SCUDDER FUND INC, 497, 1995-05-05

SCUDDER FUND INC
497, 1995-05-05

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Managed Intermediate Government Fund
345 Park Avenue, New York, New York 10154
1-800-5CU-MEMBER

Scudder, Stevens & Clark, Inc. - Investment Adviser
Scudder Investor Services, Inc. - Distributor

Managed Intermediate Government Fund (the "Fund") is a series of Scudder
Fund, Inc. (the "Company"), a professionally managed, open-end, diversified
investment company.

The Fund, for which Scudder, Stevens & Clark, Inc. acts as investment
adviser (the "Adviser"), 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 Fund 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.

Table of Contents
Page
----
Expense Information ....................................................... 2
Financial Highlights ...................................................... 3
Investment Objective and Policies ......................................... 4
Additional Information About Policies and Investments ..................... 5
Special Arrangements with Banks and Other Institutions .................... 6
Shareholder Service, Administration and Distribution Plan ................. 7
Distribution and Performance Information .................................. 7
Company Organization ...................................................... 9
Transaction Information ................................................... 10
Shareholder Benefits ...................................................... 14

May 1, 1995
<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.

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."

2
<PAGE>
Financial Highlights

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.

<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>

3
<PAGE>
Investment Objective and Policies

The investment objective of the Fund is 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 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 Fund will not invest in non-investment grade
securities. Except as otherwise indicated, the 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 the Fund's objective.
There is no assurance that the Fund will achieve its investment objective.

The 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
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.

4
<PAGE>
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
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 the Fund that may be
changed only when permitted by law and approved by the holders of a majority of
the Fund's outstanding voting securities, as described under "Company
Organization" in the Statement of Additional Information.

The Fund may not (1) issue senior securities, borrow money or pledge or
mortgage its assets, except that the Fund may borrow from banks up to 10% of the
current value of the 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 the Fund while any such borrowing exists);
(2) make loans, except that the 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; or (3) invest an amount equal to 10% or more of the current value of
the Fund's total assets in investments that are not readily marketable,
including securities restricted as to disposition under the Securities Act of
1933, and repurchase agreements having maturities of more than seven calendar
days.

For a more complete description, see "Investment Restrictions" in the
Statement of Additional Information.

Floating and Variable Rate Instruments. Certain of the obligations that
the Fund may purchase have a floating or variable rate of interest. Such
obligations bear interest at rates that are not fixed, but 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. The Fund will limit its purchase of floating and variable rate
obligations to those of the same quality as it otherwise is allowed to purchase.
The Adviser will monitor on an ongoing basis the ability of an issuer of a
demand instrument to pay principal and interest on demand. The 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 due, except when such demand instruments permit same day
settlement. To facilitate settlement, these same day demand instruments must be

5
<PAGE>
held in book entry form at a bank other than the Fund's custodian, State Street
Bank and Trust Company (the "Custodian"), subject to a subcustodian agreement
approved by the Fund between that bank and the Fund's Custodian.

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 the Fund may not 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. The 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 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. The Fund may enter
into repurchase agreements only with respect to obligations that could otherwise
be purchased by the Fund. 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.

When-Issued Securities. The 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 Fund 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
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.

The Fund will establish a segregated account in which it will maintain
liquid assets in an amount at least equal in value to the 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 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 the 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,
Scudder Service Corporation (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 the 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 the Fund may also pay a Participating Organization for
providing other administrative services to its customers who invest in the 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

6
<PAGE>
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 the 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 the Fund's shareholders
have approved, a Shareholder Service, Administration and Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act") on behalf of the Fund. Under the Plan, Participating Organizations
that enter into contractual arrangements with the Company on behalf of the Fund
and the Adviser for the Fund may receive up to 0.50% on an annual basis of the
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 the 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, the Fund may pay
service fees to brokers and dealers, investment advisers and other institutions.
The Adviser of the Fund 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 the 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 the Fund, the automatic investment in shares of the 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 the 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 the Fund includes, among other things, interest
income and accretion of original issue discount.

7
<PAGE>
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 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. The Fund forwards to the
Custodian the monies for dividends to be paid in cash on the payment date.

Shareholders of the Fund who redeem all their shares prior to a dividend
payment will receive, in addition to the redemption proceeds, dividends declared
but unpaid. Such 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.")

Taxes

The Fund 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"). The 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 the 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 the Fund. By complying with
the applicable provisions of the Code, the 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 the Fund to the extent the 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) 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 Fund may qualify for
this treatment.

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 the
Fund will arise from interest, no part of the distributions to shareholders is
expected to qualify for the dividends-received deduction. Each year the Company
will notify shareholders of the federal income tax status of distributions.

The Company will be required to withhold, subject to certain exemptions,
at a rate of 31% on dividends paid or credited to individual shareholders 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
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.

8
<PAGE>
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 the 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 "SEC yield" of the 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 yield is calculated according to methods required by the
Securities and Exchange Commission (the "SEC"), and therefore may not equate to
the level of income paid to shareholders. Yield is expressed as an annualized
percentage. "Total return" is the change in value of an investment in the Fund
for a specified period. The "average annual total return" of the Fund is the
average annual compound rate of return of an investment in the Fund assuming the
investment has been held for one year and the life of the Fund as of a stated
ending date. "Cumulative total return" represents the cumulative change in value
of an investment in the Fund for various periods. Total return calculations
assume that all dividends and capital gains distributions during the period were
reinvested in shares of the Fund. Performance will vary based upon, among other
things, changes in market conditions and the level of the Fund's expenses.

Investors who purchase and redeem shares of the 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%
of the outstanding shares of the 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.

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.

9
<PAGE>
Pursuant to the Investment Advisory Agreement (the "Agreement") with the
Company on behalf of the Fund, the Adviser regularly provides the Fund with
investment research, advice and supervision and furnishes continuously an
investment program for the Fund consistent with its investment objective and
policies. The Agreement further provides that the Adviser will pay the
compensation and certain expenses of all officers and certain employees of the
Company who are affiliated with the Adviser or its affiliates and will make
available to the Fund such of the Adviser's directors, officers and employees as
are reasonably necessary for the Fund's operations or as may be duly elected
officers or directors of the Company. Under the Agreement, the Adviser also pays
the Fund's office rent and provides 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
Fund, may render investment advice, management and other services to others.

The Fund will bear all expenses not specifically assumed by the Adviser,
including, among others, the fee payable to the 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
the Transfer Agent. For a more detailed description of the expenses to be borne
by the Fund, see "Investment Adviser" and "Distributor" in the Statement of
Additional Information.

The Fund is charged a management fee at an annual rate of 0.65% of its
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 (the "Distributor"). 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 Fund has no specific minimum initial investment requirement, it
is the Company's policy normally not to accept initial investments in amounts
below $100,000. The minimum subsequent investment for the Fund is $100. The
minimum investment requirement 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 the Fund may be purchased by writing or calling the Transfer
Agent. Orders for shares of the Fund will be executed at the net asset value per
share next determined after an order has become effective. See "Share Price."

10
<PAGE>
Orders for shares of the 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 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 the 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: 1-800-5CU-MEMBER. Give the name(s) in which the Fund's
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: Managed Intermediate Government Fund
Account (name(s) in which registered)
Account Number (as assigned by telephone) and amount
invested in the Fund

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 Managed
Intermediate Government Fund to the Transfer Agent at the address set forth
above.

Additional Purchases by Mail

1. Make a check payable to the Managed Intermediate Government Fund. 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.

11
<PAGE>
Redeeming Shares

Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of the Fund will be redeemed at its 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 Fund 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 the Fund remains open for up to one year
following complete redemption, and all costs during the period will be borne by
the Fund.

The Company reserves the right to redeem upon not less than 30 days'
written notice the 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).

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.

12
<PAGE>
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: 1-800-5CU-MEMBER, 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 Fund is received by the Transfer Agent by the close
of regular trading on the Exchange (currently 4:00 P.M., 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 the following business day. 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 the 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.

The 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 the Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Fund will not be liable
for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.

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 the Fund that have been held for seven days or more may be
exchanged for shares of one of the other funds of the Company in an identically
registered account. Shares may be exchanged for shares of another fund of the
Company only if shares of such fund may legally be sold under applicable state
laws.

13
<PAGE>
A shareholder may exchange shares by calling the Transfer Agent's toll
free number at 1-800-5CU-MEMBER by 4:00 P.M. (New York time).

Procedures applicable to redemption of the Fund's shares are also
applicable to exchanging shares. 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. 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 the Fund is determined by Scudder Fund
Accounting Corporation, a wholly-owned subsidiary of the Adviser, on each day
the Exchange is open for trading. The net asset value of shares of the 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 the 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.

The value of securities of the 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 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 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.

The Fund is managed by a team of Scudder investment professionals, each of
whom plays an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the Fund's
portfolio. They are supported by 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 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 the Fund.

14
<PAGE>
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 the Fund. 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, at least semi-annually,
reports showing the investments in the Fund 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 the Fund. 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.

15
<PAGE>
Managed Intermediate Government Fund
345 Park Avenue, New York, New York 10154
1-800-5CU-MEMBER

Investment Manager Managed Intermediate
Government Fund
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154

Distributor

Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110

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 any Prospectus
information or to make any representations May 1, 1995
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.
<PAGE>
Managed Government Securities Fund
Managed Federal Securities Fund
Managed Cash Fund
Managed Tax-Free Fund

345 Park Avenue, New York, New York 10154
1-800-854-8525

Scudder, Stevens & Clark, Inc. - Investment Adviser
Scudder Investor Services, Inc. - Distributor

Managed Government Securities Fund, Managed Federal Securities Fund,
Managed Cash Fund and Managed Tax-Free Fund are series of Scudder Fund, Inc.
(the "Company"), a professionally managed, open-end, diversified investment
company.

Managed Government Securities Fund, Managed Federal Securities Fund,
Managed Cash Fund and Managed Tax-Free Fund (each, a "Fund" and collectively,
the "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 Funds are neither
insured nor guaranteed by the U.S. Government. Each 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.

--------------------

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.

--------------------

May 1, 1995

<PAGE>

Table of Contents
Page
----
Summary ............................................................... 2
Expense Information ................................................... 5
Financial Highlights .................................................. 7
Investment Objectives and Policies .................................... 11
Additional Information About Policies and Investments ................. 13
Special Arrangements with Banks and Other Institutions ................ 16
Shareholder Service, Administration and Distribution Plan ............. 17
Distribution and Performance Information .............................. 17
Company Organization .................................................. 19
Transaction Information ............................................... 20
Shareholder Benefits .................................................. 24

Summary

The Company Scudder Fund, Inc. is a professionally
managed, open-end, diversified investment
company which offers the following four
investment series: Managed Government
Securities Fund (the "Government Fund"),
Managed Federal Securities Fund (the "Federal
Fund"), Managed Cash Fund (the "Cash Fund")
and Managed Tax-Free Fund (the "Tax-Free
Fund"), (each, a "Fund" and collectively, the
"Funds"). See "Company Organization."

Objectives and Policies Each 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 Fund invests
exclusively in high quality investments with
remaining maturities of not more than 397
days. Each 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 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 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.

2
<PAGE>
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.
See "Investment Objectives and Policies."

Additional Investment
Activities The Cash Fund may invest in obligations of
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 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."

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 Fund's
average daily net assets and 0.35% of such
assets in excess of $1.5 billion.

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."

3
<PAGE>

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 taxpayer
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 Fund is
determined at 2:00 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

* 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

* 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.

6
<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.

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>

7
<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.

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>

8
<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.

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>

9
<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.

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>

10
<PAGE>
Investment Objectives and Policies

Set forth below is a description of the investment objective and policies
of each Fund. The 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. 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 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 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.

11
<PAGE>

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
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.

12
<PAGE>

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 elect, 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, 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.

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.

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 Fund may purchase negotiable certificates of

13
<PAGE>

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 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 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 may purchase
include certificates of participation in such obligations purchased from banks.
A certificate of participation gives the 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 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

14
<PAGE>

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 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
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 Funds may be used for letter of credit
backed investments.

Securities with Put Rights. The 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.

15
<PAGE>

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 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
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.

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

16
<PAGE>

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
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 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.

Investment income for a Fund includes, among other things, interest income
and accretion of market and original issue discount and amortization of premium.

17
<PAGE>

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.")

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 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 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.

18
<PAGE>

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.")

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 Fund refers to income
generated by an investment in a Fund over a specified seven-day period. Yield is
expressed as an annualized percentage. The "effective yield" of a 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

19
<PAGE>

Investment Adviser

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 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. 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

20
<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. 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.

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

21
<PAGE>

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.

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.

Redemption by Mail

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.

22
<PAGE>

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."

Redemption by Expedited Redemption Service

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.

Redemption by Check Redemption Service

23
<PAGE>

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.

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 Company and the Distributor may modify or discontinue
exchange privileges at any time upon 60 days' notice.

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 Fund is determined at 2:00 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 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.

Shareholder Benefits

Account Services

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

24
<PAGE>

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.

25
<PAGE>
Managed Government Securities Fund
Managed Federal Securities Fund
Managed Cash Fund
Managed Tax-Free 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

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.
<PAGE>
SCUDDER FUND, INC.
345 Park Avenue
New York, New York 10154
1-800-854-8525

Scudder Fund, Inc. (the "Company") is a professionally managed, open-end,
diversified investment company comprised of five investment portfolios.

MANAGED GOVERNMENT SECURITIES FUND
MANAGED FEDERAL SECURITIES FUND
MANAGED CASH FUND
MANAGED TAX-FREE FUND

Four money market mutual 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.

and

MANAGED INTERMEDIATE GOVERNMENT FUND

A mutual fund that 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.

- --------------------------------------------------------------------------------

Statement of Additional Information

May 1, 1995

- --------------------------------------------------------------------------------

This combined Statement of Additional Information is not a prospectus
and should be read in conjunction with the applicable prospectuses of Scudder
Fund, Inc. dated May 1, 1995, as may be amended from time to time, a copy of
which may be obtained without charge by writing to Scudder Investor Services,
Inc., Two International Place, Boston, Massachusetts 02110-4103.

<PAGE>
TABLE OF CONTENTS
Page

THE FUNDS AND THEIR OBJECTIVES................................................1
General Investment Objectives and Policies...........................1
Government Securities Fund...........................................1
Federal Securities Fund..............................................1
Cash Fund............................................................2
Tax-Free Fund........................................................3
Intermediate Government Fund.........................................4
Investment Restrictions..............................................5

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES....................................7

PURCHASING SHARES.............................................................8
Money Market Funds...................................................8
Intermediate Government Fund.........................................9

REDEEMING SHARES..............................................................9

DIVIDENDS.....................................................................9
Money Market Funds...................................................9
Intermediate Government Fund........................................10
All Funds...........................................................10

PERFORMANCE INFORMATION......................................................10
Yield...............................................................10
Effective Yield.....................................................11
Average Annual Total Return.........................................11
Cumulative Total Return.............................................12
Total Return........................................................12
Comparison of Fund Performance......................................12

THE PROGRAM..................................................................13

SHAREHOLDER BENEFITS.........................................................14

COMPANY ORGANIZATION.........................................................14

INVESTMENT ADVISER...........................................................15
Personal Investments by Employees of the Adviser....................17

DISTRIBUTOR..................................................................17

SPECIAL ARRANGEMENTS WITH BANKS AND OTHER INSTITUTIONS.......................17

SHAREHOLDER SERVICE, ADMINISTRATION AND DISTRIBUTION PLAN....................18

DIRECTORS AND OFFICERS.......................................................19

REMUNERATION.................................................................20

TAXES........................................................................21

PORTFOLIO TRANSACTIONS.......................................................22

NET ASSET VALUE..............................................................23

i
<PAGE>
TABLE OF CONTENTS (continued)
Page

ADDITIONAL INFORMATION.......................................................24
Experts.............................................................24
Other Information...................................................24

FINANCIAL STATEMENTS.........................................................25

APPENDIX

ii
<PAGE>

THE FUNDS AND THEIR OBJECTIVES

(See "Investment Objectives and Policies" and "Additional
Information About Policies and Investments" in the Company's Prospectuses)

General Investment Objectives and Policies

Managed Government Securities Fund ("Government Fund"), Managed Federal
Securities Fund ("Federal Fund"), Managed Cash Fund ("Cash Fund") and Managed
Tax-Free Fund ("Tax-Free Fund") (collectively, the "Money Market Funds") are
series of Scudder Fund, Inc. (the "Company"), a professionally managed open-end,
diversified investment company comprised of five investment portfolios. The
Money Market Funds 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 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. There can be no assurance that any of the Funds will
achieve its investment objective.

Securities in which the 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 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.

Managed Intermediate Government Fund ("Intermediate Government Fund")
is a series of the Company that 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 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 Fund will not invest in non-investment grade securities.
There is no assurance that the Fund will achieve its investment objective.

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.

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. See "Investment Adviser."

Government Fund

In addition, the Fund may invest in variable or floating rate
obligations, when-issued securities and securities with put features.

Federal Fund

In addition, the Fund may invest in variable or floating rate
obligations, when-issued securities and securities with put features.

<PAGE>
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
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 certificates of deposit
and promissory notes issued by Canadian affiliates of U.S. banks under
circumstances where the instruments are guaranteed as to principal and interest
by the U.S. bank. While foreign obligations generally involve greater risks than
those of domestic obligations, such as risks relating to liquidity,
marketability, foreign taxation, nationalization and exchange controls,
generally the Adviser believes that these risks are substantially less in the
case of instruments issued by Canadian affiliates that are guaranteed by U.S.
banks than in the case of other foreign money market instruments.

