Managed Government Securities Fund
Managed Federal Securities Fund
Managed Cash Fund
Managed Tax-Free Fund
Managed Intermediate Government Fund
345 Park Avenue, New York, New York 10154
1-800-854-8525
Scudder, Stevens & Clark, Inc. - Investment Adviser
Scudder Investor Services, Inc. - Distributor
Scudder Fund, Inc. (the "Company") is a professionally managed, open-end,
diversified investment company that currently has five series (collectively, the
"Funds"):
Managed Government Securities Fund, Managed Federal Securities Fund,
Managed Cash Fund and Managed Tax-Free Fund (each, a "Money Market Fund" and
collectively, the "Money Market Funds") are money market funds that seek to
provide investors with as high a level of current income as is consistent with
their investment objectives and policies and with preservation of capital and
liquidity. The Money Market Funds are neither insured nor guaranteed by the U.S.
Government. Each Money Market Fund intends to maintain a net asset value per
share of $1.00, but there is no assurance that it will be able to do so.
Managed Intermediate Government Fund seeks to provide investors with a
high level of current income and to keep the price of its shares more stable
than that of a long-term bond. The net asset value of the Fund's shares will
fluctuate.
--------------------
This Prospectus sets forth concisely the information about the Company
that a prospective investor should know before investing. Please retain it for
future reference. If you require more detailed information, a Statement of
Additional Information dated May 1, 1995, as amended from time to time, may be
obtained without charge by writing or calling the Company at the address and
telephone number printed above. The Statement of Additional Information, which
is incorporated by reference into this Prospectus, has been filed with the
Securities and Exchange Commission.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
May 1, 1995
<PAGE>
Table of Contents
Page
----
Summary ................................................................... 2
Expense Information ....................................................... 5
Financial Highlights ...................................................... 8
Investment Objectives and Policies ........................................ 13
Additional Information About Policies and Investments ..................... 17
Special Arrangements with Banks and Other Institutions .................... 20
Shareholder Service, Administration and Distribution Plan ................. 20
Distribution and Performance Information .................................. 21
Company Organization ...................................................... 23
Transaction Information ................................................... 24
Shareholder Benefits ...................................................... 29
Summary
The Company Scudder Fund, Inc. is a professionally
managed, open-end, diversified investment
company which offers the following five
investment series: Managed Government
Securities Fund (the "Government Fund"),
Managed Federal Securities Fund (the
"Federal Fund"), Managed Cash Fund (the
"Cash Fund"), Managed Tax-Free Fund (the
"Tax-Free Fund") and Managed Intermediate
Government Fund (the "Intermediate
Government Fund"), (each, a "Fund" and
collectively, the "Funds"). See "Company
Organization."
Objectives and Policies Each Money Market Fund seeks to provide
investors with as high a level of current
income as is consistent with its stated
investment objective and policies and with
preservation of capital and liquidity. Each
Money Market Fund invests exclusively in
high quality investments with remaining
maturities of not more than 397 days. Each
Money Market Fund values its portfolio
securities on the basis of amortized cost
rather than at market value. Thus, although
the market value of a portfolio may vary
inversely to changes in prevailing interest
rates and may be affected by changes in the
creditworthiness of issuers of securities
held in its portfolio and other market
factors, each Money Market Fund expects to
maintain a constant net asset value of $1.00
per share. There is no assurance, however,
that this can be achieved.
The Government Fund invests in obligations
issued or guaranteed by the U.S. Government
or its agencies or instrumentalities.
The Federal Fund invests in obligations
issued or guaranteed by the U.S. Government
or its agencies or instrumentalities. The
Fund seeks to attain the objective of as
2
<PAGE>
high a level of current income that cannot
be subjected to state or local income tax by
reason of federal law as is consistent with
its other stated policies. Income from the
Federal Fund may not be exempt from certain
state and local taxes.
The Cash Fund invests in obligations issued
or guaranteed by the U.S. Government or its
agencies or instrumentalities, obligations
of certain U.S. or foreign banks and their
branches (such banks in each case to have
total assets of at least $1 billion),
corporate commercial paper and other
short-term corporate obligations, and
securities issued by or on behalf of states,
cities, municipalities and other public
authorities (which may or may not be exempt
from federal income taxes).
The Tax-Free Fund invests in a broad range
of securities issued by or on behalf of
states, cities, municipalities and other
public authorities ("municipal obligations")
the income of which is exempt from federal
income taxes. Income from the Tax-Free Fund
may not be exempt from certain state and
local taxes.
The Intermediate Government Fund seeks to
provide investors with a high level of
current income and to keep the price of its
shares more stable than that of a long-term
bond. The net asset value of the Fund's
shares will fluctuate. The Fund invests in
obligations issued or guaranteed by the U.S.
Government or its agencies or
instrumentalities. The Fund may also invest
in mortgage-related pass-through obligations
issued by the Government National Mortgage
Association, Federal National Mortgage
Association and the Federal Home Loan
Mortgage Corporation, and purchase
collateralized mortgage obligations issued
by the Federal Home Loan Mortgage
Corporation, Federal National Mortgage
Association or other agencies of the U.S.
Government or instrumentalities established
or sponsored by the U.S. Government. Under
ordinary market conditions, it is expected
that the portfolio of the Fund will have a
dollar-weighted average life of three to
seven years. The Fund will limit its
investments to those which are eligible for
federally-chartered credit unions. See
"Investment Objectives and Policies."
Additional Investment The Cash Fund may invest in obligations of
Activities foreign banks, which involve different risks
than those associated with obligations of
domestic banks. In addition, certain
obligations in which each Fund may invest
may have a floating or variable rate of
interest. Certain obligations in which the
Cash Fund and Tax-Free Fund may invest may
be backed by bank letters of credit. Each
Fund may enter into repurchase agreements,
and investments in any of the Funds may be
purchased on a when-issued basis and with
put features. Each of these investment
practices entails certain risks. See
"Additional Information About Policies and
Investments."
3
<PAGE>
Investment Adviser The Funds' investment adviser is Scudder,
Stevens & Clark, Inc. (the "Adviser"), a
leading provider of U.S. and international
investment management services for clients
throughout the world.
The Adviser receives monthly an investment
management fee for its services, equal, on
an annual basis, to 0.40% of the first $1.5
billion of each Money Market Fund's average
daily net assets and 0.35% of such assets in
excess of $1.5 billion; and 0.65% of the
Intermediate Government Fund's average daily
net assets.
Distributor Scudder Investor Services, Inc., a
wholly-owned subsidiary of the Adviser (the
"Distributor") is the principal underwriter
for the Company.
Custodian State Street Bank and Trust Company (the
"Custodian") is the custodian for the
Company.
Purchasing Shares Shares of any Fund may be purchased at net
asset value by writing or calling Scudder
Service Corporation, a wholly-owned
subsidiary of the Adviser (the "Transfer
Agent"). There is no sales charge. While the
Funds have no specific minimum initial
investment requirement, it is the Company's
policy normally not to accept initial
investments in amounts below $100,000 for
each Fund. The minimum subsequent investment
for any Fund is $100. See "Transaction
Information--Purchasing Shares."
Redeeming Shares Shareholders may redeem all or any part of
their investments in the Funds by contacting
the Transfer Agent. Shares will be redeemed
at their next determined net asset value.
There is no redemption charge. The Company
reserves the right, upon notice, to redeem
the shares in an investor's account if the
value of such shares falls below certain
levels or if the account does not have a
certified Social Security or tax
identification number. See "Transaction
Information--Redeeming Shares."
Share Price Scudder Fund Accounting Corporation, a
wholly-owned subsidiary of the Adviser,
determines net asset value per share of each
Fund on each day the New York Stock Exchange
(the "Exchange") is open for trading. The
net asset value per share of each Money
Market Fund is determined at 2:00 P.M. (New
York time), and the net asset value per
share of the Intermediate Government Fund is
determined at the close of regular trading
on the Exchange, which is currently 4:00
P.M. (New York time). See "Transaction
Information--Share Price."
Dividends Dividends on shares of each Fund are
declared daily and paid monthly.
Distributions of capital gains, if any, are
paid annually. Dividends and capital gains
distributions with respect to shares of each
Fund are automatically paid in additional
shares of the same Fund unless shareholders
elect to receive payments in cash. See
"Distribution and Performance
Information--Dividends and Capital Gains
Distributions."
4
<PAGE>
Expense Information
This information is designed to help an investor understand the various costs
and expenses of investing in Government Securities Fund and Federal Securities
Fund.
1) Shareholder Transaction Expenses: Expenses charged directly to an
individual account in a Fund for various transactions.
Government Federal
Securities Fund Securities Fund
--------------- ---------------
NONE NONE
2) Annual Fund Operating Expenses (after expense maintenance): Expenses paid
by a Fund before it distributed its net investment income, expressed as a
percentage of that Fund's average daily net assets for the fiscal year
ended December 31, 1994.
Investment Management Fees 0.11%* 0%**
Other Expenses:
Payments to Banks and
Other Institutions
for Shareholder and
Distribution Services 0.19% 0.22%
Miscellaneous 0.25% 0.53%
Total 0.44%* 0.75%**
---- ----
Total Fund Operating Expenses 0.55%* 0.75%**
==== ====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Fund before it distributes its
net investment income to shareholders.
