Scudder Money Market Series
Scudder Fund, Inc. is an open-end management investment company comprised of
three diversified money market portfolios. Scudder Premium Money Market Shares
offered herein is a class of Scudder Money Market Series, a portfolio of Scudder
Fund, Inc.
This prospectus sets forth concisely the information about Scudder Premium Money
Market Shares that a prospective investor should know before investing. Please
retain it for future reference.
Shares of Scudder Money Market Series are not insured or guaranteed by the U.S.
Government. Scudder Money Market Series seeks to maintain a constant net asset
value of $1.00 per share, but there can be no assurance that a stable net asset
value will be maintained.
If you require more detailed information, a Statement of Additional Information
dated July 7, 1997, as amended from time to time, may be obtained without charge
by writing Scudder Investor Services, Inc., Two International Place, Boston, MA
02110-4103 or calling 1-800-225-2470. The Statement, which is incorporated by
reference into this prospectus, has been filed with the Securities and Exchange
Commission and is available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov).
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.
Contents--see page 3.
NOT FDIC-
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Scudder
Premium Money Market Shares
Prospectus
July 7, 1997
A pure no-load(TM) (no sales charges) mutual fund portfolio seeking to provide
high money market income with preservation of capital and liquidity.
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Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Premium Money Market Shares (the "Shares") a
class of Scudder Money Market Series (the "Fund")*. By reviewing this table and
those in other mutual funds' prospectuses, you can compare the fees and
expenses with those of other funds. With Scudder's pure no-load(TM) funds, you
pay no commissions to purchase or redeem shares, or to exchange from one fund
to another. As a result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE**
Fees to exchange shares NONE
2) Annual operating expenses: Estimated expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the initial fiscal period ending
December 31, 1997.
Investment management fee (after waiver) 0.20%***
12b-1 fees NONE
Other expenses 0.20%
----
Total operating expenses (after waiver) 0.40%***
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Example
Based on the estimated level of total 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. (As noted above, the Fund has no
redemption fees of any kind.)
1 Year 3 Years
------ -------
$4 $13
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual
expenses and return vary from year to year and may be higher or lower than
those shown.
* The information set forth on this page relates only to the Fund's Scudder
Premium Money Market Shares. The Fund also offers two other classes of
shares, Scudder Money Market Managed Shares and Scudder Money Market
Institutional Shares, which may have different fees and expenses (which may
affect performance), have different minimum investment requirements and are
entitled to different services. Information about these other classes may
be obtained by contacting Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470.
** You may redeem by writing or calling the Fund or by Write-A-Check. If you
wish to receive your redemption proceeds via wire, there is a $5 wire
service fee. For additional information, please refer to "Transaction
information--Redeeming shares."
*** Until December 31, 1997 the Adviser has agreed to waive a portion of its
investment management fee. If the Adviser had not agreed to waive a portion
of the investment management fee, the investment management fee would be
0.25% and it is estimated that the total operating expenses for the Shares
would be 0.45% for the initial fiscal period.
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A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $115 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Investor Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Premium Money Market Shares
Scudder Money Market Series
Investment objective
o seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity
Investment characteristics
o stable $1.00 share price
o convenient, daily liquidity
o $25,000 initial minimum investment
o dividends declared daily and paid monthly
Contents
Investment objectives and policies 4
Why invest in Scudder Premium Money
Market Shares of the Fund? 5
Additional information about policies
and investments 6
Distribution and performance information 8
Fund organization 9
Transaction information 11
Shareholder benefits 14
Purchases 17
Exchanges and redemptions 18
Directors and Officers 20
Investment products and services 21
How to contact Scudder 22
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Investment objectives and policies
Investment objectives
Scudder Money Market Series (the "Fund"), a diversified series of Scudder Fund,
Inc. (the "Corporation"), an open-end management investment company, 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 calendar days
and certain repurchase agreements. These money market 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 Fund will maintain a dollar-weighted average maturity of 90 days or less in
an effort to maintain a constant net asset value of $1.00 per share, but there
is no assurance that it will be able to do so.
Amendments have been proposed to the federal rules regulating quality, maturity
and diversification requirements of money market funds. If the amendments are
adopted, the Fund intends to comply with such new requirements.
Except as otherwise indicated, the Fund's investment objectives and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objectives, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objectives will be
met.
Investments
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. 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 ageeements). The Fund limits its investments
in U.S. bank obligations to 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 obligations of
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 may invest in U.S. dollar-denominated obligations of
foreign banks subject to the following conditions: the foreign banks (based upon
their most recent annual financial statements) at the time of investment (i)
must have more than U.S. $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.; the
obligations must be, in the opinion of the Fund's investment adviser, Scudder,
Stevens & Clark, Inc. (the "Adviser"), of an investment quality comparable to
obligations of U.S. banks in which the Fund may invest. 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.
Fixed time deposits may be withdrawn on demand by the investor, but may be
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subject to early withdrawal penalties that vary with market conditions and the
remaining maturity of the obligations.
Generally, the commercial paper purchased by the Fund consists of direct
obligations of domestic corporate issuers, including bank holding companies,
whose obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's"), "A-1" or higher 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 higher by Moody's or "AA" or higher 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 Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such as notes,
bonds and debentures that are rated "Aa" or higher by Moody's or "AA" or higher
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 investment
quality comparable to rated securities in which the Fund may invest.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's 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
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.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
Why invest in Scudder Premium Money Market Shares of the Fund?
Scudder Premium Money Market Shares of the Fund may be appropriate for investors
desiring monthly income, yet who are also concerned about stability of their
investment principal. A money market fund may be a good choice for investors who
want their assets to grow in a stable investment, investors who want to keep
their "nest egg" safe and handy, or those who are simply looking to "park" their
investment capital for a limited period.
Scudder Premium Money Market Shares are designed for investors who have the
resources to maintain higher account balances and, in return, may be rewarded
with above-average money fund income. The minimum initial investment in Shares
of the Fund is $25,000 per account. By requiring larger account balances, the
Fund strives to reduce the impact of fixed recordkeeping and other costs on
overall expenses of this class of shares, leading to a potentially higher return
for shareholders.
The Fund also offers all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, monthly
income, and ready access to their money. A shareholder can purchase or redeem
shares on a daily basis, in a variety of ways.
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In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except for temporary purposes in order to meet
redemptions and may not make loans except through the lending of portfolio
securities, the purchase of debt obligations or through repurchase agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
The high quality securities in which the Fund invests are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest categories by at least two rating agencies
(or one, if only one rating agency has rated the security) and which do not
qualify as first tier securities are second tier securities. The Adviser may
determine, pursuant to procedures approved by the Board of Directors, that an
unrated security is equivalent to a first tier or second tier security. The Fund
will not invest more than 5% of its total assets in second tier securities or
more than 1% of its total assets in second tier securities of a single issuer.
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. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, which agency may be privately owned. The Fund 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 the 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.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase those securities at a specified time and price. If the
seller under a repurchase agreement becomes insolvent, the Fund's right to
dispose of the securities might be restricted, or the value of the securities
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may decline before the Fund is able to dispose of them. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase under a repurchase agreement, the Fund may
encounter delay and incur costs, including a decline in the value of the
securities, before being able to sell the securities.
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 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 higher 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" or "P-2"
by Moody's, "A-1" or "A-2" 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.
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 Fund may be used for letter of credit backed investments.
Securities with put rights
The Fund 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 Fund to exercise a put is unconditional and unqualified. A put
is not transferable by the Fund, although the Fund may sell the underlying
securities to a third party at any time. If necessary and advisable, the 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 Fund
expects, however, that puts generally will be available without the payment of
any direct or indirect consideration.
The Fund 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 Fund to
exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
The Fund intends 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
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underlying security. The actual put will be valued at zero in determining net
asset value of the Fund. Where the 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 the Fund will not be
considered shortened by any put to which such obligation is subject.
Third party puts
The Fund may also purchase long-term fixed rate bonds that have been coupled
with an option granted by a third party financial institution allowing the 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. The 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 the 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
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.
Distribution and performance information
Dividends and capital gains distribution
Dividends are declared daily and distributed monthly to shareholders. The Fund
may take into account capital gains and losses (other than long-term capital
gains) in its daily dividend declaration. The Fund may make additional
distributions for tax purposes, if necessary. Any dividends or capital gains
distributions declared in October, November or December with a record date in
such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. According to preference, shareholders may receive
distributions in cash or have them reinvested in additional Scudder Premium
Money Market Shares of the Fund. If an investment is in the form of a retirement
plan, all dividends and capital gains distributions must be reinvested into the
shareholder's account. Dividends ordinarily will vary from one class of the Fund
to another.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares.
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Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares.
Short-term capital gains and any other taxable income distributions are taxable
as ordinary income. It is not expected that dividends will qualify for the
dividends-received deduction for corporations.
The Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of the performance of the Fund's Scudder Premium
Money Market Shares may be included in advertisements, sales literature or
shareholder reports. Performance information is computed separately for each
class of Fund shares in accordance with formulae prescribed by the Securities
and Exchange Commission. Performance figures will vary in part because of the
different expense structures of the Fund's different classes of shares. All
performance figures are historical, show the performance of a hypothetical
investment and are not intended to indicate future performance. The "yield" of a
class of the Fund refers to income generated by an investment in that class over
a specified seven-day period. Yield is expressed as an annualized percentage.
The "effective yield" of a class of the Fund is expressed similarly but, when
annualized, the income earned by an investment in that class is assumed to be
reinvested and will reflect the effects of compounding. "Total return" is the
change in value of an investment in a class of the Fund for a specified period.
The "average annual total return" is the average annual compound rate of return
of an investment in a particular class of the Fund assuming the investment has
been held for the life of the Fund as of a stated ending date. "Cumulative total
return" represents the cumulative change in value of an investment in a
particular class of the Fund for various periods. All types of total return
calculations assume that all dividends and capital gains distributions during
the period were reinvested in the relevant class of shares of the Fund.
Performance will vary based upon, among other things, changes in market
conditions and the level of the Fund's expenses as well as particular class
expenses.
Fund organization
Scudder Money Market Series is a diversified series of Scudder Fund, Inc. (the
"Corporation"), an open-end management investment company registered under the
1940 Act. The Corporation was formed in June 1982 as a Maryland corporation.
The Corporation'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 Corporation's Adviser and Distributor, as set
forth below, decides upon matters of general policy.
The Corporation has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds.
Under the Plan, shares of each class represent an equal pro rata interest in a
particular Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of shares shall bear its own "class
expenses;" (3) each class shall have exclusive voting rights on any matter
submitted to shareholders that relates to its administrative services,
shareholder services or distribution arrangements; (4) each class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class; (5) each
class may have separate and distinct exchange privileges; (6) each class may
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have different conversion features, and (7) each class may have separate account
size requirements. Expenses currently designated as "Class Expenses" by the
Corporation's Board of Directors under the Plan include, for example, transfer
agent fees attributable to a specific class, and certain securities registration
fees.
In addition to the Scudder Premium Money Market Shares class offered herein, the
Fund offers two other classes of shares, Scudder Managed Shares and Scudder
Institutional Shares, which may have different fees and expenses (which may
affect performance), may have different minimum investment requirements and are
entitled to different services. Additional information about these other classes
of shares of the Fund may be obtained by contacting Scudder Investor Services,
Inc.
Each share of the Scudder Premium Money Market Shares class of the Fund shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters that such shares (or class of shares) shall be entitled to vote.
Shareholders of the Fund shall vote together on any matter, except to the extent
otherwise required by the 1940 Act, or when the Board of Directors of the
Corporation has determined that the matter affects only the interest of
shareholders of one or more classes of the Fund, in which case only the
shareholders of such class or classes of the Fund shall be entitled to vote
thereon. Any matter shall be deemed to have been effectively acted upon with
respect to the Fund if acted upon as provided in Rule 18f-2 under the 1940 Act,
or any successor rule, and in the Corporation's Articles of Incorporation.
The Corporation 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 Corporation retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage the Fund's daily investment and
business affairs subject to the policies established by the Board of Directors.
Pursuant to its Investment Advisory Agreement (the "Agreement") with the
Corporation on behalf of the Fund, the Adviser regularly provides the Fund with
investment research, advice and supervision and continuously furnishes an
investment program for the Fund, consistent with the Fund's investment
objectives and policies. The Agreement further provides that the Adviser will
pay the compensation and certain expenses of all officers and certain employees
of the Corporation and 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 Corporation.
Under the Agreement, the Adviser pays the 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 Fund, may render investment
advice, management and other services to others.
The Fund will bear all expenses not specifically assumed by the Adviser under
the terms of the Agreement, including, among others, the fee payable to the
Adviser as investment adviser, the fees of the Directors who are not "affiliated
persons" (as defined in the 1940 Act) of the Adviser, the expenses of all
Directors and the fees and out-of-pocket expenses of the Corporation's Custodian
and its Transfer Agent. For a more complete description of the expenses to be
borne by the Fund, see "Investment Adviser" and "Distributor" in the Statement
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of Additional Information.
The Adviser receives a management fee at an annual rate equal to 0.25% of the
average daily net assets of the Fund. Management fees are computed daily and
paid monthly. The Adviser has agreed to waive 0.05% of its management fee until
December 31, 1997.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts, 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the
Corporation's principal underwriter. Scudder Investor Services, Inc. confirms,
as agent, all purchases of shares of the Fund. Scudder Investor Relations is a
telephone information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone or by "Write-A-Check" prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund and class in which the money is to be invested,
- -- the account number of the fund and class, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $1,000 or more to your existing
account by wire.
By exchange. Premium Shares of the Fund may be exchanged for shares of other
funds in the Scudder Family of Funds, unless otherwise determined by the Board
of Directors. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Minimum account requirements may be
11
<PAGE>
different for other Scudder Funds. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the New York
Stock Exchange (the "Exchange"), shares will be purchased at the net asset value
per share calculated at the close of trading on the day of your call. "AutoBuy"
requests received after the close of regular trading on the Exchange will begin
their processing and be purchased at the net asset value calculated the
following business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA accounts.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
12
<PAGE>
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
By "Write-A-Check." You may redeem shares by writing checks against your account
balance for at least $1,000. Your Fund investments will continue to earn
dividends until your check is presented to the Fund for payment.
Checks will be returned by the Fund's transfer agent if there are insufficient
shares to meet the withdrawal amount. You should not attempt to close an account
by check because the exact balance at the time the check clears will not be
known when the check is written.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. 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.
Share price
Purchases and redemptions of the Fund's Scudder Premium Money Market Shares,
including exchanges, are made at net asset value. Scudder Fund Accounting
Corporation determines net asset value per share as of 4:00 p.m., the close of
regular trading on the Exchange, on each day the Exchange is open for trading.
Net asset value per share is calculated by dividing the total value of net
assets of the Scudder Premium Money Market Shares, less all liabilities of such
Shares, by the total number of the Shares outstanding. In calculating the net
asset value per share, the Fund uses the amortized cost value.
Processing time
Purchases made by wire and received by the Fund's transfer agent before 4:00
p.m. on any business day are executed at 4:00 p.m. on that day and begin earning
income the same day. Purchases made by check are executed on the day the check
is received in good order by the Fund's transfer agent and begin earning income
on the next business day. Redemption requests received in good order by the
Fund's transfer agent by 4:00 p.m. are executed at the net asset value
13
<PAGE>
calculated at the close of regular trading on that day and will earn a dividend
on the redeemed shares that day. If a redemption request is received by 4:00
p.m., proceeds will normally be wired that day, if requested by the shareholder,
but no dividend will be earned on the redeemed shares on that day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
The Corporation and Scudder Investor Services each reserve the right to reject
purchases of shares (including exchanges) for any reason.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends and capital gains distributions from accounts
(other than those of certain exempt payees) without a certified Social Security
or tax identification number and certain other certified information or upon
notification from the IRS or a broker that withholding is required. The Fund
reserves the right to reject new account applications without a certified Social
Security or tax identification number. The Fund also reserves the right,
following 30 days' notice, to redeem all shares in accounts without a certified
Social Security or tax identification number. A shareholder may avoid
involuntary redemption by providing the Fund with a tax identification number
during the 30-day notice period.
Minimum balances
Initial minimum investment in the Fund is $25,000. Shareholders should maintain
a share balance worth at least $15,000 (which minimum amount may be changed by
the Board of Directors).
Shareholders whose account balance falls below $15,000 for at least 30 days will
be given 60 days' notice to bring the account back up to $15,000 or more. Where
a reduction in value has occurred due to a redemption or exchange out of the
account and the account balance is not increased in 60 days, Scudder reserves
the right to redeem all shares and close the account and send the proceeds to
the shareholder's address of record. Reductions in value that result solely from
market activity will not trigger an involuntary redemption.
Please refer to "Exchanges and Redemptions-- Other Information" in the Fund's
Statement of Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
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.
A team approach to investing
The Fund is managed by a team of Scudder investment professionals who each play
an important role in the Fund's management process. Team members work together
to develop investment strategies and select securities for the Fund's portfolio.
They are supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in Scudder's offices across
14
<PAGE>
the United States and abroad. Scudder believes its team approach benefits Share
investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
David Wines, Lead Portfolio Manager for Scudder Money Market Series and Scudder
Government Money Market Series, assumed responsibility for day-to-day management
in 1996. Mr. Wines, who joined Scudder in 1996, focuses on overall investment
strategy and has eight years of investment industry experience.
Debra A. Hanson, Portfolio Manager for Scudder Money Market Series and Scudder
Government Money Market Series, works on the development and execution of
investment strategy, and has 13 years experience managing short-term
fixed-income portfolios. Ms. Hanson has been with Scudder since 1983.
K. Sue Cote, Lead Portfolio Manager for Scudder Tax Free Money Market Series,
and Portfolio Manager for Scudder Money Market Series and Scudder Government
Money Market Series, joined Scudder in 1983 and has 13 years experience working
with short-term fixed-income investments.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth, tax
free and growth and income funds with a simple toll-free call or, if you prefer,
by sending your instructions through the mail or by fax. Telephone and fax
redemptions and exchanges are subject to termination and their terms are subject
to change at any time by the Fund or the Transfer Agent. In some cases, the
Transfer Agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets. In addition, it draws upon Scudder's more than 75-year heritage of
providing investment counsel to large corporate and private clients. If you have
$100,000 or more to invest initially and would like more information about
Personal Counsel, please call 1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Shares of the Fund. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
15
<PAGE>
To reduce the volume of mail you receive, only one copy of
most Fund reports, such as the Fund's Annual Report, may be mailed to your
household (same surname, same address). Please call 1-800-225-5163 if you wish
to receive additional shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
16
<PAGE>
<TABLE>
<CAPTION>
Purchases
-----------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $25,000
an account
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds."