2
<PAGE>
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.

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 Fund's 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 Fund's 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 Fund 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 Fund may purchase the obligation if, in the opinion of the
Adviser, it is of investment quality comparable to other rated investments that
are permitted in 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 Fund's 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.

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<PAGE>
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 Fund may purchase the
obligation if, in the opinion of the Adviser, it is of investment quality
comparable to other rated investments that are permitted in the Fund. 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 floating and variable rate municipal obligations that the Fund may
purchase include certificates of participation in such obligations purchased
from banks. A certificate of participation gives the Fund an undivided interest
in the underlying municipal obligations, usually private activity bonds, in the
proportion that the Fund's interest bears to the total principal amount of such
municipal 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 Fund may invest in certificates of participation even if
the underlying municipal obligations carry stated maturities in excess of one
year, if compliance with certain conditions contained in a rule of the
Securities and Exchange Commission (the "SEC") is met. The income received on
certificates of participation constitutes interest from tax-exempt obligations.

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.

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 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 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.

4
<PAGE>
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 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.

Investment Restrictions

In connection with its investment objectives and policies as set forth
in the Prospectuses, the Company has adopted fundamental investment
restrictions, on behalf of each Fund, none of which may be changed without the
approval of the holders of a majority of a Fund's outstanding shares, as defined
in the Investment Company Act of 1940 (the "1940 Act").

As a matter of fundamental policy, the Funds may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and as
a result thereof, the value of any Fund's investments in that industry would

5
<PAGE>
exceed 25% of the current value of such Fund's total assets, provided that there
is no limitation with respect to investments in (i) municipal obligations (for
the purpose of this restriction, private activity bonds shall not be deemed
municipal obligations if the payments of principal and interest on such bonds is
the ultimate responsibility of non-governmental users), (ii) obligations of the
U.S. Government, its agencies or instrumentalities, or (iii) in the case of the
Money Market Funds (other than the Federal Fund), bank obligations;

(2) purchase or sell real estate (other than municipal obligations or
other money market securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests therein),
commodities or commodity contracts;

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;

(4) underwrite securities of other issuers, except to the extent that
the purchase of municipal obligations or other permitted investments directly
from the issuer thereof or from an underwriter for an issuer and the later
disposition of such securities in accordance with any Fund's investment program
may be deemed to be an underwriting;

(5) purchase restricted securities, which are securities that must be
registered under the Securities Act of 1933 before they may be offered or sold
to the public;

(6) invest more than 5% of the current value of any Fund's total assets
in the securities of any one issuer, other than obligations of the U.S.
Government, its agencies or instrumentalities or securities which are backed by
the full faith and credit of the U.S. (except that the Federal Fund may exceed
this 5% limit with respect to a single security that is rated in the highest
rating category for up to three business days);

(7) purchase securities of an issuer if, as a result, as to 75% of such
Fund's total assets, such Fund would own more than 10% of the voting securities
of such issuer;

(8) make investments for the purpose of exercising control or
management;

(9) write, purchase or sell puts, calls, warrants or options or any
combination thereof, except that the Funds may purchase securities with put
rights in order to maintain liquidity; or

(10) purchase equity securities or securities convertible into equity
securities.

Each of the investment restrictions described above and in the
Prospectuses under "Investment Restrictions" are fundamental policies of each of
the Funds and may be changed only when permitted by law and approved by the
holders of a majority of a Fund's outstanding voting securities, as described
under "Company Organization."

For purposes of these investment restrictions as well as for purposes
of diversification under the 1940 Act, the identification of the issuer of a
municipal obligation depends on the terms and conditions of the obligation. If
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision and the obligation is backed only by the assets and revenues of the
subdivision, such subdivision would be regarded as the sole issuer. Similarly,
in the case of a "private activity bond," if the bond is backed only by the
assets and revenues of the nongovernmental user, the nongovernmental user would
be deemed to be the sole issuer. If in either case the creating government or
another entity guarantees an obligation, the guarantee would be considered a
separate security and be treated as an issue of such government or entity.

In addition to the above fundamental investment policies, each of the
following investment restrictions may be changed at any time by the Board of
Directors:

1. No Fund may invest in oil, gas and other mineral exploration
or development programs or leases.

2. No Fund will invest in real estate limited partnership
interests.

6
<PAGE>
3. No Fund may purchase or retain securities of any open-end
investment company, or securities of closed-end investment
companies except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such
purchase, or except when such purchase, though not made in the
open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets; in any event no Fund
may purchase more than 3% of the outstanding voting securities
of another investment company, may invest more than 5% of its
assets in another investment company, or may invest more than
10% of its assets in other investment companies.

4. No Fund may purchase securities of any issuer with a record of
less than three years continuous operations, including
predecessors, except U.S. Government securities and
obligations issued or guaranteed by any foreign government or
its agencies or instrumentalities, if such purchase would
cause the investments of the Fund in all such issuers to
exceed 5% of the total assets of the Fund taken at market
value.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

(See "Additional Information About Policies and Investments"
in the Company's Prospectuses)

Municipal Notes. The Tax-Free Fund and the Cash Fund may invest in
municipal notes. Municipal notes include, but are not limited to, tax
anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs"), construction loan notes and project notes.
Municipal notes generally have maturities at the time of issuance of three years
or less. Notes sold as interim financing in anticipation of collection of taxes,
a bond sale or receipt of other revenues are usually general obligations of the
issuer. Project notes are issued by local housing authorities to finance urban
renewal and public housing projects and are secured by the full faith and credit
of the U.S. Government.

TANs An uncertainty in a municipal issuer's capacity to raise taxes as
a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers
mix various tax proceeds into a general fund that is used to meet
obligations other than those of the outstanding TANs. Use of such a
general fund to meet various obligations could affect the likelihood of
making payments on TANs.

BANs The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the
longer term municipal bond market and the likelihood that the proceeds
of such bond sales will be used to pay the principal of, and interest
on, BANs.

RANs A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an
issuer's ability to meet its obligations on outstanding RANs. In
addition, the possibility that the revenues would, when received, be
used to meet other obligations could affect the ability of the issuer
to pay the principal of, and interest on, RANs.

Zero Coupon Bonds. As indicated in the Prospectuses, the Intermediate
Government Fund may also invest in zero coupon bonds. Although the Fund may
invest up to and including 5% of its net assets in zero coupon bonds, such Fund
has no current intention to invest in any such securities. Zero coupon bonds are
debt obligations which do not entitle the holder to any periodic payments prior
to maturity and therefore are issued and traded at a discount from their face
amounts. The discount, in the absence of financial difficulties of the issuer,
decreases as the final maturity of the security approaches. Zero coupon bonds
can be sold prior to their due date in the secondary market at the then
prevailing market value, which depends primarily on the time remaining to
maturity, prevailing levels of interest rates and the perceived credit quality
of the issuer. The market prices of zero coupon bonds are more volatile than the
market prices of securities of comparable quality and similar maturity that pay
interest periodically and may respond to a greater degree to fluctuations in
interest rates than do such non-zero coupon bonds. There are currently two basic
types of zero coupon bonds: (i) those created by separating the interest and
principal components of a previously issued interest-paying security and (ii)
those originally issued in the form of a face amount only security with no
payments prior to maturity. The Fund will only invest in zero coupon bonds of
the U.S. Government and certain of its agencies and instrumentalities.

7
<PAGE>
Loans of Portfolio Securities. Each Fund may lend securities from its
portfolio to brokers, dealers and financial institutions if cash or cash
equivalent collateral, including letters of credit, marked-to-market daily and
equal to at least 100% of the current market value of the securities loaned
(including accrued interest and dividends thereon) plus the interest payable to
the Fund with respect to the loan is maintained by the borrower with the Fund in
a segregated account. In determining whether to lend a security to a particular
broker, dealer or financial institution, the Adviser will consider all relevant
facts and circumstances, including the creditworthiness of the broker, dealer or
financial institution. The Funds will not enter into any security lending
arrangement having a duration of longer than one year. Securities that a Fund
may receive as collateral will not become part of that Fund at the time of the
loan. In the event of a default by the borrower, such Fund will, if permitted by
law, dispose of the collateral except for such part thereof that is a security
in which such Fund is permitted to invest. During the time securities are on
loan, the borrower will pay the Fund any accrued income on those securities, and
the Fund may invest the cash collateral and earn additional income or receive an
agreed upon fee from a borrower that has delivered cash equivalent collateral.
No Fund will lend securities having a value that exceeds 10% of the current
value of its total assets. Loans of securities by a Fund will be subject to
termination at the Fund's or the borrower's option. Each Fund may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Company or the Adviser.
The Funds did not lend any of their portfolio securities during 1994 and have no
present intention to do so.

CMOs and REMICs. The Government Fund did not invest in collateralized
mortgage obligations (CMOs) or real estate mortgage investment conduits (REMICs)
during 1994 and has no present intention to do so.

The foregoing policies and activities of the Funds are not fundamental
and may be changed by the Board of Directors of the Company without the approval
of shareholders.

PURCHASING SHARES

(See "Transaction Information--Purchasing Shares"
in the Company's Prospectuses)

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
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 Scudder Investor
Services, Inc. (the "Distributor") reserve the right to reject any purchase
order. All funds will be invested in full and fractional shares.

Money Market Funds

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
account of State Street Bank and Trust Company (the "Custodian") 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 any 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. Wire
transmissions may, however, be subject to delays of several hours, in which
event the effectiveness of the order will be delayed. Payments by a bank wire
other than the Federal Reserve Wire System may take longer to be converted into
federal funds. When payment for shares is by check drawn on any member of the
Federal Reserve System, federal funds normally become available to the Company
on the business day after the check is deposited.

8
<PAGE>
Intermediate Government Fund

Orders for shares of the Fund will become effective at the net asset value
per share next determined after receipt by Scudder Service Corporation, a
wholly-owned subsidiary of the Adviser (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 by a bank wire other than the Federal Reserve Wire System may take
longer to be converted into federal funds. When payment for shares is by check
drawn on any member of the Federal Reserve System, federal funds normally become
available to the Company on the business day after the check is deposited.

Shares of any Fund may be purchased by writing or calling the 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. Due to the desire of
the Company to afford ease of redemption, certificates will not be issued to
indicate ownership in a Fund.

REDEEMING SHARES

(See "Transaction Information--Redeeming Shares"
in the Company's Prospectuses)

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 with respect to any Fund 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 that Fund not reasonably practicable.

The proceeds of redemption from 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.

A shareholder's Company account remains open for up to one year
following complete redemption and all costs during the period will be borne by
the Company. This permits an investor to resume investments.

DIVIDENDS

(See "Distribution and Performance Information--Dividends and
Capital Gains Distributions" in the Company's Prospectuses)

Money Market Funds

The Company declares dividends on the outstanding shares of each 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.

9
<PAGE>
Intermediate Government Fund

The Company declares dividends on the outstanding shares of the 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.

All Funds

Investment income for a Fund includes, among other things, interest
income and accretion of market and original issue discount and amortization of
premium.

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.

PERFORMANCE INFORMATION

(See "Distribution and Performance Information--Performance Information"
in the Company's Prospectuses)

From time to time, quotations of each Fund's performance may be
included in advertisements, sales literature or reports to shareholders or
prospective investors. These performance figures may be calculated in the
following manner:

Yield

The Company makes available various yield quotations with respect to
shares of the Funds. The yield for each of the following Funds for the seven-day
period ended December 31, 1994 was 5.32% for the Government Fund, 3.65% for the
Federal Fund, 5.45% for the Cash Fund, and 4.13% for the Tax-Free Fund. Each
Fund's yield may fluctuate daily and does not provide a basis for determining
future yields. The foregoing yields were computed by determining the net change
in value, exclusive of capital changes, of a hypothetical account having a
balance of one share at the beginning of the period, dividing the net change in
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7, with
the resulting yield figure carried to the nearest hundredth of one percent. The
net change in value of an account consists of the value of additional shares
purchased with dividends from the original share plus dividends declared on both
the original share and any such additional shares (not including realized gains
or losses and unrealized appreciation or depreciation) less applicable expenses,
including the management fee payable to the Adviser.

The Intermediate Government Fund may from time to time advertise its
yield as calculated over a 30-day period. The Fund's annualized yield for the
30-day period ended December 31, 1994 was 6.03%. The annualized yield for the
Fund was computed by dividing the Fund's net investment income per share earned
during this 30-day period by the net asset value per share on the last day of
this period. Income was computed by totaling the interest earned on all debt
obligations during the 30-day period and subtracting from that amount the total
of all expenses incurred during the period, including management and

10
<PAGE>
distribution fees. The 30-day yield was then annualized on a bond-equivalent
basis assuming semi-annual reinvestment and compounding of net investment
income.

Current yield for each Fund will fluctuate from time to time, unlike
bank deposits or other investments that pay a fixed yield for a stated period of
time, and do not provide a basis for determining future yields. Yield is a
function of portfolio quality, composition, maturity and market conditions as
well as expenses allocated to such Funds. Yield information may be useful in
reviewing the performance of the Fund and for providing a basis for comparison
with investment alternatives. The yield of a Fund, however, may not be
comparable to investment alternatives because of differences in the foregoing
variables and differences in the methods used to value portfolio securities and
compute expenses.

Effective Yield

The effective yield for the Money Market Funds is calculated in a
similar fashion to yield, except that the seven-day period return is compounded
by adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)^(365/7)] - 1

The effective yields (i.e., on a compound basis, assuming the daily reinvestment
of dividends) for each of the following Funds for the seven-day period ended
December 31, 1994 was 5.46% for the Government Fund, 3.72% for the Federal Fund,
5.60% for the Cash Fund, and 4.22% for the Tax-Free Fund.

Average Annual Total Return

Average annual total return is the average annual compound rate of
return for periods of one year, five years, and ten years and the life of a
Fund, where applicable, all ended on the last day of a recent calendar quarter.
Average annual total return quotations reflect changes in the price of a Fund's
shares, if any, and assume that all dividends and capital gains distributions
during the respective periods were reinvested in Fund shares. Average annual
total return is calculated by finding the average annual compound rates of
return of a hypothetical investment over such periods, according to the
following formula (average annual total return is then expressed as a
percentage):

T = (ERV/P)^(1/n) - 1

Where:

P = a hypothetical initial investment of $1,000.
T = Average Annual Total Return.
n = number of years.
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.

Average Annual Total Return for periods ended December 31, 1994

One Year Five Years Ten Years
-------- ---------- ---------
Government Fund 3.75% 4.65% 5.97%
Cash Fund 3.86% 4.86% 6.11%
Tax-Free Fund 2.29% 3.26% 4.10%

One Year Life of the Fund
-------- ----------------
Federal Fund 3.24% 3.15%(1)
Intermediate Government Fund -3.12% 0.61%(2)

11
<PAGE>
(1) For the period beginning July 17, 1991.
(2) For the period beginning March 1, 1993.

Cumulative Total Return

Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by finding the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):

C = (ERV/P) - 1

Where:

C = Cumulative Total Return.
P = a hypothetical initial investment of $1,000.
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.

Cumulative Total Return for periods ended December 31, 1994

One Year Five Years Ten Years
-------- ---------- ---------
Government Fund 3.75% 25.51% 78.65%
Cash Fund 3.86% 26.80% 80.96%
Tax-Free Fund 2.29% 17.42% 49.41%

One Year Life of the Fund
-------- ----------------
Federal Fund 3.24% 11.31%(1)
Intermediate Government Fund -3.12% 1.12%(2)

(1) For the period beginning July 17, 1991.
(2) For the period beginning March 1, 1993.

Total Return

Total return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return.

Comparison of Fund Performance

Quotations of each Fund's performance are based on historical earnings,
show the performance of a hypothetical investment, and are not intended to
indicate future performance of a Fund. An investor's shares when redeemed may be
worth more or less than their original cost. Performance of a Fund will vary
based on changes in market conditions and the level of a Fund's expenses.

From time to time, in marketing and other fund literature, the
performance of each of the Money Market Funds may be compared to the performance
of broad groups of mutual funds with similar investment goals, as tracked by
independent organizations. Among these organizations, Lipper Analytical
Services, Inc. ("Lipper") may be cited. When Lipper's tracking results are used,
the Fund will be compared to Lipper's appropriate fund category, that is, by
fund objective and portfolio holdings. For instance, the Money Market Funds will

12
<PAGE>
be compared with funds within Lipper's money market fund category. Rankings may
be listed among one or more of the asset-size classes as determined by Lipper.

Since the assets in all funds are always changing, the Money Market
Funds may be ranked within one Lipper asset-size class at one time and in
another Lipper asset-size class at some other time. Footnotes in advertisements
and other marketing literature will include the time period and Lipper
asset-size class, as applicable, for the ranking in question.

From time to time, in marketing pieces and other fund literature, the
yield of one or more of the Money Market Funds may be compared to the
performance of broad groups of comparable mutual funds, unmanaged indices of
comparable securities, bank money market deposit accounts and fixed-rate insured
certificates of deposit ("CDs"), or unmanaged indices of securities that are
comparable to money market funds in their terms and intent, such as Treasury
bills, bankers' acceptances, negotiable order of withdrawal (NOW) accounts, and
money market certificates. Most bank CDs differ from money market funds in
several ways: the interest rate is fixed for the term of the CD, there are
interest penalties for early withdrawal of the deposit, and the deposit
principal is insured by the Federal Deposit Insurance Corporation. Evaluations
of Fund performance made by independent sources may also be used in
advertisements concerning the Money Market Funds. In addition, from time to time
the Company may advertise what an initial $10,000 investment in one or more of
its portfolios would grow to over a five-year period as compared to other
institutional money market funds with similar investment objectives and their
related rankings, all as computed by IBC/Donoghue, Inc. Sources for any and all
performance information may include, but are not limited to:

IBC/Donoghue's Money Fund Report, a weekly publication of the
IBC/Donoghue's Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market fund
activity, and including certain averages as performance benchmarks, specifically
"Donoghue's Money Fund Averages m/Tax-Free Money Funds/Institutions-only" and
"Donoghue's Money Fund Average m/Institutions-only."