One year $ 6 $ 8
Three years 18 24
Five years 31 42
Ten years 69 93
See "Company Organization--Investment Adviser" for further information about
investment management fees. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
Operating Expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* For the period January 20, 1995 to June 30, 1995, the Adviser has agreed to
maintain the total annualized expenses of the Fund at not more than 0.55%
of average daily net assets. If the Adviser had not agreed to maintain the
Fund's expenses the total annualized expenses of the Fund would have been
0.84% (of which 0.40% would have consisted of investment management fees)
for the fiscal year ended December 31, 1994.
** For the period January 20, 1995 to June 30, 1995, the Adviser has agreed to
maintain the total annualized expenses of the Fund at not more than 0.75%
of average daily net assets. If the Adviser had not agreed to maintain the
Fund's expenses the total annualized expenses of the Fund would have been
1.22% (of which 0.40% would have consisted of investment management fees)
for the fiscal year ended December 31, 1994.
"Payments to Banks and Other Institutions for Shareholder and Distribution
Services" represent payments made by the Company pursuant to special contractual
arrangements with banks and other institutions that perform shareholder
servicing functions for the Company with respect to shares of any Fund owned by
customers of such banks and institutions. These shareholder services would
include certain services that otherwise would have been performed for the
Company by its Transfer Agent. In addition, each Fund in the above fee table may
pay service fees to brokers and dealers, investment advisers and other
institutions. For information with respect to such payments see "Special
Arrangements with Banks and Other Institutions" and "Shareholder Service,
Administration and Distribution Plan."
5
<PAGE>
Expense Information
This information is designed to help an investor understand the various costs
and expenses of investing in Cash Fund and Tax-Free Fund.
1) Shareholder Transaction Expenses: Expenses charged directly to an
individual account in a Fund for various transactions.
Cash Fund Tax-Free Fund
--------- -------------
NONE NONE
2) Annual Fund Operating Expenses (after expense maintenance, if any):
Expenses paid by a Fund before it distributed its net investment income,
expressed as a percentage of that Fund's average daily net assets for the
fiscal year ended December 31, 1994.
Investment Management Fees 0.27%* 0.40%
Other Expenses:
Payments to Banks and
Other Institutions
for Shareholder and
Distribution Services 0.15% 0.19%
Miscellaneous 0.13% 0.18%
Total 0.28%* 0.37%
---- ----
Total Fund Operating Expenses 0.55%* 0.77%
==== ====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Fund before it distributes its
net investment income to shareholders.
One year $ 6 $ 8
Three years 18 25
Five years 31 43
Ten years 69 95
See "Company Organization--Investment Adviser" for further information about
investment management fees. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
Operating Expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* For the period January 20, 1995 to June 30, 1995, the Adviser has agreed to
maintain the total annualized expenses of the Fund at no more than 0.55% of
average daily net assets. If the Adviser had not agreed to maintain the
Fund's expenses the total annualized expenses of the Fund would have been
0.68% (of which 0.40% would have consisted of investment management fees)
for the fiscal year ended December 31, 1994.
"Payments to Banks and Other Institutions for Shareholder and Distribution
Services" represent payments made by the Company pursuant to special contractual
arrangements with banks and other institutions that perform shareholder
servicing functions for the Company with respect to shares of any Fund owned by
customers of such banks and institutions. These shareholder services would
include certain services that otherwise would have been performed for the
Company by its Transfer Agent. In addition, each Fund in the above fee table may
pay service fees to brokers and dealers, investment advisers and other
institutions. For information with respect to such payments see "Special
Arrangements with Banks and Other Institutions" and "Shareholder Service,
Administration and Distribution Plan."
6
<PAGE>
Expense Information
This information is designed to help an investor understand the various costs
and expenses of investing in Managed Intermediate Government Fund.
1) Shareholder Transaction Expenses: Expenses charged directly to an
individual account in the Fund for various transactions.
Intermediate
Government Fund
---------------
NONE
2) Annual Fund Operating Expenses (after expense maintenance): Expenses paid
by the Fund before it distributed its net investment income, expressed as a
percentage of its average daily net assets for the fiscal year ended
December 31, 1994.
Investment Management Fees 0.11%*
12b-1 Fees 0.14%+
Other Expenses 0.55%*
----
Total Portfolio Operating Expenses 0.80%*
====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders.
One year $ 8
Three years 26
Five years 44
Ten years 99
See "Company Organization--Investment Adviser" for further information about
investment management fees. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
Operating Expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* For the period January 20, 1995 to June 30, 1995, the Adviser has agreed
to maintain the total annualized expenses of the Fund at not more than
0.80% of average daily net assets. If the Adviser had not agreed to
maintain the Fund's expenses, the total annualized expenses of the Fund
would have been 1.34% (of which 0.65% would have consisted of investment
management fees) for the fiscal year ended December 31, 1994.
+ To the extent that these payments may be deemed to be for distribution
purposes, long-term shareholders of the Fund may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealers, Inc.
"12b-1 Fees" represent payments made by the Company pursuant to special
contractual arrangements with banks and other institutions that perform
shareholder servicing functions for the Company with respect to shares of the
Fund owned by customers of such banks and institutions. These shareholder
services would include certain services that otherwise would have been performed
for the Company by its Transfer Agent. In addition, the Fund may pay service
fees to brokers and dealers, investment advisers and other institutions. For
information with respect to such payments see "Special Arrangements with Banks
and Other Institutions" and "Shareholder Service, Administration and
Distribution Plan."
7
<PAGE>
Financial Highlights
Government Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance,
audited financial statements are available in the Company's Annual Report dated
December 31, 1994 and may be obtained without charge by writing or calling the
Company.
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders, which is incorporated by reference to the Statement of
Additional Information. The financial highlights should be read in conjunction
with the financial statements and notes thereto included in the Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
beginning of period
Net investment .037 .026 .035 .056 .075 .084 .069 .061 .063 .077
income
Distributions from (.037) (.026) (.035) (.056) (.075) (.084) (.069) (.061) (.063) (.077)
net investment income
and net realized
capital gains
Net asset value, end of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
period
Total Return (%) 3.75(b) 2.68(b) 3.51(b) 5.65(b) 7.73(b) 8.81(b) 7.13 6.24 6.44(b) 7.97(b)
Ratios and Supplemental
Data
Net assets, end of $ 69 $ 92 $ 151 $ 87 $ 82 $ 64 $ 409 $ 587 $ 786 $ 564
year ($ millions)
Ratio of operating .55 .55 .55 .55 .73 .75 .69 .69 .60 .51
expenses to average
daily net assets (%)(a)
Ratio of net investment 3.61 2.65 3.39 5.54 7.48 8.42 6.83 6.01 6.19 7.71
income to average net
assets (%)
(a) Operating expense .84 .77 .76 .80 .80 .80 -- -- .71 .77
ratio including expenses
reimbursed, management
fee and other expenses
not imposed (%)
(b) Total returns are higher, for the periods indicated, due to maintenance of the Fund's expenses.
</TABLE>
8
<PAGE>
Federal Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance,
audited financial statements are available in the Company's Annual Report dated
December 31, 1994 and may be obtained without charge by writing or calling the
Company.
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders, which is incorporated by reference to the Statement of
Additional Information. The financial highlights should be read in conjunction
with the financial statements and notes thereto included in the Annual Report.
<TABLE>
<CAPTION>
For the Period July
17, 1991
(commencement of
operations) through
Years Ended December 31, December 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, $ 1.00 $ 1.00 $ 1.00 $ 1.00
beginning of period
Net investment .032 .024 .030 .021
income
Distributions from (.032) (.024) (.030) (.021)
net investment income
and net realized
capital gains
Net asset value, end of $ 1.00 $ 1.00 $ 1.00 $ 1.00
period
Total Return (%)(b) 3.24 2.45 3.02 4.80(c)
Ratios and Supplemental Data
Net assets, end of $ 13 $ 13 $ 12 $ 14
year ($ millions)
Ratio of operating .69 .52 .53 .52(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 3.19 2.43 3.00 4.67(c)
income to average net
assets (%)
(a) Operating expense ratio including expenses 1.22 1.14 1.07 .92
reimbursed, management fee and other expenses not
imposed (%)
(b) Total returns are higher due to maintenance of the Fund's expenses.
(c) Annualized
</TABLE>
9
<PAGE>
Cash Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance,
audited financial statements are available in the Company's Annual Report dated
December 31, 1994 and may be obtained without charge by writing or calling the
Company.
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders, which is incorporated by reference to the Statement of
Additional Information. The financial highlights should be read in conjunction
with the financial statements and notes thereto included in the Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
beginning of period
Net investment .038 .028 .037 .059 .076 .086 .070 .062 .063 .077
income
Distributions from (.038) (.028) (.037) (.059) (.076) (.086) (.070) (.062) (.063) (.077)
net investment income
and net realized
capital gains
Net asset value, end $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
of period
Total Return (%) 3.86(b) 2.81(b) 3.74(b) 6.07(b) 7.92(b) 8.93 7.21 6.35 6.46(b) 7.92(b)
Ratios and
Supplemental Data
Net assets, end of $ 367 $ 324 $ 305 $ 347 $ 385 $ 331 $ 389 $ 445 $ 752 $ 915
year ($ millions)
Ratio of operating .55 .55 .55 .55 .67 .72 .65 .68 .69 .64
expenses to average
daily net assets
(%)(a)
Ratio of net 3.84 2.78 3.76 5.93 7.64 8.56 6.95 6.08 6.26 7.65
investment income to
average net assets (%)
(a) Operating expense .68 .66 .64 .64 .70 -- -- -- .73 .71
ratio including
expenses reimbursed,
management fee and
other expenses not
imposed (%)
(b) Total returns are higher, for the periods indicated, due to maintenance of the Fund's expenses.