<S> <C> <C>
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Service
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares-- By
wire for details, including the ABA wire transfer number. Then call
1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing
additional shares Minimum additional investment: $1,000; IRAs $100
Make checks o By Mail Send a check with a Scudder investment slip, or with a
payable to "The letter of instruction including your account number and the
Scudder Funds." complete Fund and class name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By
wire for details, including the ABA wire transfer number.
o In Person Visit one of our InvestorCenters to make an additional
investment in your Scudder fund account. Investor Center locations
are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By AutoBuy for more details.
o By Automatic You may arrange to make investments on a
Investment Plan regular basis through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
-----------------------------------------------------------------------------------------------------------------------
17
<PAGE>
Exchanges and redemptions
- -----------------------------------------------------------------------------------------------------------------------
Exchanging shares Minimum investments: $25,000 to establish a new account in Scudder Money Market Premium
Shares; $1,000 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
For information o By Mail Print or type your instructions and include:
on exchanging to or Fax - the name of the Fund and class and the account number you are
other Scudder exchanging from;
Funds, see - your name(s) and address as they appear on your account;
"Transaction - the dollar amount or number of shares you wish to exchange;
Information--By - the name of the Fund and class you are exchanging into;
exchange." - your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Service 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA 02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 8 p.m.
eastern time or to access SAIL(TM), Scudder's Automated Information Line, call
1-800-343-2890 (24 hours a day). You may have redemption proceeds sent to your
predesignated bank account, or redemption proceeds of up to $100,000 sent to your
address of record.
o By "Write- You may redeem shares by writing checks against your account balance as often
A-Check" as you like for at least $1,000, but not more than $5,000,000.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and class and the account number you are
exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund and class you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000. See Transaction
information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically. Call 1-800-225-5163
Withdrawal for more information and an enrollment form.
Plan
</TABLE>
18
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up to
$2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from
their taxable income, and all investment earnings accrue on a tax-deferred
basis. The Scudder No-Fee IRA charges you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee communications
and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by the
plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans. The Scudder Keogh
charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500 or
more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
19
<PAGE>
Directors and Officers
David S. Lee*
Chairman and Director
Edgar R. Fiedler
Director
Peter B. Freeman
Director
Daniel Pierce*
President and Director
Robert W. Lear
Director
Stephen L. Akers*
Vice President
Carol L. Franklin*
Vice President
Thomas W. Joseph*
Vice President and Assistant Secretary
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
K. Sue Cote*
Vice President
Jerard K. Hartman*
Vice President
Kathryn L. Quirk*
Vice President
*Scudder, Stevens & Clark, Inc.
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series**
Scudder Government Money Market Series**
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Scudder Tax- Free Money Market Series**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited
Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *Not available in all
states. **Institutional class of shares is not available in all states and does
not have exchange privileges. +++ +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
21
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges
and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to
obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the
Scudder Investor Centers.Check for a Investor Center near you--they
can be found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
22
<PAGE>
Scudder Fund, Inc. is an open-end management investment company comprised of
three diversified money market portfolios: Scudder Money Market Series, Scudder
Tax Free Money Market Series and Scudder Government Money Market Series (the
"Funds"). Each Fund offers a Managed Shares class (the "Managed Shares"),
described herein.
This prospectus sets forth concisely the information about the Managed Shares of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series, that a prospective investor should know before
investing. Please retain it for future reference.
Shares offered by the Funds are not insured or guaranteed by the U.S.
Government. The Funds seek to maintain a constant net asset value of $1.00 per
share, but there can be no assurance that a stable net asset value will be
maintained.
If you require more detailed information, a Statement of Additional Information
dated July 7, 1997, as amended from time to time, may be obtained without charge
by writing Scudder Investor Services, Inc., Two International Place, Boston, MA
02110-4103 or calling 1-800-854-8525. The Statement, which is incorporated by
reference into this prospectus, has been filed with the Securities and Exchange
Commission and is available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov).
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.
Contents--see page 6.
- ------- -----------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ------- -----------------
Scudder
Managed Shares
- ------------------------------
o Scudder Money Market Series
o Scudder Tax Free
Money Market Series
o Scudder Government
Money Market Series
- ------------------------------
Prospectus
July 7, 1997
Three pure no-load(TM) (no sales charges) mutual fund portfolios each seeking to
provide high money market income with preservation of capital and liquidity
through investments in different types of instruments.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in the Funds*. By reviewing this table and those in other
mutual funds' prospectuses, you can compare each Fund's fees and expenses with
those of other funds. With Scudder's pure no-load(TM) funds, you pay no
commissions to purchase or redeem shares, or to exchange from one Fund to
another. As a result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account for various transactions.
<TABLE>
<CAPTION>
Scudder Scudder
Scudder Tax Free Government
Money Market Money Market Money Market
Series Series Series
------ ------ ------
<S> <C> <C> <C>
Sales commissions to purchase shares (sales load) NONE NONE NONE
Commissions to reinvest dividends NONE NONE NONE
Redemption fees NONE** NONE** NONE**
Fees to exchange shares NONE NONE NONE
2) Annual operating expenses: Expenses paid by each Fund before it distributes
its net investment income, expressed as a percentage of the average daily
net assets for the fiscal year ended December 31, 1996.***
Investment management fee (after waiver) 0.20% 0.15% 0.10%
12b-1 fees NONE NONE NONE
Other expenses 0.25% 0.27% 0.48%
---- ---- ----
Total operating expenses (after waiver) 0.45% 0.42% 0.58%
==== ==== ====
Example
Based on the level of total 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. (As noted above, each Fund has no redemption fees of
any kind.)
One Year $5 $4 $6
Three Years $14 $13 $19
Five Years $25 $24 $32
Ten Years $57 $53 $73
</TABLE>
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual
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.
* The information on this page relates only to each Fund's class of Managed
Shares. Each of the Funds also offers a class of Institutional Shares, and
in addition, Scudder Money Market Series offers a class of Premium Money
Market Shares. These classes of shares may have different fees and expenses
(which may affect performance), have different minimum investment
requirements and are entitled to different services. Information about
these other classes may be obtained by contacting Scudder Investor
Services, Inc., Two International Place, Boston, MA 02110-4103 or calling
1-800-854-8525.
** You may redeem by writing or calling the Fund or by Write-A-Check. If you
wish to receive your redemption proceeds via wire, there is a $5 wire fee
for redemptions under $1,000 with the exception of sweep accounts. For
additional information, please refer to "Transaction information--Redeeming
shares."
*** Expenses for the fiscal year ended December 31, 1996 have been restated to
reflect an increase in transfer agency fees which took effect July 1, 1997
and an investment management fee waiver which took effect July 7, 1997.
Until December 31, 1997, the Adviser has agreed to waive a portion of its
investment management fee. If the Adviser had not agreed to waive a portion
of the investment management fee, the investment management fee would have
been 0.25% for each Fund.
Actual total operating expenses for the fiscal year ended December 31,
1996, for Scudder Money Market Series, Scudder Tax Free Money Market
Series and Scudder Government Money Market Series were 0.55%, 0.72% and
0.55%, respectively. If the Adviser had not agreed to waive a portion of
the investment management fee for the fiscal year ended December 31, 1996,
for Scudder Money Market Series and Scudder Government Money Market
Series, total operating expenses would have been: 0.62% and 0.77%,
respectively.
2
<PAGE>
Financial highlights
Scudder Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information
derived from the audited financial statements.*
If you would like more detailed information concerning Fund performance,
audited financial statements are available in the Annual Report dated
December 31, 1996 and may be obtained without charge by writing or calling
Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment
income .049 .054 .038 .028 .037 .059 .076 .086 .070 .062
Distributions from
net investment income
and net realized
capital gains (.049) (.054) (.038) (.028) (.037) (.059) (.076) (.086) (.070) (.062)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%) 4.97(b) 5.57(b) 3.86(b) 2.81(b) 3.74(b) 6.07(b) 7.92(b) 8.93 7.21 6.35
Ratios and
Supplemental Data
Net assets, end of
year ($ millions) $431 $372 $367 $324 $305 $347 $385 $331 $389 $445
Ratio of operating
expenses to average
daily net assets (%)(a) .55 .55 .55 .55 .55 .55 .67 .72 .65 .68
Ratio of net investment
income to average net
assets (%) 4.86 5.45 3.84 2.78 3.76 5.93 7.64 8.56 6.95 6.08
(a) Operating expense
ratio including expenses
reimbursed, management
fee and other expenses
not imposed (%) .62 .68 .68 .66 .64 .64 .70 -- -- --
(b) Total returns are higher, for the periods indicated, due to maintenance of the Fund's expenses.
* Effective July 7, 1997, Scudder Money Market Series was divided into three classes, of which Scudder Money
Market Managed Shares is one. Shares of the Fund outstanding on such date
were redesignated as the Managed Shares of the Fund. The data set forth
above reflects the investment performance of the Fund prior to such
redesignation.
</TABLE>
3
<PAGE>
Financial highlights
Scudder Tax Free Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information
derived from the audited financial statements.*
If you would like more detailed information concerning Fund performance,
audited financial statements are available in the Annual Report dated
December 31, 1996 and may be obtained without charge by writing or calling
Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment
income .028 0.32 .023 .018 .025 .042 .053 .057 .049 .042
Distributions from
net investment income
and net realized
capital gains (.028) (.032) (.023) (.018) (.025) (.042) (.053) (.057) (.049) (.042)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%) 2.88 3.30 2.29 1.85 2.56 4.20 5.47 5.91 4.98 4.25
Ratios and Supplemental
Data
Net assets, end of $165 $138 $125 $107 $91 $107 $135 $137 $261 $336
year ($ millions)
Ratio of operating .72 .79 .77 .78 .77 .75 .77 .76 .60 .66
expenses to average
daily net assets (%)
Ratio of net investment 2.84 3.25 2.26 1.83 2.54 4.14 5.33 5.72 4.85 4.14
income to average net
assets (%)
</TABLE>
* Effective July 7, 1997, Scudder Tax Free Money Market Series was divided
into two classes, of which Scudder Tax Free Money Market Managed Shares
is one. Shares of the Fund outstanding on such date were redesignated as
the Managed Shares of the Fund. The data set forth above reflects the
investment performance of the Fund prior to such redesignation.
4
<PAGE>
Financial highlights
Scudder Government Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information
derived from the audited financial statements.*
If you would like more detailed information concerning Fund performance,
audited financial statements are available in the Annual Report dated
December 31, 1996 and may be obtained without charge by writing or calling
Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment
income .048 .054 .037 .026 .035 .056 .075 .084 .069 .061
Distributions from net
investment income and
net realized
capital gains (.048) (.054) (.037) (.026) (.035) (.056) (.075) (.084) (.069) (.061)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%) 4.91(b) 5.49(b) 3.75(b) 2.68(b) 3.51(b) 5.65(b) 7.73(b) 8.81(b) 7.13 6.24
Ratios and
Supplemental Data
Net assets, end of
year ($ millions) $28 $50 $69 $92 $151 $87 $82 $64 $409 $587
Ratio of operating
expenses to average
daily net assets
(%)(a) ` .55 .55 .55 .55 .55 .55 .73 .75 .69 .69
Ratio of net
investment income
to average net
assets (%) 4.81 5.36 3.61 2.65 3.39 5.54 7.48 8.42 6.83 6.01
(a) Operating expense
ratio including expenses
reimbursed, management
fee and other expenses not
imposed (%) .77 .86 .84 .77 .76 .80 .80 .80 -- --
</TABLE>
(b) Total returns are higher, for the periods indicated, due to maintenance of
the Fund's expenses.
* Effective July 7, 1997, Scudder Government Money Market Series was divided
into two classes, of which Scudder Government Money Market Managed Shares
is one. Shares of the Fund outstanding on such date were redesignated as
the Managed Shares of the Fund. The data set forth above reflects the
investment performance of the Fund prior to such redesignation.
5
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $115 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Financial Intermediary Services
Group, easy exchange among funds, shareholder reports, informative newsletters
and the walk-in convenience of Scudder Investor Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Managed Shares
Three pure no-load(TM) (no sales charges) mutual funds, each investing in
different types of money market investments.
Investment objectives
o Scudder Money Market Series
seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity.
o Scudder Tax Free Money Market Series
seeks as high a level of current income that cannot be subjected to federal
income tax as is consistent with its investment policies and with
preservation of capital and liquidity.
o Scudder Government Money Market Series
seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity.
Investment characteristics
o stable $1.00 share price
o convenient, daily liquidity
o $100,000 minimum investment
o dividends declared daily and paid monthly
Contents
Investment objectives and policies 7
Scudder Money Market Series 7
Scudder Tax Free Money Market Series 8
Scudder Government Money Market Series 9
Why invest in Managed Shares? 9
Additional information about policies and investments 10
Distribution and performance information 13
Fund organization 14
Transaction information 16
Shareholder benefits 19
Purchases 22
Exchanges and redemptions 23
Directors and Officers 25
Investment products and services 26
How to contact Scudder 27
6
<PAGE>
Investment objectives and policies
Set forth below is a description of the investment objectives and policies of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series (the "Funds"). The Funds seek 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. In addition,
Scudder Tax Free Money Market Series seeks to provide current income that is
exempt from federal income taxes.
Each Fund will maintain a dollar-weighted average maturity of 90 days or less in
an effort to maintain a constant net asset value of $1.00 per share, but there
is no assurance that each will be able to do so.
Amendments have been proposed to the federal rules regulating quality, maturity
and diversification requirements of money market funds. If the amendments are
adopted, each Fund intends to comply with such new requirements.
Except as otherwise indicated, each Fund's investment objectives and policies
are not fundamental and may be changed without a vote of shareholders. If there
is a change in a Fund's investment objectives, shareholders should consider
whether the Fund remains an appropriate investment in light of their current
financial position and needs. There can be no assurance that any of the Funds
will achieve its investment objectives.
Scudder Money Market Series
Scudder Money Market Series 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 calendar days and certain repurchase agreements. These money
market 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.
Investments
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. 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 ageeements). The Fund limits its investments
in U.S. bank obligations to 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 obligations of
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 may invest in U.S. dollar-denominated obligations of
foreign banks subject to the following conditions: the foreign banks (based upon
their most recent annual financial statements) at the time of investment (i)
must have more than U.S. $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.; the
obligations must be, in the opinion of the Fund's investment adviser Scudder,
Stevens & Clark, Inc. (the "Adviser"), of an investment quality comparable to
7
<PAGE>
obligations of U.S. banks in which the Fund may invest. 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.
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.
Generally, the commercial paper purchased by the Fund consists of 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 higher 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 higher by Moody's or "AA" or higher 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 Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such as notes,
bonds and debentures that are rated "Aa" or higher by Moody's or "AA" or higher
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.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's 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
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.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
Scudder Tax Free Money
Market Series
Scudder Tax Free Money Market Series 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 calendar
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.
Investments
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
8
<PAGE>
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 tax
and are not subject to the alternative minimum tax. The foregoing constitutes a
fundamental policy that cannot be changed without the approval of a majority of
the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater number of
investors, issuers and market makers than the market for municipal obligations.
The more limited marketability of municipal obligations may make it difficult in
certain circumstances to dispose of large investments advantageously. In
addition, certain municipal obligations might lose tax-exempt status in the
event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's 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
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
Scudder Government
Money Market Series
Scudder Government Money Market Series 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 calendar
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.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
Why invest in Managed Shares?
The Managed Shares class of each Fund is designed for investors who have the
resources and ability to maintain higher account balances and, in return, may be
rewarded with above average money fund income. The minimum initial investment in
each Fund's Managed Shares class is $100,000 per account. By requiring larger
account balances, each Fund strives to reduce the impact of fixed recordkeeping
and other costs on overall expenses of this class of shares, leading to
potentially higher returns for Managed Shares shareholders.
9
<PAGE>
The Funds also offer all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, and easy
access to their money. A shareholder can purchase or redeem shares on a daily
basis, in a variety of ways.
In addition, each Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
Additional information about policies and investments
Investment restrictions
Each Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce each Fund's
investment risk.
Each Fund may not borrow money except for temporary purposes in order to meet
redemptions and may not make loans except through the lending of portfolio
securities, the purchase of debt obligations or through repurchase agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Funds' Statement of Additional
Information.
The high quality securities in which the Funds invest are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest categories by at least two rating agencies
(or one, if only one rating agency has rated the security) and which do not
qualify as first tier securities are second tier securities. The Adviser may
determine, pursuant to procedures approved by the Directors, that an unrated
security is equivalent to a first tier or second tier security. Neither Scudder
Money Market Series nor Scudder Government Money Market Series will invest more
than 5% of its total assets in second tier securities or more than 1% of its
total assets in second tier securities of a single issuer. Scudder Tax Free
Money Market Series is able to invest without limit in second tier securities.
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. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, which agency may be privately owned. The Funds 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
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the Prime Rate, and at specified intervals.
Repurchase agreements
As a means of earning income for periods as short as overnight, each Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, a Fund acquires securities, subject to the seller's
agreement to repurchase those securities at a specified time and price. If the
seller under a repurchase agreement becomes insolvent, a Fund's right to dispose
of the securities might be restricted, or the value of the securities may
decline before a Fund is able to dispose of them. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase under a repurchase agreement, a Fund may
encounter delay and incur costs, including a decline in the value of the
securities, before being able to sell the securities.
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.
Scudder Tax Free Money Market Series 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.
Scudder Money Market Series' and Scudder Tax Free Money Market Series'
investments in municipal bonds are limited to bonds that are rated at the date
of purchase "Aa" or higher by Moody's or "AA" or higher 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" or
"P-2" by Moody's, "A-1" or "A-2" 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
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may pay for certain puts either separately in cash or by paying a higher price
for portfolio securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities). The Funds
expect, however, that puts generally will be available without the payment of
any direct or indirect consideration.
The Funds may enter into puts only with banks or broker/dealers that, in the
opinion of the Adviser, present minimal credit risks. The ability of the Funds
to exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
The Funds intend to enter into puts solely to maintain liquidity and do not
intend to exercise their rights thereunder for trading purposes. The puts will
only be for periods substantially less than the life of the underlying security.
The acquisition of a put will not affect the valuation by the Fund of the
underlying security. The actual put will be valued at zero in determining net
asset value of the Funds. Where a Fund pays directly or indirectly for a put,
its cost will be reflected as an unrealized loss for the period during which the
put is held by the Fund and will be reflected in realized gain or loss when the
put is exercised or expires. If the value of the underlying security increases,
the potential for unrealized or realized gain is reduced by the cost of the put.
The maturity of a municipal obligation purchased by a Fund will not be
considered shortened by any put to which such obligation is subject.
Third party puts
The 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.
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Distribution and performance information
Dividends and capital gains distributions
The Funds' dividends from net investment income are declared daily and
distributed monthly. The Funds may take into account capital gains and losses
(other than long-term capital gains) in their daily dividend declaration. An
additional distribution for tax purposes may be made, if necessary. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. According to preference,
shareholders may receive distributions in cash or have them reinvested in
additional Managed Shares of the same Fund. If an investment is in the form of a
retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account. Dividends ordinarily will vary from
one class of a Fund to another.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares.
Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares.
Short-term capital gains and any other taxable income distributions are taxable
as ordinary income. It is not expected that dividends will qualify for the
dividends-received deduction for corporations.