Bank Rate Monitor, a weekly newsletter, published by the Advertising
News Service, Inc., that includes a national index of bank money market rates
and yields on CDs and other bank depository instruments of varied maturities for
the 100 leading banks and thrifts in the nation's top 10 Census Statistical
Metropolitan Areas.

THE PROGRAM

Scudder Treasurers Trust(TM) (the "Program") is a corporate and
institutional cash investment program with respect to the Funds. The Program is
designed especially for treasurers and financial officers of small and
middle-sized corporations and financial institutions. The Funds reduce
substantially the costs and inconvenience of direct investment in individual
securities. They help reduce risk by diversifying investments across a broad
range of securities. They also provide flexibility since shares can be redeemed
from or exchanged between any of the Funds at no extra cost.

The Money Market Funds seek to provide busy executives with assistance
in the professional management of their cash reserves. These executives
frequently engage experts (meaning experienced professionals) for services
requiring specialized knowledge and expertise. The investment of liquid assets
is one such service. Each of the Funds has a different objective and offers
full-time professional reserve asset management, which is frequently not
available from traditional cash management providers. The Program can help
institutional cash managers take advantage of today's investment opportunities
and techniques to improve the performance of their liquid assets.

The Funds allow small and middle-sized businesses and other
institutions to take advantage of the investment management services of the
Adviser. The Adviser's investment counsel clients include corporations,
foundations, institutions, insurance companies, endowments, trusts, retirement
plans and individuals.

The Money Market Funds also anticipate lower expense ratios than those
of money market mutual funds designed for individual investors because the Money
Market Funds' average account balances are normally higher than those of the
average money market fund. The Program also offers special services designed for
the convenience of corporate and institutional treasurers.

13
<PAGE>
Each of the Money Market Funds seeks to provide the combination of
price stability, liquidity and current income that treasurers often require for
liquid assets such as operating reserves.

SHAREHOLDER BENEFITS

(See "Shareholders Benefits" in the Company's Prospectuses)

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 any Fund. In addition to the copy of the regular Statement
of Account furnished to the registered holder after each transaction, a monthly
summary of accounts can be provided. The monthly summary will show for each
account the account number, the month-end share balance and the dividends and
distributions paid during the month. All costs of this service will be borne by
the Company. For information on the special monthly summary of accounts, contact
the Company.

IRAs. A form of individual retirement account ("IRA") is available for
investment in shares of any active Fund of the Company. Individuals, who have
not attained 70-1/2 years of age, may make tax-deductible IRA contributions of
up to $2,000 annually ($2,250 if contributions are made to separate IRAs for the
contributor and a nonworking spouse and a joint return is filed). Such
deductions, however, are reduced or eliminated if the individual or, in the case
of a married individual filing jointly, either the individual or the
individual's spouse is an active participant in an employer-sponsored retirement
plan, depending on adjusted gross income.

In addition, individuals who have received certain distributions from
qualified plans or other IRAs are eligible to establish an IRA by making a
rollover contribution.

Individuals may also make nondeductible IRA contributions in an amount
equal to the $2,000 (or $2,250) contribution limit less any deductible
contributions for the year. As with deductible contributions, taxes on the
income from such contributions will be deferred until distributed from the IRA.

Scudder Trust Company has agreed to serve as custodian of the IRA and
furnish the services provided for in the Custody Agreement. Scudder Trust
Company will charge individuals establishing an IRA an application fee as well
as certain additional fees for its services under the Custody Agreement. In
accordance with IRS regulations, an individual may revoke an IRA within seven
calendar days after it is established.

Distributions prior to death, disability or attainment of age 59-1/2
will generally result in a 10% excise tax on the amount distributed. In
addition, distributions to a participant in an IRA must commence by April 1 of
the calendar year following the year such participant attains age 70-1/2.

For additional information required for adopting an IRA, including
information on fees, obtain the form of Custody Agreement and related materials,
including disclosure materials, available from the Company. The foregoing
discussion is provided for your general information. Because the application of
the tax provisions discussed above will vary depending on the particular
individual's situation, consultation with a legal advisor regarding an IRA is
strongly recommended.

COMPANY ORGANIZATION

(See "Company Organization" in the Company's Prospectuses)

The Company was formed on June 18, 1982 as a corporation under the laws
of the State of Maryland. The authorized capital stock of the Company consists
of 10,000,000,000 shares having a par value of $.001 per share of which
3,000,000,000 shares each have been designated for the Government Fund and Cash
Fund, 1,000,000,000 shares each have been designated for the Federal Fund and
Tax-Free Fund and 100,000,000 shares have been designated for the Intermediate
Government Fund. The Company's Articles of Incorporation authorize the Board of
Directors to classify or reclassify any unissued shares of capital stock.
Pursuant to that authority, the Board of Directors has created eight classes
constituting the Government Fund, Federal Fund, Cash Fund, Tax-Free Fund,
Intermediate Government Fund, Managed Municipal Income Fund, Managed New York
Municipal Income Fund and Managed Total Return Fund, and may, in the future,
create other classes of capital stock representing shares of additional
portfolios.

14
<PAGE>
Generally, all shares of the Company have equal voting rights and will
be voted in the aggregate, and not by class, except where voting by class is
required by law or where the matter involved affects only one class, such as
with respect to approval of an investment advisory agreement or a Rule 12b-1
plan. As used in the Prospectuses and in this Statement of Additional
Information, the term "majority", when referring to the approvals to be obtained
from shareholders in connection with general matters affecting the Funds and all
additional portfolios (e.g., election of directors), means the vote of the
lesser of (i) 67% of the Company's shares represented at a meeting if the
holders of more than 50% of the outstanding shares are present in person or by
proxy, or (ii) more than 50% of the Company's outstanding shares. The term
"majority", when referring to the approvals to be obtained from shareholders in
connection with matters affecting a single Fund or any other single portfolio
(e.g., annual approval of investment management contracts), means the vote of
the lesser of (i) 67% of the shares of the portfolio represented at a meeting if
the holders of more than 50% of the outstanding shares of the portfolio are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the portfolio. Shareholders are entitled to one vote for each full share held
and fractional votes for fractional shares held.

Each share of a Fund of the Company represents an equal proportionate
interest in that Fund with each other share of the same Fund and is entitled to
such dividends and distributions out of the income earned on the assets
belonging to that Fund as are declared in the discretion of the Company's Board
of Directors. In the event of the liquidation or dissolution of the Company,
shares of a Fund are entitled to receive the assets attributable to that Fund
that are available for distribution, and a proportionate distribution, based
upon the relative net assets of the Funds, of any general assets not
attributable to a Fund that are available for distribution.

Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Company.

INVESTMENT ADVISER

(See "Company Organization--Investment Adviser" in the Company's Prospectuses)

The Company retains Scudder, Stevens & Clark, Inc. (the "Adviser") as
investment adviser on behalf of each of the Funds pursuant to Investment
Advisory Agreements (the "Agreements"). The Adviser is one of the most
experienced investment counsel firms in the U.S. It 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's wholly-owned subsidiary,
the Distributor, acts as principal underwriter for shares of registered open-end
investment companies. 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.

The Adviser maintains a research department with more than 50
professionals, which conducts continuous studies of the factors that affect
various industries, companies and individual securities in the U.S. as well as
abroad. In this work the Adviser utilizes reports, statistics and other
investment information from a wide variety of sources, including brokers and
dealers who may execute portfolio transactions for the Portfolios and for other
clients of the Adviser. Investment decisions, however, are based primarily on
investigations and critical analyses by the Adviser's own research specialists
and portfolio managers.

The Adviser may give advice and take action with respect to any of its
other clients, which may differ from advice given or from the time or nature of
action taken with respect to a Portfolio of the Company. If these clients and
such Portfolio are simultaneously buying or selling a security with a limited
market, the price may be adversely affected. In addition, the Adviser may, on
behalf of other clients, furnish financial advice or be involved in tender
offers or merger proposals relating to companies in which such Portfolio
invests. The best interests of any Portfolio may or may not be consistent with
the achievement of the objectives of the other persons for whom the Adviser is
providing advice or for whom they are acting. Where a possible conflict is
apparent, the Adviser will follow whatever course of action is in its judgment
in the best interests of the Portfolio. The Adviser may consult independent
third persons in reaching its decision.

15
<PAGE>
Subject to policy established by the Company's Board of Directors,
which has overall responsibility for the business and affairs of each Fund, the
Adviser manages the operations of the Funds. In addition to providing advisory
services, the Adviser furnishes office space and certain facilities and
personnel required for conducting the business of the Funds and the Adviser pays
the compensation of the Company's officers, directors and employees affiliated
with the Adviser or its affiliates. Although the Adviser currently pays the
compensation, as well as certain expenses, of all officers and employees of the
Company who are affiliated with the Adviser or its affiliates, the terms of the
Agreements state that the Adviser is not obligated to pay the compensation and
expenses of the Company's clerical employees other than those providing advisory
services. The Adviser, however, has represented to the Company's Board of
Directors that its current intention is to continue to pay such compensation and
expenses.

Each Money Market Fund is charged a management fee at an equal 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 of 0.65% of its average daily net
assets. Management fees are computed daily and paid monthly.

For the Company's fiscal year ended December 31, 1994, management fees
paid to the Adviser were $80,152 for the Government Fund, $0 for the Federal
Fund, $948,135 for the Cash Fund, $498,692 for the Tax-Free Fund and $79,747 for
the Intermediate Government Fund. Had the Adviser not waived $221,083 of its
management fee for the Government Fund, $52,196 of its management fee for the
Federal Fund, $458,399 of its management fee for the Cash Fund and $62,965 of
its management fee for the Intermediate Government Fund, the total fee paid by
each such Fund in 1994 would have been $301,235, $52,196, $1,406,534 and
$142,712, respectively.

For the Company's fiscal year ended December 31, 1993, management fees
paid to the Adviser were $192,363 for the Government Fund, $0 for the Federal
Fund, $1,042,421 for the Cash Fund, $460,375 for the Tax-Free Fund and $0 for
the Intermediate Government Fund. Had the Adviser not waived $234,532 of its
management fee for the Government Fund, $46,632 of its management fee for the
Federal Fund, $380,095 of its management fee for the Cash Fund and $62,233 of
its management fee for the Intermediate Government Fund, the total fee paid by
each such Fund in 1993 would have been $426,895, $46,632, $1,422,516 and
$62,233, respectively.

For the Company's fiscal year ended December 31, 1992, management fees
paid to the Adviser were $227,497 for the Government Fund, $1,196,249 for the
Cash Fund, $0 for the Federal Fund and $421,680 for the Tax-Free Fund. Had the
Adviser not waived $254,233 of its management fee for the Government Fund,
$64,621 of its management fee for the Federal Fund and $354,848 of its
management fee for the Cash Fund, the total fee paid by each such Fund in 1992
would have been $481,730, $64,621 and $1,551,097, respectively.

Each of the Agreements provides that the relevant Fund pay all of its
expenses that are not specifically assumed by the Adviser. (Expenses
attributable to each Fund will be charged against the assets of that Fund, other
expenses of the Company will be allocated among the Funds in a manner which may,
but need not, be proportionately in relation to the net assets of each Fund.)
Expenses payable by each of the Funds include, but are not limited to,
organizational expenses; clerical salaries; brokerage and other expenses of
executing portfolio transactions; legal, auditing or accounting expenses; trade
association dues; taxes or governmental fees; the fees and expenses of the
transfer agent of the Fund; the cost of preparing share certificates or any
other expenses, including clerical expenses of issue, redemption or repurchase
of shares of the Fund; the expenses and fees for registering and qualifying
securities for sale; the fees of Directors of the Company who are not employees
or affiliates of the Adviser or its affiliates; travel expenses of all officers,
directors and employees; insurance premiums; the cost of preparing and
distributing reports and notices to shareholders; and the fees or disbursements
of custodians of the Fund's assets.

Each of the Agreements provides that if, in any fiscal year, the "total
expenses" of the relevant Fund ("total expenses" generally excludes taxes,
interest, brokerage commissions and other portfolio transaction expenses, other
expenditures that are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the management
fee) exceed the expense limitations applicable to such Fund imposed by the
securities regulations of any state, the Adviser will pay or reimburse the Fund
for the excess. Each of the Agreements, however, limits such payment or
reimbursement to the amount of the annual management fee otherwise payable by
the Fund. It is believed that currently the most restrictive state annual
expense limitation is 2.5% of the first $30,000,000 of average daily net assets,
2% of the next $70,000,000 and 1.5% of average daily net assets over
$100,000,000. For the three years ended December 31, 1994, the Adviser has not
had to reimburse any Fund because of these limitations.

16
<PAGE>
Each of the Agreements will continue in effect from year to year
provided such continuance is approved annually (i) by the holders of a majority
of the respective Fund's outstanding voting securities or by the Company's Board
of Directors and (ii) by a majority of the directors of the Company who are not
parties to the investment management contract or "interested persons" (as
defined in the 1940 Act) of any such party. Each of the Agreements may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.

Personal Investments by Employees of the Adviser

Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.

DISTRIBUTOR

(See "Company Organization--Distributor" in the Company's Prospectuses)

Pursuant to a contract with the Company, Scudder Investor Services,
Inc. (the "Distributor"), a wholly-owned subsidiary of the Adviser, serves as
the Company's principal underwriter in connection with a continuous offering of
shares of the Company. The Distributor receives no remuneration for its services
as principal underwriter and is not obligated to sell any specific amount of
Company shares. As principal underwriter, it accepts purchase orders for shares
of the Company. In addition, the Underwriting Agreement obligates the
Distributor to pay certain expenses in connection with the offering of the
shares of the Company. After the Prospectuses and periodic reports have been
prepared, set in type and mailed to shareholders, the Distributor will pay for
the printing and distribution of copies thereof used in connection with the
offering to prospective investors. The Distributor will also pay for
supplemental sales literature and advertising costs.

SPECIAL ARRANGEMENTS WITH BANKS AND OTHER INSTITUTIONS

(See "Special Arrangements with Banks and Other Institutions"
in the Company's Prospectuses)

As indicated under "Special Arrangements with Banks and Other
Institutions" in the Prospectuses, the Company and the Adviser enter into
special contractual arrangements with certain banks and other institutions
(collectively, "Participating Organizations") that process substantial volumes
of purchases and redemptions of shares of the Funds 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 of the Funds. The Company pays a
Participating Organization to the extent that it performs a shareholder
servicing function for the Company with respect to shares of the Funds owned
from time to time by customers of the Participating Organization. These
shareholder services, which would otherwise have been performed for the Company
by its transfer agent, generally include providing office space, equipment and
various personnel as necessary to (i) maintain an account in the name of each
investor reflecting purchases, redemptions, daily dividend accruals and monthly
dividend disbursements, (ii) process purchase and redemption requests and
dividend payments and reinvestments, (iii) prepare and mail statements of
account and (iv) address and mail all communications by the Company to its
shareholders, including financial reports, other reports to shareholders, tax
notices and proxy statements. In certain cases the Adviser of a Fund also pays a
Participating Organization for providing other administrative services to its
customers who invest in such Fund where these services would have been provided
to shareholders by the Adviser. Those services typically consist of handling
general shareholder relations with investors in the Funds, such as information
as to the status of their accounts, the current yield and dividends declared to
date and assistance with other questions related to their accounts.

17
<PAGE>
Payments by the Company to a Participating Organization for the
shareholder services described above are calculated on the basis of the
estimated charge by the transfer agent for providing comparable services. Such
payments are separately negotiated with each Participating Organization and vary
depending upon such factors as the services provided and the costs incurred by
the Participating Organization. Payments by the Company will be made monthly at
an annual rate that is not expected to exceed 0.25% of the average daily net
asset value of shares of any Fund owned by customers of the Participating
Organization. Payments by the Company to Participating Organizations for 1994
amounted to $141,429 for the Government Fund, $28,522 for the Federal Fund,
$526,308 for the Cash Fund, $235,366 for the Tax-Free Fund and $30,065 for the
Intermediate Government Fund. Payments by the Adviser to a Participating
Organization for the administrative services described above, to the extent such
payments are made, will be paid out of the Adviser's investment management fee,
past profits or any other source available to it. For the year ended December
31, 1994 payments by the Adviser pursuant to these arrangements aggregated
$26,610 for the Government Fund, $3,151 for the Federal Fund, $119,076 for the
Cash Fund, $29,649 for the Tax-Free Fund and $4,904 for the Intermediate
Government Fund. Arrangements with Participating Organizations, which will be
subject to contractual agreement between the parties and may be terminated by
the Company without cause and in its sole discretion, will be reviewed
periodically by the Company's Board of Directors.