</TABLE>
10
<PAGE>
Tax-Free Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance,
audited financial statements are available in the Company's Annual Report dated
December 31, 1994 and may be obtained without charge by writing or calling the
Company.
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders, which is incorporated by reference to the Statement of
Additional Information. The financial highlights should be read in conjunction
with the financial statements and notes thereto included in the Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
beginning of period
Net investment .023 .018 .025 .042 .053 .057 .049 .042 .044 0.50
income
Distributions from (.023) (.018) (.025) (.042) (.053) (.057) (.049) (.042) (.044) (.050)
net investment income
and net realized
capital gains
Net asset value, end of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
period
Total Return (%) 2.29 1.85 2.56 4.20 5.47 5.91 4.98 4.25 4.47(b) 5.08(b)
Ratios and Supplemental
Data
Net assets, end of $ 125 $ 107 $ 91 $ 107 $ 135 $ 137 $ 261 $ 336 $ 415 $ 388
year ($ millions)
Ratio of operating .77 .78 .77 .75 .77 .76 .60 .66 .69 .64
expenses to average
daily net assets (%)(a)
Ratio of net investment 2.26 1.83 2.54 4.14 5.33 5.72 4.85 4.14 4.35 4.96
income to average net
assets (%)
(a) Operating expense -- -- -- -- -- -- -- -- .72 .74
ratio including expenses
reimbursed, management fee
and other expenses not
imposed (%)
(b) Total returns are higher, for the periods indicated, due to maintenance of the Fund's expenses.
</TABLE>
11
<PAGE>
Intermediate Government Fund
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the audited
financial statements.
If you would like more detailed information concerning the Fund's
performance, a complete portfolio listing and audited financial statements are
available in the Company's Annual Report dated December 31, 1994 and may be
obtained without charge by writing or calling the Company.
The following information has been audited by Price Waterhouse LLP,
independent accountants, whose unqualified report thereon is included in the
Annual Report to Shareholders, which is incorporated by reference to the
Statement of Additional Information. The financial highlights should be read in
conjunction with the financial statements and notes thereto included in the
Annual Report.
<TABLE>
<CAPTION>
For the Period
March 1, 1993
Year (commencement
Ended of operations)
December 31, to December 31,
1994 1993
------------ ---------------
<S> <C> <C>
Net asset value, beginning of period $ 9.98 $10.00
-------- ------
Income from Investment Operations:
Net investment income (a) .49 .45
Net realized and unrealized loss on investments (.80) (.02)
-------- ------
Total from investment operations (.31) .43
-------- ------
Less dividends from net investment income (.49) (.45)
-------- ------
Net asset value, end of period $ 9.18 $ 9.98
======== ======
Total return (%) (d) (3.12) 4.37(b)
======== ======
Ratios and Supplementary Data
Net assets, end of period ($ millions) 22 15
Ratio of operating expenses, to average net assets (%) (a) 1.01 .51(c)
Ratio of net investment income, to average net assets (%) 5.19 5.35(c)
Portfolio turnover rate (%) 336.62 132.98(c)
(a) Reflects a per share amount of expenses reimbursed by the
Manager of $ -- $ .03
Reflects a per share amount of management fee and other fees
not imposed $ .03 $ .07
Operating expense ratio including expenses reimbursed,
management fee and other expenses not imposed (%) 1.34 1.69(c)
(b) Not annualized
(c) Annualized
(d) Total returns are higher due to maintenance of the Fund's expenses.
</TABLE>
12
<PAGE>
Investment Objectives and Policies
Set forth below is a description of the investment objective and policies
of each Fund. The Money Market Funds seek to provide investors with as high a
level of current income through investment in high-quality short-term
obligations as is consistent with their investment objectives and policies and
with preservation of capital and liquidity. The Federal Fund seeks to provide
current income that cannot be subjected to state and local taxes by reason of
federal law, and the Tax-Free Fund seeks to provide current income that is
exempt from federal income taxes. The Intermediate Government Fund seeks to
provide investors with a high level of current income and to keep the price of
its shares more stable than that of a long-term bond. The Intermediate
Government Fund is not a fixed-price money market fund, and the value of its
shares will fluctuate. In seeking its investment objective of high current
income, the Intermediate Government Fund will not invest in non-investment grade
securities. Except as otherwise indicated, each Fund's investment objective and
policies are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in each Fund's
objective. There can be no assurance that any of the Funds will achieve its
investment objective.
Securities in which the Money Market Funds invest may not yield as high a
level of current income as securities of lower quality and longer maturities
which generally have less liquidity and greater market risk.
Each Money Market Fund will maintain a dollar-weighted average maturity of
90 days or less in an effort to maintain a net asset value per share of $1.00,
but there is no assurance that it will be able to do so.
Government Fund
The Government Fund seeks to provide investors with as high a level of
current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Fund invests exclusively in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities that have remaining maturities of not more than 397 days and
certain repurchase agreements.
In addition, the Fund may invest in variable or floating rate obligations,
when-issued securities and securities with put features.
Federal Fund
The Federal Fund seeks to provide investors with as high a level of
current income that cannot be subjected to state or local income taxes by reason
of federal law as is consistent with its investment policies and with
preservation of capital and liquidity. To achieve this objective, the Fund
invests exclusively in obligations issued or guaranteed by the U.S. Government
that have remaining maturities of not more than 397 days, including securities
issued by the Federal Farm Credit Banks Funding Corp. and the Student Loan
Marketing Association, and in certain repurchase agreements when in the judgment
of the Adviser this is advisable for liquidity purposes, in order to enhance
yield or in other circumstances such as when appropriate securities are not
available.
In addition, the Fund may invest in variable or floating rate obligations,
when-issued securities and securities with put features.
Cash Fund
The Cash Fund seeks to provide investors with as high a level of current
income as is consistent with its investment policies and with preservation of
capital and liquidity. The Fund invests exclusively in a broad range of
short-term money market instruments that have remaining maturities of not more
than 397 days and certain repurchase agreements. These securities consist of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, taxable and tax-exempt municipal obligations, corporate and
bank obligations, certificates of deposit, bankers' acceptances and variable
amount master demand notes.
The bank obligations in which the Fund may invest include negotiable
certificates of deposit, bankers' acceptances, fixed time deposits or other
short-term bank obligations. The Fund limits its investments in U.S. bank
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obligations to obligations of U.S. banks (including foreign branches, the
obligations of which are guaranteed by the U.S. parent) that have at least $1
billion in total assets at the time of investment. "U.S. banks" include
commercial banks that are members of the Federal Reserve System or are examined
by the Comptroller of the Currency or whose deposits are insured by the Federal
Deposit Insurance Corporation. In addition, the Fund may invest in savings banks
and savings and loan associations insured by the Federal Deposit Insurance
Corporation that have total assets in excess of $1 billion at the time of the
investment. The Fund limits its investments in foreign bank obligations to U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) which
banks (based upon their most recent annual financial statements) at the time of
investment (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) are among the 100 largest banks in the world
as determined on the basis of assets; and (iii) have branches or agencies in the
U.S.; and which obligations, in the opinion of the Adviser, are of an investment
quality comparable to obligations of U.S. banks in which the Fund may invest.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties that vary with market conditions and the
remaining maturity of the obligations. The Fund may not invest more than 10% of
the value of its total assets in investments that are not readily marketable
including fixed time deposits subject to withdrawal penalties maturing in more
than seven calendar days.
The Fund may invest in U.S. dollar-denominated obligations of foreign
banks. There is no limitation on the amount of the Fund's assets that may be
invested in obligations of foreign banks that meet the conditions set forth
above. Such investments may involve greater risks than those affecting U.S.
banks or Canadian affiliates of U.S. banks. In addition, foreign banks are not
subject to examination by any U.S. Government agency or instrumentality.
Except for obligations of foreign banks and foreign branches of U.S.
banks, the Fund will not invest in the securities of foreign issuers. Generally,
the Fund may not invest less than 25% of the current value of its total assets
in bank obligations (including bank obligations subject to repurchase
agreements).
The commercial paper purchased by the Fund is limited to direct
obligations of domestic corporate issuers, including bank holding companies,
which obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's"), "A-1" or better by Standard & Poor's
("S&P") or "F-1" by Fitch Investors Service, Inc. ("Fitch"), (ii) issued or
guaranteed as to principal and interest by issuers having an existing debt
security rating of "Aa" or better by Moody's or "AA" or better by S&P or Fitch,
or (iii) securities that, if not rated, are of comparable investment quality as
determined by the Adviser in accordance with procedures adopted by the Board of
Directors.