For the Scudder Tax Free Money Market Series, distributions of tax-exempt income
are not subject to federal income taxes, except for the possible applicability
of the alternative minimum tax. However, distributions may be subject to state
and local income taxes. A portion of the Fund's income, including income from
repurchase agreements, gains from options, and market discount bonds, may be
taxable to shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable as long-term capital gains regardless of the
length of time shareholders have owned shares. Short-term capital gains and any
other taxable income distributions are taxable as ordinary income. Distributions
of tax-exempt income are taken into consideration in computing the portion, if
any, of Social Security and railroad retirement benefits subject to federal and,
in some cases, state taxes.
Each Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of performance of the Managed Shares of a Fund may
be included in advertisements, sales literature or shareholder reports.
Performance information is computed separately for each class of each Fund in
accordance with formulae prescribed by the Securities and Exchange Commission.
Performance figures will vary in part because of the different expense
structures of each Fund's different classes of shares. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "yield" of a class of a Fund refers
to income generated by an investment in that class over a specified seven-day
period. Yield is expressed as an annualized percentage. The "effective yield" of
a class of a Fund is expressed similarly but, when annualized, the income earned
by an investment in that class is assumed to be reinvested and will reflect the
effects of compounding. "Total return" is the change in value of an investment
in a class of a Fund for a specified period. The "average annual total return"
is the average annual compound rate of return of an investment in a particular
class of a Fund assuming the investment has been held for one year, five years
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and ten years as of a stated ending date. "Cumulative total return" represents
the cumulative change in value of an investment in a particular class of a Fund
for various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
the relevant class of shares of a Fund.
Scudder Tax Free Money Market Series' tax-equivalent yield is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Fund's yield, assuming
certain tax brackets for the Fund shareholder. Yield for the Fund is expressed
as an annualized percentage. The "effective yield" of Scudder Tax Free Money
Market Series is expressed similarly but, when annualized, the income earned by
an investment in the Fund is assumed to be reinvested and will reflect the
effects of compounding. The yield of Scudder Tax Free Money Market Series refers
to the income generated by an investment in the Fund over a specified seven-day
period.
Performance will vary based upon, among other things, changes in market
conditions and the level of a Fund's expenses as well as particular class
expenses.
Fund organization
Each Fund is a diversified series of Scudder Fund, Inc. (the "Corporation"), an
open-end management investment company registered under the 1940 Act. The
Corporation was formed in June 1982 as a Maryland corporation.
The Corporation'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 Adviser and Distributor, as set forth below,
decides upon matters of general policy.
The Corporation has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds. The plan was approved by the Corporation's Board of
Directors at a meeting on April 24, 1997.
Under the Plan, shares of each class represent an equal pro rata interest in a
particular Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of shares shall bear its own "class
expenses;" (3) each class shall have exclusive voting rights on any matter
submitted to shareholders that relates to its administrative services,
shareholder services, or distribution arrangements; (4) each class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class; (5) each
class may have separate and distinct exchange privileges; (6) each class may
have different conversion features, and (7) each class may have separate account
size requirements. Expenses currently designated as "Class Expenses" by the
Corporation's Board of Directors under the Plan include, for example, transfer
agent fees attributable to a specific class, and certain securities registration
fees.
In addition to the Managed Shares class offered herein, each of Scudder Tax Free
Money Market and Scudder Government Money Market Series offers another class of
shares, Institutional Shares, and Scudder Money Market Series offers two other
classes of shares, Institutional Shares and Premium Money Market Shares. Each of
these other classes of shares may have different fees and expenses (which may
affect performance), may have different minimum investment requirements and are
entitled to different services. Additional information about these other classes
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of shares of the Funds may be obtained by contacting the Distributor at the
address or number listed herein.
Each share of the Managed Shares class of each Fund shall be entitled to one
vote (or fraction thereof in respect of a fractional share) on matters that such
shares (or class of shares) shall be entitled to vote. Shareholders of each Fund
shall vote together on any matter, except to the extent otherwise required by
the 1940 Act, or when the Board of Directors of the Corporation has determined
that the matter affects only the interest of shareholders of one or more classes
of a Fund, in which case only the shareholders of such class or classes of that
Fund shall be entitled to voter thereon. Any matter shall be deemed to have been
effectively acted upon with respect to a Fund if acted upon as provided in Rule
18f-2 under the 1940 Act, or any successor rule, and in the Corporation's
Articles of Incorporation.
The Corporation 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 Corporation retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage its daily investment and business
affairs subject to the policies established by the Board of Directors.
Pursuant to its Investment Advisory Agreement (the "Agreement") with the
Corporation on behalf of each Fund, the Adviser regularly provides each Fund
with investment research, advice and supervision and continuously furnishes an
investment program for each Fund consistent with its investment objectives and
policies. The Agreement further provides that the Adviser will pay the
compensation and certain expenses of all officers and certain employees of the
Corporation and make available to each 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 Corporation. Under the
Agreement, 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" (as defined in the 1940 Act) of the Adviser, the expenses of all
Directors and the fees and out-of-pocket expenses of the Corporation's Custodian
and its Transfer Agent. For a more complete description of the expenses to be
borne by each Fund, see "Investment Adviser" and "Distributor" in the Statement
of Additional Information.
The Adviser received a management fee from each of Scudder Money Market Series,
Scudder Tax Free Money Market Series and Scudder Government Money Market Series
of 0.40% for the first $1.5 billion of each Fund's average daily net assets and
0.35% for all assets thereafter, for the fiscal year ended December 31, 1996.
Effective July 7, 1997, the Adviser will receive an annual fee of 0.25% of each
Fund's average daily net assets. Until December 31, 1997, the Adviser has agreed
to a management fee waiver of 0.05%, 0.10% and 0.15% for the Scudder Money
Market Series, Scudder Tax Free Money Market Series and Scudder Government Money
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Market Series, respectively. Management fees are computed daily and paid
monthly.
Scudder, Stevens & Clark, Inc., is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Funds.
Each Fund, on behalf of its Managed Shares class, may enter into arrangements
with banks and other institutions which are omnibus account holders of shares of
the Managed Shares class providing for the payment of fees to the institution
for servicing and maintaining accounts of beneficial owners of the omnibus
account. Such payments are expenses of the respective Managed Shares class only.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the
Corporation's principal underwriter. Scudder Investor Services, Inc. confirms,
as agent, all purchases of shares of the Funds.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining each Fund's daily net asset value per share and maintaining the
general accounting records of the Funds.
Custodian
State Street Bank and Trust Company is the Funds' custodian.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after a
Fund's transfer agent receives the purchase request in good order. Purchases are
made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
a Fund may hold redemption proceeds until the purchase check has cleared. If you
purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone or by "Write-A-Check" prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-854-8525 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund and class in which the money is to be invested,
- -- the account number of the fund and class, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $1,000 or more to your existing
account by wire with the exception of a sweep account.
By exchange. Managed Shares of each Fund may be exchanged for Managed Shares of
any other Fund of the Corporation or for shares of other Funds in the Scudder
Family of Funds, unless otherwise determined by the Directors. Your new account
will have the same registration and address as your existing account. Minimum
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account requirements may be different for other Scudder funds.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-854-8525 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-854-8525 for more information.
To purchase additional shares, call 1-800-854-8525. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the New York
Stock Exchange (the "Exchange"), shares will be purchased at the net asset value
per share calculated at the close of trading on the day of your call. "AutoBuy"
requests received after the close of regular trading on the Exchange will begin
their processing and be purchased at the net asset value calculated the
following business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA accounts.
Redeeming shares
The Funds allow you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-854-8525 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions less
than $1,000 with the exception of sweep accounts.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Funds' transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-854-8525 for more information.
To redeem shares, call 1-800-854-8525. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
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received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-854-8525.
By "Write-A-Check." You may redeem shares by writing checks against your account
balance for at least $1,000. Your Fund investments will continue to earn
dividends until your check is presented to the Fund for payment.
Checks will be returned by the Fund's transfer agent if there are insufficient
shares to meet the withdrawal amount. You should not attempt to close an account
by check because the exact balance at the time the check clears will not be
known when the check is written.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Funds use 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. The Funds will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Share price
Purchases and redemptions of a Fund's Managed Shares, including exchanges, are
made at net asset value. Scudder Fund Accounting Corporation determines net
asset value per share as of 4:00 p.m., the close of regular trading on the
Exchange, on each day the Exchange is open for trading for Scudder Money Market
Series and Scudder Government Money Market Series and at 2:00 p.m. for the
Scudder Tax Free Money Market Series. Net asset value per share is calculated by
dividing the total value of net assets attributable to a class, less all
liabilities attributable to that class, by the total number of shares
outstanding for the class.
In calculating the net asset value per share, each Fund uses the amortized cost
method to value its portfolio securities.
Processing time
Purchases made by wire and received by the Funds' transfer agent before noon on
any business day are executed at 4:00 p.m. (2:00 p.m. for the Scudder Tax Free
Money Market Series) on that day and begin earning income the same day.
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Purchases made by check are executed on the day the check is received in good
order by the Funds' transfer agent and begin earning income on the next business
day. Redemption requests received in good order by the Funds' transfer agent by
4:00 p.m. (2:00 p.m. for the Scudder Tax Free Money Market Series) are executed
at the net asset value calculated at the close of regular trading on that day
and will earn a dividend on the redeemed shares that day. If a redemption
request is received by 4:00 p.m. (2:00 p.m. for the Scudder Tax Free Money
Market Series), proceeds will normally be wired that day, if requested by the
shareholder, but no dividend will be earned on the redeemed shares on that day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-854-8525.
The Funds will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
The Corporation and Scudder Financial Intermediary Services Group each reserve
the right to reject purchases of shares (including exchanges) for any reason.
Tax identification number
Be sure to complete the Tax Identification Number section of a Fund's
application when you open an account. Federal tax law requires each Fund to
withhold 31% of taxable dividends and capital gains distributions from accounts
(other than those of certain exempt payees) without a certified Social Security
or tax identification number and certain other certified information or upon
notification from the IRS or a broker that withholding is required. Each Fund
reserves the right to reject new account applications without a certified Social
Security or tax identification number. Each Fund also reserves the right,
following 30 days' notice, to redeem all shares in accounts without a certified
Social Security or tax identification number. A shareholder may avoid
involuntary redemption by providing the Fund with a tax identification number
during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $100,000, which
amount may be changed by the Board of Directors.
Shareholders whose account balance falls below $100,000 for at least 30 days
will be given 60 days' notice to bring the account back up to $100,000 or more.
Where a reduction in value has occurred due to a redemption or exchange out of
an account and the account balance is not increased within 60 days, Scudder
reserves the right to redeem all shares and close the account and send the
proceeds to the shareholder's address of record. Reductions in value that result
solely from market activity will not trigger an involuntary redemption.
Please refer to "Exchanges and Redemptions--
Other information" in the Funds' Statement of Additional Information for more
information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
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.
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A team approach to investing
The Funds are managed by a team of Scudder investment professionals who each
play an important role in each Fund's management process. Team members work
together to develop investment strategies and select securities for each 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 United States and abroad. Scudder believes its team approach
benefits Fund investors by bringing together many disciplines and leveraging
Scudder's extensive resources.
David Wines, Lead Portfolio Manager for Scudder Money Market Series and Scudder
Government Money Market Series, assumed responsibility for day-to-day management
of the Funds in 1996. Mr. Wines, who joined Scudder in 1996, focuses on overall
investment strategy and has eight years of investment industry experience.
Debra A. Hanson, Portfolio Manager for Scudder Money Market Series and Scudder
Government Money Market Series works on the development and execution of
investment strategy, and has 13 years' experience managing short-term
fixed-income portfolios. Ms. Hanson has been with Scudder since 1983.
K. Sue Cote, Lead Portfolio Manager for Scudder Tax Free Money Market Series,
and Portfolio Manager for Scudder Money Market Series and Scudder Government
Money Market Series, joined Scudder in 1983 and has 13 years' experience working
with short-term fixed-income investments.
Rebecca L. Wilson, Portfolio Manager for the Scudder Tax Free Money Market
Series, contributes 11 years of experience in municipal investing and research.
Ms. Wilson has been with Scudder since 1986.
Donald C. Carleton, Portfolio Manger for Scudder Tax Free Money Market Series,
has 28 years of investment management experience and has been with Scudder since
1983.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by a Fund or the transfer agent. In some cases,
the Transfer Agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets. In addition, it draws upon Scudder's more than 75-year heritage of
20
<PAGE>
providing investment counsel to large corporate and private clients. If you have
$100,000 or more to invest initially and would like more information about
Personal Counsel, please call 1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Managed Shares of each Fund. Please call 1-800-854-8525 to request this feature.
Special Monthly Summary of Accounts.
A special service is available to banks, brokers, investment advisers, trust
companies and others who have a number of accounts in one or more of the Funds.
A monthly summary of accounts can be provided, showing for each account the
account number, the month-end share balance and the dividends and distributions
paid during the month.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as each Fund's Annual Report, may be mailed to your household (same
surname, same address). Please call 1-800-854-8525 if you wish to receive
additional shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
21
<PAGE>
Purchases
<TABLE>
<CAPTION>
Opening Minimum initial investment: $100,000; IRAs $100,000
an account
<S> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular, express, registered,
or certified mail to:
Scudder Shareholder Service Center
42 Longwater Drive
Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-854-8525 for instructions.
o In Person Visit one of our Investor Centers to complete your application
with the help of a Scudder representative. Investor Center
locations are listed under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $1,000; IRAs $100
additional
shares
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
Scudder Funds." Fund and class name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By AutoBuy for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-854-8525 for more information and an
enrollment form.
</TABLE>
22
<PAGE>
Exchanges and redemptions
<TABLE>
<CAPTION>
Exchanging Minimum investments: $100,000 to establish a new account;
shares $1,000 to exchange among existing accounts
<S> <C>
o By Telephone To speak with a service representative, call 1-800-854-8525 from
8 a.m. to 6 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and class and the account number you are
exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund and class you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA 02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming
shares o By Telephone To speak with a service representative, call 1-800-854-8525 from
8 a.m. to 6 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
o By "Write- You may redeem shares by writing checks against your account
A-Check" balance as often as you like for at least $1,000, but not more than
$5,000,000.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and class and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
23
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from
their taxable income, and all investment earnings accrue on a tax-deferred
basis. The Scudder No-Fee IRA charges you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans. The
Scudder Keogh charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National
Life Insurance Company (in New York State, Intramerica Life
Insurance Company [S 1802]). The contract is offered by Scudder
Insurance Agency, Inc. (in New York State, Nevada and Montana,
Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in
all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
24
<PAGE>
Directors and Officers
David S. Lee*
Chairman and Director
Edgar R. Fiedler
Director
Peter B. Freeman
Director
Daniel Pierce*
President and Director
Robert W. Lear
Director
Stephen L. Akers*
Vice President
Carol L. Franklin*
Vice President
Thomas W. Joseph*
Vice President and Assistant Secretary
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
K. Sue Cote*
Vice President
Jerard K. Hartman*
Vice President
Kathryn L. Quirk*
Vice President
*Scudder, Stevens & Clark, Inc.
25
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- -------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series**
Scudder Government Money Market Series**
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series**
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited
Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- -------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *Not available in all
states. **Institutional class of shares is not available in all states and does
not have exchange privileges. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by Scudder's
insurance agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens &
Clark, Inc., are traded on various stock exchanges.
26
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Financial Intermediary Services Group -- 1-800-854-8525
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal CounselSM -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
Scudder Shareholder Service Center
42 Longwater Drive
Norwell, Massachusetts
02061-1612
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
27
<PAGE>
Scudder Fund, Inc. is an open-end management investment company comprised of
three diversified money market portfolios: Scudder Money Market Series, Scudder
Tax Free Money Market Series and Scudder Government Money Market Series (the
"Funds"). Each Fund offers an institutional class of shares (the "Institutional
Shares"), described herein.
This prospectus sets forth concisely the information about the Institutional
Shares of Scudder Money Market Series, Scudder Tax Free Money Market Series and
Scudder Government Money Market Series, that a prospective investor should know
before investing. Please retain it for future reference.
Shares offered by the Funds are not insured or guaranteed by the U.S.
Government. The Funds seek to maintain a constant net asset value of $1.00 per
share, but there can be no assurance that a stable net asset value will be
maintained.
If you require more detailed information, a Statement of Additional Information
dated July 7, 1997, as amended from time to time, may be obtained without charge
by writing Scudder Investor Services, Inc., Two International Place, Boston, MA
02110-4103 or calling 1-800-854-8525. The Statement, which is incorporated by
reference into this prospectus, has been filed with the Securities and Exchange
Commission and is available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov).
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.
Contents--see page 3.
NOT FDIC-
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Scudder
Institutional Shares
- ---------------------------------------
o Scudder Money Market Series
o Scudder Tax Free
Money Market Series
o Scudder Government
Money Market Series
- ---------------------------------------
Prospectus
July 7, 1997
Three pure no-load(TM) (no sales charges) mutual fund portfolios, each seeking
to provide high money market income with preservation of capital and liquidity
through investments in different types of instruments.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in the Funds.* By reviewing this table and those in other
mutual funds' prospectuses, you can compare each Fund's fees and expenses with
those of other funds. With Scudder's pure no-load(TM) funds, you pay no
commissions to purchase or redeem shares, or to exchange from one Fund to
another. As a result, all of your investment goes to work for you.
<TABLE>
1) Shareholder transaction expenses: Expenses charged directly to your individual account for various transactions.
Scudder Scudder Scudder Government
Money Market Tax Free Money Market
Series Money Market Series Series
------ ------------------- ------
<S> <C> <C> <C>
Sales commissions to purchase shares (sales load) NONE NONE NONE
Commissions to reinvest dividends NONE NONE NONE
Redemption fees NONE NONE NONE
Fees to exchange shares** NONE NONE NONE
2) Annual operating expenses: Estimated expenses paid by each Fund before it distributes its net investment income, expressed as
a percentage of the average daily net assets for the initial fiscal period ended December 31, 1997.
Investment management fee (after waiver) 0.20%*** 0.15%*** 0.10%***
12b-1 fees NONE NONE NONE
Other expenses 0.06% 0.14% 0.21%
---- ---- ----
Total operating expenses (after waiver) 0.26%*** 0.29%*** 0.31%***
==== ==== ====
Example
Based on the estimated level of total 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. (As noted above, the Funds have no
redemption fees of any kind.)
One Year $ 3 $ 3 $ 3
Three Years $ 8 $ 9 $10
</TABLE>
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual
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.
* The information on this page relates only to each Fund's class of
Institutional Shares. Each of the Funds also offers a class of Managed
Shares; in addition, Scudder Money Market Series offers a class of Premium
Money Market Shares. These classes of shares may have different fees and
expenses (which may affect performance), have different minimum investment
requirements and are entitled to different services. Information regarding
any other class of the Funds may be obtained by contacting Scudder Investor
Services, Two International Place, Boston, MA 02110 or calling
1-800-854-8525.
** The Institutional Shares are not exchangeable within the Scudder Family of
Funds.