A Participating Organization may charge its customer one or more of the
following types of fees, as agreed upon by the Participating Organization and
the customer, with respect to the cash management or other services it provides:
account fees (a fixed amount per month or per year); transaction fees (a fixed
amount per transaction processed); compensating balance requirements (a minimum
dollar amount a customer must maintain in order to obtain the services offered);
or account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on those assets). Services
provided by a Participating Organization to its customers are in addition to and
not duplicative of the services for which the Company or the Adviser may make
payments pursuant to the arrangements described above. Participating
Organizations and other interested investors may obtain Prospectuses from the
Distributor upon request. No preference will be shown in the selection of
portfolio investments of any Fund for the instruments of Participating
Organizations. Payments by each of the Funds and the Adviser to Participating
Organizations in respect of shareholder services and administration discussed in
this section may be made under the Shareholder Service, Administration and
Distribution Plan discussed below.

SHAREHOLDER SERVICE, ADMINISTRATION AND DISTRIBUTION PLAN

(See "Shareholder Service, Administration and Distribution Plan"
in the Company's Prospectuses)

As indicated in the Prospectuses, each of the Funds has adopted a
Shareholder Service, Administration and Distribution Plan (the "Plan") under
Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Rule").

Each Plan will continue in effect from year to year thereafter if such
continuance is approved by a majority vote of both the Directors of the Company
and a majority of the Directors who were not "interested persons" (as defined by
the 1940 Act) of the Funds and who had no direct or indirect financial interest
in the operation of the Plan or in any agreement related to the Plan (the
"Qualified Directors"). Agreements related to the Plans must also be approved by
such vote of the Directors and the Qualified Directors. Such agreements will
terminate automatically if assigned, and may be terminated at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting
securities of the proper Fund. No Plan may be amended to increase materially the
amounts payable to Service Organizations without the approval of a majority of
the outstanding voting securities of the proper Fund and no material amendment
to a Plan may be made except by a majority of both the Directors of the Company
and the Qualified Directors.

Each Plan requires that the Treasurer of the Fund shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plan. The Rule also

18
<PAGE>
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested directors.

<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS

The principal occupations of the Directors and executive officers of the Company for the past five years
are listed below.

Position with
Position with Underwriter, Scudder
Name (Age) and Address Company Principal Occupation** Investor Services, Inc.
- ---------------------- ------- ---------------------- -----------------------
<S> <C> <C> <C>
Daniel Pierce (61)+*# President and Chairman of the Board and Vice President,
Director Managing Director of Director and Assistant
Scudder, Stevens & Clark, Treasurer
Inc.

David S. Lee (61)+*# Chairman of the Managing Director of President, Director
Board and Director Scudder, Stevens & Clark, and Assistant Treasurer
Inc.

Edgar R. Fiedler (66)# Director Vice President and Economic --
845 Third Avenue Counsellor, The Conference
New York, NY 10022 Board, Inc.

Peter B. Freeman (62) Director Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI, 02906

Robert W. Lear (77) Director Executive-in-Residence, --
429 Silvermine Road Visiting Professor, Columbia
New Canaan, CT 06840 University Graduate School
of Business

Thomas W. Joseph (56)+ Vice President Principal of Scudder, Vice President,
Stevens & Clark, Inc. Director, Treasurer
and Assistant Clerk

Thomas F. McDonough (48)+ Vice President and Principal of Scudder, Clerk
Assistant Secretary Stevens & Clark, Inc.

Pamela A. McGrath (41)+ Vice President and Principal of Scudder, --
Treasurer Stevens & Clark, Inc.

Irene McC. Pelliconi (64)++ Secretary Vice President of Scudder, --
Stevens & Clark, Inc.

* Messrs. Lee and Pierce are considered by the Company to be persons who are "interested persons" of the
Adviser or of the Company (within the meaning of the 1940 Act).
** All the Directors and officers have been associated with their respective companies for more than five
years, but not necessarily in the same capacity.
# Messrs. Pierce, Fiedler and Lee are members of the Executive Committee.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
</TABLE>

19
<PAGE>
Directors of the Company not affiliated with the Adviser receive from
the Company an annual fee and a fee for each Board of Directors and Board
Committee meeting attended and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings. Directors who are affiliated with the
Adviser do not receive compensation from the Company, but the Company may
reimburse such Directors for all out-of-pocket expenses relating to attendance
at meetings.

As of April 1, 1995, the Directors and officers of the Company, as a
group, owned less than 1% of the outstanding shares of each Fund of the Company.

As of April 1, 1995, the following shareholders held of record more
than five percent of such Fund:

Government Fund. Lazard Freres & Co., New York, NY 10020, held of
record, but not beneficially, 23.09% of the outstanding shares of the Government
Fund. In addition, Citibank, N.A., New York, NY 10022, held of record 23.09% of
the outstanding shares of the Government Fund.

Federal Fund. Lazard Freres & Co., New York, NY 10020, held of record,
but not beneficially, 99.99% of the outstanding shares of the Federal Fund.

Cash Fund. Chemical Bank, Jericho, NY 11753-0900, Cudd & Co., New York,
NY 10036, Citibank, N.A., New York, NY 10022, Lack & Lindsay, Wilmington, DE
19808-1956 and Hare & Co., New York, NY 10005, held of record 10.05%, 9.98%,
6.25%, 5.67% and 5.28%, respectively, of the outstanding shares of the Cash
Fund.

Tax-Free Fund. Hare & Co., New York, NY 10005, Cudd & Co., New York, NY
10036, Chemical Bank, Jericho, NY 11753-0900 and Lack & Lindsay, Wilmington, DE
19808-1956, held of record 16.24%, 11.38%, 14.29% and 6.3%, respectively, of the
outstanding shares of the Tax-Free Fund.

Intermediate Government Fund. Summa Four Inc., Manchester NH 03103-7252
and Sweet Briar College, Sweet Briar, VA 24595-1051, held of record and
beneficially, 69.29%, and 14.02%, respectively, of the outstanding shares of the
Intermediate Government Fund.

As of April 1, 1995 no other persons, to the knowledge of management,
owned of record or beneficially more than 5% of the outstanding shares of any
Fund. To the extent that any of the above institutions is the beneficial owner
of more than 25% of the outstanding shares of the Company or a Fund, it may be
deemed to be a "control" person of the Company or such Fund for purposes of the
1940 Act.

REMUNERATION

Several of the officers and Directors of the Company may be officers or
employees of the Adviser, Scudder Fund Accounting Corporation, Scudder Investor
Services, Inc., Scudder Service Corporation or Scudder Trust Company, from whom
they receive compensation, as a result of which they may be deemed to
participate in the fees paid by the Company. The Funds pay no direct
remuneration to any officer of the Company. However, each of the Company's
Directors who is not affiliated with the Adviser will be compensated for all
expenses relating to Company business (specifically including travel expenses
relating to Company business). Each of these unaffiliated Directors received
from the Company compensation for each of: quarterly payments of the annual
Director's fee, each Directors' meeting, and each Board Committee meeting
attended, in the amount of $250 per Fund if the average daily net assets of each
Fund are less than $500,000,000, or $500 per Fund if the average daily net
assets of each Fund are in excess of $500,000,000. For the fiscal year ended
December 31, 1994, such fees totaled $152,530. Effective May 1, 1995, each of
these unaffiliated Directors receives from the Company compensation of $150 per
Fund for each Directors' meeting and each Board committee meeting attended, and
an annual Director's fee, payable quarterly, of $500 for each Fund with average
daily net assets less than $100 million, and $1,500 for each Fund with average
daily net assets in excess of $100 million.

The following Compensation Table, provides in tabular form, the following data.

Column (1) All Directors who receive compensation from the Company.*
Column (2) Aggregate compensation received by a Director from all Funds of the
Company.

20
<PAGE>
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Company.
Column (5) Total compensation received by a Director from the Company plus
compensation received from all funds managed by the Adviser for which a Director
serves. The total number of funds from which a Director receives such
compensation is also provided in column (5).

<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1994
========================= ========================== ======================== ================ =======================
(1) (2) (3) (4) (5)
Pension or Retirement Estimated Total Compensation
Aggregate Compensation Benefits Accrued As Annual From Company and
Name of Person, Position from Company* Part of Company Benefits Upon Company Complex Paid
Expenses Retirement to Director
========================= ========================== ======================== ================ =======================
<S> <C> <C> <C> <C>

Edgar R. Fiedler, $26,250** N/A N/A $30,003
Director (6 Funds)

Peter B. Freeman, $24,500 N/A N/A $141,843
Director (31 Funds)

Robert W. Lear, $26,250 N/A N/A $62,875
Director (10 Funds)

* Scudder Fund, Inc. consists of Managed Government Securities Fund, Managed Federal Securities Fund, Managed Cash
Fund, Managed Tax-Free Fund and Managed Intermediate Government Fund.
** Mr. Fiedler received $26,250 through a deferred compensation program. As of December 31, 1994, Mr. Fiedler had a
total of $182,472 accrued in a deferred compensation program for serving on the Board of Directors of the
Company. Mr. Fiedler also as of December 31, 1994 had a total of $183,603 accrued in a deferred compensation
program for serving on the Board of Directors for Scudder Institutional Fund, Inc. (which has 4 active portfolios).
</TABLE>

TAXES

(See "Distribution and Performance Information--Taxes"
in the Company's Prospectuses)

The Prospectuses describe generally the tax treatment of distributions
by the Company. This section of the Statement includes additional information
concerning federal taxes.

Qualification by each Fund as a regulated investment company under the
Internal Revenue Code of 1986 (the "Code") requires, among other things, that
(a) at least 90% of the Fund's annual gross income, without offset for losses
from the sale or other disposition of securities, be derived from interest,
payments with respect to securities loans, dividends and gains from the sale or
other disposition of securities or options thereon; (b) the Fund derive less
than 30% of its gross income from gains (without offset for losses) from the
sale or other disposition of securities or options thereon held for less than
three months; and (c) the Fund diversify its holdings so that, at the end of
each quarter of the taxable year, (i) at least 50% of the market value of the
Fund's assets is represented by cash, Government securities and other securities
limited in respect of any one issuer to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's assets is invested in the
securities of any one issuer (other than U.S. government securities or
securities of other regulated investment companies), or of two or more issuers
which the taxpayer controls and which are determined to be engaged in the same
or similar trade or business. As a regulated investment company, each Fund will
not be subject to federal income tax on its net investment income and net
capital gains distributed to its shareholders, provided that it distributes to
its stockholders at least 90% of its net taxable investment income (including
net short-term capital gain) and at least 90% of the excess of its tax exempt
interest income over attributable expenses earned in each year. Investment
income of a Fund includes, among other things, accretion of market and original
issue discount, even though the Fund will not receive current payments on
discount obligations. In addition, the Tax-Free Fund intends that at least 50%
of the value of its total assets at the close of each quarter of its taxable
year will consist of obligations, the interest on which is exempt from federal
income tax, so that the Fund will qualify under the Code to pay exempt-interest
dividends.

21
<PAGE>
A 4% nondeductible excise tax will be imposed on a Fund (except the
Tax-Free Fund to the extent of its tax-exempt income) to the extent it does not
meet certain minimum distribution requirements by the end of each calendar year.
For this purpose, any income or gain retained by a Fund that is subject to tax
will be considered to have been distributed by year-end. In addition, dividends
declared in October, November or December payable to shareholders of record on a
specified date in such a month and paid in the following January will be treated
as having been paid by each Fund and received by shareholders on December 31 of
the calendar year in which the dividend was declared. Each Fund intends that it
will timely distribute substantially all of its net investment income and net
capital gains and, thus, expects not to be subject to the excise tax.

Any gain or loss realized upon a sale or redemption of shares of a Fund
by a shareholder who is not a dealer in securities is treated as long-term
capital gain or loss if the shares have been held for more than one year and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the sale or redemption of shares of a Fund held for six months
or less is treated as long-term capital loss to the extent of any long-term
capital gain distribution received by the shareholder. Any loss realized by a
shareholder upon the sale or redemption of shares of the Tax-Free Fund held for
six months or less is disallowed to the extent of any exempt-interest dividends
received by the shareholder.

Gains or losses on sales of securities by a Fund will be long-term
capital gains or losses if the securities have been held by it for more than one
year, except in certain cases where the Fund acquires a put or writes a call
thereon. Other gains or losses on the sale of securities will be short-term
capital gains or losses.

Exempt-interest dividends allocable to interest received by the
Tax-Free Fund, on certain "private activity" obligations issued after August 7,
1986 will be treated as interest on such obligations and thus will give rise to
an item of tax preference that will increase a shareholder's alternative minimum
taxable income. Exempt-interest dividends paid to a corporate shareholder by the
Tax-Free Fund (whether or not from interest on private activity bonds) will be
taken into account (i) in determining the alternative minimum tax imposed on 75%
of the excess of adjusted current earnings of the corporation over alternative
minimum taxable income, (ii) in calculating the environmental tax equal to 0.12%
of a corporation's modified alternative minimum taxable income in excess of $2
million, and (iii) in determining the foreign branch profits tax imposed on the
effectively connected earnings and profits tax (with adjustments) of U.S.
branches of foreign corporations.

Any loss realized on a sale or exchange of shares of a Fund will be
disallowed to the extent shares of such Fund are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are disposed
of.

Income from the Federal Fund and Tax-Free Fund may not be exempt from
certain state and local taxes.

PORTFOLIO TRANSACTIONS

Subject to the supervision of the Board of Directors, the Adviser is
primarily responsible for the investment decisions of each of the Funds and the
placing of such Funds' portfolio transactions. In placing orders, it is the
policy of the Adviser to obtain the most favorable net results, taking into
account such factors as price, size of order, difficulty of execution and skill
required of the executing broker. While the Adviser will generally seek
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.

To the maximum extent feasible, the Adviser places orders for portfolio
transactions for the Funds through the Distributor, which in turn places orders
on behalf of the Funds. The Distributor receives no commissions, fees or other
remuneration from the Funds for this service. Allocation of portfolio
transactions by the Distributor is supervised by the Adviser.

The Funds' purchases and sales of portfolio securities are generally
placed by the Adviser with the issuer or a primary market maker for these
securities on a net basis, without any brokerage commissions being paid by the
Funds. Trading, however, does involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid and
asked prices. Transaction costs may also include fees paid to third parties for
information as to potential purchasers or sellers of securities but only for the
purpose of seeking for the Funds the most favorable net results, including such
fees, on a particular transaction. Purchases of underwritten issues may be made,

22
<PAGE>
which will include an underwriting fee paid to the underwriter. During the
Company's last three fiscal years, the Funds paid no brokerage commissions.

Research and Statistical Information. When it can be done consistently
with the policy of obtaining the most favorable net results, it is the Adviser's
practice to place orders with brokers and dealers who supply market quotations
to the fund accounting agent of the Funds for valuation purposes, or who supply
research, market and statistical information to the Adviser. Except for
implementing the policy stated above, there is no intention on the part of the
Adviser to place portfolio transactions with particular brokers or dealers or
groups thereof, and the Adviser does not place orders with brokers or dealers on
the basis that such broker or dealer has or has not sold shares of the Funds.
Although such research, market and statistical information is useful to the
Adviser, it is the Adviser's opinion that such information is only supplementary
to their own research efforts, since the information must still be analyzed,
weighed and reviewed by the staff of the Adviser. Information so received will
be in addition to, and not in lieu of, the services required to be performed by
the Adviser under the investment advisory agreements with the Funds, and the
expenses of the Adviser will not necessarily be reduced as a result of the
receipt of such information. Such information may be useful to the Adviser in
providing services to clients other than the Funds, and not all such information
is used by the Adviser in connection with the Funds.

NET ASSET VALUE

Net asset value per share for each Fund is determined by Scudder Fund
Accounting Corporation, a wholly-owned subsidiary of the Adviser, on each day
the Exchange is open for trading. The net asset value per share of each Fund is
determined at 2:00 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. The Exchange
is closed on Saturdays, Sundays, and on New Year's Day, Presidents' Day (the
third Monday in February), Good Friday, Memorial Day (the last Monday in May),
Independence Day, Labor Day (the first Monday in September), Thanksgiving Day
and Christmas Day (collectively, the "Holidays"). When any Holiday falls on a
Saturday, the Exchange is closed the preceding Friday, and when any Holiday
falls on a Sunday, the Exchange is closed the following Monday. Although the
Company intends to declare dividends with respect to each of its Money Market
Funds on all other days, including Martin Luther King, Jr. Day (the third Monday
in January), Columbus Day (the second Monday in October) and Veterans' Day, no
redemptions will be made on these three bank holidays nor on any of the
Holidays.

As indicated under "Transaction Information--Share Price" in the
Prospectuses, each Money Market Fund uses the amortized cost method to determine
the value of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act.
The amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity, regardless of the impact
of fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Fund would receive if the security were sold. During these periods the
yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of a Fund's portfolio on a particular day,
a prospective investor in that Fund would be able to obtain a somewhat higher
yield than would result from investment in a fund using solely market values,
and existing Fund shareholders would receive correspondingly less income. The
converse would apply during periods of rising interest rates.

Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, each Money Market Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities (as defined in Rule 2a-7) of no more than 397 calendar days
and invest only in securities determined by the Board of Directors to be of high
quality with minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to Rule 2a-7, the Board is
required to establish procedures designed to stabilize, to the extent reasonably
possible, such Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's portfolio
holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by using

23
<PAGE>
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Directors. If
such deviation exceeds 1/2 of 1%, the Board will promptly consider what action,
if any, will be initiated. In the event the Board determines that a deviation
exists that may result in material dilution or other unfair results to investors
or existing shareholders, the Board will take such corrective action as it
regards as appropriate, including the redemption of shares in kind, the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity, withholding dividends or establishing a net
asset value per share by using available market quotations.

