street,
Kansas City, Missouri 64105.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 24th day
of November, 1999.
Zurich Yieldwise Funds
By /s/ Mark S. Casady
------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on behalf of the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
November 24, 1999
- --------------------------------------
Thomas W. Littauer Chairman and Trustee
/s/ John W. Ballantine November 24, 1999
- --------------------------------------
John W. Ballantine* Trustee
/s/ Lewis A. Burnham November 24, 1999
- --------------------------------------
Lewis A. Burnham* Trustee
/s/ Donald L. Dunaway November 24, 1999
- --------------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman November 24, 1999
- --------------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones November 24, 1999
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson November 24, 1999
- --------------------------------------
Shirley D. Peterson* Trustee
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William P. Sommers November 24, 1999
- --------------------------------------
William P. Sommers* Trustee
November 24, 1999
- --------------------------------------
Cornelia M. Small Trustee
/s/ John R. Hebble November 24, 1999
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ Philip J. Collora
Philip J. Collora**
** Philip J. Collora signs this
document pursuant to powers of
attorney contained in
Post-Effective Amendment No. 44 to
the Registration Statement filed
September 30, 1998 and filed
herewith.
<PAGE>
LIMITED POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Caroline Pearson, Maureen E. Kane, and Philip J. Collora and any of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Zurich YieldWise
Funds, a Massachusetts business trust, on Form N-1A under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and any or
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as all intents and purposes as he
might or could do in person, hereby ratifying and confirming all said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
DATED: November 24, 1999
/s/ John W. Ballantine
----------------------
John W. Ballantine
Trustee
<PAGE>
File No. 2-51992
File No.811-2527
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
PRE-EFFECTIVE AMENDMENT NO. 48
--
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 48
--
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
ZURICH MONEY FUNDS
<PAGE>
INDEX TO EXHIBITS
(i)
(j)
VEDDER PRICE VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601-1003
312-609-7500
FACSIMILE: 312-609-5005
A PARTNERSHIP INCLUDING VEDDER, PRICE,
KAUFMAN & KAMMHOLZ, P.C.
WITH OFFICES IN CHICAGO AND NEW YORK CITY
November 18, 1999
Zurich Money Funds
222 South Riverside Plaza
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 47 to the
Registration Statement on Form N-1A under the Securities Act of 1933 being filed
by Zurich Money Funds (the "Fund") in connection with the public offering from
time to time of units of beneficial interest, no par value ("Shares"), in the
Zurich Money Fund, Zurich Government Money Fund, and Zurich Tax-Free Money Fund
(each, a "Portfolio" and collectively, the "Portfolios").
We have acted as counsel to the Fund, and in such capacity are familiar
with the Fund's organization and have counseled the Fund regarding various legal
matters. We have examined such Fund records and other documents and certificates
as we have considered necessary or appropriate for the purposes of this opinion.
In our examination of such materials, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us.
Based upon the foregoing and assuming that the Fund's Amended and
Restated Agreement and Declaration of Trust dated January 20, 1998 and the
By-Laws of the Fund adopted October 10, 1985, are presently in full force and
effect and have not been amended in any respect and that the resolutions adopted
by the Board of Trustees of the Fund on October 10, 1985, August 6, 1986, and
May 12, 1987 relating to organizational matters, securities matters and the
issuance of shares are presently in full force and effect and have not been
amended in any respect, we advise you and opine that (a) the Fund is a validly
existing voluntary association with transferrable shares under the laws of the
Commonwealth of Massachusetts and is authorized to issue an unlimited number of
Shares in the Portfolio; and (b) presently and upon such further issuance of the
Shares in accordance with the Fund's Agreement and Declaration of Trust and the
receipt by the Fund of a purchase price not less than the net asset value per
Share and when the pertinent provisions of the Securities Act of 1933 and such
"blue-sky" and securities laws as may be applicable have been complied with, and
assuming that the Fund continues to validly exist as provided in (a) above, the
Shares are and will be legally issued and outstanding, fully paid and
nonassessable.
<PAGE>
VEDDER PRICE
Zurich Money Funds
November 18, 1999
Page 2
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund or a
Portfolio. However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts and obligations of the Fund or a Portfolio and requires that
notice of such disclaimer be given in each note, bond, contract, instrument,
certificate share or undertaking made or issued by the Trustees or officers of
the Fund. The Agreement and Declaration of Trust provides for indemnification
out of the property of a Portfolio for all loss and expense of any shareholder
of that Portfolio held personally liable for the obligations of such Portfolio.
Thus, the risk of liability is limited to circumstances in which a Portfolio
would be unable to meet its obligations.
This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this opinion
in connection with said Post-Effective Amendment.
Very truly yours,
/s/VEDDER, PRICE, KAUFMAN & KAMMHOLZ
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
DAS/COK
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated September 16, 1999 in the Registration Statement (Form
N-1A) of Zurich Money Funds and its incorporation by reference in the related
Prospectus and Statement of Additional Information filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 47 to the Registration
Statement under the Securities Act of 1933 (File No. 2-51992) and in this
Amendment No. 47 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-2527).
ERNST & YOUNG LLP
Chicago, Illinois
November 19, 1999