*** Until December 31, 1997, the Adviser has agreed to waive a portion of its
investment management fee. If the Adviser had not agreed to waive a portion
of the investment management fee, the investment management fee for the
Institutional Shares class of each Fund would be 0.25%, and it is estimated
that the total operating expenses for the Institutional Shares class of
each Fund would be: Scudder Money Market Series 0.31%, Scudder Tax Free
Money Market Series 0.39% and Scudder Government Money Market Series 0.46%
for the initial fiscal period.
2
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $115 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares. There are no "12b-1" fees either, which many
other funds now charge to support their marketing efforts. All of your
investment goes to work for you. We look forward to welcoming you as a
shareholder.
/s/Daniel Pierce
Scudder Institutional Shares
Three pure no-load(TM) (no sales charges) mutual funds each investing in
different types of money market investments:
Investment objectives
o Scudder Money Market Series
seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity.
o Scudder Tax Free Money Market Series
seeks as high a level of current income that cannot be subjected to federal
income tax as is consistent with its investment policies and with
preservation of capital and liquidity.
o Scudder Government Money Market Series
seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity.
Investment characteristics
o stable $1.00 share price
o easy liquidity
o $1 million minimum investment
o dividends declared daily and paid monthly
Contents
Investment objectives and policies 4
Scudder Money Market Series 4
Scudder Tax Free Money Market Series 5
Scudder Government Money Market Series 6
Why invest in Institutional Shares? 6
Additional information about policies
and investments 7
Distribution and performance information 9
Fund organization 11
Transaction information 13
Shareholder benefits 16
Purchases and redemptions 18
Directors and Officers 19
How to contact Scudder Back cover
3
<PAGE>
Investment objectives and policies
Set forth below is a description of the investment objectives and policies of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series (the "Funds"). The Funds seek 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. In addition,
Scudder Tax Free Money Market Series seeks to provide current income that is
exempt from federal income taxes.
Each Fund will maintain a dollar-weighted average maturity of 90 days or less in
an effort to maintain a constant net asset value of $1.00 per share, but there
is no assurance that it will be able to do so.
Amendments have been proposed to the federal rules regulating quality, maturity
and diversification requirements of money market funds. If the amendments are
adopted, each Fund intends to comply with such new requirements.
Except as otherwise indicated, each Fund's investment objectives and policies
are not fundamental and may be changed without a vote of shareholders. If there
is a change in a Fund's investment objectives, shareholders should consider
whether the Fund remains an appropriate investment in light of their current
financial position and needs. There can be no assurance that any of the Funds
will achieve its investment objectives.
Scudder Money Market Series
Scudder Money Market Series 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 calendar days and certain repurchase agreements. These money
market 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.
Investments
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. 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 ageeements). The Fund limits its investments
in U.S. bank obligations to 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 obligations of
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 may invest in U.S. dollar-denominated obligations of
foreign banks subject to the following conditions: the foreign banks (based upon
their most recent annual financial statements) at the time of investment (i)
must have more than U.S. $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.; the
obligations must be, in the opinion of the Funds' investment adviser, Scudder,
Stevens & Clark, Inc. (the "Adviser"), of an investment quality comparable to
obligations of U.S. banks in which the Fund may invest. Such investments may
4
<PAGE>
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.
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.
Generally, the commercial paper purchased by the Fund consists of 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 higher 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 higher by Moody's or "AA" or higher 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 Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such as notes,
bonds and debentures that are rated "Aa" or higher by Moody's or "AA" or higher
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.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's 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
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.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Funds' Statement of Additional Information.
Scudder Tax Free Money Market Series
Scudder Tax Free Money Market Series 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 calendar
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.
Investments
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
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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 tax
and are not subject to the alternative minimum tax. The foregoing constitutes a
fundamental policy that cannot be changed without the approval of a majority of
the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater number of
investors, issuers and market makers than the market for municipal obligations.
The more limited marketability of municipal obligations may make it difficult in
certain circumstances to dispose of large investments advantageously. In
addition, certain municipal obligations might lose tax-exempt status in the
event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's 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
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Funds' Statement of Additional Information.
Scudder Government Money Market Series
Scudder Government Money Market Series 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 calendar
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.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Funds' Statement of Additional Information.
Why invest in Institutional Shares?
The Institutional Shares class of each Fund is designed for institutional and
individual investors who have the resources to maintain higher account balances
and, in return, may be rewarded with above average money fund income. The
minimum initial investment in each Fund's Institutional Shares class is
$1,000,000 per account. By requiring larger account balances, each Fund strives
to reduce the impact of fixed recordkeeping and other costs on overall expenses
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of this class of shares, leading to potentially higher returns for participating
investors.
Each Fund also offers all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, monthly
income, and ready access to their money. A shareholder can purchase or redeem
shares on a daily basis, in a variety of ways.
Additional information about policies and investments
Investment restrictions
Each Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Funds'
investment risk.
Each Fund may not borrow money except for temporary purposes in order to meet
redemptions and may not make loans except through the lending of portfolio
securities, the purchase of debt obligations or through repurchase agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Funds' Statement of Additional
Information.
The high quality securities in which the Funds invest are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest categories by at least two rating agencies
(or one, if only one rating agency has rated the security) and which do not
qualify as first tier securities are second tier securities. The Adviser may
determine, pursuant to procedures approved by the Directors, that an unrated
security is equivalent to a first tier or second tier security. Neither Scudder
Money Market Series nor Scudder Government Money Market Series will invest more
than 5% of its total assets in second tier securities or more than 1% of its
total assets in second tier securities of a single issuer. Scudder Tax Free
Series is able to invest without limit in second tier securities.
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. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, which agency may be privately owned. The Funds 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.
Repurchase agreements
As a means of earning income for periods as short as overnight, each Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, a Fund acquires securities, subject to the seller's
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agreement to repurchase those securities at a specified time and price. If the
seller under a repurchase agreement becomes insolvent, a Fund's right to dispose
of the securities might be restricted, or the value of the securities may
decline before a Fund is able to dispose of them. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase under a repurchase agreement, a Fund may
encounter delay and incur costs, including a decline in the value of the
securities, before being able to sell the securities.
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.
Scudder Tax Free Money Market Series 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.
Scudder Money Market Series' and Scudder Tax Free Money Market Series'
investments in municipal bonds are limited to bonds that are rated at the date
of purchase "Aa" or higher by Moody's or "AA" or higher 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" or
"P-2" by Moody's, "A-1" or "A-2" 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
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any direct or indirect consideration.
The Funds may enter into puts only with banks or broker/dealers that, in the
opinion of the Adviser, present minimal credit risks. The ability of the Funds
to exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
The Funds intend to enter into puts solely to maintain liquidity and do not
intend to exercise their rights thereunder for trading purposes. The puts will
only be for periods substantially less than the life of the underlying security.
The acquisition of a put will not affect the valuation by the Fund of the
underlying security. The actual put will be valued at zero in determining net
asset value of the Funds. Where a Fund pays directly or indirectly for a put,
its cost will be reflected as an unrealized loss for the period during which the
put is held by the Fund and will be reflected in realized gain or loss when the
put is exercised or expires. If the value of the underlying security increases,
the potential for unrealized or realized gain is reduced by the cost of the put.
The maturity of a municipal obligation purchased by a Fund will not be
considered shortened by any put to which such obligation is subject.
Third party puts
The 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.
Distribution and performance information
Dividends and capital gains distributions
The Funds' dividends from net investment income are declared daily and
distributed monthly. The Funds may take into account capital gains and losses
(other than long-term capital gains) in their daily dividend declaration. An
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additional distribution for tax purposes may be made, if necessary. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. According to preference,
shareholders may receive distributions in cash or have them reinvested in
additional Institutional Shares of the relevant Fund. If an investment is in the
form of a retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account. Dividends ordinarily will vary from
one class of a Fund to another.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares.
Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares.
Short-term capital gains and any other taxable income distributions are taxable
as ordinary income. It is not expected that dividends will qualify for the
dividends-received deduction for corporations.
For the Scudder Tax Free Money Market Series distributions of tax-exempt income
are not subject to federal income taxes, except for the possible applicability
of the alternative minimum tax. However, distributions may be subject to state
and local income taxes. A portion of each Fund's income, including income from
repurchase agreements, gains from options, and market discount bonds, may be
taxable to shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable as long-term capital gains regardless of the
length of time shareholders have owned shares. Short-term capital gains and any
other taxable income distributions are taxable as ordinary income. Distributions
of tax-exempt income are taken into consideration in computing the portion, if
any, of Social Security and railroad retirement benefits subject to federal and,
in some cases, state taxes.
Each Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of performance of the Institutional Shares of a
Fund may be included in advertisements, sales literature or shareholder reports.
Performance information is computed separately for each class of each Fund in
accordance with formulae prescribed by the Securities and Exchange Commission.
Performance figures will vary in part because of the different expense
structures of each Fund's different classes of shares. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "yield" of a class of a Fund refers
to income generated by an investment in that class over a specified seven-day
period. Yield is expressed as an annualized percentage. The "effective yield" of
a class of a Fund is expressed similarly but, when annualized, the income earned
by an investment in that class is assumed to be reinvested and will reflect the
effects of compounding. "Total return" is the change in value of an investment
in a class of a Fund for a specified period. The "average annual total return"
is the average annual compound rate of return of an investment in a particular
class of a Fund assuming the investment has been held for the life of the Fund
as of a stated ending date. "Cumulative total return" represents the cumulative
change in value of an investment in a particular class of a Fund for various
periods. All types of total return calculations assume that all dividends and
capital gains distributions during the period were reinvested in the relevant
class of shares of a Fund.
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Scudder Tax Free Money Market Series' tax-equivalent yield is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Fund's yield, assuming
certain tax brackets for the Fund shareholder. Yield for the Fund is expressed
as an annualized percentage. The "effective yield" of Scudder Tax Free Money
Market Series is expressed similarly but, when annualized, the income earned by
an investment in the Fund is assumed to be reinvested and will reflect the
effects of compounding. The yield of Scudder Tax Free Money Market Series refers
to the income generated by an investment in the Fund over a specified seven-day
period.
Performance will vary based upon, among other things, changes in market
conditions and the level of a Fund's expenses as well as particular class
expenses.
Fund organization
Each Fund is a diversified series of Scudder Fund, Inc. (the "Corporation"), an
open-end management investment company registered under the 1940 Act. The
Corporation was formed in June 1982 as a Maryland Corporation.
The Corporation'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 Adviser and Distributor, as set forth below,
decides upon matters of general policy.
The Corporation has adopted a plan (the "Plan") pursuant to Rule 18f-3 under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds.
Under the Plan, shares of each class represent an equal pro rata interest in
that Fund and, generally, shall have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (1) each class shall have a different
designation; (2) each class of shares shall bear its own "class expenses;" (3)
each class shall have exclusive voting rights on any matter submitted to
shareholders that relates to its administrative services, shareholder services
or distribution arrangements; (4) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class; (5) each class may have separate
and distinct exchange privileges; (6) each class may have different conversion
features, and (7) each class may have separate account size requirements.
Expenses currently designated as "Class Expenses" by the Corporation's Board of
Directors under the Plan include, for example, transfer agent fees attributable
to a specific class, and certain securities registration fees.
In addition to the Institutional Shares class offered herein, each of Scudder
Tax Free Money Market and Scudder Government Money Market Series offers another
class of shares, Managed Shares, and Scudder Money Market Series offers two
other classes of shares, Managed Shares and Premium Money Market Shares. Each of
these other classes of shares may have different fees and expenses (which may
affect performance), may have different minimum investment requirements and are
entitled to different services. Additional information about these other classes
of shares of the Funds may be obtained by contacting the Distributor at the
address or number listed herein.
Each share of the Institutional Shares class of each Fund shall be entitled to
one vote (or fraction thereof in respect of a fractional share) on matters that
such shares (or class of shares) shall be entitled to vote. Shareholders of each
Fund shall vote together on any matter, except to the extent otherwise required
by the 1940 Act, or when the Board of Directors of the Corporation has
determined that the matter affects only the interest of shareholders of one or
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more classes of a Fund, in which case only the shareholders of such class or
classes of that Fund shall be entitled to voter thereon. Any matter shall be
deemed to have been effectively acted upon with respect to a Fund if acted upon
as provided in Rule 18f-2 under the 1940 Act, or any successor rule, and in the
Corporation's Articles of Incorporation.
The Corporation 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 Corporation retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage its daily investment and business
affairs subject to the policies established by the Board of Directors.
Pursuant to its Investment Advisory Agreement (the "Agreement") with the
Corporation on behalf of each Fund, the Adviser regularly provides each Fund
with investment research, advice and supervision and continuously furnishes an
investment program for each Fund consistent with its investment objectives and
policies. The Agreement further provides that the Adviser will pay the
compensation and certain expenses of all officers and certain employees of the
Corporation and make available to each 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 Corporation. Under the
Agreement, 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" (as defined in the 1940 Act) of the Adviser, the expenses of all
Directors and the fees and out-of-pocket expenses of the Corporation's Custodian
and its Transfer Agent. For a more complete description of the expenses to be
borne by each Fund, see "Investment Adviser" and "Distributor" in the Statement
of Additional Information.
The Adviser receives from each Fund a management fee of 0.25% of each Fund's
average daily net assets. Until December 31, 1997, the Adviser has agreed to a
management fee waiver of 0.05%, 0.10% and 0.15% for the Scudder Money Market
Series, Scudder Tax Free Money Market Series and Scudder Government Money Market
Series, respectively. Management fees are computed daily and paid monthly.
Scudder, Stevens & Clark, Inc., is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Funds.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the
Corporation's principal underwriter. Scudder Investor Services, Inc. confirms,
as agent, all purchases of shares of the Funds.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining each Fund's daily net asset value per share and maintaining the
general accounting records of the Funds.
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Custodian
State Street Bank and Trust Company is the Fund's custodian.
Transaction information
Purchasing shares
It is the Funds' policy for the Institutional Shares not to accept initial
investments in amounts below $1,000,000. 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 Corporation
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 Corporation.
Investment minimums may also be waived for Directors and Officers of the
Corporation. The Corporation and the Distributor each 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 Corporation'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 received by the custodian or when a check is converted into
federal funds. Orders will be executed at 4:00 p.m. (eastern time) on the same
day if a bank wire or check is converted to federal funds or a federal funds'
wire is received by 4:00 p.m. (2:00 p.m. for Scudder Tax Free Money Market
Series). In addition, if investors known to the Corporation notify the
Corporation by 4:00 p.m. (2:00 p.m. for Scudder Tax Free Money Market Series)
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 4:00 p.m. at the close
of regular trading on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading, and at 2:00 p.m. for Scudder Tax Free Money
Market Series. 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 check
Checks drawn on a non-member bank or a foreign bank may take substantially
longer to be converted into federal funds and, accordingly, may delay the
execution of an order. Checks must be payable in U.S. dollars and will be
accepted subject to collection at full face value.
By investing in a Fund, a shareholder appoints the Transfer Agent to establish
an open account to which all shares purchased will be credited, together with
any dividends and capital gains distributions that are paid in additional
shares. See "Distribution and performance information--Dividends and capital
gains distributions."
By wire
1. Shareholders may open an account by calling toll-free from any
continental state: 1-800-854-8525. Give the Fund(s) and class 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
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DDA#9903-555-2
Attention: [Name of Fund(s) and class(es)]
Account (name(s) in which registered)
Account Number (as assigned by telephone)
and amount invested in each 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 can be used. Mail the Purchase
Application to:
Scudder Service Corporation
42 Longwater Drive
Norwell, Massachusetts 02061-1612
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 check payable to "The Scudder Funds"
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 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, Scudder Fund, Inc. has
established several different redemption procedures.
Payment of redemption proceeds may be made in securities, subject to regulation
by some state securities commissions. The Corporation may suspend the right of
redemption during any period when (i) trading on the Exchange is restricted or
the Exchange is closed, other than customary weekend and holiday closings, (ii)
the SEC has by order permitted such suspension or (iii) an emergency, as defined
by rules of the SEC, exists making disposal of portfolio securities or
determination of the value of the net assets of the Funds not reasonably
practicable.
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 Corporation 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 Scudder Fund, Inc. 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 $100,000 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
14
<PAGE>
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 s hares."
Checks for redemption proceeds will normally be mailed the day following receipt
of the request in proper form, although the Corporation reserves the right to
take up to seven days. Unless other instructions are given in proper form, a
check for the proceeds of a redemption will be sent to the shareholder's address
of record. The Custodian may benefit from the use of redemption proceeds until
the check issued to a redeeming shareholder for such proceeds has cleared.
When proceeds of a redemption are to be paid to someone other than the
shareholder, either by wire or check, the signature(s) on the letter of
instruction must be guaranteed regardless of the amount of the redemption.
Redemption by Expedited Redemption Service
If Expedited Redemption Service has been elected on the Purchase Application on
file with the Transfer Agent, redemption of shares may be requested by
telephoning the Transfer Agent on any day Scudder Fund, Inc. and the Custodian
are open for business.
No redemption of shares purchased by check will be permitted pursuant to the
Expedited Redemption Service until seven business days after those shares have
been credited to the shareholder's account.
1. Telephone the request to the Transfer Agent by calling toll-free from
any continental state: 1-800-854-8525, or
2. Mail the request to the Transfer Agent at the address set forth under
"Purchasing shares."
Proceeds of Expedited Redemptions 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 (eastern time) on a
day the Corporation and the Custodian are open for business, the redemption
proceeds will be transmitted to the shareholder's bank that same day. Such
expedited redemption requests received after 12:00 noon and prior to 4:00 p.m.
(eastern time) will be honored the same day if such redemption can be
accomplished in time to meet the Federal Reserve Wire System schedules. 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 Corporation,
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.
Share price
Purchases and redemptions of a Fund's Institutional Shares, including exchanges,
are made at net asset value. Scudder Fund Accounting Corporation determines net
asset value per share as of 4:00 p.m., the close of regular trading on the
Exchange, on each day the Exchange is open for trading for Scudder Money Market
Series and Scudder Government Money Market Series, and at 2:00 p.m. for the
Scudder Tax Free Money Market Series. Net asset value per share is calculated by
15
<PAGE>
dividing the total value of net assets attributable to a class, less all
liabilities attributable to that class, by the total number of shares
outstanding for the class.
In calculating net asset value per share, each Fund uses the amortized cost
method to value its portfolio securities.
Purchase restrictions
The Corporation and Scudder Financial Intermediary Services Group each reserve
the right to reject purchases of shares, including exchanges, for any reason.
Tax identification number
Be sure to complete the Tax Identification Number section of a Fund's
application when you open an account. Federal tax law requires each Fund to
withhold 31% of taxable dividends and capital gains distributions from accounts
(other than those of certain exempt payees) without a certified Social Security
or tax identification number and certain other certified information or upon
notification from the IRS or a broker that withholding is required. Each Fund
reserves the right to reject new account applications without a certified Social
Security or tax identification number. Each Fund also reserves the right,
following 30 days' notice, to redeem all shares in accounts without a certified
Social Security or tax identification number. A shareholder may avoid
involuntary redemption by providing the Fund with a tax identification number
during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000,000, which
amount may be changed by the Board of Directors.