ADDITIONAL INFORMATION

Experts

The financial highlights of each Fund included in the Prospectuses and
the Financial Statements incorporated by reference in this Statement of
Additional Information have been audited by Price Waterhouse LLP, 1177 Avenue of
the Americas, New York, New York 10036, independent accountants, and are
included in the Prospectuses and this Statement of Additional Information in
reliance upon the accompanying report of said firm, which reports are given upon
their authority as experts in accounting and auditing.

Other Information

The CUSIP number of the Government Fund is 811149103.
The CUSIP number of the Federal Fund is 811149806.
The CUSIP number of the Cash Fund is 811149202.
The CUSIP number of the Tax-Free Fund is 811149301.
The CUSIP number of the Intermediate Government Fund is 811149889.

Each Fund has a fiscal year end of December 31.

The law firm of Sullivan & Cromwell is counsel to the Company.

Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts 02110-4103, a wholly-owned subsidiary of the Adviser,
computes net asset value for the Funds. Each Money Market Fund pays SFAC an
annual fee equal to 0.0200% of the first $150 million of average daily net
assets, 0.0060% of such assets in excess of $150 million and 0.0035% of such
assets in excess of $1 billion, plus holding and transaction charges for this
service. The Intermediate Government Fund pays SFAC an annual fee equal to
0.0250% of the first $150 million of average daily net assets, 0.0075% of such
assets in excess of $150 million and 0.0045% of such assets in excess of $1
billion, plus holding and transaction charges for this service. For the year
ended December 31, 1994, the amount charged to the Funds by SFAC aggregated
$12,500 for the Government Securities Fund, $1,264 for the Federal Fund, $20,231
for the Cash fund, and $12,490 for the Tax-Free Fund, of which $2,500, $238,
$4,058, and $2,825, respectively, remain unpaid at December 31, 1994. For the
year ended December 31, 1994 for the Federal Fund, SFAC did not impose fees
amounting $11,236. For the year ended December 31, 1994, the amount charged to
Intermediate Government Fund by SFAC aggregated $3,322, of which $717 is unpaid.
For the year ended December 31, 1994 for Intermediate Government Fund, SFAC did
not impose fees amounting to $6,990.

Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the Adviser, is
the transfer, dividend-paying and shareholder service agent for the Company and
as such performs the customary services of a transfer agent and dividend
disbursing agent. These services include, but are not limited to: (i) receiving
for acceptance in proper form orders for the purchase or redemption of Company
shares and promptly effecting such orders; (ii) recording purchases of Company
shares and, if requested, issuing stock certificates; (iii) reinvesting
dividends and distributions in additional shares or transmitting payments
therefor; (iv) receiving for acceptance in proper form transfer requests and
effecting such transfers; (v) responding to shareholder inquiries and
correspondence regarding shareholder account status; (vi) reporting abandoned
property to the various states; and (vii) recording and monitoring daily the
issuance in each state of shares of each Fund of the Company. The Service
Corporation applies a minimum annual charge of $220,000 for servicing all Funds
of the Company. An activity fee is charged on a monthly basis for the
shareholder accounts serviced. The difference between the activity fees charged
and the annual $220,000 minimum is allocated among all the Funds based on

24
<PAGE>
relative net assets. For the year ended December 31, 1994, the amount charged to
the Company by Service Corporation aggregated $22,023 for the Government Fund,
$2,356 for the Federal Fund, $97,769 for the Cash Fund, and $26,150 for the
Tax-Free Fund, of which $1,724, $196, $8,556, and $2,228, respectively, remain
unpaid at December 31, 1994. For the year ended December 31, 1994 for the
Intermediate Government Fund, Service Corporation did not impose any of its fees
amounting to $3,233.

The Company's Prospectuses and this Statement of Additional Information
omit certain information contained in the Registration Statement and its
amendments which the Company has filed with the SEC under the Securities Act of
1933 and reference is hereby made to the Registration Statement for further
information with respect to the Company and the securities offered hereby. The
Registration Statement and its amendments are available for inspection by the
public at the SEC in Washington, D.C.

FINANCIAL STATEMENTS

The financial statements, including the investment portfolios of the
Company, together with the Report of Independent Accountants, Financial
Highlights and notes to financial statements are incorporated herein by
reference in the Annual Reports to the Shareholders of the Company dated
December 31, 1994 and are hereby deemed to be a part of this Statement of
Additional Information.

25
<PAGE>

APPENDIX

The following is a description of the ratings given by Moody's, S&P and
Fitch to corporate and municipal bonds, corporate and municipal commercial paper
and municipal notes.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa". Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest degree of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds rated
"A" possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated "Baa" are considered to be medium grade
obligations, neither highly protected nor poorly secured. Moody's applies
numerical modifiers 1, 2 and 3 in each rating category from "Aa" through "Baa"
in its rating system. The modifier 1 indicates that the security ranks in the
higher end of the category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB". Bonds rated "AAA" have the highest ratings assigned
by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the higher rated issues only in small degree".
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible to" adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead a "weakened capacity" to make such payments. The ratings
from "AA" to "BBB" may be modified by the addition of a plus or minus sign to
show relative standing within the category.

Fitch: The four highest ratings of Fitch for corporate and municipal
bonds are "AAA," "AA," "A" and "BBB". Bonds rated "AAA" are considered to be
investment-grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated "AA" are
considered to be investment grade and of very high credit quality. The obligor's
ability to pay interest and repay principal is very strong, although not quite
as strong as bonds rated "AAA". Because bonds rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F1+". Bonds rated "A" are
considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher rates. Bonds rated "BBB" are considered to be investment
grade and of satisfactory credit quality. The obligor's ability to pay interest
and repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse effects
on these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with greater ratings.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior ability for
repayment of senior short-term obligations".

S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is strong".
Commercial paper with "overwhelming safety characteristics" will be rated
"A-1+".

Fitch: The rating "F-1" is the highest rating assigned by Fitch. Among
the factors considered by Fitch in assigning this rating are: (1) the issuer's
liquidity; (2) its standing in the industry; (3) the size of its debt; (4) its
ability to service its debt; (5) its profitability; (6) its return on equity;
(7) its alternative sources of financing; and (8) its ability to access the
capital markets. Analysis of the relative strength or weakness of these factors
and others determines whether an issuer's commercial paper is rated "F-1".

<PAGE>
Municipal Notes

Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality". Notes rated "MIG 2"
or "VMIG 2" are of "high quality," with margins or protection "ample although
not as large as in the preceding group". Notes rated "MIG 3" or "VMIG 3" are of
"favorable quality," with all security elements accounted for but lacking the
strength of the preceding grades.

S&P: The "SP-1" rating reflects a "very strong or strong capacity to
pay principal and interest". Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+". The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Fitch: The highest ratings for state and municipal short-term
obligations are "F-1+," "F-1," and "F-2".
<PAGE>
MANAGED INTERMEDIATE GOVERNMENT FUND

- --------------------------------------------------------------------------------

ANNUAL REPORT
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<PAGE>
Managed Intermediate Government Fund
Performance Update
December 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Managed Intermediate Government Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 9,688 -3.12% -3.12%
Life of
Fund* $10,112 1.12% .61%

Lehman Brothers 1-3 Year
Government Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,052 .52% .52%
Life of
Fund* $10,368 3.68% 2.09%

*The Fund commenced operations on March 1, 1993.
Index comparisons begin March 31, 1993.

A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:

Periods ended December 31

Managed Intermediate Government Fund
Year Amount
- ----------------------
3/31/93* 10000
6/93 10202
9/93 10340
12/93 10392
3/94 10134
6/94 10043
9/94 10091
12/94 10068

Lehman Brothers 1-3 Year
Government Index
Year Amount
- ----------------------
3/31/93* 10000
6/93 10111
9/93 10250
12/93 10315
3/94 10265
6/94 10265
9/94 10368
12/94 10368

The Lehman Brothers 1-3 Year Government Index is composed of agency
and treasury securities with maturities of 1-3 years. Both the Fund
and Index assume reinvestment of dividends. Index returns do not
reflect fees or expenses.

- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

Yearly periods ended December 31
- ----------------------------------
<TABLE>
<S> <C> <C>
1993* 1994
---------------
Net Asset Value... $ 9.98 $ 9.18
Income Dividends.. $ .45 $ .49
Fund Total
Return (%)........ 4.37 -3.12
Index Total
Return (%)........ 3.15 .52
</TABLE>

Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results.
Total return and principal value will fluctuate, so that an investor's
shares when redeemed may be worth more or less than when purchased.
If the Manager had not maintained the Fund's expenses, the total return
would have been lower.

2
<PAGE>
February 21, 1995

Dear Shareholder:

We are pleased to provide you with the Managed Intermediate Government
Fund's Annual Report which covers the Fund's performance and progress for the
year ended December 31, 1994.

The investment objective of the Fund is 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.

As of December 31, the Fund's 30-day net annualized yield was 6.03%. The
Fund's net asset value per share declined from $9.98 on December 31, 1993 to
$9.18 on December 31, 1994. Assuming the reinvestment of the dividends for the
period totaling $0.49, the total return for the year ended December 31, 1994 was
- -3.12%, compared to the -3.72% average return for all Intermediate U.S.
Government Funds and -1.65% average return of all Short U.S. Government Funds
for the same twelve-month period according to Lipper Analytical Services, Inc.,
an independent analyst of investment performance. However, it is important to
note that the Fund, with its emphasis on maintaining a relatively stable per
share price, is managed in a more conservative fashion than most Intermediate
U.S. Government Funds.

Audited financial statements for the year ended December 31, 1994 and a
list of the Fund's investments as of that date are set forth on the following
pages.

If you have any questions concerning your Fund, please call toll free (800)
854-8525 from any continental state. We will be glad to hear from you at any
time.

/s/David S. Lee
David S. Lee
Chairman

3
<PAGE>
Portfolio Management Discussion

The past year was one of the most difficult in recent times for
fixed-income investors in the United States. In February, after five years of
accommodating monetary policy, the Federal Reserve began a series of
interest-rate increases designed to slow economic growth down to a more
sustainable pace.

Managed Intermediate Government Fund's performance in 1994 reflects a year
in which interest rates rose persistently across the maturity spectrum. The
Fund's share price declined $0.80, from $9.98 on December 31, 1993, to $9.18 at
the end of the year. (When interest rates rise, bond prices generally decline,
since existing bonds are deemed less attractive than newly issued,
higher-yielding securities.) However, rising interest rates also tend to result
in higher coupons for fixed-income investments. The Fund distributed a total of
$0.49 per share in income during the year, contributing to a 30-day net
annualized yield of 6.03% on December 31, 1994, up from 5.39% a year earlier.
Combined, price change plus distributions provided a -3.12% total return for the
year, compared with 0.52% for the unmanaged Lehman Brothers 1-3 Year Government
Index and -4.26% for five-year U.S. Treasury notes.

Higher interest rates have had numerous effects on financial markets,
although mostly negative. One effect was the unwinding of financial leverage in
the United States. In the three years prior to 1994, investors had borrowed at
low short-term rates to invest in higher-yielding, long-maturity bonds. Last
year's increase in short-term rates made this form of leverage largely
unprofitable. In early December, for example, it was revealed that Orange
County--one of the wealthiest counties in the United States--was going into
bankruptcy due to the highly leveraged investment strategy of its investment
portfolio.

Throughout the first half of the year, we kept a large portion of the
Fund's holdings invested in mortgage-backed securities (approximately 80%).
Later in the year, in view of increasingly higher short-term interest rates, we
decreased the Fund's mortgage-backed holdings to approximately 31% in favor of
short-term U.S. Government obligations. At the present time, the Fund is
constructed in a very conservative fashion. Looking ahead a year, we believe the
outlook for U.S. fixed-income securities is positive. While it is never clear
when the level of interest rates actually begins to affect the U.S. economy, the
Fed's actions should eventually produce a slowdown. At that point, interest
rates should begin to move lower, providing appreciation potential for
fixed-income securities.

As always, we encourage you to take a long-term perspective when evaluating
your Fund's performance.

/s/David H. Glen /s/Robert E. Pruyne
David H. Glen Robert E. Pruyne
Lead Portfolio Manager Portfolio Manager

4
<PAGE>
<TABLE>
MANAGED INTERMEDIATE GOVERNMENT FUND
INVESTMENT PORTFOLIO
DECEMBER 31, 1994

<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------------ -------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 1.5%
State Street Bank and Trust Co. dated 12/30/94, at 5.25%, to be
repurchased on 1/3/95 (proceeds at maturity $338,197)
collateralized by $335,000 U.S. Treasury Notes, 9.5%,
11/15/95 (cost $338,000) (note 3) . . . . . . . . . . . . . . . $ 338,000 $ 338,000
-------------
SHORT-TERM NOTE -- 3.4%
Federal National Mortgage Association Discount Note
5.79%, due 1/20/95 (cost $747,708) . . . . . . . . . . . . . . 750,000 747,708
-------------
U.S. GOVERNMENT AGENCY PASS-THRUS -- 28.4%
Federal Home Loan Mortgage Corporation*
7%, with various maturities to 2/1/99 . . . . . . . . . . . . . 3,398,505 3,283,806
Federal National Mortgage Association*
9%, due 8/1/07 . . . . . . . . . . . . . . . . . . . . . . . . 2,956,775 2,998,347
-------------

TOTAL U.S. GOVERNMENT AGENCY PASS-THRUS (cost $6,471,428) . . . . . . 6,282,153
-------------

U.S. TREASURY OBLIGATIONS -- 66.7%
U.S. Treasury Note, 5.875%, 5/15/95 . . . . . . . . . . . . . . 3,000,000 2,993,430
U.S. Treasury Note, 4.125%, 5/31/95 . . . . . . . . . . . . . . 3,000,000 2,972,340
U.S. Treasury Note, 4.625%, 8/15/95 . . . . . . . . . . . . . . 3,000,000 2,957,820
U.S. Treasury Note, 5.125%, 11/15/95 . . . . . . . . . . . . . 3,000,000 2,948,910
U.S. Treasury Note, 4.625%, 2/29/96 . . . . . . . . . . . . . . 3,000,000 2,908,590
-------------
TOTAL U.S. TREASURY OBLIGATIONS (cost $14,799,844) . . . . . . . . . 14,781,090
-------------
TOTAL INVESTMENTS -- 100.0% (cost $22,356,980)** . . . . . . . . . . . . . . . . . . . $ 22,148,951
=============
<FN>
* The investments in mortgage-backed securities are interests in separate
pools of mortgages. All separate investments in each of these issues which
have similar coupon rates have been aggregated for presentation purposes.
Effective maturities of these investments may be shorter than stated
maturities due to prepayments.

** Cost for federal income tax purposes was $22,356,980. At December 31, 1994,
net unrealized depreciation for all securities based on tax cost was
$208,029. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$3,270 and unrealized depreciation for allsecurities in which there was an
excess of tax cost over market value of $211,299.
</TABLE>

See notes to financial statements.

5
<PAGE>
<TABLE>

MANAGED INTERMEDIATE GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994

<S> <C> <C>
ASSETS
Investments, at market (identified cost $22,356,980) (note 2) . . . . $ 22,148,951
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . 196,639
Deferred organizational expenses (note 2) . . . . . . . . . . . . . . 38,724
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 22,384,859

LIABILITIES
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,320
Management fee payable (note 5) . . . . . . . . . . . . . . . . . . . 79,748
Accrued expenses (note 5) . . . . . . . . . . . . . . . . . . . . . . 36,028
----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 206,096
-------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $ 22,178,763
=============
NET ASSETS
Net assets consist of:
Unrealized depreciation on investments . . . . . . . . . . . . . . $ (208,029)
Accumulated net realized loss . . . . . . . . . . . . . . . . . . (1,782,963)
Capital Stock ($.001 par value) . . . . . . . . . . . . . . . . . 2,416
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 24,167,339
-------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $ 22,178,763
=============
NET ASSET VALUE, offering and redemption price per share
($22,178,763 -:-2,416,466 outstanding shares of
Capital Stock, $.001 par value, 100,000,000
shares authorized) . . . . . . . . . . . . . . . . . . . . . . . . $9.18
=====
</TABLE>

See notes to financial statements.

6
<PAGE>
<TABLE>
MANAGED INTERMEDIATE GOVERNMENT FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994

<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,361,227

EXPENSES:
Management fee (note 5) . . . . . . . . . . . . . . . . . . . . . . . $ 79,747
Shareholders services (note 5 and 6) . . . . . . . . . . . . . . . . 34,969
Directors' fees and expenses (note 5) . . . . . . . . . . . . . . . . 19,403
Custodian and Accounting fees (note 5) . . . . . . . . . . . . . . . 32,094
Professional services . . . . . . . . . . . . . . . . . . . . . . . . 16,551
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . 16,788
Amortization of organization expense (note 2) . . . . . . . . . . . . 12,235
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . 7,811
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,203 220,801
---------- -----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . 1,140,426

NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments . . . . . . . . . . . . . . . . . (1,787,223)
Net unrealized depreciation on investments during the period . . . . (150,339)
-----------
Net loss on investments . . . . . . . . . . . . . . . . . . . . . . . (1,937,562)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . $ (797,136)
===========
</TABLE>

See notes to financial statements.