The Fund may invest in non-convertible corporate debt securities such as
notes, bonds and debentures that have remaining maturities of not more than 397
days and that are rated "Aa" or better by Moody's or "AA" or better by S&P or
Fitch, and variable amount master demand notes. A variable amount master demand
note differs from ordinary commercial paper in that it is issued pursuant to a
written agreement between the issuer and the holder. Its amount may from time to
time be increased by the holder (subject to an agreed maximum) or decreased by
the holder or the issuer and is payable on demand. The rate of interest varies
pursuant to an agreed-upon formula. Generally, master demand notes are not rated
by a rating agency. However, the Fund may invest in a master demand note that,
if not rated, is in the opinion of the Adviser of an investment quality
comparable to rated securities in which the Fund may invest. The Adviser
monitors the issuers of such master demand notes on a daily basis. Transfer of
such notes is usually restricted by the issuer, and there is no secondary
trading market for such notes. The Fund may not invest in a master demand note
if, as a result, more than 10% of the value of its total net assets would be
invested in such notes.
All of the securities in which the Fund will invest must meet credit
standards applied by the Adviser pursuant to procedures established by the Board
of Directors. Should an issue of securities cease to be rated or if its rating
is reduced below the minimum required for purchase by the Fund, the Adviser will
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dispose of any such security, as soon as practicable, unless the Directors of
the Company determine that such disposal would not be in the best interests of
the Fund.
In addition, the Fund may invest in variable or floating rate obligations,
obligations backed by bank letters of credit, when-issued securities and
securities with put features.
Tax-Free Fund
The Tax-Free Fund seeks to provide investors with as high a level of
current income that cannot be subjected to federal income tax by reason of
federal law as is consistent with its investment policies and with preservation
of capital and liquidity. The Fund invests primarily in high-quality municipal
obligations the interest on which is exempt from federal income taxes and that
have remaining maturities of not more than 397 days. Opinions relating to the
exemption of interest on municipal obligations from federal income tax are
rendered by bond counsel to the municipal issuer. The Fund may also invest in
certain taxable obligations on a temporary defensive basis, as described below.
From time to time the Fund may invest 25% or more of the current value of
its total assets in municipal obligations that are related in such a way that an
economic, business or political development or change affecting one such
obligation would also affect the other obligations. For example, certain
municipal obligations accrue interest that is paid from revenues of similar type
projects; other municipal obligations have issuers located in the same state.
The Fund may, pending the investment of proceeds of sales of shares or
proceeds from sales of portfolio securities or in anticipation of redemptions,
or to maintain a "defensive" posture when, in the opinion of the Adviser, it is
advisable to do so because of market conditions, elect to invest temporarily up
to 20% of the current value of its total assets in cash reserves or taxable
securities. Under ordinary market conditions, the Fund will maintain at least
80% of the value of its total assets in obligations that are exempt from federal
income taxes and are not subject to the alternative minimum tax. The foregoing
constitutes a fundamental policy that cannot be changed without the approval of
a majority of the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In addition, certain municipal obligations might lose tax-exempt
status in the event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit
standards applied by the Adviser pursuant to procedures established by the Board
of Directors. Should an issue of securities cease to be rated or if its rating
is reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors of
the Company determine that such disposal would not be in the best interests of
the Fund.
In addition, the Fund may enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features.
Intermediate Government Fund
The Intermediate Government Fund invests in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities and
certain repurchase agreements described below under "Additional Information
About Policies and Investments." The Fund may also invest in mortgage-related
pass-through obligations issued by the Government National Mortgage Association,
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation ("pass-through obligations"); purchase collateralized mortgage
obligations ("CMOs") issued by the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association or other agencies of the U.S. Government
or instrumentalities established or sponsored by the U.S. Government; and invest
in zero coupon bonds. Under ordinary market conditions, it is expected that the
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portfolio of the Fund will have a dollar-weighted average life of three to seven
years. The Fund will limit its investments to those which are eligible for
federally-chartered credit unions.
Obligations of U.S. Government agencies and instrumentalities are debt
securities issued by U.S. Government sponsored enterprises and federal agencies.
Some of such obligations are supported by (a) the full faith and credit of the
U.S. Treasury (such as Government National Mortgage Association participation
certificates), (b) the limited authority of the issuer to borrow from the U.S.
Treasury (such as securities of the Federal Home Loan Bank), (c) the authority
of the U.S. Government to purchase certain obligations of the issuer (such as
securities of the Federal National Mortgage Association) or (d) only the credit
of the issuer. In the case of obligations not backed by the full faith and
credit of the U.S., the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment.
A pass-through obligation is a security that represents an ownership
interest in a pool of mortgages and the resultant cash flow from those
mortgages. Payments by homeowners on the loans in the pool flow through to
certificate holders in amounts sufficient to repay principal and to pay interest
at the pass-through rate. The average lives of pass-through obligations may be
shortened by unscheduled prepayments of principal and interest on the underlying
mortgages. Variations in the maturities of pass-through obligations will affect
the Fund's yield. Furthermore, as with any debt obligation, fluctuations in
interest rates will inversely affect the market value of pass-through
obligations. Moreover, during periods of declining interest rates, prepayments
may affect the Fund's ability to maintain positions in high-yielding
pass-through obligations. In the case of pass-through obligations purchased at a
premium, such premiums may be lost as a result of a decrease in value of the
pass-through obligations due to such prepayments. The Fund will invest only in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency of the U.S. Government
(such as the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation). Such guarantees are only for timely payment of principal
and/or interest and do not guarantee yield or protect against declines in market
value. The Fund will invest only in pass-through obligations of U.S. Government
agencies or instrumentalities that meet the criteria as set forth above. There
is no limitation on the amount of the Fund's assets that may be invested in
pass-through obligations.
A CMO is a debt obligation backed by a portfolio of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities. Generally, a CMO is partitioned into several classes
with a ranked priority by which the classes of obligations are redeemed.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has stated maturity or final distribution
date. Principal prepayments on the underlying mortgages or securities may cause
the CMOs to be retired substantially earlier than their stated maturities or
final distribution dates. Interest is paid or accrues on all classes of the CMOs
on a monthly, quarterly or semi-annual basis. The principal of and interest on
the underlying mortgages or securities may be allocated among the several
classes of series of a CMO in innumerable ways. In one structure, payments of
principal, including any principal prepayments, on the underlying mortgages or
securities are applied to the classes of a CMO in the order of their respective
stated maturities or final distribution dates, so that no payment of principal
will be made on any class of CMOs until all other classes having an earlier
stated maturity or final distribution date have been paid in full.
The Fund may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
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date but may be retired earlier. PAC Bonds generally call for payments of a
specified amount of principal on each payment date.
Additional Information About Policies and Investments
Investment Restrictions
The following investment restrictions and those described in the Statement
of Additional Information are fundamental policies of each Fund that may be
changed only when permitted by law and approved by the holders of a majority of
such Fund's outstanding voting securities, as described under "Company
Organization" in the Statement of Additional Information.
No Fund may (1) issue senior securities, borrow money or pledge or
mortgage its assets, except that each Fund may borrow from banks up to 10% of
the current value of such Fund's total net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
not more than 10% of the current value of the Fund's total net assets (but
investments may not be purchased by such Fund while any such borrowing exists);
(2) make loans, except that each Fund may loan portfolio securities, purchase or
hold a portion of an issue of publicly distributed bonds, debentures or other
obligations, and enter into repurchase agreements with respect to its portfolio
securities and except that each Money Market Fund may purchase negotiable
certificates of deposit and bankers' acceptances; or (3) invest an amount equal
to 10% or more of the current value of such Fund's total assets in investments
that are not readily marketable, including securities restricted as to
disposition under the Securities Act of 1933, repurchase agreements having
maturities of more than seven days and, in the case of the Cash Fund, fixed time
deposits subject to withdrawal penalties having maturities of more than seven
calendar days.
For a more complete description, see "Investment Restrictions" in the
Statement of Additional Information.
Obligations of U.S. Government Agencies and Instrumentalities. Obligations
of U.S. Government agencies and instrumentalities are debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies. Some
of such obligations are supported by (a) the full faith and credit of the U.S.
Treasury (such as Government National Mortgage Association participation
certificates), (b) the limited authority of the issuer to borrow from the U.S.
Treasury (such as securities of the Federal Home Loan Bank), (c) the authority
of the U.S. Government to purchase certain obligations of the issuer (such as
securities of the Federal National Mortgage Association) or (d) only the credit
of the issuer. In the case of obligations not backed by the full faith and
credit of the U.S., the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, which agency may be
privately owned. The Company will invest in obligations of U.S. Government
agencies and instrumentalities only when the Adviser is satisfied that the
credit risk with respect to the issuer is minimal.
Floating and Variable Rate Instruments. Certain of the obligations that
each Fund may purchase have a floating or variable rate of interest. Such
obligations bear interest at rates that are not fixed, but which vary with
changes in specified market rates or indices, such as the Prime Rate, and at
specified intervals. Certain of such obligations may carry a demand feature that
would permit the holder to tender them back to the issuer at par value prior to
maturity. Each Money Market Fund may invest in floating and variable rate
obligations even if they carry stated maturities in excess of 397 days, if
certain conditions contained in a rule of the Securities and Exchange Commission
(the "SEC") are met, in which case the obligations will be treated as having
maturities of not more than 397 days. Each Fund will limit its purchase of
floating and variable rate obligations to those meeting the quality standards
set forth above for such Fund. The Adviser will monitor on an ongoing basis the
earning power, cash flow and other liquidity ratios of the issuers of such
obligations, and will similarly monitor the ability of an issuer of a demand
instrument to pay principal and interest on demand. Each Fund's right to obtain
payment at par on a demand instrument could be affected by events occurring
between the date the Fund elects to demand payment and the date payment is due
that may affect the ability of the issuer of the instrument to make payment when
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due except when such demand instruments permit same day settlement. To
facilitate settlement, the same day demand instruments must be held in book
entry form at a bank other than the Fund's Custodian subject to a sub-custodian
agreement approved by the Fund between that bank and the Fund's Custodian.