Shareholders whose account balance falls below $1,000,000 for at least 30 days
will be given 60 days' notice to bring the account back up to $1,000,000 or
more. Where a reduction in value has occurred due to a redemption or exchange
out of an account and the account balance is not increased within 60 days,
Scudder reserves the right to redeem all shares and close the account and send
the proceeds to the shareholder's address of record. Reductions in value that
result solely from market activity will not trigger an involuntary redemption.
Please refer to "Exchanges and Redemptions--Other information" in each Funds'
Statement of Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
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.
A team approach to investing
The Funds are managed by a team of Scudder investment professionals who each
play an important role in each Fund's management process. Team members work
together to develop investment strategies and select securities for each 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 United States and abroad. Scudder believes its team approach
benefits Fund investors by bringing together many disciplines and leveraging
Scudder's extensive resources.
David Wines, Lead Portfolio Manager for Scudder Money Market Series and Scudder
Government Money Market Series, assumed responsibility for day-to-day management
16
<PAGE>
of the Funds in 1996. Mr. Wines, who joined Scudder in 1996, focuses on overall
investment strategy and has eight years of investment industry experience.
Debra A. Hanson, Portfolio Manager for Scudder Money Market Series and Scudder
Government Money Market Series, works on the development and execution of
investment strategy, and has 13 years' experience managing short-term
fixed-income portfolios. Ms. Hanson has been with Scudder since 1983.
K. Sue Cote, Lead Portfolio Manager for Scudder Tax Free Money Market Series,
and Portfolio Manager for Scudder Money Market Series and Scudder Government
Money Market Series, joined Scudder in 1983 and has 13 years' experience working
with short-term fixed-income investments.
Rebecca L. Wilson, Portfolio Manager for the Scudder Tax Free Money Market
Series, contributes 11 years of experience in municipal investing and research.
Ms. Wilson has been with Scudder since 1986.
Donald C. Carleton, Portfolio Manager for Scudder Tax Free Money Market Series,
has 28 years of investment management experience and has been with Scudder since
1983.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Institutional Shares of each Fund. Please call 1-800-854-8525 to request this
feature.
Shareholder reports
Each Fund sends to its shareholders, semiannually, reports showing the
investments in the Funds and other information (including unaudited financial
statements) pertaining to the Funds. An annual report, containing financial
statements audited by independent accountants, is sent to shareholders each
year.
17
<PAGE>
<TABLE>
<CAPTION>
Purchases and redemptions
- -----------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $1,000,000
an account
<S> <C> <C>
Make checks o By Mail Send your completed and signed application and check by regular, express,
payable to "The registered or certified mail to:
Scudder Funds."
Scudder Shareholder Service Center
42 Longwater Drive
Norwell, Massachusetts 02061-1612
o By Wire Please see Transaction information--Purchasing shares-- By wire
for details, including the ABA wire transfer number. Then call
1-800-854-8525 for instructions.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: no minimum
additional shares
Make checks o By Mail Send a check with a purchase application, or with a letter of instruction including
payable to "The your account number and the complete Fund name and class, to the address listed above.
Scudder Funds."
o By Wire Please see Transaction information--Purchasing shares-- By wire for details,
including the ABA wire transfer number.
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-854-8525 from
8 a.m. to 6 p.m. eastern time.
o By Mail Send your instructions for redemption to the address set forth under Opening an
Account above and include:
- the name of the Fund and class and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000. See Transaction
information--Redeeming shares.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
Directors and Officers
David S. Lee*
Chairman and Director
Edgar R. Fiedler
Director
Peter B. Freeman
Director
Daniel Pierce*
President and Director
Robert W. Lear
Director
Stephen L. Akers*
Vice President
Carol L. Franklin*
Vice President
Thomas W. Joseph*
Vice President and Assistant Secretary
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
K. Sue Cote*
Vice President
Jerard K. Hartman*
Vice President
Kathryn L. Quirk*
Vice President
*Scudder, Stevens & Clark, Inc.
19
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Financial Intermediary Services Group-- 1-800-854-8525
Please address all correspondence to:
Scudder Shareholder Service Center
42 Longwater Drive
Norwell, Massachusetts
02061-1612
<PAGE>
SCUDDER FUND, INC.
345 Park Avenue
New York, New York 10154
1-800-854-8525
Scudder Fund, Inc. is a professionally managed, open-end,
diversified management investment company comprised of three money market
investment portfolios.
SCUDDER MONEY MARKET SERIES
SCUDDER TAX FREE MONEY MARKET SERIES
SCUDDER GOVERNMENT MONEY MARKET SERIES
Mutual fund portfolios seeking to provide high money-market income with
preservation of capital and liquidity through
investments in different instruments.
- --------------------------------------------------------------------------------
Statement of Additional Information
July 7, 1997
- --------------------------------------------------------------------------------
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 July 7, 1997, 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>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE FUNDS AND THEIR OBJECTIVES.......................................................................................1
General Investment Objectives and Policies..................................................................1
Cash Fund...................................................................................................1
Tax Free Fund...............................................................................................3
Government Fund.............................................................................................4
Investment Restrictions.....................................................................................4
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES...........................................................................6
PURCHASING SHARES....................................................................................................7
Wire Transfer of Federal Funds..............................................................................7
Additional Information About Making Subsequent Investments by AutoBuy.......................................8
Share Certificates..........................................................................................8
EXCHANGES AND REDEMPTIONS............................................................................................8
Exchanges...................................................................................................9
Redemption by Telephone.....................................................................................9
Redemption By AutoSell.....................................................................................10
Redemption by Mail or Fax..................................................................................11
Redemption by Write-a-Check................................................................................11
FEATURES AND SERVICES OFFERED BY THE FUNDS..........................................................................12
The Pure No-Load(TM) Concept...............................................................................12
Dividend and Capital Gain Distribution Options.............................................................13
Scudder Investor Centers...................................................................................13
Reports to Shareholders....................................................................................13
Diversification............................................................................................13
Transaction Summaries......................................................................................13
THE SCUDDER FAMILY OF FUNDS.........................................................................................14
SPECIAL PLAN ACCOUNTS...............................................................................................18
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension
Plans for Corporations and Self-Employed Individuals..................................................19
Scudder IRA: Individual Retirement Account................................................................19
Scudder 403(b) Plan........................................................................................20
Automatic Withdrawal Plan..................................................................................20
Group or Salary Deduction Plan.............................................................................20
Uniform Transfers/Gifts to Minors Act......................................................................21
DIVIDENDS...........................................................................................................21
PERFORMANCE INFORMATION.............................................................................................21
Yield......................................................................................................22
Effective Yield............................................................................................22
Average Annual Total Return................................................................................22
Cumulative Total Return....................................................................................23
Total Return...............................................................................................23
Tax-Equivalent Yield.......................................................................................23
Comparison of Fund Performance.............................................................................24
THE PROGRAM.........................................................................................................27
ORGANIZATION OF THE FUNDS...........................................................................................27
INVESTMENT ADVISER..................................................................................................29
Personal Investments by Employees of the Adviser...........................................................30
DISTRIBUTOR.........................................................................................................30
DIRECTORS AND OFFICERS..............................................................................................31
i
<PAGE>
TABLE OF CONTENTS (continued) Page
REMUNERATION........................................................................................................32
Responsibilities of the Board--Board and Committee Meetings................................................32
Compensation of Officers and Directors.....................................................................33
TAXES ...........................................................................................................33
PORTFOLIO TRANSACTIONS..............................................................................................36
NET ASSET VALUE.....................................................................................................37
ADDITIONAL INFORMATION..............................................................................................38
Experts....................................................................................................38
Other Information..........................................................................................38
FINANCIAL STATEMENTS................................................................................................39
APPENDIX
</TABLE>
ii
<PAGE>
THE FUNDS AND THEIR OBJECTIVES
(See "Investment objectives and policies" and "Additional information about
policies and investments" in the Funds' Prospectuses)
General Investment Objectives and Policies
Scudder Money Market Series ("Cash Fund"), Scudder Tax Free Money
Market Series ("Tax Free Fund") and Scudder Government Money Market Series
("Government Fund") (collectively, the "Funds") are the three investment
portfolios comprising Scudder Fund, Inc. (the "Corporation"), a professionally
managed open-end, diversified management investment company. The 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. In addition, the Tax Free Fund also 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 objectives.
Each of the Funds offers classes of shares as follows: Scudder Money
Market Series offers Premium Money Market Shares, Managed Shares and
Institutional Shares; Scudder Tax Free Money Market Series offers Managed Shares
and Institutional Shares; and Scudder Government Money Market Series offers
Managed Shares and Institutional Shares.
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
constant net asset value of $1.00 per share, but there is no assurance that each
will be able to do so.
Except as otherwise indicated, each Fund's investment objectives and
policies are not fundamental and may be changed without a vote of shareholders.
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."
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 calendar 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 ("CD's"), 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 obligations
of 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 may invest in U.S. dollar-denominated
obligations of foreign banks subject to the following conditions: foreign banks
(based upon their most recent annual financial statements) at the time of
investment (i) have more than U.S. $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 (iv) are obligations which, 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%
<PAGE>
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.
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).
Generally, 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 Fund's
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 calendar 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.
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" or
"P-2" by Moody's, "A-1" or "A-2" 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.
2
<PAGE>
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 Corporation determine that such disposal would not be in the best interests
of the Fund.
In addition, the Fund may invest in variable or floating rate
obligations, obligations backed by bank letters of credit, when-issued
securities and securities with put features.
Tax Free Fund
The Tax Free Fund seeks to provide investors with as high a level of
current income that cannot be subjected to federal income tax by reason of
federal law as is consistent with its investment policies and with preservation
of capital and liquidity. The Fund invests primarily in high-quality municipal
obligations the interest on which is exempt from federal income taxes and that
have remaining maturities of not more than 397 calendar 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.
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" or
"P-2" by Moody's, "A-1" or "A-2" 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
3
<PAGE>
constitutes a fundamental policy that cannot be changed without the approval of
a majority of the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In addition, certain municipal obligations might lose tax-exempt
status in the event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit
standards applied by the Adviser pursuant to procedures established by the Board
of Directors. Should an issue of securities cease to be rated or if its rating
is reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors of
the Corporation determine that such disposal would not be in the best interests
of the Fund.
In addition, the Fund may enter into repurchase agreements, and invest
in variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features. The Fund
intends to take the position that it is the owner of any municipal obligation
acquired with a put feature, and that tax-exempt interest earned with respect to
such municipal obligations will be tax-exempt in its hands. There is no
assurance that the Internal Revenue Service will agree with such position in any
particular case. Additionally, the federal income tax treatment of certain other
aspects of these investments, including the treatment of tender fees and swap
payments, in relation to various regulated investment company tax provisions is
unclear.
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 calendar
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.
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the Investment Company Act of 1940 (the "1940
Act") and the rules thereunder and as used in this Statement of Additional
Information, means the lesser of (1) 67% or more of the voting securities
present at such meeting, if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Fund.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.
As a matter of fundamental policy, each Fund may not:
(1) issue senior securities, borrow money or pledge or mortgage its
assets, except that each Fund may borrow from banks up to 10% of the current
value of such Fund's total net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of not more
than 10% of the current value of the Fund's total net assets (but investments
may not be purchased by such Fund while any such borrowing exists);
(2) make loans, except that each Fund may loan portfolio securities,
purchase or hold a portion of an issue of publicly distributed bonds, debentures
or other obligations, and enter into repurchase agreements with respect to its
portfolio securities and except that each Money Market Fund may purchase
negotiable certificates of deposit and bankers' acceptances;
4
<PAGE>
(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;
(4) 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
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), or (ii) obligations of
the U.S. Government, its agencies or instrumentalities; or (iii) bank
obligations;
(5) 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;
(6) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales
of securities;
(7) 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;
(8) 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;
(9) 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.;
(10) 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;
(11) make investments for the purpose of exercising control or
management;
(12) 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
(13) purchase equity securities or securities convertible into
equity securities.
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.
5
<PAGE>
2. No Fund will invest in real estate limited partnership
interests.
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 Funds' 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.
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
6
<PAGE>
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 Corporation or the
Adviser.
Industry Concentration. To the extent the Cash Fund's investments are
concentrated in the banking industry, the Cash Fund will have correspondingly
greater exposure to the risk factors which are characteristic of such
investments. Sustained increases in interest rates can adversely affect the
availability or liquidity and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the exposure to credit losses. In addition, the value of the investment return
on the Cash Fund's shares could be affected by economic or regulatory
developments in or related to the banking industry, and the effects of
competition within the banking industry as well as with other types of financial
institutions.
The foregoing policies and activities of the Funds are not fundamental
and may be changed by the Board of Directors of the Corporation without the
approval of shareholders.
PURCHASING SHARES
(See "Transaction information--Purchasing shares" in the Funds' Prospectuses)
Each Fund has specific minimum initial investment requirements for each
class of shares. The Premium Shares require a $25,000 minimum initial investment
and a minimum subsequent investment of $1,000. The Managed Shares require a
$100,000 minimum initial investment and a minimum subsequent investment of
$1,000. The Institutional Shares require a $1,000,000 minimum investment and
have no minimum subsequent investment. 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 Funds 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 Funds. Investment minimums
may also be waived for Directors and officers of the Funds. The Funds, Scudder
Investor Services, Inc. and Scudder Financial Intermediary Services Group each
reserve the right to reject any purchase order. All funds will be invested in
full and fractional shares.
Wire Transfer of Federal 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 4:00 p.m. for the Cash Fund and the Government Fund (eastern
time) and at 2:00 p.m. for the Tax Free Fund on the same day if a bank wire or
check is converted to federal funds or a federal funds' wire is received by 4:00
p.m. or 2:00 p.m., respectively. In addition, if investors known to the Funds
notify the Funds by 4:00 p.m. for the Cash Fund and the Government Fund and by
2:00 p.m. for the Tax Free Fund 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 4:00 p.m. for the Cash Fund and the Government Fund and at 2:00
p.m. for the Tax Free Fund 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 Funds 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 particular class of a Fund will be executed at the
net asset value per share next determined after an order has become effective.
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.
7
<PAGE>
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" in the Funds' Prospectuses.
Additional Information About Making Subsequent Investments by AutoBuy
Shareholders of a Fund's Premium Shares and Managed Shares, whose
predesignated bank account of record is a member of the Automated Clearing House
Network (ACH) and who have elected to participate in the AutoBuy program, may
purchase shares by telephone. Through this service shareholders may make
purchases up to $250,000. To purchase shares by AutoBuy, shareholders should
call before 4:00 p.m. eastern time (or 2:00 p.m. for the Tax Free Fund).
Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by the close of regular trading on the New York Stock Exchange (the
"Exchange"), shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. AutoBuy requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day. If you purchase shares by AutoBuy and redeem them within seven
days of the purchase, the Fund may hold the redemption proceeds for a period of
up to seven business days. If you purchase shares and there are insufficient
funds in your bank account the purchase will be canceled and you will be subject
to any losses or fees incurred in the transaction. AutoBuy transactions are not
available for most retirement plan accounts. However, AutoBuy transactions are
available for Scudder IRA accounts.
In order to request purchases by AutoBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoBuy may so indicate on the application.
Existing shareholders who wish to add AutoBuy to their account may do so by
completing an AutoBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.
The Funds employ procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Funds will not be liable
for acting upon instructions communicated by telephone that they reasonably
believe to be genuine.
Share Certificates
Due to the desire of each Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in any Fund.
Share certificates now in a shareholder's possession may be sent to the Transfer
Agent for cancellation and credit to such shareholder's account. Shareholders
who prefer may hold the certificates in their possession until they wish to
exchange or redeem such shares.
EXCHANGES AND REDEMPTIONS
(See "Transaction Information--Exchanges and Redemptions"
in the Funds' Prospectuses)
Payment of redemption proceeds may be made in securities. The
Corporation may suspend the right of redemption with respect to any Fund during
any period when (i) trading on 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.
A shareholder's Fund account remains open for up to one year following
complete redemption and all costs during the period will be borne by the
Corporation. This permits an investor to resume investments.
8
<PAGE>
Exchanges
The following information regarding exchanges applies only to Premium
Shares and each Fund's class of Managed Shares. The exchange privileges listed
below do not apply to the Institutional Shares.
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL(TM)) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $25,000 for Premium
Shares, and $100,000 for Managed Shares. Exchanges into other Scudder Funds may
have lower minimum exchange requirements. When an exchange represents an
additional investment into an existing account, the account receiving the
exchange proceeds must have identical registration, tax identification number,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $1,000 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain an original signature guarantee as described
under "Transaction information--Redeeming shares--Signature guarantees" in each
Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Funds and the Transfer Agent each reserve the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Funds employ
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Funds do not follow such
procedures, they may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine. The Funds and the Transfer Agent each reserve the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "The Scudder Family of Funds" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a prospectus of
the Scudder fund into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
Shareholders currently receive the right to redeem up to $100,000 to their
address of record automatically, without having to elect it. Shareholders may
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<PAGE>
also request to have the proceeds mailed or wired to their pre-designated bank
account.
(a) NEW INVESTORS wishing to establish telephone redemption to a
pre-designated bank account must complete the appropriate
section on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder Pension and Profit-Sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a pre-designated bank account or who want to change the
bank account previously designated to receive redemption
payments should either return a Telephone Redemption Option
Form (available upon request) or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. A signature and a signature guarantee
are required for each person in whose name the account is
registered.
Telephone redemption is not available with respect to shares
represented by share certificates or shares held in certain retirement accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. The Premium Shares
have a $5 charge for wire redemptions. The Managed Shares have a $5 charge for
wire redemptions unless it is for an amount of $1,000 or greater or it is a
sweep account. The Institutional Shares do not charge a wire fee.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
The Funds employ procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Funds do not follow such procedures, they may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Funds will not be
liable for acting upon instructions communicated by telephone that they
reasonably believe to be genuine.
Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption By AutoSell
The following information regarding Redemption by AutoSell applies only
to Premium Shares and each Fund's class of Managed Shares. AutoSell does not
apply to the Institutional Shares.
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the AutoSell program may sell shares of a Fund by telephone. To sell shares by
AutoSell, shareholders should call before 4 p.m. eastern time. Redemptions must
be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account in two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. AutoSell requests
received after the close of regular trading on the Exchange will begin their
processing and be redeemed at the net asset value calculated the following
business day. AutoSell transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.
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<PAGE>
In order to request redemptions by AutoSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds will be credited.
New investors wishing to establish AutoSell may so indicate on the application.
Existing shareholders who wish to add AutoSell to their account may do so by
completing an AutoSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Funds employ procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Funds will not be liable
for acting upon instructions communicated by telephone that they reasonably
believe to be genuine.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signatures guaranteed as explained in each
Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
any redemptions to ensure that all necessary documents accompany the request.
When shares are held in the name of a corporation, trust, fiduciary, agent,
attorney or partnership, the Transfer Agent requires, in addition to the stock
power, certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within five days after receipt
by the Transfer Agent of a request for redemption that complies with the above
requirements. Delays of more than seven business days of payment for shares
tendered for repurchase or redemption may result, but only until the purchase
check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.