7
<PAGE>
<TABLE>
MANAGED INTERMEDIATE GOVERNMENT FUND
STATEMENT OF CHANGES IN NET ASSETS

<CAPTION>
FOR THE PERIOD
MARCH 1, 1993
YEAR (COMMENCEMENT
ENDED OF OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1994 1993
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS

OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,140,426 $ 512,106
Net realized gain (loss) on investments . . . . . . . . . . . . . . . (1,787,223) 4,260
Net unrealized depreciation on investments during the period . . . . (150,339) (57,690)
------------- -------------
Net increase (decrease) in net assets resulting from operations . . . (797,136) 458,676
------------- -------------
Dividends to shareholders from net investment income
($.49 and $.45 per share, respectively) . . . . . . . . . . . . . (1,140,426) (512,106)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares . . . . . . . . . . . . . . . . . . . . 9,084,268 15,294,331
Net asset value of shares issued in investment of dividends . . . . . 514,707 15,550
------------- -------------
9,598,975 15,309,881

Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . (498,287) (241,814)
------------- -------------
Increase in net assets from Capital Stock transactions . . . . . . . 9,100,688 15,068,067
------------- -------------
Total increase in net assets . . . . . . . . . . . . . . . . . . . . 7,163,126 15,014,637

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 15,015,637 1,000
------------- -------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,178,763 $ 15,015,637
============= =============
INCREASE (DECREASE) IN FUND SHARES:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911,210 1,526,724
Shares issued to shareholders in investment of dividends . . . . . . 54,256 1,551
------------- -------------
965,466 1,528,275
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (53,264) (24,111)
------------- -------------
Net increase in Fund shares . . . . . . . . . . . . . . . . . . . . . 912,202 1,504,164

SHARES OUTSTANDING:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 1,504,264 100
------------- -------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,416,466 1,504,264
============= =============

</TABLE>

See notes to financial statements.

8
<PAGE>
<TABLE>
MANAGED INTERMEDIATE GOVERNMENT FUND
FINANCIAL HIGHLIGHTS

THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
THE PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.

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)
<FN>
(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>

9
<PAGE>
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Managed Intermediate Government Fund (the "Fund") is a portfolio of Scudder
Fund, Inc. (the "Company") which is an open-end diversified management
investment company.

2. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies followed by the Fund are:

(a) Security Valuation--The value of securities is determined as of the
close of regular trading on the New York Stock Exchange. 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 assets for
which current market quotes 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.

(b) Federal Income Taxes--The Fund's policy is to qualify as a regulated
investment company under the Internal Revenue Code and to distribute all taxable
income, including any realized net capital gains, to shareholders. Therefore, no
Federal income tax provision is required. As of December 31, 1994, the Fund had
a net tax basis capital loss carryforward of approximately $1,787,000, which may
be applied against any realized net taxable capital gains of each succeeding
year until fully utilized or until December 31, 2002, whichever comes first.

(c) Allocation of Expenses--Expenses not directly chargeable to the Fund
are allocated primarily on the basis of relative net assets of the Company.

(d) Dividends--Dividends from net investment income are declared each
business day to shareholders of record on the previous business day for payment
on the first business day of the following month. During any particular year,
net realized gains from investment transactions in excess of available capital
loss carryforwards would be taxable to the Fund if not distributed. Therefore,
the Fund intends to distribute these amounts to shareholders. An additional
distribution may be made to the extent necessary to avoid the payment of a four
percent federal excise tax. The Fund uses the specific identification method for
determining realized gains or losses on investments for both financial and
federal income tax reporting purposes.

(e) Organization Costs--Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.

(f) Other--Investment transactions are recorded on trade dates. Interest
income is recorded as earned and is adjusted for gains and losses on paydowns on
mortgage-backed securities. Distributions to shareholders are recorded on the
ex-dividend dates.

3. REPURCHASE AGREEMENTS

It is the Company's policy to obtain possession, through its custodian, of
the securities underlying each repurchase agreement to which it is a party,
either through physical delivery or book entry transfer in the Federal Reserve
System or Participants Trust Company. Payment by the Company in respect of a
repurchase agreement is authorized only when proper delivery of the underlying
securities is made to the Company's custodian. The Company's investment manager
values such underlying securities each business day using quotations obtained
from a reputable, independent source. If the Company's investment manager
determines that the value of such underlying securities (including accrued
interest thereon) does not at least equal the value of each repurchase agreement
(including accrued interest thereon) to which such securities are subject, it
will ask for additional securities to be delivered to the Company's custodian.
In connection with each repurchase agreement transaction, if the seller defaults
and the value of the collateral declines or if the seller enters an insolvency
proceeding, realization of the collateral by the Company may be delayed or
limited.

10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PURCHASES AND SALES OF SECURITIES

During the year ended December 31, 1994, purchases and sales of securities,
which were exclusively U.S. Government securities, (excluding short-term
investments) aggregated $59,358,710 and $62,195,094, respectively.

5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

The Company retains Scudder, Stevens & Clark, Inc. ("Scudder") as
investment manager ("Manager") for the Fund, pursuant to an investment advisory
agreement between Scudder and the Company on behalf of the Fund, for a
management fee payable each month, based upon the average daily value of the
Fund's net assets, at an annual rate of 0.65%. For the year ended December 31,
1994, Scudder did not impose a portion of its fee amounting to $62,965, and the
portion imposed amounted to $79,747.

Under certain state regulations, if the total expenses of the Fund,
exclusive of taxes, interest, and extraordinary expenses exceed certain
limitations, the Company's investment adviser is required to reimburse the Fund
for such excess up to the amount of the management fee. During the year ended
December 31, 1994, no such reimbursement was required.

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of Scudder
is the Company's shareholder service, transfer and dividend disbursing agent.
For the year ended December 31, 1994, SSC did not impose any of its fees
amounting to $3,233.

Effective September 22, 1994, Scudder Fund Accounting Corporation ("SFAC"),
a wholly-owned subsidiary of Scudder, assumed responsibility for determining the
daily net asset value per share and maintaining the portfolio and general
accounting records for the Fund. For the year ended December 31, 1994, the
amount charged to the Fund by SFAC aggregated $3,322, of which $717 is unpaid.
For the year ended December 31, 1994, SFAC did not impose fees amounting to
$6,990.

The Company has a compensation arrangement under which payment of
Directors' fees may be deferred. Interest is accrued (based on the rate of
return earned on the 90 day Treasury Bill as determined at the beginning of each
calendar quarter) on the deferred balances and is included in "Directors' fees
and expenses." The accumulated balance of deferred directors' fees and interest
thereon relating to the Fund constituting the Company aggregated $7,625, an
applicable portion of which is included in accrued expenses of the Fund.

6. SHAREHOLDER SERVICES

The Fund has special arrangements with certain banks, institutions and
other persons under which they receive compensation from the Fund and Scudder
for performing shareholder servicing functions for their customers who own
shares in the Fund from time to time. For the year ended December 31, 1994,
payments by the Fund pursuant to these arrangements aggregated $30,065.

7. SHAREHOLDER SERVICE, ADMINISTRATION AND DISTRIBUTION PLAN

The Company has a Shareholder Service, Administration and Distribution Plan
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 under
which participating organizations which enter into agreements with the Company
and Scudder may receive a fee of up to 0.25% on an annual basis from each of the
Company and Scudder. Such fee is calculated on the average daily net assets of
the company for which such participating organizations are responsible. No
payments have been made by the Company for shareholder service, administration
and distribution assistance under this plan other than indicated in Note 6
above.

8. CAPITAL STOCK

At December 31, 1994, one holder of record of the Fund held approximately
50% of the outstanding shares.

11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
SCUDDER FUND, INC. -- MANAGED INTERMEDIATE GOVERNMENT FUND

In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Managed Intermediate Government
Fund (a portfolio of Scudder Fund, Inc., hereafter referred to as the "Fund") at
December 31, 1994, the results of its operations for the year then ended, and
the changes in its net assets and the financial highlights for the year then
ended and for the period March 1, 1993 (commencement of operations) through
December 31, 1993, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statement based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial presentation. We
believe that our audits, which included confirmation of securities at December
31, 1994 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
February 21, 1995

- -------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1994 DIVIDENDS

The total amount of dividends declared in 1994 by the Managed Intermediate
Government Fund is taxable as ordinary dividend income for Federal income tax
purposes. None of this amount qualifies for the dividends received deduction
available to corporations.
- -------------------------------------------------------------------------------

12
(Next two pages are blank)
<PAGE>
Board of Directors

DAVID S. LEE(1) Chairman of the Board; Managing Director,
Scudder, Stevens & Clark, Inc.

EDGAR R. FIEDLER(1) (2) (3) Vice President and Economic Counsellor, The
Conference Board; formerly Assistant
Secretary of the Treasury for Economic
Policy

PETER B. FREEMAN(2) (3) Corporate Director and Trustee

ROBERT W. LEAR(2) (3) Executive-in-Residence and Visiting
Professor, Columbia University Graduate
School of Business; Director or Trustee,
Various Organizations

DANIEL PIERCE(1) President; Chairman of the Board, Scudder,
Stevens & Clark, Inc.

(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee

Officers

DAVID S. LEE Chairman of the Board

DANIEL PIERCE President

THOMAS W. JOSEPH Vice President and Assistant Secretary

THOMAS F. McDONOUGH Vice President and Assistant Secretary

PAMELA A. McGRATH Vice President and Treasurer

IRENE McC. PELLICONI Secretary

15
<PAGE>
Managed Intermediate Government Fund

345 Park Avenue, New York, New York 10154
(800) 5CU-MEMBER

Investment Manager MANAGED INTERMEDIATE
Scudder, Stevens & Clark, Inc. GOVERNMENT FUND
345 Park Avenue
New York, New York 10154

Distributor
Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110

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
ANNUAL REPORT
- --------------------------------------------- DECEMBER 31, 1994

This report is for the information of the
shareholders. Its use in connection with any
offering of the Fund's shares is authorized
only in case of a concurrent or prior
delivery of the Fund's current prospectus.
<PAGE>
MANAGED GOVERNMENT SECURITIES FUND

MANAGED FEDERAL SECURITIES FUND

MANAGED CASH FUND

MANAGED TAX-FREE FUND

- --------------------------------------------------------------------------------

ANNUAL REPORT
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<PAGE>
Board of Directors

DAVID S. LEE(1) Chairman of the Board; Managing
Director, Scudder, Stevens & Clark,
Inc.

EDGAR R. FIEDLER(1) (2) (3) Vice President and Economic Counsellor,
The Conference Board; formerly
Assistant Secretary of the Treasury for
Economic Policy

PETER B. FREEMAN(2) (3) Corporate Director and Trustee

ROBERT W. LEAR(2) (3) Executive-in-Residence and Visiting
Professor, Columbia University Graduate
School of Business; Director or
Trustee, Various Organizations

DANIEL PIERCE(1) President; Chairman of the Board,
Scudder, Stevens & Clark, Inc.

(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee

Officers

DAVID S. LEE Chairman of the Board

DANIEL PIERCE President

THOMAS W. JOSEPH Vice President and Assistant Secretary

THOMAS F. McDONOUGH Vice President and Assistant Secretary

PAMELA A. McGRATH Vice President and Treasurer

IRENE McC. PELLICONI Secretary

2
<PAGE>
February 21, 1995

Dear Shareholder:

The Company provided competitive investment results to its shareholders in
1994. The Company, operated for institutions and their clients, includes four
money market funds: Managed Government Securities Fund, Managed Federal
Securities Fund, Managed Cash Fund and Managed Tax-Free Fund.

Each Fund seeks to provide as high a level of current income as is
consistent with preservation of capital and liquidity. The Managed Federal
Securities Fund seeks to maximize income that cannot be subjected to state and
local income taxes by reason of Federal law and the Managed Tax-Free Fund seeks
to provide income exempt from Federal income tax. The Funds differ from each
other in the types of money market instruments in which each invests.

Aggregate net assets of the Funds were $573 million at December 31, 1994. A
table showing dividend payments and other financial information for the five
years ended December 31, for each Fund, except for the Managed Federal
Securities Fund which commenced operations on July 17, 1991, is on page 16.

Net asset value per share of each Fund was maintained at $1.00.

Audited financial statements for the year ended December 31, 1994 and a
list of each Fund's investments as of that date are set forth on the following
pages.

If you have any questions concerning your Company or any of its Funds,
please call toll free (800) 854-8525 from any continental state. We will be glad
to hear from you at any time.

/s/David S. Lee
David S. Lee
Chairman

3
<PAGE>
<TABLE>
MANAGED GOVERNMENT SECURITIES FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1994

<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2a)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT -- 11.2%

Donaldson, Lufkin & Jenrette Securities Corp., dated
12/30/94 (proceeds at maturity $7,703,025)
collateralized by $7,711,000 U.S. Treasury Note,
6%, 6/30/96 (cost $7,698,000) (note 3) . . . . . . . . 5.96% 1/3/95 $ 7,698,000 $ 7,698,000
------------
U.S. AGENCY OBLIGATIONS -- 83.3%

All Nippon Airways Co. Ltd. Variable Rate Note
(Guaranteed by Export-Import Bank) . . . . . . . . . . 6.35 1/3/95* 1,200,000 1,200,000
Federal Farm Credit Bank Discount Note . . . . . . . . . 5.69 1/5/95 5,000,000 4,996,883
Federal Farm Credit Bank Discount Note . . . . . . . . . 5.70 1/17/95 3,000,000 2,992,507
Federal Farm Credit Bank Discount Note . . . . . . . . . 5.75 2/24/95 10,000,000 9,914,950
Federal Home Loan Bank Discount Note . . . . . . . . . . 5.82 1/4/95 4,000,000 3,998,087
Federal Home Loan Bank Discount Note . . . . . . . . . . 5.68 1/10/95 5,000,000 4,993,000
Federal Home Loan Mortgage Corp. Discount Note . . . . . 5.94 1/30/95 3,000,000 2,985,838
Federal Home Loan Mortgage Corp. Discount Note . . . . . 5.75 2/16/95 5,000,000 4,963,775
Federal National Mortgage Assn. Discount Note . . . . . . 5.88 1/4/95 3,000,000 2,998,550
Federal National Mortgage Assn. Discount Note . . . . . . 5.70 1/18/95 5,110,000 5,096,439
Federal National Mortgage Assn. Discount Note . . . . . . 6.06 2/7/95 3,000,000 2,981,562
Federal National Mortgage Assn. Discount Note . . . . . . 5.76 2/17/95 5,000,000 4,962,922
Federal National Mortgage Assn. Variable Rate Note . . . 6.15 3/14/95* 5,000,000 5,000,000
------------
TOTAL U.S. AGENCY OBLIGATIONS (cost $57,084,513) . . . . . . . . . . . . . . . . . . . . . . 57,084,513
------------
TOTAL INVESTMENTS -- 94.5% (cost $64,782,513)** . . . . . . . . . . . . . . . . . . . . . . . 64,782,513
------------
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
VALUE
(NOTE 2a)
------------
<S> <C>
OTHER ASSETS AND LIABILITIES -- 5.5%
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,157,064

Interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,959
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (286,638)
Payable for Capital Stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,745)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,700)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (160,476)
------------
3,774,464
------------

NET ASSETS -- 100.0%
Applicable to 68,556,977 shares of $.001 par value Capital Stock outstanding;
3,000,000,000 shares authorized (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,556,977
============

NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>
* Date of next interest rate change.

** Cost for federal income tax purposes.
</TABLE>

See notes to financial statements.

5
<PAGE>
<TABLE>
MANAGED FEDERAL SECURITIES FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1994

<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2a)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 100.2%

U.S. Treasury Bill . . . . . . . . . . . . . . . . . . . 4.18% 1/12/95 $ 12,842,000 $ 12,825,599
------------
TOTAL U.S. TREASURY OBLIGATIONS (cost $12,825,599)** . . . . . . . . . . . . . . . . . . . . . 12,825,599
------------
OTHER ASSETS AND LIABILITIES -- (0.2)%
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,357
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,652
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,778)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,603)
------------
(20,372)
------------
NET ASSETS -- 100.0%
Applicable to 12,805,227 shares of $.001 par value Capital Stock
outstanding; 1,000,000,000 shares authorized (note 7) . . . . . . . . . . . . . . . . . . . $ 12,805,227
============

NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>
**Cost for federal income tax purposes.
</TABLE>

See notes to financial statements.