The floating and variable rate obligations that the Funds other than the
Intermediate Government Fund may purchase include certificates of participation
in such obligations purchased from banks. A certificate of participation gives
each such Fund an undivided interest in the underlying obligations in the
proportion that such Fund's interest bears to the total principal amount of such
obligations. Certain of such certificates of participation may carry a demand
feature that would permit the holder to tender them back to the issuer prior to
maturity. The Money Market Funds may invest in certificates of participation
even if the underlying obligations carry stated maturities in excess of one
year, upon compliance with certain conditions contained in a rule of the SEC.
The income received on certificates of participation in tax-exempt municipal
obligations constitutes interest from tax-exempt obligations.
To the extent that floating and variable rate instruments without demand
features are not readily marketable, they will be subject to the investment
restriction that no Fund may invest an amount equal to 10% or more of the
current value of its total assets in securities that are not readily marketable.
Repurchase Agreements. Each Fund may enter into repurchase agreements
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually agreed-upon time and price. Sellers of repurchase
agreements are banks that are issuers of eligible bank obligations (see "Cash
Fund" under "Investment Objectives and Policies" above) and dealers that meet
guidelines established by the Board of Directors. The period of maturity is
usually quite short, often overnight or a few days, although it may extend over
a number of months. Each Fund may enter into repurchase agreements only with
respect to obligations that could otherwise be purchased by the Fund. While the
maturities of the underlying securities may be greater than one year, the term
of the repurchase agreement in the case of the Money Market Funds is always less
than one year. If the seller defaults and the value of the underlying securities
has declined, the Fund may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, the Fund's disposition
of the security may be delayed or limited.
Municipal Obligations. Municipal obligations, which are debt obligations
issued by or on behalf of states, cities, municipalities and other public
authorities, and may be general obligation, revenue, or industrial development
bonds, include municipal bonds, municipal notes and municipal commercial paper.
The Tax-Free Fund may invest in excess of 25% of its assets in industrial
development bonds subject to the Fund's fundamental investment policy requiring
that it maintain at least 80% of the value of its total assets in obligations
that are exempt from federal income tax and are not subject to the alternative
minimum tax. For purposes of the Fund's fundamental investment limitation
regarding concentration of investments in any one industry, industrial
development bonds will be considered representative of the industry for which
purpose that bond was issued.
The Cash and Tax-Free Funds' investments in municipal bonds are limited to
bonds that are rated at the date of purchase "Aa" or better by Moody's or "AA"
or better by S&P or Fitch.
The Funds' investments in municipal notes will be limited to notes that
are rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in
the case of an issue having a variable rate demand feature) by Moody's, "SP-1"
or "SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of
270 days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. The Funds may invest
in municipal commercial paper that is rated at the date of purchase "P-1" by
Moody's, "A-1" or "A-1+" by S&P or "F-1" by Fitch. If a municipal obligation is
not rated, the Funds may purchase the obligation if, in the opinion of the
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Adviser, it is of investment quality comparable to other rated investments that
are permitted in the Funds.
Letters of Credit. Municipal obligations, including certificates of
participation, commercial paper and other short-term obligations may be backed
by an irrevocable letter of credit of a bank which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Only
banks which, in the opinion of the Adviser, are of investment quality comparable
to other permitted investments of the Money Market Funds may be used for letter
of credit backed investments.
Securities with Put Rights. The Money Market Funds may enter into put
transactions with respect to obligations held in their portfolios with
broker/dealers pursuant to a rule under the Investment Company Act of 1940 (the
"1940 Act") and with commercial banks.
The right of the Funds to exercise a put is unconditional and unqualified.
A put is not transferable by a Fund, although the Fund may sell the underlying
securities to a third party at any time. If necessary and advisable, any Fund
may pay for certain puts either separately in cash or by paying a higher price
for portfolio securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities). The Funds
expect, however, that puts generally will be available without the payment of
any direct or indirect consideration.
The Funds may enter into puts only with banks or broker/dealers that, in
the opinion of the Adviser, present minimal credit risks. The ability of the
Funds to exercise a put will depend on the ability of the bank or broker/dealer
to pay for the underlying securities at the time the put is exercised. In the
event that a bank or broker/dealer should default on its obligation to
repurchase an underlying security, the Fund might be unable to recover all or a
portion of any loss sustained from having to sell the security elsewhere.
The Funds intend to enter into puts solely to maintain liquidity and do
not intend to exercise their rights thereunder for trading purposes. The puts
will only be for periods substantially less than the life of the underlying
security. The acquisition of a put will not affect the valuation by the Fund of
the underlying security. The actual put will be valued at zero in determining
net asset value of the Funds. Where a Fund pays directly or indirectly for a
put, its cost will be reflected as an unrealized loss for the period during
which the put is held by the Fund and will be reflected in realized gain or loss
when the put is exercised or expires. If the value of the underlying security
increases, the potential for unrealized or realized gain is reduced by the cost
of the put. The maturity of a municipal obligation purchased by a Fund will not
be considered shortened by any put to which such obligation is subject.
Third Party Puts. The Money Market Funds may also purchase long-term fixed
rate bonds that have been coupled with an option granted by a third party
financial institution allowing a Fund at specified intervals, not exceeding 397
calendar days, to tender (or "put") the bonds to the institution and receive the
face value thereof (plus accrued interest). These third party puts are available
in several different forms, may be represented by custodial receipts or trust
certificates and may be combined with other features such as interest rate
swaps. A Fund receives a short-term rate of interest (which is periodically
reset), and the interest rate differential between that rate and the fixed rate
on the bond is retained by the financial institution. The financial institution
granting the option does not provide credit enhancement, and in the event that
there is a default in the payment of principal or interest, or downgrading of a
bond to below investment grade, or a loss of the bond's tax-exempt status, the
put option will terminate automatically, the risk to a Fund will be that of
holding such a long-term bond and the dollar-weighted average maturity of the
Fund would be adversely affected.
When-Issued Securities. Each Fund may purchase securities on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. The Funds will only make
commitments to purchase securities on a when-issued basis with the intention of
actually acquiring the securities, but may sell them before the settlement date
if it is deemed advisable. When-issued securities are subject to market
fluctuation and no income accrues to the purchaser prior to issuance. The
purchase price, and the interest rate that will be received on debt securities,
are fixed at the time the purchaser enters into the commitment. Purchasing a
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security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed upon purchase price, in which case
there could be an unrealized loss at the time of delivery.
Each Fund will establish a segregated account in which it will maintain
liquid assets in an amount at least equal in value to that Fund's commitments to
purchase when-issued securities. If the value of these assets declines, the Fund
will place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such commitments.
Portfolio Turnover
Recent economic and market conditions have necessitated more active
trading, resulting in a higher portfolio turnover rate for the Intermediate
Government Fund. A higher rate involves greater transaction costs to the Fund
and may result in the realization of net capital gains, which would be taxable
to shareholders when distributed.
Special Arrangements with Banks and Other Institutions
As more fully described in the Statement of Additional Information, the
Company and the Adviser for a Fund may enter into special contractual
arrangements with banks and other institutions (collectively, "Participating
Organizations") that process substantial volumes of purchases and redemptions of
shares of the Fund for their customers. Under such contractual arrangements, the
Transfer Agent will ordinarily maintain an omnibus account for a Participating
Organization and the Participating Organization will maintain sub-accounts for
its customers for whom it processes purchases and redemptions of shares. The
Company pays a Participating Organization to the extent that it performs a
shareholder servicing function for the Company with respect to shares of any
Fund owned from time to time by customers of the Participating Organization.
These shareholder services would otherwise have been performed for the Company
by its transfer agent. In certain cases, the Adviser for a Fund may also pay a
Participating Organization for providing other administrative services to its
customers who invest in such Fund where those services would have been provided
to shareholders by the Adviser. A Participating Organization may charge its
customers a fee, as agreed upon by the Participating Organization and the
customer, with respect to the cash management or other services it provides.
Customers of Participating Organizations should read this Prospectus in
conjunction with the service agreement and other literature describing the
services and related fees that will be provided by the Participating
Organization to its customers prior to any purchase of shares.
There are currently unresolved issues with respect to existing federal
laws and regulations relating to the permissible activities of banks and trust
companies, including the extent to which certain Participating Organizations may
perform the shareholder and administrative services described herein. A judicial
or administrative decision or interpretation with respect to those laws and
regulations, as well as future changes in such laws and regulations, could
prevent certain Participating Organizations from performing these services. If a
Participating Organization were prohibited from performing these services, it is
expected that all arrangements between the Company, the Adviser and the
Participating Organization would be terminated and that customers of the
Participating Organization who seek to invest in a Fund would have to purchase
and redeem shares directly through the Transfer Agent.
Shareholder Service, Administration and Distribution Plan
The Company's Board of Directors has adopted, and each Fund's shareholders
have approved, a Shareholder Service, Administration and Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act on behalf of each Fund. Under
the Plan, Participating Organizations that enter into contractual arrangements
with the Company on behalf of a Fund and the Adviser for the Fund may receive up
to 0.50% on an annual basis of such Fund's average daily net assets for any of
shareholder service, administration and distribution assistance. Of such fees,
up to 0.25% may be paid by the Fund and up to 0.25% may be paid by the Adviser
out of its management fee, past profits or any other sources available to it.