Redemption by Write-a-Check
The following information regarding Redemption by Write-a-Check applies
only to Premium Shares and each Fund's class of Managed Shares. Redemption by
Write-a-Check does not apply to the Institutional Shares.
All new investors and existing shareholders who apply to State Street
Bank and Trust Company for checks may use them to pay any person, provided that
each check is for at least $1,000 and not more than $5 million. By using the
checks, the shareholder will receive daily dividend credit on his or her shares
until the check has cleared the banking system. Investors who purchased shares
by check may write checks against those shares only after they have been on a
Fund's book for seven business days. Shareholders who use this service may also
use other redemption procedures. No shareholder may write checks against
certificated shares. The Funds pay the bank charges for this service. However,
each Fund will review the cost of operation periodically and reserve the right
to determine if direct charges to the persons who avail themselves of this
service would be appropriate. Each Fund, Scudder Service Corporation and State
Street Bank and Trust Company reserve the right at any time to suspend or
terminate the "Write-a-Check" procedure.
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FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in each Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
<TABLE>
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Scudder No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund Load Fund with 0.75% 0.25% 12b-1 Fee
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 $25,937 $23,733 $24,222 $25,354
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15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Investors are encouraged to review the fee tables of each Fund's
respective prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
12
<PAGE>
Dividend and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income, or distributions from realized capital
gains in additional shares of the same class of the Fund. A change of
instructions for the method of payment must be received by the Fund's transfer
agent at least 5 days prior to a dividend record date. Shareholders may change
their dividend option either by calling 1-800-225-5163 or by sending written
instructions to the Transfer Agent. Please include your account number with your
written request. See "How to contact Scudder" in the prospectus for the address.
Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distributions of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the same class of the relevant Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gains distributions automatically deposited to their personal
bank account usually within three business days after a Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by the
Distributor. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or obtain assistance
with opening an account, adding monies or special options to existing accounts,
making exchanges within the Scudder Family of Funds, redeeming shares or opening
retirement plans. Checks should not be mailed to the Centers but should be
mailed to "The Scudder Funds" at the address listed under "How to contact
Scudder" in the Funds' prospectuses.
Reports to Shareholders
All three Funds issue to their respective shareholders annual and
semiannual financial statements (audited annually by independent accountants),
including a list of investments held and statements of assets and liabilities,
operations, changes in net assets and financial highlights for that Fund, as the
case may be.
Diversification
A shareholder's investment represents an interest in a large,
diversified portfolio of carefully selected securities. Diversification may
protect investors against the possible risks associated with concentrating in
fewer securities.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
13
<PAGE>
The site is designed for interactivity, simplicity and maneuverability.
A section entitled "Planning Resources" provides information on asset
allocation, tuition, and retirement planning to users who fill out interactive
"worksheets." Investors can easily establish a "Personal Page," that presents
price information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties
on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call Me(TM) feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Funds' prospectuses.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in most Scudder funds must be at least $2,500 or $1,000 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower. The minimum initial purchase required
for the Cash Fund's Premium Shares is $25,000 and subsequent purchases must be
for $1,000 or more. The minimum initial required purchase for each Fund's
Managed Shares is $100,000 and subsequent purchases must be for $1,000 or more.
The minimum initial purchase required for a Fund's Institutional Shares is
$1,000,000 and there is no minimum subsequent purchase. Please see the
respective prospectuses for these classes of shares for further information
regarding minimum balance requirements.
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
14
<PAGE>
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices
and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share and declares
dividends daily. The institutional class of shares of this Fund is not
within the Scudder Family of Funds.
Scudder Government Money Market Series seeks to provide investors with
as high a level of current income as is consistent with its investment
polices 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 calendar days and certain repurchase
agreements. The institutional class of shares of this Fund is not
within the Scudder Family of Funds.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder Global Bond Fund seeks to provide total return with an emphasis
on current income by investing primarily in high-grade bonds
denominated in foreign currencies and the U.S. dollar. As a secondary
objective, the Fund will seek capital appreciation.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder High Yield Bond Fund seeks to provide a high level of current
income and, secondarily, capital appreciation through investment
primarily in below investment grade domestic debt securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
of principal value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate- and
long-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder Tax Free Money Market Series 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
institutional class of shares of this Fund is not within the Scudder
Family of Funds.
15
<PAGE>
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in municipal
securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
high-grade, long-term municipal securities.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
- --------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
16
<PAGE>
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Classic Growth Fund seeks long-term growth of capital with
reduced share price volatility compared to other growth mutual funds.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.
Scudder Global Discovery Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.
Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S.
and foreign issuers. Income is an incidental consideration.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in equity securities of large U.S.
growth companies.
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a broad and flexible investment program
emphasizing common stocks.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-cap stocks.
17
<PAGE>
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in securities of emerging growth companies poised
to be leaders in the 21st century.
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio will, under normal market conditions, invest
substantially in a select mix of Scudder bond mutual funds, but will
have some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks a balance of growth
and income by investing in a select mix of Scudder money market, bond
and equity mutual funds.
Scudder Pathway Series: Growth Portfolio seeks to provide investors
with long-term growth of capital. In pursuing this objective, the
Portfolio will, under normal market conditions, invest predominantly in
a select mix of Scudder equity mutual funds designed to provide
long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total
return. Total return consists of any capital appreciation plus dividend
income and interest. To achieve this objective, the Portfolio invests
in a select mix of international and global Scudder Funds.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; and easy telephone
exchanges into other Scudder funds.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Funds' prospectuses.)
The following information regarding Special Plan Accounts applies only
to Premium Shares and each Fund's class of Managed Shares. Special Plan Accounts
do not apply to the Institutional Shares.
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
18
<PAGE>
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of the Funds may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Funds may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.
Scudder IRA: Individual Retirement Account
Shares of the Funds may be purchased as the underlying investment for
an Individual Retirement Account which meets the requirements of Section 408(a)
of the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
<TABLE>
- -----------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------
Contributions 5% 10% 15%
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
19
<PAGE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
<TABLE>
- -----------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------
Contributions 5% 10% 15%
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of the Funds may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Shareholders may designate
which day they want the automatic withdrawal to be processed. The check amounts
may be based on the redemption of a fixed dollar amount, fixed share amount,
percent of account value or declining balance. The Plan provides for income
dividends and capital gains distributions, if any, to be reinvested in
additional shares. Shares are then liquidated as necessary to provide for
withdrawal payments. Since the withdrawals are in amounts selected by the
investor and have no relationship to yield or income, payments received cannot
be considered as yield or income on the investment and the resulting
liquidations may deplete or possibly extinguish the initial investment and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the payee must be submitted in writing, signed
exactly as the account is registered, and contain signature guarantee(s) as
described under "Transaction information--Redeeming shares--Signature
guarantees" in the Funds' prospectuses. Any such requests must be received by
the Funds' transfer agent ten days prior to the date of the first automatic
withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the
shareholder, the Corporation or its agent on written notice, and will be
terminated when all shares of the Funds under the Plan have been liquidated or
upon receipt by the Corporation of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Corporation and its agents reserve the right to establish a
maintenance charge in the future depending on the services required by the
investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
20
<PAGE>
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Corporation reserves the right, after notice has been given to the
shareholder and Custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
DIVIDENDS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Funds' Prospectuses)
The Corporation 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. for the Tax Free Fund and 4:00 p.m. for the
Cash Fund and Government Fund on the day of declaration. Realized capital gains
and losses (other than long-term capital gains) 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. for the Tax Free Fund and 4:00 p.m. for the
Cash Fund and Government Fund 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.
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 class 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. 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 Funds' 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. Performance information will be calculated separately for
each class of a Fund's shares. Because each class of shares is subject to
different expenses, the net yield of each class of a particular Fund for the
same period may differ. Performance information enumerated below is provided at
the Fund level since each Fund consisted of one class of shares (which class was
redesignated as the Managed Shares Class) on December 31, 1996. These
performance figures may be calculated in the following manner:
21
<PAGE>
Yield
The Corporation makes available various yield quotations with respect
to shares of the Funds. The annualized yield for each of the following Funds for
the seven-day period ended December 31, 1996 was 4.94% for the Cash Fund, 3.23%
for the Tax Free Fund and 4.46% for the Government 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.
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 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, 1996 was 5.06% for the Cash Fund, 3.29% for the Tax Free Fund and
4.56% for the Government 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.
22
<PAGE>
Average Annual Total Return for periods ended December 31, 1996
One Year Five Years Ten Years
Cash Fund 4.97%* 4.19%* 5.73%
Tax Free Fund 2.88% 2.57% 3.76%
Government Fund 4.91%* 4.07%* 5.58%
* Total returns are higher, for the periods indicated, due to maintenance of
the Fund's expenses. Return for Five Years would have been lower had
expenses not been maintained.
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, 1996
One Year Five Years Ten Years
Cash Fund 4.97%* 22.76%* 74.54%
Tax Free Fund 2.88% 13.54% 44.64%
Government Fund 4.91%* 22.05%* 72.05%
* Total returns are higher, for the periods indicated, due to maintenance of
the Fund's expenses. Return for Five Years would have been lower had
expenses not been maintained.
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.
Tax-Equivalent Yield
For the Scudder Tax Free Money Market Series, Tax-Equivalent Yield is
the net annualized taxable yield needed to produce a specified tax-exempt yield
at a given tax rate based on a specified 30 day (or one month) period assuming
semiannual compounding of income. Tax-equivalent yield is calculated by dividing
that portion of the Fund's yield (as computed in the yield description above)
which is tax-exempt by one minus a stated income tax rate and adding the product
to that portion, if any, of the yield of the Fund that is not tax-exempt. Thus,
taxpayers with a federal tax rate of -----% and an effective combined marginal
tax rate of -----% would need to earn a taxable yield of -----% to receive
after-tax income equal to the -----% tax-free yield of Scudder Tax Free Money
Market Series for the 30-day period ended ------------- .
23
<PAGE>
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of a Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to, the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the Nasdaq OTC Composite Index, the Nasdaq
Industrials Index, the Russell 2000 Index, and statistics published by the Small
Business Administration.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature, Directors
and officers of the Funds, the Funds' portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective and
current shareholders a better sense of the outlook and approach of those who
manage the Funds. In addition, the amount of assets that the Adviser has under
management in various geographical areas may be quoted in advertising and
marketing materials.
The Funds may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of projected
future college costs based on assumed rates of inflation and examples of
hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Funds. The
description may include a "risk/return spectrum" which compares the Funds to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Funds to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
Government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
24
<PAGE>
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Funds, including reprints of, or selections from, editorials or
articles about these Funds. Sources for Fund performance information and
articles about the Funds include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
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.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
25
<PAGE>
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC's Government Money
Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news weekly that periodically reports
mutual fund performance data.
26
<PAGE>
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication issued 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
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 with the exception
of the Institutional Shares which are not exchangeable.
The 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 Funds also anticipate lower expense ratios than those of money
market mutual funds designed for individual investors because the 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.
Each of the Funds seeks to provide the combination of price stability,
liquidity and current income that treasurers often require for liquid assets
such as operating reserves.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' Prospectuses)
The Corporation was formed on June 18, 1982 under the laws of the State
of Maryland. The authorized capital stock of the Corporation consists of
10,000,000,000 shares having a par value of $.001 per share. 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 twenty-eight classes which are not currently
offered but which may be in the future.
Pursuant to authority expressly granted by of the Charter of the
Corporation, the Board of Directors has reclassified six hundred million
(600,000,000) shares of authorized and unissued Capital Stock into Scudder Money
Market Series. Prior to the reclassification, three billion (3,000,000,000)
27
<PAGE>
shares of Capital Stock were classified as shares of Scudder Money Market
Series. After the reclassification, three billion six hundred million
(3,600,000,000) shares of Capital Stock are classified as shares of the Scudder
Money Market Series.
The Board of Directors has subdivided Scudder Money Market Series,
Scudder Tax Free Money Market Series and Scudder Government Money Market Series
(the "Funds") into classes. In addition, with respect to Scudder Tax Free Money
Market Series and Scudder Government Money Market Series, there is one
additional class of Capital Stock, to be referred to for all purposes as
"Institutional Shares," and with respect to Scudder Money Market Series, two
additional classes of Capital Stock, to be referred to for all purposes as
"Institutional Shares" and the "Premium Money Market Shares" or "Premium
Shares."
After giving effect to the above classifications of Capital Stock, with
respect to these three Funds, the Corporation shall have, in addition to the
three billion four hundred million (3,400,000,000) shares of Capital Stock
previously classified as set forth in the Charter, three billion six hundred
million (3,600,000,000) shares of its authorized Capital Stock classified as the
Scudder Money Market Series, which is further classified into eight hundred
million (800,000,000) Managed Shares, eight hundred million (800,000,000)
Institutional Shares, and two billion (2,000,000,000) Premium Money Market
Shares; one billion (1,000,000,000) shares of Capital Stock classified as the
Scudder Tax Free Money Market Series, which is further classified into five
hundred million (500,000,000) Managed Shares and five hundred million
(500,000,000) Institutional Shares; and three billion (3,000,000,000) shares of
Capital Stock classified as and the Scudder Government Money Market Series,
which is further classified into one billion five hundred million
(1,500,000,000) Managed Shares and one billion five hundred million
(1,500,000,000) Institutional Shares.
Each share of each class of a Fund shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters that such shares
(or class of shares) shall be entitled to vote. Shareholders of each Fund shall
vote together on any matter, except to the extent otherwise required by the 1940
Act, or when the Board of Directors of the Corporation has determined that the
matter affects only the interest of shareholders of one or more classes of a
Fund, in which case only the shareholders of such class or classes of that Fund
shall be entitled to vote thereon. Any matter shall be deemed to have been
effectively acted upon with respect to a Fund if acted upon as provided in Rule
18f-2 under the 1940 Act, or any successor rule, and in the Corporation's
Articles of Incorporation. 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 Corporation'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 Corporation'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 Corporation 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
Corporation's Board of Directors. In the event of the liquidation or dissolution
of the Corporation, 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 Corporation.
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INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Funds' Prospectuses)
The Corporation retains Scudder, Stevens & Clark, Inc. 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 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, 1996, the Adviser and its affiliates
had in excess of $115 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 Funds 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 Fund of the Corporation. If these clients and
such Fund 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 Fund invests. The best
interests of any Fund 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
Fund. The Adviser may consult independent third persons in reaching its
decision.
Subject to policy established by the Corporation'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 Corporation'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 Corporation 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 Corporation's clerical employees
other than those providing advisory services. The Adviser, however, has
represented to the Corporation's Board of Directors that its current intention
is to continue to pay such compensation and expenses.
For the period January 1, 1997 until July 7, 1997, the Adviser received
a management fee from each Fund at an annual rate of 0.40% for the first $1.5
billion of average daily net assets and 0.35% of such assets in excess of $1.5
billion. Until July 7, 1997, the Adviser has agreed to waive a portion of its
investment management fee for each of the Cash Fund and Government Fund to the
extent necessary so that the total annualized expenses of each Fund do not
exceed 0.55% of average daily net assets. Effective July 7, 1997, the Adviser
receives a management fee at an annual rate of 0.25% of average daily net assets
for each Fund. For the period July 7, 1997 to December 31, 1997 there is a
management fee waiver for the Cash Fund, Tax Free Fund and Government Fund of
0.05%, 0.10% and 0.15%, respectively. Management fees are computed daily and
paid monthly.
For the Corporation's fiscal year ended December 31, 1996, management
fees paid to the Adviser were $1,227,581 for the Cash Fund, $587,278 for the Tax
Free Fund and $131,141 for the Government Fund. Had the Adviser not waived
$274,989 of its management fee for the Cash Fund and $150,102 of its management
fee for the Government Fund, the total fee paid by each Fund in 1996 would have
been $1,502,570 and $281,243, respectively.
For the Corporation's fiscal year ended December 31, 1995, management
fees paid to the Adviser were $1,045,111 for the Cash Fund, $530,696 for the Tax
Free Fund and $62,892 for the Government Fund. Had the Adviser not waived
29
<PAGE>
$474,280 of its management fee for the Cash Fund and of $211,734 its management
fee for the Government Fund, the total fee paid by each such Fund in 1995 would
have been $1,519,391 and $274,626, respectively.
For the Corporation's fiscal year ended December 31, 1994, management
fees paid to the Adviser were $948,135 for the Cash Fund, $498,692 for the Tax
Free Fund and $80,152 for the Government Fund. Had the Adviser not waived
$458,399 of its management fee for the Cash Fund and $221,083 of its management
fee for the Government Fund, the total fee paid by each such Fund in 1994 would
have been $1,406,534 and $301,235, respectively.
The Agreement provides that the relevant Fund pay all of its expenses
that are not specifically assumed by the Adviser. (Expenses attributable to a
specific class of each Fund will be charged against the assets of that class of
the Fund, other expenses of the Corporation 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
Corporation 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.
The Agreement 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 Corporation's Board of
Directors and (ii) by a majority of the Directors of the Corporation 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 "Fund organization--Distributor" in the Funds' Prospectuses)
Pursuant to a contract with the Corporation, Scudder Investor Services,
Inc., a subsidiary of the Adviser, serves as the Corporation's principal
underwriter in connection with a continuous offering of shares of the
Corporation. The Distributor receives no remuneration for its services as
principal underwriter and is not obligated to sell any specific amount of Fund
shares. As principal underwriter, it accepts purchase orders for shares of the
Fund. In addition, the Underwriting Agreement obligates the Distributor to pay
certain expenses in connection with the offering of the shares of the Fund.
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.
30
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<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
The principal occupations of the Directors and executive officers of
the Corporation for the past five years are listed below.
Position with
Position with Underwriter, Scudder
Name (Age) and Address Corporation Principal Occupation** Investor Services, Inc.
- ---------------------- ----------- ---------------------- ----------------------
<S> <C> <C> <C>
Daniel Pierce (63)+*# President and Chairman of the Board and Vice President,
Director Managing Director of Director and Assistant
Scudder, Stevens & Clark, Treasurer
Inc.
David S. Lee (63)+*# Chairman of the Managing Director of President, Director
Board and Director Scudder, Stevens & Clark, and Assistant Treasurer
Inc.
Edgar R. Fiedler (68)# Director Senior Fellow and Economic --
50023 Brogden Counselor, The Conference
Chapel Hill, NC 27514 Board, Inc.
Peter B. Freeman (64) Director Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI 02906
Robert W. Lear (79) Director Executive-in-Residence, --
429 Silvermine Road Visiting Professor, Columbia
New Canaan, CT 06840 University Graduate School
of Business
Stephen L. Akers (45)+ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
K. Sue Cote (35)+ Vice President Principal of Scudder, --
Stevens & Clark, Inc.
Carol L. Franklin (44)+ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Jerard K. Hartman (64)++ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Thomas W. Joseph (57)+ Vice President and Principal of Scudder, Vice President,
Assistant Secretary Stevens & Clark, Inc. Director, Treasurer
and Assistant Clerk
Thomas F. McDonough (50)+ Vice President and Principal of Scudder, Assistant Clerk
Secretary Stevens & Clark, Inc.
Pamela A. McGrath (43)+ Vice President and Managing Director of --
Treasurer Scudder, Stevens & Clark,
Inc.