6
<PAGE>
<TABLE>
MANAGED CASH FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1994

<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2a)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 26.7%
ABN-AMRO North American Finance Inc. (Yankee) . . . . . . 5.89% 2/17/95 $ 10,000,000 $ 9,999,859
Banque National de Paris . . . . . . . . . . . . . . . . 5.88 1/5/95 15,000,000 15,000,016
Bayerische Landesbank (Yankee) . . . . . . . . . . . . . 5.96 1/23/95 15,000,000 15,000,000
Canadian Imperial Bank of Commerce . . . . . . . . . . . 6.29 2/23/95 15,000,000 15,000,000
National Westminster Bank PLC (Yankee) . . . . . . . . . 5.85 1/17/95 15,000,000 15,000,132
Rabobank Nederland, NV (Yankee) . . . . . . . . . . . . . 6.52 4/20/95 10,000,000 9,999,693
Societe Generale (Yankee) . . . . . . . . . . . . . . . . 6.18 3/6/95 18,000,000 18,000,000
------------
TOTAL CERTIFICATES OF DEPOSIT (cost $97,999,700) . . . . . . . . . . . . . . . . . . . . . . 97,999,700
------------

COMMERCIAL PAPER -- 39.5%
Abbey National North America . . . . . . . . . . . . . . 5.83 2/15/95 15,000,000 14,892,187
Associates Corp. of North America . . . . . . . . . . . . 6.13 1/23/95 15,000,000 14,944,542
AT&T Corp. . . . . . . . . . . . . . . . . . . . . . . . 6.32 3/22/95 10,000,000 9,861,556
Barclays U.S. Funding Corp. . . . . . . . . . . . . . . . 6.10 3/1/95 10,000,000 9,901,339
J.P. Morgan & Co. Inc. . . . . . . . . . . . . . . . . . 6.24 3/1/95 15,000,000 14,848,813
New Center Asset Trust . . . . . . . . . . . . . . . . . 5.82 1/17/95 10,000,000 9,974,489
New Center Asset Trust . . . . . . . . . . . . . . . . . 6.20 2/10/95 8,000,000 7,945,600
Norfolk Southern Corp. . . . . . . . . . . . . . . . . . 6.39 4/4/95 15,000,000 14,755,875
Receivables Capital Corp. . . . . . . . . . . . . . . . . 6.11 1/6/95 15,333,000 15,320,159
Rincon Securities Inc. (LOC Trust Co. of Georgia) . . . . 5.58 1/18/95 17,650,000 17,604,159
Santander Finance Inc. (Delaware ) . . . . . . . . . . . 5.70 2/14/95 15,000,000 14,896,875
------------
TOTAL COMMERCIAL PAPER (cost $144,945,594) . . . . . . . . . . . . . . . . . . . . . . . . . 144,945,594
------------

REPURCHASE AGREEMENT -- 11.5%
Donaldson, Lufkin & Jenrette Securities Corp.,
dated 12/30/94 (proceeds at maturity $42,144,493)
collateralized by $44,317,000 U.S. Treasury Note,
4.75%, 2/15/97 (cost $42,117,000) (note 3) . . . . . . 5.96 1/3/95 42,117,000 42,117,000
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 10.2%
Student Loan Marketing Association Variable Rate Note . . 5.89 1/4/95* 15,000,000 15,000,000
Student Loan Marketing Association Variable Rate Note . . 5.91 1/4/95* 22,400,000 22,391,840
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (cost $37,391,840) . . . . . . . . . . . . . . . . . 37,391,840
------------
</TABLE>

7
<PAGE>
MANAGED CASH FUND (CONTINUED)

<TABLE>
<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2a)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
VARIABLE COUPON RENEWABLE NOTES -- 11.7%
Adesa Funding Corp. (LOC Banc One) . . . . . . . . . . . 6.28% 1/5/95* $ 3,524,000 $ 3,524,000
Banc One Texas NA . . . . . . . . . . . . . . . . . . . . 5.72 1/3/95* 10,000,000 10,000,000
Citibank Money Market Credit Card Trust . . . . . . . . 6.31 1/10/95* 8,181,817 8,181,817
Development Authority of Richmond County Georgia
Nutra-Sweet Co., Series 1990 (LOC Union Bank of
Switzerland) . . . . . . . . . . . . . . . . . . . . 6.10 1/3/95* 96,000,000 6,000,000

MMR Funding I (LOC Bayerische Vereinsbank) . . . . . . . 6.28 1/5/95* 5,500,000 5,500,000
Society Bank NA . . . . . . . . . . . . . . . . . . . . . 5.67 1/3/95* 10,000,000 9,997,691
------------
TOTAL VARIABLE COUPON RENEWABLE NOTES (cost $43,203,508) . . . . . . . . . . . . . . . . . . 43,203,508
------------
TOTAL INVESTMENTS -- 99.6% (cost $365,657,642)** . . . . . . . . . . . . . . . . . . . . . . 365,657,642
------------
OTHER ASSETS AND LIABILITIES -- 0.4%
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,279,578
Receivable for Capital Stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,449
Interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,044,250
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,738,084)
Payable for Capital Stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (198,055)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93,249)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (276,601)
------------
1,449,288
------------
NET ASSETS -- 100.0%
Applicable to 367,269,010 shares of $.001 par value Capital Stock outstanding;
3,000,000,000 shares authorized (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . $367,106,930
============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>
* Date of next interest rate change.

** Cost for federal income tax purposes.

ABBREVIATIONS USED IN THE STATEMENT:

LOC Letter of Credit
</TABLE>

See notes to financial statements.

8
<PAGE>
<TABLE>
MANAGED TAX-FREE FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1994

<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* SHORT-TERM MUNICIPAL SECURITIES-- 100.6% AMOUNT (NOTE 2a)
- ------- --------- ---------
<S> <C> <C> <C>
ALASKA -- 1.6%
VMIG-1 Alaska Housing Finance Corp. General Mortgage Revenue Series 1991-A
VRDN, 5.75%, 6/1/26 . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000,000 $ 2,000,000
-----------
ARIZONA -- 4.6%
SS&C Pima County Industrial Development Authority, Series 1985 SFE
Technologies Project VRDN, 6%, 12/1/05 . . . . . . . . . . . . . . . 2,700,000 2,700,000
A-1+ Salt River Project Electric System Revenue Refunding Series 1992-A
TOB, 5.75%, 1/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000
-----------
TOTAL ARIZONA . . . . . . . . . . . . . . . . . . . . . . . . 5,700,000
-----------
ARKANSAS -- 0.1%
VMIG-1 Jonesboro Industrial Revenue Bond Farr Co. Project VRDN,
6.25%, 12/1/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000 170,000
-----------
CALIFORNIA -- 14.1%
SP-1+ California State RAN, 5%, 6/28/95 . . . . . . . . . . . . . . . . . . . 750,000 752,869
A-1 Corona Multi-Family Housing Revenue, Series 1985-B, VRDN,
6.125%, 1/1/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000
MIG-1 Fresno Unified School District TRAN, 4.75%, 7/19/95 . . . . . . . . . . 1,950,000 1,956,216
A-1 Lancaster Household Bank Project Antelope Pines Estate Series 1984-A
VRDN, 6.125%, 11/1/04 . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000
SP-1+ Los Angeles County TRAN, 4.5%, 6/30/95 . . . . . . . . . . . . . . . . . 2,000,000 2,006,171
SP-1+ Los Angeles County Unified School District TRAN, 4.5%, 7/10/95 . . . . . 1,000,000 1,004,519
SS&C San Macros Multi-Family Housing Revenue Household Bank Project
Series 1985 VRDN, 6.125%, 6/1/05 . . . . . . . . . . . . . . . . . . 6,900,000 6,900,000
-----------
TOTAL CALIFORNIA . . . . . . . . . . . . . . . . . . . . . . 17,619,775
-----------
COLORADO -- 3.7%
VMIG-1 Colorado Student Loan Obligation Bond Authority Series 1990-C VRDN,
5.05%, 3/1/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,900,000 2,900,000
VMIG-1 Regional Transportation District Colorado Special Passenger Fair
Revenue Bond VRDN, 5.05%, 6/1/99 . . . . . . . . . . . . . . . . . . 1,700,000 1,700,000
-----------
TOTAL COLORADO . . . . . . . . . . . . . . . . . . . . . . . 4,600,000
-----------
CONNECTICUT -- 1.6%
A-1+ Hartford Multi-Family Housing Underwood Towers Project
VRDN, 5.75%, 6/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000
-----------
FLORIDA -- 6.0%
VMIG-1 Broward County Housing Finance Authority Welleby Apartments
Project VRDN, 5.7%, 12/1/06 . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
A-1+ Dade County Water and Sewer System Revenue Series 1994 VRDN
FGIC Insured, 4.95%, 10/5/22 . . . . . . . . . . . . . . . . . . . . 4,000,000 4,000,000

VMIG-1 Florida Local Government Finance Authority VRDN, 5.5%, 9/1/16 . . . . . 2,500,000 2,500,000
-----------
TOTAL FLORIDA . . . . . . . . . . . . . . . . . . . . . . . . 7,500,000
-----------
GEORGIA -- 6.6%
A-1+ DeKalb Private Hospital Authority Egleston Children's Hospital at
Emory University Series 1984-B VRDN, 5.4%, 3/1/24 . . . . . . . . . . 2,100,000 2,100,000
A-1+ LaGrange Industrial Development Authority Sara Lee Corp. Project VRDN, .
5.7%, 10/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 4,000,000
</TABLE>

9
<PAGE>
MANAGED TAX-FREE FUND

<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2a)
- ------- --------- ---------
<S> <C> <C> <C>
SS&C Savannah Downtown Development Authority, Series 1985
VRDN, 6%, 5/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 $ 1,000,000
A-1+ Turner County Industrial Development Revenue Coats & Clark Inc.
Series 1984 VRDN, 3.6%, 10/1/98 . . . . . . . . . . . . . . . . . . . 1,100,000 1,100,000
-----------
TOTAL GEORGIA . . . . . . . . . . . . . . . . . . . . . . . . 8,200,000
-----------
IDAHO -- 0.8%
SP-1+ Idaho General Obligation TAN, 4.5%, 6/29/95 . . . . . . . . . . . . . . 1,000,000 1,003,211
-----------
ILLINOIS -- 8.4%
A-1+ Illinois Development Finance Authority Pollution Control Revenue
Illinois Power Co. TECP, 3.6%, 1/13/95 . . . . . . . . . . . . . . . 3,700,000 3,700,000
VMIG-1 Illinois Educational Facilities Authority University Pooled Finance
Program VRDN FGIC Insured, 5.6%, 12/1/05 . . . . . . . . . . . . . . 4,710,000 4,710,000
A-1+ Illinois Health Facilities Authority Highland Park Hospital Revenue
Series 1991-B OP FGIC Insured, 3.75%, 6/1/95 . . . . . . . . . . . . 2,000,000 2,000,000
-----------
TOTAL ILLINOIS . . . . . . . . . . . . . . . . . . . . . . . 10,410,000
-----------
IOWA -- 1.6%
SP-1+ Iowa School Corporation Warrant Certificates Series 1994-A Capital
Guaranty Insured, 4.25%, 7/17/95 . . . . . . . . . . . . . . . . . . 2,000,000 2,006,759
-----------
LOUISIANA -- 3.8%
A-1+ Louisiana Recovery District Sales Tax Revenue Bonds Series 1988
VRDN FGIC Insured, 5.85%, 7/1/97 . . . . . . . . . . . . . . . . . . 4,700,000 4,700,000
-----------
MAINE -- 1.8%
SP-1+ Maine TAN Series 1994, 4.5%, 6/30/95 . . . . . . . . . . . . . . . . . . 2,200,000 2,206,261
-----------
MARYLAND -- 3.5%
MIG-1 Anne Arundel County Port Facilities Revenue Baltimore Gas & Electric
TECP, 5.1%, 1/3/95 . . . . . . . . . . . . . . . . . . . . . . . . . 4,320,000 4,320,000
-----------
MASSACHUSETTS -- 1.6%
A-1+ Commonwealth of Massachusetts Bay Transportation Authority
Series 1984-A OP, 3.75%, 3/1/95 . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
SS&C Commonwealth of Massachusetts General Obligation Bond, 5.5%, 11/1/95 . . 1,000,000 1,006,396
-----------
TOTAL MASSACHUSETTS . . . . . . . . . . . . . . . . . . . . . 2,006,396
-----------
MISSOURI -- 0.8%
P-1 St. Louis Industrial Development Authority Kirkwood Project
Series 1985 VRDN, 6%, 12/1/15 . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
-----------
NEW HAMPSHIRE -- 1.6%
A-1+ New Hampshire Business Finance Authority Connecticut Light & Power
VRDN, 5.65%, 12/1/22 . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000
-----------
NEW MEXICO -- 1.2%
A-1 Belen Industrial Revenue Refunding Bond United Desiccants Project
VRDN, 5.65%, 4/1/00 . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,500,000
-----------
NEW YORK -- 0.8%
VMIG-1 New York City General Obligation Series 1994-H-2 VRDN MBIA Insured,
5.85%, 8/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
-----------
</TABLE>

10
<PAGE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2a)
- ------- --------- ---------
<S> <C> <C> <C>
PENNSYLVANIA -- 14.0%
SS&C Elk County Stackpole Corporation Series 1989 VRDN, 4.245%, 3/1/04. . . . $ 750,000 $ 750,000
A-1+ Emmaus General Authority Local Government Revenue Bond Pool
Series G-3 VRDN, 5.65%, 3/1/24 . . . . . . . . . . . . . . . . . . . 3,450,000 3,450,000
A-1 Emmaus General Authority Local Government Revenue Bond Pool
Series G-4 VRDN, 5.7%, 3/1/24 . . . . . . . . . . . . . . . . . . . . 1,850,000 1,850,000
P-1 Montgomery County Higher Education and Health Series 1988 VRDN
AMBAC Insured, 4.9%, 9/1/18 . . . . . . . . . . . . . . . . . . . . . 2,400,000 2,400,000
SP-1+ Pennsylvania State TAN, 4.75%, 6/30/95 . . . . . . . . . . . . . . . . . 1,000,000 1,003,835
SP-1 Philadelphia General Obligation TRAN, 4.75%, 6/15/95 . . . . . . . . . . 5,000,000 5,015,570
SP-1+ Philadelphia School District TRAN, 4.75%, 6/30/95 . . . . . . . . . . . 3,000,000 3,007,825
------------
TOTAL PENNSYLVANIA . . . . . . . . . . . . . . . . . . . . . 17,477,230
------------
TENNESSEE -- 1.2%
SP-1+ Tennessee State Local Development Authority BAN, 4.5%, 6/1/95 . . . . . 1,500,000 1,505,197
------------
TEXAS -- 3.4%
A-1+ Harris County Health Facilities Authority Texas Medical Center
VRDN, MBIA Insured, 6.05%, 2/15/22 . . . . . . . . . . . . . . . . . 1,200,000 1,200,000
A-1+ Harris County Toll Road Revenue VRDN, 5.75%, 8/1/20 . . . . . . . . . . 1,000,000 1,000,000
SP-1+ Texas State RAN, 5%, 8/31/95 . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,011,833
------------
TOTAL TEXAS . . . . . . . . . . . . . . . . . . . . . . . . . 4,211,833
------------
UTAH -- 4.4%
AAA Intermountain Power Agency Refunding Revenue Series-I Prerefunded
Bond, 8.75%, 7/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,040,171
MIG-1 Salt Lake City Pooled Hospital Financing TECP, 4.35%, 1/10/95 . . . . . 1,000,000 1,000,000
VMIG-1 Utah Housing Finance Agency Single-Family Mortgage Bond
Series 1993-D VRDN, 5.7%, 7/1/16 . . . . . . . . . . . . . . . . . . 3,400,000 3,400,000
------------
TOTAL UTAH . . . . . . . . . . . . . . . . . . . . . . . . . 5,440,171
------------
VERMONT -- 5.5%
SS&C Vermont Industrial Development Authority Vermont Marble Co.
VRDN, 4.245%, 12/1/04 . . . . . . . . . . . . . . . . . . . . . . . . 4,170,000 4,170,000
VMIG-1 Vermont Student Assistance Corporation VRDN, 3.75%, 1/1/04 . . . . . . . 2,700,000 2,700,000
-----------
TOTAL VERMONT . . . . . . . . . . . . . . . . . . . . . . . . 6,870,000
-----------
VIRGINIA -- 3.1%
MIG-1 Louisa County Pollution Control Revenue Virginia Electric
Power Company TECP, 3.5%, 2/15/95 . . . . . . . . . . . . . . . . . . 2,500,000 2,500,000
MIG-1 York County Pollution Control Revenue Virginia Electric Power
Company TECP, 3.9%, 3/10/95 . . . . . . . . . . . . . . . . . . . . . 1,400,000 1,400,000
------------
TOTAL VIRGINIA . . . . . . . . . . . . . . . . . . . . . . . 3,900,000
------------
WISCONSIN -- 4.8%
SP-1+ Wisconsin State Operating Note, 4.5%, 6/15/95 . . . . . . . . . . . . . 6,000,000 6,014,025
------------

TOTAL INVESTMENT PORTFOLIO -- 100.6% (Cost $125,360,858)** . . . . . . . 125,360,858
------------
</TABLE>

11
<PAGE>
MANAGED TAX-FREE FUND (CONTINUED)

<TABLE>
VALUE
(NOTE 2a)
------------
<S> <C>
OTHER ASSETS AND LIABILITIES -- (0.6)%
Receivable for Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,000
Interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,203,204
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,495,057)
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (361,999)
Payable for Capital Stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,163)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,806)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (163,305)
------------
(764,126)
------------
NET ASSETS -- 100%
Applicable to 124,596,732 shares of $.001 par value Capital Stock outstanding;
1,000,000,000 shares authorized (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . $124,596,732
============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>
** Cost for federal income tax purposes.

</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------------------
* CREDIT RATINGS (UNAUDITED) SHOWN ARE EITHER BY MOODY'S INVESTORS
SERVICE, INC., STANDARD & POOR'S CORPORATION OR SCUDDER:
<CAPTION>
MOODY'S STANDARD & POOR'S
<S> <C> <C>
P-1 A-1/A-1+ Commercial paper of the highest quality.

Aaa AAA Judged to be the best quality and carry the smallest amount of investment risk.

Aa AA Judged to be of high quality by all standards. Moody's applies numerical
modifiers 1, 2, and 3 in each rating classification. The modifier 1 indicates
that the security ranks in the higher end of its rating category, and the
modifier 3 indicates that the security ranks in the lower end of its rating
category. Standard & Poor's assigns a corresponding + or - to indicate the
issue's ranking in its associated category.

MIG-1 SP-1/SP-1+ Short-term tax-exempt instrument of the best quality with strong protection.

VMIG-1 Short-term tax-exempt variable rate demand instrument of the best quality
with strong protection.