Under existing agreements, the Company pays fees to Participating Organizations
that perform shareholder services for their customers that would otherwise be
performed by the Company's Transfer Agent. In certain cases, the Adviser for a
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Fund may also pay fees to Participating Organizations for providing other
administrative services to their customers that would be provided by the
Adviser. In addition, each of the Funds may pay service fees to brokers and
dealers, investment advisers and other institutions. The Adviser for each of
such Funds may make payments to all such institutions for similar purposes. The
fees payable to Participating Organizations from time to time shall, within such
limits, be determined by the Board of Directors of the Company. Among the
factors that will be considered in determining the amount of fees payable to a
Participating Organization will be the amount of the average daily net assets of
a Fund attributable to the Participating Organization, the facilities that the
Participating Organization has for the establishment of shareholder accounts and
records, the processing of purchases and redemptions of shares of that Fund, the
automatic investment in shares of that Fund of client account balances, the
furnishing of assistance in handling client inquiries regarding the Fund and
related shareholder services. Participating Organizations referred to above
under "Special Arrangements with Banks and Other Institutions" may be
compensated for their services pursuant to the Plan.
Distribution and Performance Information
Dividends and Capital Gains Distributions
The Company declares dividends on the outstanding shares of each Money
Market Fund from each Fund's net investment income at the close of each business
day to shareholders of record at 2:00 P.M. (New York time) on the day of
declaration. Realized capital gains and losses may be taken into account in
determining the daily distribution. Shares purchased will begin earning
dividends on the day the purchase order is executed and shares redeemed will
earn dividends through the previous day. Net investment income for a Saturday,
Sunday or holiday will be declared as a dividend on the previous business day to
shareholders of record at 2:00 P.M. (New York time) on that day.
The Company declares dividends on the outstanding shares of the
Intermediate Government Fund from the Fund's net investment income at the close
of each business day to shareholders of record at 4:00 P.M. (New York time) on
the previous business day. Shares purchased will begin earning dividends on the
day after the purchase order is executed and shares redeemed will earn dividends
through the day of redemption except that with respect to orders for shares for
which federal funds wires are received by 12:00 Noon (New York time) or if
monies are otherwise received in time to be invested by the Fund that same day,
such shares purchased will begin earning dividends on the day the purchase order
is executed. Net investment income for a Saturday, Sunday or holiday will be
declared as a dividend on the next business day to shareholders of record at
4:00 P.M. (New York time) on the previous business day.
Investment income for a Money Market Fund includes, among other things,
interest income and accretion of market and original issue discount and
amortization of premium. Investment income for the Intermediate Government Fund
includes, among other things, interest income and accretion of original issue
discount.
With respect to all Funds, dividends declared in and attributable to the
preceding month will be paid on the first business day of each month. Net
realized capital gains after utilization of capital loss carryforwards, if any,
will be distributed annually, although an additional distribution may be
necessary to prevent the application of a federal excise tax. Dividends and
distributions will be invested in additional shares of the same Fund at net
asset value and credited to the shareholder's account on the payment date or, at
the shareholder's election, paid in cash. Dividend checks and Statements of
Account will be mailed approximately two business days after the payment date.
Each Fund forwards to the Custodian the monies for dividends to be paid in cash
on the payment date.
Shareholders who redeem all their shares prior to a dividend payment will
receive, in addition to the redemption proceeds, dividends declared but unpaid.
Shareholders who redeem only a portion of their shares will be entitled to all
dividends declared but unpaid on such shares on the next dividend payment date.
(See also "Transaction Information--Redeeming Shares.")
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Taxes
Each of the Company's Funds has in the past qualified, and intends to
continue to qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Each Fund will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies generally will be applied to each Fund
separately, rather than to the Company as a whole. In addition, net capital
gains, net investment income, and operating expenses will be determined
separately for each Fund. By complying with the applicable provisions of the
Code, each Fund will not be subject to federal income taxes with respect to net
investment income and net capital gains distributed to its shareholders. A 4%
non-deductible excise tax will be imposed on each Fund (except the Tax-Free Fund
to the extent of its tax-exempt income) to the extent such Fund does not meet
certain distribution requirements by the end of each calendar year.
Dividends from net investment income (including realized net short-term
capital gains in excess of net long-term capital losses), except
"exempt-interest dividends" (described below), will be taxable as ordinary
income for federal income tax purposes. Most states exempt from personal income
tax dividends paid by a regulated investment company attributable to interest
derived from obligations of the U.S. Government and certain of its agencies and
instrumentalities. For example, shareholders of a regulated investment company
will not be subject to New York State or City personal income tax on the
dividends paid by such a fund to the extent attributable to interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities, provided that at the close of each quarter of the fund's
taxable year at least 50% of the value of the total assets of the fund consists
of such obligations. Dividends paid by the Federal Fund are intended to qualify
for this treatment, and dividends paid by the Government Fund and Intermediate
Government Fund may qualify. Dividends distributed by the Tax-Free Fund are not
excluded in determining New York State or City franchise taxes on corporations
and financial institutions. In addition to the distributions described above, in
the case of the dividends distributed by the Tax-Free Fund, that part of the
Fund's net investment income that is attributable to interest from tax-exempt
securities and that is distributed to shareholders will be designated by the
Company as an "exempt-interest dividend," and, as such, will be exempt from
federal income tax. Income from the Federal Fund and the Tax-Free Fund may not
be exempt from certain state and local taxes.
Distributions of net long-term capital gains in excess of net short-term
capital losses, if any, will be taxable as long-term capital gains, whether
received in cash or reinvested in additional shares, regardless of how long the
shareholder has held the shares. Because substantially all of the income of each
Fund will arise from interest, no part of the distributions to shareholders is
expected to qualify for the dividends-received deduction available to
corporations. Each year the Company will notify shareholders of the federal
income tax status of distributions.
In the case of the shareholders of the Tax-Free Fund, interest on
indebtedness incurred, or continued, to purchase or carry shares of the Fund
will not be deductible for federal income tax purposes to the extent that the
Fund's distributions are exempt from federal income tax. In addition, a portion
of an exempt-interest dividend allocable to certain tax-exempt obligations may
be treated as a preference item for purposes of the alternative minimum tax
imposed on both individuals and corporations. Persons who may be "substantial
users" (or "related persons" of substantial users) of facilities financed by
private activity bonds should consult their tax advisors before purchasing
shares in the Tax-Free Fund.
The Company will be required to withhold, subject to certain exemptions,
at a rate of 31% on dividends paid or credited to individual shareholders
(except shareholders of the Tax-Free Fund to the extent it distributes
exempt-interest dividends) and on redemption proceeds, if a correct Social
Security or taxpayer identification number, certified when required, is not on
file with the Company or Transfer Agent. (See also "Transaction
Information--Redeeming Shares.")
The exemption of interest income for federal income tax purposes may not
result in similar exemptions under the tax law of state and local tax
authorities. In general, interest earned on obligations issued by the state or
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locality in which the investor resides may be exempt from state and local taxes.
State and local laws differ, however, with respect to the tax treatment of
dividends attributable to interest on obligations of: (i) the U.S. Government
and certain of its agencies and instrumentalities and (ii) obligations of states
and localities, and shareholders should consult their tax advisors about the
taxability of dividends. The Company furnishes each shareholder of record with a
statement of the portion of the previous year's income derived from: (i) U.S.
Government Obligations and (ii) various agencies and instrumentalities, each of
which is specified by name. Shareholders are urged to consult their own tax
advisors regarding specific questions as to federal, state or local taxes.
Performance Information
From time to time, quotations of a Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "yield" of a Money Market Fund
refers to income generated by an investment in a Fund over a specified seven-day
period. The "SEC yield" of the Intermediate Government Fund is an annualized
expression of the net income generated by the Fund over a specified 30-day (one
month) period, as a percentage of the Fund's share price on the last day of the
period. The SEC yield is calculated according to methods required by the SEC,
and therefore may not equate to the level of income paid to shareholders. Yield
is expressed as an annualized percentage. The "effective yield" of a Money
Market Fund is expressed similarly but, when annualized, the income earned by an
investment in a Fund is assumed to be reinvested and will reflect the effects of
compounding. "Total return" is the change in value of an investment in a Fund
for a specified period. The "average annual total return" of a Fund is the
average annual compound rate of return of an investment in a Fund assuming the
investment has been held for one year, five years and ten years as of a stated
ending date. If a Fund has not been in operation for at least ten years, the
life of the Fund will be used where applicable. "Cumulative total return"
represents the cumulative change in value of an investment in a Fund for various
periods. Total return calculations assume that all dividends and capital gains
distributions during the period were reinvested in shares of a Fund. Performance
will vary based upon, among other things, changes in market conditions and the
level of a Fund's expenses.
Investors who purchase and redeem shares of any Fund through
broker/dealers, banks and other institutions may be subject to service fees
imposed by those entities with respect to the cash management and other services
they provide. Such fees will have the effect of reducing the return for those
investors. See "Special Arrangements with Banks and Other Institutions." Orders
placed by an investor directly with the Transfer Agent will not be subject to
such fees.