31
<PAGE>
Position with
Underwriter, Scudder
Name (Age) and Address Corporation Principal Occupation** Investor Services, Inc.
- ---------------------- ----------- ---------------------- ----------------------
<S> <C> <C> <C>
Kathryn L. Quirk (44)++ Vice President Managing Director of Senior Vice President,
Scudder, Stevens & Clark, Director and Clerk
Inc.
</TABLE>
* Messrs. Lee and Pierce are considered by the Corporation to be persons who
are "interested persons" of the Adviser or of the Corporation (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
Directors of the Corporation not affiliated with the Adviser receive
from the Corporation 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 Corporation, but the
Corporation may reimburse such Directors for all out-of-pocket expenses relating
to attendance at meetings.
As of June 10, 1997, the Directors and officers of the Corporation, as
a group, owned less than 1% of the outstanding shares of each Fund of the
Corporation, except for Peter B. Freeman, who owned 1.26% of the Cash Fund.
As of June 10, 1997, the following shareholders held of record more
than five percent of such Fund:
Cash Fund. State Street Bank and Trust Co., North Quincy, MA
02171-1753, Chemical Bank, Jericho, NY 10017-2014, Wilmington Trust Company,
Wilmington DE 19801, Citibank, Long Island City, NY 11120, Lucian T. Baldwin III
Trust, Winnetka, IL 60093-4223, Cudd & Co., New York, NY 10036, Hare & Co., New
York, NY 10005, and Scudder Trust Company, Two International Place, Boston, MA
02110-4103 held of record 15.2%, 11.0%, 9.7%, 8.7%, 8.2%, 7.9%, 7.2% and 6.1%,
respectively, of the outstanding shares of the Cash Fund.
Tax Free Fund. Chemical Bank, Jericho, NY 10017-2014, Cudd & Co., New
York, NY 10036, Hare & Co., New York, NY 10005, and State Street Bank and Trust
Co., North Quincy, MA 02171-1753 held of record 34.0%, 20.2%, 17.6% and 10.9%,
respectively, of the outstanding shares of the Tax Free Fund.
Government Fund. No shareholder held of record more than 5% of the
outstanding shares of the Governmen Fund.
As of June 10, 1997, 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 Corporation or a Fund, it may
be deemed to be a "control" person of the Corporation or such Fund for purposes
of the 1940 Act.
REMUNERATION
Responsibilities of the Board--Board and Committee Meetings
The Board of Directors is responsible for the general oversight of each
Fund's business. A majority of the Board's members are not affiliated with
Scudder, Stevens & Clark, Inc. These "Independent Directors" have primary
responsibility for assuring that each Fund is managed in the best interests of
its shareholders.
The Board of Directors meets at least quarterly to review the
investment performance of each Fund and other operational matters, including
policies and procedures designated to assure compliance with various regulatory
requirements. At least annually, the Independent Directors review the fees paid
to the Adviser and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
32
<PAGE>
other things, each Funds' investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates, and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by each Fund's independent
public accountants and by independent legal counsel selected by the Independent
Directors.
All of the Independent Directors serve on the Committee of Independent
Directors, which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects each Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
The Independent Directors met four times during 1996, including Board
and Committee meetings and meetings to review each Fund's contractual
arrangements as described above. All of the Independent Directors attended 100%
of all such meetings.
Compensation of Officers and Directors
The Independent Directors receive compensation of $150 per Fund for
each Directors' meeting and each Board Committee meeting attended, and an annual
Director's fee 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, payable quarterly. No additional compensation is paid to any
Independent Director for travel time to meetings, attendance at directors'
educational seminars or conferences, service on industry or association
committees, participation as speakers at directors' conferences, service on
special trustee task forces or subcommittees or service as lead or liaison
trustee. Independent Directors do not receive any employee benefits such as
pension, retirement or health insurance.
The Independent Directors also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type an complexity
and in some cases have substantially different Directors fee schedules. The
following table shows the aggregate compensation received by each Independent
Directors during 1996 from the Company and from all of Scudder funds as a group.
Name Scudder Fund, Inc.* All Scudder Funds
---- ------------------- -----------------
Edgar R. Fiedler, Director** $17,776 $108,083 (20 funds)
Peter B. Freeman, Director $8,000 $131,734 (33 funds)
Robert W. Lear, Director $8,000 $33,049 (11 funds)
* Scudder Fund, Inc. consists of the Cash Fund, Tax Free Fund and Government
Fund.
** Mr. Fiedler received $17,776 through a deferred compensation program.
As of December 31, 1996, Mr. Fiedler had a total of $205,223 accrued in
a deferred compensation program for serving on the Board of Directors
of the Company. In addition, as of December 31, 1996, Mr. Fiedler had a
total of $191,130 accrued in a deferred compensation program for
serving on the Board of Directors of Scudder Institutional Fund, Inc.
Members of the Board of Directors who are employees of Scudder or its
affiliates receive no direct compensation from the Company, although they are
compensated as employees of Scudder, or its affiliates, as a result of which
they may be deemed to participate in fees paid by each Fund.
TAXES
(See "Distribution and Performance Information--Taxes" in the
Funds' Prospectuses)
The Prospectuses for each class of shares of the Funds describe
generally the tax treatment of distributions by the Corporation. This section of
the Statement includes additional information concerning federal taxes.
33
<PAGE>
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; or other income derived with
respect to its business of investing in stock securities or currencies (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 certain 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,
securities of other regulated investment companies 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 generally 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.
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
including "exempt-interest 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 generally 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. Any loss realized on a
sale or exchange of shares of a Fund will be disallowed to the extent shares of
such Fund are re-acquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Dividends paid out of a Fund's investment company taxable income (which
includes, among other items, dividends, interest and net excess of net long-term
capital losses) will be taxable to a shareholder as ordinary income. Because no
portion of a Fund's income is expected to consist of dividends paid by U. S.
corporations, no portion of the dividends paid by a Fund is expected to be
eligible for the corporate dividends-received deduction. Distributions of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Fund on the reinvestment date. Shareholders will
be notified annually as to the U.S. federal tax status of distributions, and
shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.
The Tax Free Fund intends to qualify under the Code to pay
"exempt-interest dividends" to its shareholders. The Fund will be so qualified
if, at the close of each quarter of its taxable year, at least 50% of the value
of its total assets consists of securities on which the interest payments are
exempt from federal income tax. To the extent that dividends distributed by the
Fund to its shareholders are derived from interest income exempt from federal
income tax and are designated as "exempt-interest dividends" by the Fund, they
will be excludable from the gross incomes of the shareholders for federal income
tax purposes. "Exempt-interest dividends," however, must be taken into account
34
<PAGE>
by shareholders in determining whether their total incomes are large enough to
result in taxation of up to one-half of their social security benefits and
certain railroad retirement benefits. It should also be noted that tax-exempt
interest on private activity bonds in which the Portfolio may invest generally
is treated as a tax preference item for purposes of the alternative minimum tax
for corporate and individual shareholders. The Fund will inform shareholders
annually as to the portion of the distributions from the Fund which constituted
"exempt-interest dividends."
Investments by a Fund in zero coupon or other original issue discount
(other than tax-exempt securities) securities will result in income to the Fund
equal to a portion of the excess of the face value of the securities over their
issue price (the "original issue discount") each year that the securities are
held, even though the Fund receives no cash interest payments. This income is
included in determining the amount of income which a Fund must distribute to
maintain its status as a regulated investment company and to avoid the payment
of federal income tax and the 4% excise tax.
Gain derived by a Fund from the disposition of any market discount
bonds (i.e., bonds purchased other than at original issue, where the face value
of the bonds exceeds their purchase price), including tax-exempt market discount
bonds, held by the Fund will be taxed as ordinary income to the extent of the
accrued market discount on the bonds, unless the Fund elects to include the
market discount in income as it accrues.
The taxation of over-the-counter options on debt securities is governed
by Code section 1234. Pursuant to Code section 1234, the premium received by a
Fund for selling a put or call option is not included in income at the time of
receipt. If the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the difference between the
amount paid to close out its position and the premium received is short-term
capital gain or loss. If a call option written by a Fund is exercised, thereby
requiring the Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term
depending upon the holding period of the security. With respect to a put or call
option that is purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term,
depending upon the holding period of the option. If the option expires, the
resulting loss is a capital loss and is long-term or short-term, depending upon
the holding period of the option. If the option is exercised, the cost of the
option, in the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount realized on the
underlying security in determining gain or loss.
Certain options in which a Fund may invest are "section 1256
contracts." Gains or losses on section 1256 contracts generally are considered
60% long-term and 40% short-term capital gains or losses. Also, section 1256
contracts held by a Fund at the end of each taxable year (and, generally, for
purposes of the 4% excise tax, on October 31 of each year) are
"marked-to-market" (that is, treated as sold at fair market value), resulting in
unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Funds of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Funds which is taxed as
ordinary income when distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle positions, the amount which may be distributed to
shareholders, and which will be taxed to them as ordinary income or long-term
capital gain, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
35
<PAGE>
The 30% limitation and the diversification requirements applicable to
each Fund's assets may limit the extent to which each Fund will be able to
engage in options transactions.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
Under the Code, a shareholder may not deduct that portion of interest
on indebtedness incurred or continue to purchase or carry shares of an
investment company paying exempt interest dividends (such as those of the Tax
Free Fund) which bears the same ratio to the total of such interest as the
exempt-interest dividends bear to the total dividends (excluding net capital
gain dividends) received by the shareholder. In addition, under rules issued by
the Internal Revenue Service for determining when borrowed funds are considered
to be used to purchase or carry particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to such purchase.
Each Fund may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions (other than redemption proceeds,
provided the Fund maintains a constant net asset value per share) payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability.
The tax consequences to a foreign shareholder of an investment in a
Fund may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
Fund shareholders may be subject to state and local taxes on their Fund
distributions, including distributions from the Tax Free Fund. In many states,
Fund distributions which are derived from interest on certain U.S. Government
obligations are exempt from taxation. Shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund. Persons who may be "substantial users" (or "related
persons" of substantial users) of facilities financed by industrial development
bonds should consult their tax advisers before purchasing shares of the Tax Free
Fund. The term "substantial user" generally includes any "non-exempt person" who
regularly uses in his or her trade or business a part of a facility financed by
industrial development bonds. Generally, an individual will not be a "related
person" of a substantial user under the Code unless the person or his or her
immediate family owns directly or indirectly in the aggregate more than a 50%
equity interest in the substantial user.
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
36
<PAGE>
fees, on a particular transaction. Purchases of underwritten issues may be made,
which will include an underwriting fee paid to the underwriter. During the
Corporation'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 subsidiary of the Adviser, on each day the Exchange is
open for trading. The net asset value per share of the Cash Fund and the
Government Fund is determined normally 4:00 p.m., and at 2:00 p.m. for the Tax
Free Fund. The net asset value per share of each class is computed by dividing
the value of the total assets attributable to a specific class, less all
liabilities attributable to those shares, by the total number of outstanding
shares of that class. 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 Corporation intends to declare dividends with
respect to each of its 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 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 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
37
<PAGE>
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
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 Managed Shares
Prospectus 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
<TABLE>
<S> <C>
The CUSIP number of the Scudder Premium Money Market Shares is 811149871
The CUSIP number of the Scudder Money Market Managed Shares is 811149202
The CUSIP number of the Scudder Money Market Institutional Shares is 811149863
The CUSIP number of the Scudder Tax Free Money Market Managed Shares is 811149301
The CUSIP number of the Scudder Tax Free Money Market Institutional Shares is 811149855
The CUSIP number of the Scudder Government Money Market Managed Shares is 811149103
The CUSIP number of the Scudder Government Money Market Institutional Shares is 811149848
</TABLE>
Each Fund has a fiscal year end of December 31.
The law firm of Dechert Price & Rhoads is counsel to the Funds.
Information enumerated below is provided at the Fund level since each
Fund consisted of one class of shares (which class was redesignated as the
Managed Shares Class) on December 31, 1996.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Funds. Each 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. For the year ended December
31, 1996, the amount charged to the Funds by SFAC aggregated $30,000 for the
Government Fund, $48,900 for the Cash Fund, and $39,965 for the Tax Free Fund,
of which $2,500, $4,177, and $3,306, respectively, remained unpaid at December
31, 1996.
Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Corporation 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 Fund shares
and promptly effecting such orders; (ii) recording purchases of Fund 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 Corporation. The Service Corporation applies monthly
38
<PAGE>
activity fees for servicing shareholder accounts of $220,000. Effective October
1, 1995 the minimum monthly charge to any Fund shall be the pro rata portion of
the annual fee, determined by dividing such aggregate fee by the number of Funds
of the Corporation and series of Institutional Fund. When a Fund's monthly
activity charges do not equal or exceed the minimum monthly charge, the minimum
will be charged. For the year ended December 31, 1996, the amount charged to the
Corporation by Scudder Service Corporation aggregated $23,477 for the Government
Fund, $66,490 for the Cash Fund, and $23,477 for the Tax Free Fund, of which
$2,292, $5,556, and $2,292, respectively, remained unpaid at December 31, 1996.
The Funds' Prospectuses and this Statement of Additional Information
omit certain information contained in the Registration Statement and its
amendments which the Corporation 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 Corporation 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
Corporation, together with the Report of Independent Accountants, Financial
Highlights and notes to financial statements in the Annual Reports to the
Shareholders of the Corporation dated December 31, 1996 are incorporated herein
by reference and are hereby deemed to be a part of this Statement of Additional
Information.
Effective July 7, 1997, the Corporation's Board of Directors has
approved a name change of the Funds from Managed Cash Fund, Managed Tax-Free
Fund and Managed Government Securities Fund to Scudder Money Market Series,
Scudder Tax Free Money Market Series and Scudder Government Money Market Series,
respectively. In addition, the Board of Directors has subdivided Scudder Money
Market Series, Scudder Tax Free Money Market Series and Scudder Government Money
Market Series into classes. Shares of each Fund outstanding as of July 7, 1997
have been redesignated as shares of the Managed Class of the respective Fund.
Furthermore, with respect to the Scudder Tax Free Money Market Series and
Scudder Government Money Market Series one additional class was created of
"Institutional Shares," with respect to the Scudder Money Market Series two
additional classes were created, the "Institutional Shares" and the "Premium
Money Market Shares." The financial statements incorporated herein reflect the
investment performance of each Fund prior to the aforementioned redesignation of
shares.
39
<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 GOVERNMENT SECURITIES FUND
MANAGED CASH FUND
MANAGED TAX-FREE FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Board of Directors
<S> <C>
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
</TABLE>
- --------------------------------------------------------------------------------
Officers
DAVID S. LEE Chairman of the Board
DANIEL PIERCE President
STEPHEN L. AKERS Vice President
K. SUE COTE Vice President
CAROL L. FRANKLIN Vice President
JERARD K. HARTMAN Vice President
KATHRYN L. QUIRK Vice President
THOMAS W. JOSEPH Vice President and Assistant Secretary
THOMAS F. McDONOUGH Vice President and Secretary
PAMELA A. McGRATH Vice President and Treasurer
2
<PAGE>
Dear Shareholder:
Operated exclusively for institutions and their clients, Scudder Fund, Inc.
provided competitive investment results in 1996. Scudder Fund, Inc. includes
three separate money market funds -- Managed Government Securities Fund, Managed
Cash Fund, and Managed Tax-Free Fund. Each Fund seeks to provide a high level of
income while preserving capital and maintaining liquidity.
All three funds seek to maintain a net asset value of $1.00, and have done so
since their inception. (There is no guarantee, of course, that each fund will
maintain stable net asset values.) The Managed Tax-Free Fund seeks to provide
income exempt from Federal income tax.
Total net assets for Managed Government Securities Fund, Managed Cash Fund and
Managed Tax-Free Fund were $625 million on December 31, 1996, compared to $560
million at the start of the year, which does not include the assets of Managed
Federal Securities Fund. Managed Federal Securities Fund ceased operations on
November 29, 1996. A table showing dividend payments and other financial
information for the twelve months ended December 31, 1996 is on page 16. This
table also shows dividend payments and financial information for each fund for
the five years ended December 31, 1996. In addition, please see the following
pages for audited financial statements for the year ended December 31, 1996, as
well as a list of each Fund's investments.
If you have any questions concerning any of these funds, please call toll free
(800) 854-8525 from any continental state.
/s/David S. Lee
David S. Lee
Chairman
3
<PAGE>
MANAGED GOVERNMENT SECURITIES FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2a)
------- --------- ---------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 7.1%
State Street Bank & Trust, dated 12/31/96 at 6.00%
(proceeds at maturity $1,976,659) collateralized
by $1,865,000 U.S. Treasury Bond, 7.125%, 2/15/23
(cost $1,976,000) (note 3) ................................. 1/2/97 $ 1,976,000 $ 1,976,000
-------------
U.S. AGENCY OBLIGATIONS -- 93.5%
Federal Home Loan Bank Discount Note ......................... 1/2/97 2,000,000 1,999,708
Federal Home Loan Mortgage Corp. Discount Note ............... 4/1/97 4,000,000 3,946,900
Federal Home Loan Mortgage Corp. Discount Note ............... 1/14/97 3,000,000 2,994,301
Federal Home Loan Mortgage Corp. Discount Note ............... 1/17/97 3,200,000 3,192,590
Federal Home Loan Mortgage Corp. Discount Note ............... 1/24/97 3,000,000 2,989,957
Federal National Mortgage Assn. Discount Note ................ 1/21/97 6,000,000 5,982,700
Federal National Mortgage Assn., 5.18% ....................... 3/14/97* 5,000,000 5,000,000
-------------
TOTAL U.S. AGENCY OBLIGATIONS (cost $26,106,156) ............................................... 26,106,156
-------------
TOTAL INVESTMENTS -- 100.6% (cost $28,082,156)** ............................................... 28,082,156
-------------
OTHER ASSETS AND LIABILITIES -- (0.6%)
Cash ........................................................................................... 706
Receivable for capital stock sold .............................................................. 10,417
Interest receivable and other assets ........................................................... 58,489
Dividend payable ............................................................................... (118,924)
Payable for capital stock redeemed ............................................................. (1,400)
Management fee payable (note 4) ................................................................ (18,770)
Accrued expenses (note 4) ...................................................................... (94,387)
-------------
(163,869)
-------------
NET ASSETS -- 100.0%
Applicable to 27,918,287 shares of $.001 par value Capital Stock outstanding;
3,000,000,000 shares authorized (note 7) .................................................... $ 27,918,287
=============
NET ASSET VALUE PER SHARE ...................................................................... $1.00
=====
</TABLE>
* Date of next interest rate change.
** Cost for federal income tax purposes.
See notes to financial statements.