</TABLE>

<TABLE>
ABBREVIATIONS USED IN THE STATEMENT:
<S> <C> <C> <C>
TECP Tax Exempt Commercial Paper VRDN Variable Rate Demand Note

GO General Obligation SS&C These securities are not rated by either
Moody's or Standard & Poor's. Scudder has
determined that these securities are of
MP, OP Security with a "mandatory or optional comparable quality to rated acceptable
put" feature; date shown represents the notes on a cash flow basis and are of
earliest date the security may be redeemed appropriate credit for the standards
or the interest rate will be reset if the required by the Fund's investment
security is not redeemed objective.

RAN Revenue Anticipation Note TOB Tender Option Bond is a security with a
periodic "put feature"

BAN Bond Anticipation Note TRAN Tax Revenue Anticipation Note

TAN Tax Anticipation Note
</TABLE>

See notes to financial statements.

12
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994

<CAPTION>
MANAGED MANAGED
GOVERNMENT FEDERAL MANAGED MANAGED
SECURITIES SECURITIES CASH TAX-FREE
FUND FUND FUND FUND
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income . . . . . . . . . . . . . . $ 3,135,133 $ 506,484 $15,430,767 $ 3,775,176
----------- ---------- ----------- -----------
EXPENSES (note 2c):
Management fee (note 4) . . . . . . . . . . 80,152 -- 948,135 498,692
Shareholder services (notes 4 and 5) . . . 168,039 31,673 645,384 265,015
Directors' fees and expenses (note 4) . . . 23,757 20,039 45,391 43,940
Custodian and Accounting fees (note 4) . . 51,505 12,528 97,205 48,724
Professional services . . . . . . . . . . . 59,623 15,228 130,558 71,229
Reports to shareholders . . . . . . . . . . 4,987 780 22,713 7,660
Amortization of organization expenses . . . -- 2,379 -- --
Registration fees . . . . . . . . . . . . . 15,969 10,352 23,555 20,521
Miscellaneous . . . . . . . . . . . . . . . 8,714 3,191 21,087 6,944
----------- ---------- ----------- -----------
Total expenses before reimbursement . . 412,746 96,170 1,934,028 962,725
Reimbursement from Manager (note 4) . . . . -- (5,585) -- --
----------- ---------- ----------- -----------
Net expenses . . . . . . . . . . . . . . 412,746 90,585 1,934,028 962,725
----------- ---------- ----------- -----------
NET INVESTMENT INCOME AND INCREASE IN NET
ASSETS FROM OPERATIONS . . . . . . . . . $ 2,722,387 $ 415,899 $13,496,739 $ 2,812,451
=========== ========== =========== ===========
</TABLE>

See notes to financial statements.

13
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,

<CAPTION>
MANAGED GOVERNMENT MANAGED FEDERAL
SECURITIES FUND SECURITIES FUND
------------------------------- -------------------------------
1994 1993 1994 1993
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:

Net investment income and increase
in net assets from operations . . . . $ 2,722,387 $ 2,833,014 $ 415,899 $ 282,771
-------------- -------------- -------------- --------------
Dividends (notes 2b and 2d) . . . . . . (2,722,387) (2,833,014) (415,899) (282,771)

-- -- -- --
-------------- -------------- -------------- --------------

CAPITAL STOCK TRANSACTIONS (note 7):

Proceeds from sale of shares . . . . . . 269,803,425 335,556,356 23,109,819 37,932,380
Net asset value of shares issued in
reinvestment of dividends . . . . . . 2,043,089 1,878,316 332,762 269,517
-------------- -------------- -------------- --------------
271,846,514 337,434,672 23,442,581 38,201,897
Cost of shares redeemed . . . . . . . . (295,383,364) (395,908,790) (23,414,968) (37,827,368)
-------------- -------------- -------------- --------------
Increase (decrease) in net assets
from Capital Stock transactions . . . (23,536,850) (58,474,118) 27,613 374,529
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets . . (23,536,850) (58,474,118) 27,613 374,529

NET ASSETS:

Beginning of period . . . . . . . . . . . . 92,093,827 150,567,945 12,777,614 12,403,085
-------------- -------------- -------------- --------------
End of period . . . . . . . . . . . . . . . $ 68,556,977 $ 92,093,827 $ 12,805,227 $ 12,777,614
============== ============== ============== ==============
</TABLE>

See notes to financial statements.

14
<PAGE>
<TABLE>
<CAPTION>
MANAGED CASH FUND MANAGED TAX-FREE FUND
------------------------------- -------------------------------
1994 1993 1994 1993
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:

Net investment income and increase
in net assets from operations . . $ 13,496,739 $ 9,825,551 $ 2,812,451 $ 2,105,535
Dividends (notes 2b and 2d) . . . . (13,496,739) (9,825,551) (2,812,451) (2,105,535)
-------------- -------------- -------------- --------------

-- -- -- --
-------------- -------------- -------------- --------------
CAPITAL STOCK TRANSACTIONS (note 7):

Proceeds from sale of shares . . . . 1,838,028,319 1,961,672,439 586,552,129 572,329,633
Net asset value of shares issued in
reinvestment of dividends . . . . 6,568,961 5,298,855 1,385,261 1,128,695
-------------- -------------- -------------- --------------
1,844,597,280 1,966,971,294 587,937,390 573,458,328
Cost of shares redeemed . . . . . . (1,801,334,141) (1,948,559,426) (570,047,516) (557,688,091)
-------------- -------------- -------------- --------------
Increase (decrease) in net assets
from Capital Stock transactions . 43,263,139 18,411,868 17,889,874 15,770,237
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets 43,263,139 18,411,868 17,889,874 15,770,237

NET ASSETS:

Beginning of period . . . . . . . . . . 323,843,791 305,431,923 106,706,858 90,936,621
-------------- -------------- -------------- --------------
End of period . . . . . . . . . . . . . $ 367,106,930 $ 323,843,791 $ 124,596,732 $ 106,706,858
============== ============== ============== ==============

</TABLE>

See notes to financial statements.

15
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS

THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED
FROM THE FINANCIAL STATEMENTS.

<CAPTION>
RATIO OF RATIO OF NET
NET ASSET NET ASSET OPERATING INVESTMENT NET ASSETS
VALUE, AT NET VALUE, AT EXPENSES INCOME END OF
BEGINNING INVESTMENT DIVIDENDS END TOTAL TO AVERAGE TO AVERAGE PERIOD
PERIOD OF PERIOD INCOME PAID OF PERIOD RETURN NET ASSETS (a) NET ASSETS (MILLION)
- ------------------------------- --------- ---------- --------- --------- ------ -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGED GOVERNMENT
SECURITIES FUND
Year ended 12/31/94 . . . . $1.00 $.037 $(.037) $1.00 3.75%* 0.55% 3.61% $ 69
Year ended 12/31/93 . . . . 1.00 .026 (.026) 1.00 2.68* 0.55 2.65 92
Year ended 12/31/92 . . . . 1.00 .035 (.035) 1.00 3.51* 0.55 3.39 151
Year ended 12/31/91 . . . . 1.00 .056 (.056) 1.00 5.65* 0.55 5.54 87
Year ended 12/31/90 . . . . 1.00 .075 (.075) 1.00 7.73* 0.73 7.48 82

MANAGED FEDERAL
SECURITIES FUND
Year ended 12/31/94 . . . . 1.00 .032 (.032) 1.00 3.24* 0.69 3.19 13
Year ended 12/31/93 . . . . 1.00 .024 (.024) 1.00 2.45* 0.52 2.43 13
Year ended 12/31/92 . . . . 1.00 .030 (.030) 1.00 3.02* 0.53 3.00 12
7/17/91(c) to 12/31/91 . . . 1.00 .021 (.021) 1.00 4.80(b)* 0.52(b) 4.67(b) 14

MANAGED CASH FUND
Year ended 12/31/94 . . . . 1.00 .038 (.038) 1.00 3.86* 0.55 3.84 367
Year ended 12/31/93 . . . . 1.00 .028 (.028) 1.00 2.81* 0.55 2.78 324
Year ended 12/31/92 . . . . 1.00 .037 (.037) 1.00 3.74* 0.55 3.76 305
Year ended 12/31/91 . . . . 1.00 .059 (.059) 1.00 6.07* 0.55 5.93 347
Year ended 12/31/90 . . . . 1.00 .076 (.076) 1.00 7.92* 0.67 7.64 385

MANAGED TAX-FREE FUND
Year ended 12/31/94 . . . . 1.00 .023 (.023) 1.00 2.29 0.77 2.26 125
Year ended 12/31/93 . . . . 1.00 .018 (.018) 1.00 1.85 0.78 1.83 107
Year ended 12/31/92 . . . . 1.00 .025 (.025) 1.00 2.56 0.77 2.54 91
Year ended 12/31/91 . . . . 1.00 .042 (.042) 1.00 4.20 0.75 4.14 107
Year ended 12/31/90 . . . . 1.00 .053 (.053) 1.00 5.47 0.77 5.33 135
<FN>
(a) Had the investment manager not voluntarily waived a portion of the management fee, and not reimbursed certain expenses, the
annualized expense ratio would have been, for the Managed Government Securi Securities Fund, Managed Federal Securities Fund
and Managed Cash Fund, 0.84%, 1.22% and 0.68%, for the year ended December 31, 1994, respectively; 0.77%, 1.14% and 0.66%,
for the year ended December 31, 1993, respectively; 0.76%, 1.07% and 0.64%, for the year ended December 31, 1992, respectively;
0.80%, 0.92% and 0.64%, for the year ended December 31, 1991, respectively; for the Managed Government Securities Fund and
Managed Cash Fund, 0.80% and 0.70%, for the year ended December 31, 1990.
(b) Annualized
(c) Date commenced operations.
* Total returns are higher, for the periods indicated, due to the maintenance of the Fund's expenses.
</TABLE>

16
<PAGE>
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Scudder Fund, Inc. (the "Company") is an open-end diversified management
investment company which currently includes four active money market investment
portfolios: Managed Government Securities Fund, Managed Federal Securities Fund,
Managed Cash Fund, and Managed Tax-Free Fund (collectively, the "Funds").

2. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies followed by the Company are:

(a) Security Valuation--Each of the Funds values its investments using the
amortized cost method, which involves initially valuing an investment at its
cost and thereafter assuming a constant amortization to maturity of any premium
or discount. This method results in a value approximating market.

(b) Federal Income Taxes--The Company's policy is to qualify each Fund as a
regulated investment company under the Internal Revenue Code and to distribute
all taxable and tax-exempt income, including any realized net capital gains, to
shareholders. Therefore, no Federal income tax provision is required.

(c) Allocation of Expenses--Expenses not directly chargeable to a specific
Fund are allocated primarily on the basis of relative net assets of the Company.

(d) Dividends--Dividends from net investment income are declared each
business day to shareholders of record that day for payment on the first
business day of the following month.

(e) Other--Investment transactions are recorded on trade dates. Interest
income, including the accretion or amortization of discount or premium, is
recorded on the accrual basis. Discounts or premiums on securities purchased are
accreted or amortized, respectively, on a straight line basis over the life of
the respective securities. Distributions to shareholders are recorded on the
ex-dividend dates.

The Managed Cash Fund must have at least 25% of its investment portfolio
invested in bankers' acceptances, certificates of deposits, commercial paper,
fixed time deposits or other obligations of domestic and foreign banks.

3. REPURCHASE AGREEMENTS

4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

The Company retains Scudder, Stevens & Clark, Inc. ("Scudder") as
investment manager for the Funds, pursuant to investment advisory agreements
between Scudder and the Company on behalf of each such Fund, for a management
fee payable each month, based upon the average daily value of each Fund's net
assets, at annual rates of 0.40% on the first $1.5 billion and 0.35% on any
amount in excess thereof. Scudder has agreed not to impose a portion of its
management fee, to the extent necessary so that expenses of each of the Managed
Government Securities Fund and the Managed Cash Fund do not exceed 0.55% of the
average daily net assets of each Fund.

17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

For the year ended December 31, 1994, Scudder did not impose fees amounting
to $221,083, $52,196 and $458,399 on the Managed Government Securities Fund, the
Managed Federal Securities Fund and the Managed Cash Fund, respectively. In
addition, Scudder reimbursed a portion of expenses amounting to $5,585 for the
Managed Federal Securities Fund.

Under certain state regulations, if the total expenses of any of the Funds,
exclusive of taxes, interest, and extraordinary expenses exceed certain
limitations, the Company's investment adviser is required to reimburse the Fund
for such excess up to the amount of management fees. During the year ended
December 31, 1994, no such reimbursement was required.

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of Scudder,
is the Company's shareholder service, transfer and dividend disbursing agent.
For the year ended December 31, 1994, the amount charged to the Company by SSC
aggregated $22,023 for the Managed Government Securities Fund, $2,356 for the
Managed Federal Securities Fund, $97,769 for the Managed Cash Fund, and $26,150
for the Managed Tax-Free Fund, of which $1,724, $196, $8,556, and $2,228,
respectively, remain unpaid at December 31, 1994.

Effective August 1, 1994 for the Managed Government Securities Fund,
Managed Federal Securities Fund, and Managed Cash Fund, and August 18, 1994 for
the Managed Tax-Free Fund, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of Scudder, assumed responsibility for determining the
daily net asset value per share and maintaining the portfolio and general
accounting records for the Funds. For the year ended December 31, 1994, the
amount charged to the Funds by SFAC aggregated $12,500 for the Managed
Government Securities Fund, $1,264 for the Managed Federal Securities Fund,
$20,231 for the Managed Cash Fund, and $12,490 for the Managed Tax-Free Fund, of
which $2,500, $238, $4,058, and $2,825, respectively, remain unpaid at December
31, 1994. For the year ended December 31, 1994 for the Managed Federal
Securities Fund, SFAC did not impose fees amounting to $11,236.

The Company has a compensation arrangement under which payment of
directors' fees may be deferred. Interest is accrued (based on the rate of
return earned on the 90 day Treasury Bill as determined at the beginning of each
calendar quarter) on the deferred balances and is included in "Directors' fees
and expenses." The accumulated balance of deferred directors' fees and interest
thereon relating to the Funds constituting the Company aggregated $406,611, an
applicable portion of which is included in accrued expenses of each such Fund.

5. SHAREHOLDER SERVICES

Each of the Funds has special arrangements with certain banks, institutions
and other persons under which they receive compensation from the Funds and
Scudder for performing shareholder servicing functions for their customers who
own shares in the Funds from time to time. For the year ended December 31, 1994,
payments by the Funds pursuant to these arrangements aggregated $141,429 for the
Managed Government Securities Fund, $28,522 for the Managed Federal Securities
Fund, $526,308 for the Managed Cash Fund and $235,366 for the Managed Tax-Free
Fund.

6. SHAREHOLDER SERVICE, ADMINISTRATION AND DISTRIBUTION PLAN

The Company has a Shareholder Service, Administration and Distribution Plan
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 under
which participating organizations which enter into agreements with the Company
and Scudder may receive a fee of up to 0.25% on an annual basis from each of the
Company and Scudder. Such fee is calculated on the average daily net assets of
the Company for which such participating organizations are responsible. No
payments have been made by the Company for shareholder service, administration
and distribution assistance under this plan other than as indicated in Note 5
above.

18
<PAGE>
NOTES TO FINANCIAL STATEMENTS

7. CAPITAL STOCK

At December 31, 1994, the Company had 10,000,000,000 shares of $.001 par
value Capital Stock authorized, of which 3,000,000,000 shares each have been
designated for the Managed Government Securities Fund and Managed Cash Fund and
1,000,000,000 shares each have been designated for the Managed Federal
Securities Fund and Managed Tax-Free Fund. Net paid in capital in excess of par
value was $68,488,420, for the Managed Government Securities Fund, $12,792,422
for the Managed Federal Securities Fund, $366,739,661 for the Managed Cash Fund
and $124,472,135 for the Managed Tax-Free Fund. At December 31, 1994, one holder
of record of the Managed Federal Securities Fund held approximately 67% of the
outstanding shares.

19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
SCUDDER FUND, INC.

In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Managed Government Securities Fund, Managed Federal Securities Fund, Managed
Cash Fund, and Managed Tax-Free Fund (each a separate portfolio of Scudder Fund,
Inc., hereafter referred to as the "Fund") at December 31, 1994, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended (except for the
Managed Federal Securities Fund which commenced operations on July 7, 1991), in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial presentation. We believe that our audits, which
included confirmation of securities at December 31, 1994 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
February 21, 1995

- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1994 DIVIDENDS

The total amount of dividends declared in 1994 by each of the Managed
Government Securities Fund, Managed Federal Securities Fund and Managed Cash
Fund of Scudder Fund, Inc. is taxable as ordinary dividend income for Federal
income tax purposes. None of this amount qualifies for the dividends received
deduction available to corporations.

All of the dividends from the Managed Tax-Free Fund declared in 1994 are
exempt from Federal income tax. However, in accordance with the Internal Revenue
Code, you are required to report them on your 1994 Federal income tax return.

Although dividend income from the Managed Tax-Free Fund is exempt from
Federal taxation, it may not be exempt from state or local taxation. You should
consult your tax advisor as to the state and local tax status of the dividends
you received.
- --------------------------------------------------------------------------------

20
(Next three pages are blank)
<PAGE>
Managed Government
Securities Fund

Managed Federal
Securities Fund

Managed Cash Fund

Managed Tax-Free 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

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

- --------------------------------------------- ANNUAL REPORT
DECEMBER 31, 1994
The Funds are neither insured nor guaranteed
by the U.S. Government. Each 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.

This report is for the information of the
shareholders. Its use in connection with any
offering of the Company's shares is
authorized only in case of a concurrent or
prior delivery of the Company's current
prospectus.