Company Organization
The Company was formed on June 18, 1982 as a corporation under the laws of
the State of Maryland. The Company is a professionally managed, open-end
diversified investment company registered under the 1940 Act. The Company's
activities are supervised by its Board of Directors. The Board of Directors,
under applicable laws of the State of Maryland, in addition to supervising the
actions of the Company's Adviser and Distributor, as set forth below, decides
upon matters of general policy.
On April 1, 1995, Summa Four, Inc. held of record and beneficially 69.29%,
respectively, of the outstanding shares of the Intermediate Government Fund. To
the extent that a shareholder is the beneficial owner of 25% or more of the
Fund's outstanding shares, it may be deemed to be a "control" person of the Fund
for purposes of the 1940 Act.
Shareholders have one vote for each share held on matters on which they
are entitled to vote. The Company is not required to and has no current
intention of holding annual shareholder meetings, although meetings may be
called for purposes such as electing or removing Directors, changing fundamental
investment policies or approving an investment advisory agreement. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Director as if Section 16(c) of the 1940 Act were applicable.
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Investment Adviser
The Company retains the investment management firm of Scudder, Stevens &
Clark, Inc. (the "Adviser"), a Delaware corporation, to manage the Company's
daily investment and business affairs subject to the policies established by the
Board of Directors. The Adviser is one of the most experienced investment
counsel firms in the U.S. The Adviser was established in 1919 as a partnership
and was restructured as a Delaware corporation in 1985. The principal source of
the Adviser's income is professional fees received from providing continuing
investment advice. The Adviser provides investment counsel for many individuals
and institutions, including insurance companies, endowments, industrial
corporations and financial and banking organizations. As of December 31, 1994,
the Adviser and its affiliates had in excess of $90 billion under their
supervision, approximately two-thirds of which was invested in fixed-income
securities.
Pursuant to Investment Advisory Agreements (the "Agreements") with the
Company on behalf of each Fund, the Adviser regularly provides each Fund with
investment research, advice and supervision and furnishes continuously an
investment program for each Fund consistent with its investment objective and
policies. The Agreements further provide that the Adviser will pay the
compensation and certain expenses of all officers and certain employees of the
Company and make available to each such Fund such of the Adviser's directors,
officers and employees as are reasonably necessary for such Fund's operations or
as may be duly elected officers or directors of the Company. Under the
Agreements, the Adviser pays each Fund's office rent and will provide investment
advisory research and statistical facilities and all clerical services relating
to research, statistical and investment work. The Adviser, including the
Adviser's employees who serve the Funds, may render investment advice,
management and other services to others.
Each Fund will bear all expenses not specifically assumed by the Adviser
under the terms of the Agreements, including, among others, the fee payable to
the Adviser as investment adviser, the fees of the Directors who are not
"affiliated persons" of the Adviser, the expenses of all Directors and the fees
and out-of-pocket expenses of the Company's Custodian and its Transfer Agent.
For a more complete description of the expenses to be borne by the Funds, see
"Investment Adviser" and "Distributor" in the Statement of Additional
Information.
Each Money Market Fund is charged a management fee at an annual rate equal
to 0.40% of the first $1.5 billion of average daily net assets and 0.35% of such
assets in excess of $1.5 billion. The Intermediate Government Fund is charged a
management fee at an annual rate equal to 0.65% of the Fund's average daily net
assets. Management fees are computed daily and paid monthly.
Transfer Agent
Scudder Service Corporation, P.O. Box 2038, Boston, Massachusetts 02106, a
wholly-owned subsidiary of the Adviser, is the transfer, shareholder servicing
and dividend-paying agent for the Company.
Distributor
Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser,
is the Company's principal underwriter. Scudder Investor Services, Inc.
confirms, as agent, all purchases of shares of the Company. Under the
Underwriting Agreement with the Company, the Distributor acts as the principal
underwriter and bears the cost of printing and mailing prospectuses to potential
investors and of any advertising expenses incurred by it in connection with the
distribution of shares.
Custodian
State Street Bank and Trust Company is the custodian for the Company.
Transaction Information
Purchasing Shares
While the Funds have no specific minimum initial investment requirement,
it is the Company's policy normally not to accept initial investments in amounts
below $100,000 for each of the Funds. The minimum subsequent investment for any
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<PAGE>
of the Funds is $100. The minimum investment requirements may be waived or
lowered for investments effected through banks and other institutions that have
entered into special arrangements with the Company and for investments effected
on a group basis by certain other entities and their employees, such as pursuant
to a payroll deduction plan and for investments made in an Individual Retirement
Account offered by the Company. Investment minimums may also be waived for
Directors and officers of the Company. The Company and the Distributor reserve
the right to reject any purchase order. All funds will be invested in full and
fractional shares.
Shares of any Fund may be purchased by writing or calling the Company's
Transfer Agent. Orders for shares of a Fund will be executed at the net asset
value per share next determined after an order has become effective. See "Share
Price."
Orders for shares of a Fund will become effective when an investor's bank
wire order or check is converted into federal funds (monies credited to the
Custodian's account with its registered Federal Reserve Bank). If payment is
transmitted by the Federal Reserve Wire System, the order will become effective
upon receipt. Orders will be executed at 2:00 P.M. (New York time) on the same
day if a bank wire or check is converted to federal funds by 12:00 Noon (New
York time) or a federal funds' wire is received by 12:00 Noon (New York time).
In addition, if investors known to the Company notify the Company by 2:00 P.M.
(New York time) that they intend to wire federal funds to purchase shares of a
Fund on any business day and if monies are received in time to be invested,
orders will be executed at the net asset value per share determined at 2:00 P.M.
(New York time) the same day.
Orders for shares of the Intermediate Government Fund will become
effective at the net asset value per share next determined after receipt by the
Transfer Agent of a check drawn on any member of the Federal Reserve System or
by the Custodian of a bank wire or Federal Reserve wire.
Wire transmissions may, however, be subject to delays of several hours, in
which event the effectiveness of the order will be delayed. Payments transmitted
by a bank wire other than the Federal Reserve Wire System may take longer to be
converted into federal funds.
Checks drawn on a non-member bank or a foreign bank may take substantially
longer to be converted into federal funds and, accordingly, may delay the
execution of an order. Checks must be payable in U.S. dollars and will be
accepted subject to collection at full face value.
By investing in a Fund, a shareholder appoints the Transfer Agent to
establish an open account to which all shares purchased will be credited,
together with any dividends and capital gains distributions that are paid in
additional shares. See "Distribution and Performance Information--Dividends and
Capital Gains Distributions."
Initial Purchase by Wire
1. Shareholders may open an account by calling toll free from any
continental state: 1-800-854-8525. Give the Fund(s) to be invested in, name(s)
in which the account is to be registered, address, Social Security or taxpayer
identification number, dividend payment election, amount to be wired, name of
the wiring bank and name and telephone number of the person to be contacted in
connection with the order. An account number will then be assigned.
2. Instruct the wiring bank to transmit the specified amount to:
State Street Bank and Trust Company
Boston, Massachusetts
ABA Number 011000028
Custody and Shareholder Services Division
Attention: [Name of Fund(s)]
Account (name(s) in which registered)
Account Number (as assigned by telephone) and amount
invested in each Fund
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3. Complete a Purchase Application. Indicate the services to be used. A
completed Purchase Application must be received by the Transfer Agent before the
Expedited Redemption or Check Redemption Service can be used. Mail the Purchase
Application to:
Scudder Service Corporation
P.O. Box 2038
Boston, Massachusetts 02106
Additional Purchases by Wire
Instruct the wiring bank to transmit the specified amount to the Custodian
with the information stated above.
Initial Purchase by Mail
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and your check payable to the Fund whose
shares are to be purchased, to the Transfer Agent at the address set forth
above.
Additional Purchases by Mail
1. Make a check payable to the Fund whose shares are to be purchased.
Write the shareholder's Fund account number on the check.
2. Mail the check and the detachable stub from the Statement of Account
(or a letter providing the account number) to the Transfer Agent at the address
set forth above.
Redeeming Shares
Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of any Fund will be redeemed at their next determined net asset value.
See "Share Price." For the shareholder's convenience, the Company has
established several different redemption procedures.
Payment of redemption proceeds may be made in securities, subject to
regulation by some state securities commissions. The Company may suspend the
right of redemption during any period when (i) trading on the New York Stock
Exchange (the "Exchange") is restricted or the Exchange is closed, other than
customary weekend and holiday closings, (ii) the SEC has by order permitted such
suspension or (iii) an emergency, as defined by rules of the SEC, exists making
disposal of portfolio securities or determination of the value of the net assets
of the Funds not reasonably practicable.
The proceeds of redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for federal income tax
purposes.
A shareholder's account in a Fund remains open for up to one year
following complete redemption, and all costs during the period will be borne by
that Fund.
The Company reserves the right to redeem upon not less than 30 days'
written notice all shares in an account that has a value of $1,000 or less.
However, any shareholder affected by the exercise of this right will be allowed
to make additional investments prior to the date fixed for redemption to avoid
liquidation of the account.
The Company also reserves the right, following 30 days' notice to
shareholders, to redeem all shares in accounts without certified Social Security
or taxpayer identification numbers. A shareholder may avoid involuntary
redemption by providing the Company with a taxpayer identification number during
the 30-day notice period.
Redemption by Mail
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number and give
Social Security or taxpayer identification number (where applicable).
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<PAGE>
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $50,000 or more, the
signature(s) must be guaranteed by a commercial bank that is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing. In
addition, signatures may be guaranteed by other Eligible Guarantor Institutions,
i.e., other banks, other brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. The Transfer Agent, however, may reject redemption
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMPsm"). Signature guarantees
by notaries public are not acceptable. Further documentation, such as copies of
corporate resolutions and instruments of authority, may be requested from
corporations, administrators, executors, personal representatives, trustees or
custodians to evidence the authority of the person or entity making the
redemption request.
4. Mail the letter to the Transfer Agent at the address set forth under
"Purchasing Shares."
Checks for redemption proceeds will normally be mailed the day following
receipt of the request in proper form, although the Company reserves the right
to take up to seven days. Unless other instructions are given in proper form, a
check for the proceeds of a redemption will be sent to the shareholder's address
of record. The Custodian may benefit from the use of redemption proceeds until
the check issued to a redeeming shareholder for such proceeds has cleared.
When proceeds of a redemption are to be paid to someone other than the
shareholder, either by wire or check, the signature(s) on the letter of
instruction must be guaranteed regardless of the amount of the redemption.
Redemption by Expedited Redemption Service
If Expedited Redemption Service has been elected on the Purchase
Application on file with the Transfer Agent, redemption of shares may be
requested by telephoning the Transfer Agent on any day the Company and the
Custodian are open for business.
No redemption of shares purchased by check will be permitted pursuant to
the Expedited Redemption Service until seven business days after those shares
have been credited to the shareholder's account.
1. Telephone the request to the Transfer Agent by calling toll free from
any continental state: 1-800-854-8525, or
2. Mail the request to the Transfer Agent at the address set forth under
"Purchasing Shares."
Proceeds of Expedited Redemptions of $1,000 or more will be wired to the
shareholder's bank indicated in the Purchase Application. If an Expedited
Redemption request for the Funds is received by the Transfer Agent by 12:00 Noon
(New York time) on a day the Company and the Custodian are open for business,
the redemption proceeds will be transmitted to the shareholder's bank that same
day. Such expedited redemption request received after 12:00 Noon and before 2:00
P.M. (New York time) will be honored the same day if such redemption can be
accomplished in time to meet the Federal Reserve Wire System's schedule. A check
for proceeds of less than $1,000 will be mailed to the shareholder's address of
record. In the case of investments in a Fund that have been effected through
banks and other institutions that have entered into special arrangements with
the Company, the full amount of the redemption proceeds will be transmitted by
wire.
Each Fund uses procedures designed to give reasonable assurance that
telephone instructions are genuine, including recording telephone calls, testing
a caller's identity and sending written confirmation of telephone transactions.
If a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. Each Fund will not be liable
for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
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Redemption by Check Redemption Service
If Check Redemption Service has been elected on the Purchase Application
on file with the Transfer Agent, redemptions of shares may be made by using
redemption checks provided by the Company. There is no charge for this service.
No redemption of shares purchased by check will be permitted pursuant to
the Check Redemption Service until seven business days after those shares have
been credited to the shareholder's account.
1. Checks must be written for amounts of $500 or more.
2. Checks may be payable to anyone and negotiated in the normal way.
3. If more than one shareholder owns the shares, all must sign the check
unless an election has been made to require only one signature on checks and
that election has been indicated on the Purchase Application.
The shareholder should make certain that there are adequate shares in the
account to cover the amount of checks written under this service. If
insufficient shares are in the account, or if checks are improperly signed, they
will not be honored.
Shares represented by a redemption check will continue to earn daily
income until the check clears the banking system. When honoring a redemption
check, the Transfer Agent will redeem exactly enough full and fractional shares
from an account to cover the amount of the check. The Check Redemption Service
may be terminated at any time by the Custodian or the Company.
Exchanging Shares
Shares of any of the Funds that have been held for seven days or more may
be exchanged for shares of one of the other Funds in an identically registered
account. Shares may be exchanged for shares of another Fund only if shares of
such Fund may legally be sold under applicable state laws.
A shareholder may exchange shares by calling the Transfer Agent's toll
free number at 1-800-854-8525 by 4:00 P.M. (New York time).
Procedures applicable to redemption of a Fund's shares are also applicable
to exchanging shares. The proceeds of redemption for the Intermediate Government
Fund may be more or less than the amount invested and, therefore, a redemption
may result in a gain or loss for federal income tax purposes. The Company and
the Distributor may modify or discontinue exchange privileges at any time upon
60 days' notice. A capital gain or loss for tax purposes may be realized upon an
exchange, depending upon the cost or other basis of shares redeemed.
Share Price
Net asset value per share for each Fund is determined by Scudder Fund
Accounting Corporation on each day the Exchange is open for trading. The net
asset value per share of each Money Market Fund is determined at 2:00 P.M. (New
York time), and the net asset value of shares of the Intermediate Government
Fund is determined at the close of regular trading on the Exchange, which is
currently 4:00 P.M. (New York time). The net asset value per share of each Fund
is computed by dividing the value of the total assets of the Fund, less all
liabilities, by the total number of outstanding shares of the Fund.
Each Money Market Fund uses the amortized cost method to value its
portfolio securities and seeks to maintain a constant net asset value of $1.00
per share. The amortized cost method involves valuing a security at its cost and
accreting any discount and amortizing any premium over the period until
maturity, regardless of the impact of fluctuating interest rates on the market
value of the security. See the Statement of Additional Information for a more
complete description of the amortized cost method.
The value of securities of the Intermediate Government Fund is determined
as of the close of regular trading on the Exchange. The Fund's securities are
valued utilizing primarily the latest bid prices or, if bid prices are not
available, on the basis of valuations based on a matrix system, both as
furnished by a reputable independent pricing service. Debt securities maturing
in 60 days or less are valued at amortized cost. All other securities and other
28
<PAGE>
assets for which current market quotations are not readily available are valued
at fair value as determined in good faith by the Company's Board of Directors
and in accordance with procedures adopted by the Board of Directors.
Because of the difference between the bid and asked prices of the
over-the-counter securities in which the Intermediate Government Fund may
invest, there may be an immediate reduction in the net asset value of the shares
of the Fund after the Fund has completed a purchase of such securities, since
they will be valued at the bid price but usually purchased at or near the asked
price.
Shareholder Benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced
investment management firms, actively manages your Scudder fund investment.
Professional management is an important advantage for investors who do not have
the time or expertise to invest directly in individual securities.
Each Fund is managed by a team of Scudder investment professionals, who
each play an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the Fund's
portfolio. They are supported by Scudder's large staff of economists, research
analysts, traders, and other investment specialists who work in Scudder's
offices across the U.S. and abroad. Scudder believes its team-approach benefits
Fund investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager David H. Glen has set the Intermediate Government
Fund's investment strategy and overseen its daily operation since the Fund was
introduced in 1993. Mr. Glen has 15 years of experience in finance and
investing. Mark S. Boyadjian, Portfolio Manager, joined the team in 1995, and
contributes his seven years' experience managing fixed-income securities. Mr.
Boyadjian has been with Scudder since 1989.
Account Services
Shareholders will be sent a Statement of Account from the Distributor, as
agent of the Company, whenever a share transaction is effected in the accounts.
Shareholders can write or call the Company at the address and telephone number
on the cover of this Prospectus with any questions relating to their investment
in shares of any of the Funds.
Shareholder Services
The Company offers the following shareholder services. See the Statement
of Additional Information for further details about these services or call or
write the Company.
Special Monthly Summary of Accounts. A special service is available to
banks, brokers, investment advisers, trust companies and others who have a
number of accounts in one or more of the Funds. A monthly summary of accounts
can be provided, showing for each account the account number, the month-end
share balance and the dividends and distributions paid during the month.
Shareholder Reports. The fiscal year of the Company ends on December 31 of
each year. The Company sends to its shareholders, semi-annually, reports showing
the investments in each of the Company's Funds and other information (including
unaudited financial statements) pertaining to the Company. An annual report,
containing financial statements audited by the Company's independent
accountants, is sent to shareholders each year.
Shareholder inquiries should be addressed to Scudder Fund, Inc., 345 Park
Avenue, New York, New York 10154.
IRAs. A form of individual retirement account ("IRA") is available to
qualified individuals for investment in shares of any Fund of the Company.
Individuals who have received certain distributions from tax qualified plans
under the Code or other IRAs are eligible to establish an IRA by making a
rollover contribution.
29
<PAGE>
Managed Government
Securities Fund
Managed Federal
Securities Fund
Managed Cash Fund
Managed Tax-Free Fund
Managed Intermediate
Government Fund
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager Managed Government
Securities Fund
Scudder, Stevens & Clark, Inc.
345 Park Avenue Managed Federal
New York, New York 10154 Securities Fund
Distributor Managed Cash Fund
Scudder Investor Services, Inc. Managed Tax-Free Fund
Two International Place
Boston, Massachusetts 02110 Managed Intermediate
Government Fund
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 2038
Boston, Massachusetts 02106
Legal Counsel
Sullivan & Cromwell
New York, New York
- ----------------------------------------
No person has been authorized to give Prospectus
any information or to make any May 1, 1995
representations not contained in this
Prospectus, and information or
representations not contained herein
must not be relied upon as having been
authorized by the Company or the
Distributor. This Prospectus does not
constitute an offer of any security
other than the registered securities to
which it relates or an offer to any
person in any jurisdiction where such
offer would be unlawful.