4
<PAGE>
MANAGED CASH FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2a)
-------- --------- ---------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 18.8%
Bank of America, Illinois, 5.70% ............................. 5/28/97 $ 5,000,000 $ 4,997,843
Bank of New York Co., Inc., 5.365% ........................... 6/10/97 7,000,000 7,000,000
Canadian Imperial, 5.37% ..................................... 1/10/97 15,000,000 15,000,000
Fifth Third Bank, 5.36% ...................................... 1/8/97 15,000,000 15,000,013
National Westminster Bank, PLC, 5.41% ........................ 1/21/97 15,000,000 15,000,246
Rabobank Nederland N.V., 5.56% ............................... 3/3/97 14,000,000 14,001,352
Societe Generale, 5.37% ...................................... 2/19/97 10,000,000 10,000,000
-------------
TOTAL CERTIFICATES OF DEPOSIT (cost $80,999,454) ............................................... 80,999,454
-------------
COMMERCIAL PAPER -- 63.6%
American Express Credit Corp. ................................ 1/23/97 15,000,000 14,951,142
Associates Corp. of North America ............................ 1/21/97 15,000,000 14,955,667
Barclays U.S. Funding Corp. .................................. 2/28/97 10,000,000 9,914,933
Beneficial Corp. ............................................. 4/1/97 10,000,000 9,866,250
Centric Funding Corp. ........................................ 2/10/97 10,000,000 9,940,667
Centric Funding Corp. ........................................ 2/18/97 5,000,000 4,963,600
Chevron Transport Corp. ...................................... 4/1/97 10,000,000 9,865,500
Ciesco, L.P. ................................................. 1/15/97 14,000,000 13,971,144
CIT Group Holdings, Inc. ..................................... 1/22/97 15,000,000 14,950,913
Commerzbank AG ............................................... 2/28/97 10,000,000 9,914,772
Corporate Asset Funding Co., Inc. ............................ 2/25/97 12,000,000 11,901,733
Deutsche Bank Financial, Inc. ................................ 3/4/97 12,000,000 11,891,093
Dresdner U.S. Finance, Inc. .................................. 1/2/97 14,000,000 13,997,814
Ford Motor Credit Corp. ...................................... 4/1/97 10,000,000 9,866,250
General Electric Capital Corp. ............................... 1/23/97 15,000,000 14,949,583
Household Finance Corp. ...................................... 1/15/97 10,000,000 9,978,456
J.P. Morgan & Co., Inc. ...................................... 1/8/97 14,000,000 13,985,354
New Center Asset Trust ....................................... 5/27/97 18,000,000 17,610,180
Pacificorp ................................................... 2/28/97 10,000,000 9,914,772
Prudential Funding Corp. ..................................... 1/9/97 15,000,000 14,982,267
Republic New York Corp. ...................................... 1/15/97 8,000,000 7,983,107
Texaco Inc. .................................................. 1/9/97 14,000,000 13,982,796
Virginia Electric & Power Co. ................................ 2/13/97 10,000,000 9,936,097
-------------
TOTAL COMMERCIAL PAPER (cost $274,274,090) ..................................................... 274,274,090
-------------
CORPORATE BOND -- 1.7%
General Electric Capital Corp., 7.625% ....................... 1/10/97 2,000,000 2,001,052
MMR Funding I (LOC Bayerische Vereinsbank), 5.84% ............ 1/2/97* 5,500,000 5,500,000
-------------
TOTAL CORPORATE BOND (cost $7,501,052) ......................................................... 7,501,052
-------------
</TABLE>
See notes to financial statements.
5
<PAGE>
MANAGED CASH FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2a)
-------- --------- ---------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.7%
Student Loan Marketing Association, 5.39% .................... 1/14/97* $ 15,000,000 $ 15,000,000
Student Loan Marketing Association, 5.41% .................... 1/14/97* 22,400,000 22,396,073
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (cost $37,396,073) .................................... 37,396,073
-------------
REPURCHASE AGREEMENTS -- 12.9%
State Street Bank & Trust, dated 12/31/96 at 6.00%
(proceeds at maturity $55,637,540) collateralized
by $52,410,000 U.S. Treasury Bond, 7.125%, 2/15/23
(cost $55,619,000) ......................................... 1/2/97 55,619,000 55,619,000
-------------
TOTAL INVESTMENTS -- 105.7% (cost $455,789,669)** .............................................. 455,789,669
-------------
OTHER ASSETS AND LIABILITIES -- (5.7%)
Receivable for capital stock sold .............................................................. 5,614,903
Interest receivable and other assets ........................................................... 1,334,256
Dividend payable ............................................................................... (1,569,532)
Payable for capital stock redeemed ............................................................. (1,147,761)
Due to custodian ............................................................................... (28,399,017)
Management fee payable (note 4) ................................................................ (115,079)
Accrued expenses (note 4) ...................................................................... (209,164)
-------------
(24,491,394)
-------------
NET ASSETS -- 100.0%
Applicable to 431,298,275 shares of $.001 par value Capital Stock outstanding;
3,000,000,000 shares authorized (note 7) .................................................... $ 431,298,275
=============
NET ASSET VALUE PER SHARE ...................................................................... $1.00
=====
</TABLE>
* Date of next interest rate change.
** Cost for federal income tax purposes.
See notes to financial statements.
6
<PAGE>
MANAGED TAX-FREE FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* SHORT-TERM MUNICIPAL INVESTMENTS -- 100.7% AMOUNT (NOTE 2a)
- ------ --------- ---------
<S> <C> <C>
ARIZONA
MIG1 Pima County Industrial Development Authority, Series 1985, SFE
Technologies, VRDN, 4.5%, 12/1/05 ................................. $ 1,900,000 $ 1,900,000
A1+ Pima County, Industrial Development Authority, Tucson Electric
Power Co., Series 1982A, VRDN, 4.1%, 7/1/22 ....................... 1,800,000 1,800,000
-----------
TOTAL ARIZONA ................................................. 3,700,000
-----------
CALIFORNIA
A1+ Burbank Redevelopment Agency, Multifamily Housing Series 1985A,
VRDN, 3%, 11/1/10 ................................................. 5,100,000 5,100,000
SP1+ California State, GO, RAN, Series 1996, 4.5%, 6/30/97 ................ 2,000,000 2,007,805
MIG1+ California Statewide Community Development Authority, Northern
California Retired Officers, VRDN, 5%, 6/1/26 ..................... 1,300,000 1,300,000
A1 Corona Multi--Family Housing Revenue, Series 1985B, VRDN, 4.125%,
2/1/05 ............................................................ 2,000,000 2,000,000
SS&C Huntington Beach, Multi--Family Housing Revenue, River Meadows
Apartments, Series B, VRDN, 4.125%, 10/1/05 ....................... 6,800,000 6,800,000
SS&C Lancaster Household Bank Project, Antelope Pines Estate, Series 1984-A
VRDN, 3.55%, 11/1/04 .............................................. 3,000,000 3,000,000
A1+ Orange County, Sanitation District #1- 3, 5- 7&11, Series 1993, VRDN,
5%, 8/1/16 ........................................................ 900,000 900,000
SS&C San Marcos, Redevelopment Agency, Multi-Family Rental Housing
Series 1985 A, VRDN, 4.125%, 6/1/05 ............................... 6,900,000 6,900,000
-----------
TOTAL CALIFORNIA .............................................. 28,007,805
-----------
COLORADO
A1+ Colorado Health Facilities Authority, Composite Issue for Kaiser
Permanente, Series 1995A, VRDN, 4.15%, 8/1/15 ..................... 1,000,000 1,000,000
A1+ Regional Transportation, District of Colorado, Special Passenger Fare
Revenue, Series 1989A, VRDN, 4%, 6/1/99 ........................... 1,700,000 1,700,000
-----------
TOTAL COLORADO ................................................ 2,700,000
-----------
DISTRICT OF COLUMBIA
A1+ District of Columbia, General Fund Recovery, Series B-3, VRDN,
5.1%, 6/1/03 ...................................................... 2,000,000 2,000,000
MIG1 District of Columbia, GO, General Fund Recovery, Series B2,
VRDN, 5.1%, 6/1/03 ................................................ 300,000 300,000
MIG1 District of Columbia, GO, VRDN, Series A3, 5%, 10/1/07 ............... 1,000,000 1,000,000
-----------
TOTAL DISTRICT OF COLUMBIA .................................... 3,300,000
-----------
FLORIDA
MIG1 Broward County, Housing Finance Authority, Welleby Apartments
Project, VRDN, 4.25%, 12/1/06 ..................................... 1,000,000 1,000,000
A1+ Gainesville, Florida Utilities System, Series C, TECP, 3.6%, 1/6/97 .. 1,000,000 1,000,000
AAA Dade County Health Facilities Authority, Miami Children's Hospital,
VRDN, AMBAC Insured, 4%, 9/1/25 ................................... 1,200,000 1,200,000
A1+ Dade County, Water and Sewer System Revenue, Series 1994, VRDN,
FGIC Insured, 4%, 10/5/22 ......................................... 4,700,000 4,700,000
</TABLE>
See notes to financial statements.
7
<PAGE>
MANAGED TAX-FREE FUND (CONTINUED)
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2a)
- ------ --------- ---------
<S> <C> <C>
MIG1 Jacksonville Pollution Control Revenue, Florida Power and Light, TECP,
Series 1994, 3.55%, 2/20/97 ....................................... $ 1,300,000 $ 1,300,000
A1 Sarasota County, Public Hospital District, Sarasota Memorial Hospital,
TECP, Series 1993A, 3.7%, 2/18/97 ................................. 2,500,000 2,500,000
-----------
TOTAL FLORIDA ................................................. 11,700,000
-----------
GEORGIA
A1+ Turner County Industrial Development Revenue, Coats & Clark Inc.,
Series 1984, VRDN, 3.65%, 10/1/98 ................................. 1,600,000 1,600,000
-----------
IDAHO
MIG1 Idaho Health Facilities Authority Revenue, St. Lukes Regional Medical
Center Project, Series 1995, VRDN, 5.25%, 5/1/22 .................. 2,400,000 2,400,000
-----------
ILLINOIS
P1 Illinois Education Facilities Authority Pooled Financing Program, TECP,
3.55%, 2/20/97 .................................................... 3,500,000 3,500,000
MIG1 Illinois Educational Facilities Authority, University Pooled Finance
Program, VRDN, FGIC Insured, 4.25%, 12/1/05 ....................... 1,810,000 1,810,000
SS&C Pekin, Industrial Development Revenue Refunding Bonds, BOC Group,
Series 1992, VRDN, 4.15%, 9/1/12 .................................. 2,600,000 2,600,000
-----------
TOTAL ILLINOIS ................................................ 7,910,000
-----------
INDIANA
A1+ Sullivan Hoosier Energy Rural Electric Project, TECP, Series 1985L
3.45%, 2/12/97 .................................................... 2,000,000 2,000,000
A1+ Sullivan PCR, Hoosier Energy Rural Electric Project, TECP, 3.6%,
1/6/97 ............................................................ 2,000,000 2,000,000
-----------
TOTAL INDIANA ................................................. 4,000,000
-----------
IOWA
MIG1 Council Bluffs Pollution Control, VRDN, Iowa Illinois Gas & Electric
Company, Series 1995, 4.25%, 1/1/25 ............................... 1,000,000 1,000,000
-----------
KENTUCKY
MIG1 Mayfield, Multi-City Lease Revenue, Kentucky League of Cities Funding
Trust, VRDN, Series 1996, 4.3%, 7/1/26 ............................ 1,000,000 1,000,000
-----------
LOUISIANA
MIG1 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue,
1st Stage, Series 1994, VRDN, 5%, 9/1/06 .......................... 100,000 100,000
-----------
MARYLAND
A1 Anne Arundel County, Baltimore Electric & Gas Company, TECP,
3.55%, 1/9/97 ..................................................... 3,020,000 3,020,000
-----------
MASSACHUSETTS
MIG1 Commonwealth of Massachusetts GO Note, Series A, 4.25%, 6/10/97 ...... 5,000,000 5,018,815
SP1 Massachusetts Bay Transportation Authority, Series B, 4.75%, 9/5/97 .. 1,000,000 1,005,204
A1+ Massachusetts Health & Educational Facilities Authority, Harvard
University, Series I, VRDN, 3.9%, 2/1/16 .......................... 3,215,000 3,215,000
MIG1 Massachusetts Industrial Finance Agency, Merritt Care Beverly
Enterprises, VRDN, 5%, 4/1/09 ..................................... 800,000 800,000
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2a)
- ------ --------- ---------
<S> <C> <C>
MIG1 Massachusetts Industrial Finance Agency, Resource Recovery, Ogden
Haverhill Project, VRDN, 3.9%, 12/1/06 ............................ $ 2,900,000 $ 2,900,000
P1 Massachusetts Water Resources Authority, TECP, Series 1994, 3.65%,
1/15/97 ........................................................... 1,000,000 1,000,000
-----------
TOTAL MASSACHUSETTS ........................................... 13,939,019
-----------
MISSISSIPPI
A1 Jackson County, Chevron USA Inc., Project, Pollution Control Revenue
Bonds, VRDN, 5%, 12/1/16 .......................................... 1,400,000 1,400,000
-----------
MISSOURI
MIG1 Missouri HEFA, Health Facilities Revenue, Sisters of Mercy, VRDN,
4.2%, 6/1/19 ...................................................... 1,100,000 1,100,000
MIG1 Missouri HEFA, Health Facilities Revenue, Sisters of Mercy, VRDN,
4.2%, 6/1/19 ...................................................... 1,000,000 1,000,000
SP1+ Missouri HEFA, School District, Advance Funding Notes, Series 1996 C,
Kansas City School District, 4.5%, 9/8/97 ......................... 1,000,000 1,003,959
P1 St. Louis Industrial Development Authority, Kirkwood Project, Series
1985, VRDN, 4.125%, 12/1/15 ....................................... 1,000,000 1,000,000
-----------
TOTAL MISSOURI ................................................ 4,103,959
-----------
NEBRASKA
P1 Nebraska Public Power District (all Districts), TECP, Series 1996,
3.5%, 1/28/97 ..................................................... 5,000,000 5,000,000
A1+ Omaha Public Power District, TECP, 3.6%, 1/28/97 ..................... 1,300,000 1,300,000
-----------
TOTAL NEBRASKA ................................................ 6,300,000
-----------
NEW HAMPSHIRE
A1+ New Hampshire Business Finance Authority, Connecticut Light & Power,
VRDN, 4.15%, 12/1/22 .............................................. 2,000,000 2,000,000
-----------
NEW JERSEY
A1+ New Jersey State Turnpike Authority, Series D, VRDN, 3.75%, 1/1/18 ... 1,900,000 1,900,000
-----------
NEW MEXICO
SS&C Belen Industrial Revenue Refunding Bond, United Desiccants Project,
VRDN, 4.3%, 4/1/00 ................................................ 1,000,000 1,000,000
P1 Farmington, Pollution Control Revenue, Arizona Public Service Co.,
Series 1994B, VRDN, 5%, 9/1/24 .................................... 1,300,000 1,300,000
-----------
TOTAL NEW MEXICO .............................................. 2,300,000
-----------
NEW YORK
MIG1 New York City Municipal Water Finance Authority, Series 1994G,
FGIC insured, VRDN, 5%, 6/15/24 ................................... 1,000,000 1,000,000
MIG1 New York City, Municipal Water Finance Authority, Series C, VRDN,
FGIC Insured, 5%, 6/15/23 ......................................... 1,000,000 1,000,000
MIG1 New York City, TAN, Series 1996A, 4.5%, 2/12/97 ...................... 1,875,000 1,876,888
P1 State of New York, TECP, Series Q, 3.55%, 1/14/97 .................... 2,500,000 2,500,000
-----------
TOTAL NEW YORK ................................................ 6,376,888
-----------
</TABLE>
See notes to financial statements.
9
<PAGE>
MANAGED TAX-FREE FUND (CONTINUED)
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2a)
- ------ --------- ---------
<S> <C> <C>
NORTH CAROLINA
A1+ North Carolina Municipal Power Agency #1, Catawaba Project, TECP,
Series 1996A, 3.55%, 2/20/97 ...................................... $ 2,000,000 $ 2,000,000
-----------
OHIO
MIG1 Cuyahoga County, Health & Education, University Hospital of
Cleveland, VRDN, 5%, 1/1/16 ....................................... 1,100,000 1,100,000
-----------
PENNSYLVANIA
MIG1 Delaware Valley, Finance Authority, Series 1985A, VRDN, 4.15%,
12/1/20 .......................................................... 1,600,000 1,600,000
SS&C Elk County, Industrial Development Authority, VRDN, 3.795%, 3/1/04 ... 750,000 750,000
A1+ Emmaus, General Authority, Local Government Revenue Pool
Program, Series 1989 G, VRDN, 4.15%, 3/1/24 ....................... 1,300,000 1,300,000
A1 Emmaus, General Authority, Local Government Revenue Pool Program,
1989 Series G-5, VRDN, 4.2%, 3/1/24 .............................. 2,000,000 2,000,000
A1+ Emmaus, General Authority, Local Government Revenue Pool Program,
1989 Series G-6, VRDN, 4.15%, 3/1/24 ............................. 1,900,000 1,900,000
MIG1 Philadelphia, TRAN, GO, 4.5%, 6/30/97 ................................ 1,000,000 1,002,606
SP1 Philadelphia, School District, TRAN, Series 1996-1997,
4.5%, 6/30/97 ..................................................... 3,000,000 3,007,122
-----------
TOTAL PENNSYLVANIA ............................................ 11,559,728
-----------
PUERTO RICO
MIG1 Puerto Rico Commonwealth, TRAN, Series 1996, 4%, 7/30/97 ............. 1,500,000 1,504,830
-----------
RHODE ISLAND
MIG1 Rhode Island State, TAN, 4.5%, 6/30/97 ............................... 3,000,000 3,015,369
-----------
TENNESSEE
MIG1 Clarksville, Public Building Authority, Pooled Financing, Series 1990,
VRDN, MBIA Insured, 4%, 7/1/13 .................................... 1,900,000 1,900,000
MIG1 Franklin, Industrial Development Revenue, Franklin Oaks Apartments,
VRDN, 4.25%, 12/1/07 .............................................. 2,000,000 2,000,000
-----------
TOTAL TENNESSEE ............................................... 3,900,000
-----------
TEXAS
MIG1 Harris County, TAN, Series 1996, 4.5%, 2/28/97 ....................... 1,000,000 1,001,149
A1+ Harris County, Toll Roads, Series 1994G, VRDN, 4%, 8/1/20 ............ 2,500,000 2,500,000
MIG1 Lone Star, Airport Improvement Authority, Series A5, VRDN, 4.95%,
12/1/14 ........................................................... 1,300,000 1,300,000
MIG1 Lone Star, Airport Improvement Authority, Series B2, VRDN,
4.95%, 12/1/14 .................................................... 1,600,000 1,600,000
MIG1 Lone Star, Airport Improvement Authority, Series 1984 B1, VRDN,
4.95%, 12/1/14 .................................................... 1,000,000 1,000,000
SS&C Montgomery Industrial Development Authority, Medical Manufacturing
Partners Project, Series 1987, VRDN, 4.1%, 8/1/17 ................. 3,640,000 3,640,000
MIG1 North Central Texas Health Facilities Development Corp., Presbyterian
Medical Center, VRDN, Series 1985 C, 4.95%, 12/1/15 ............... 1,900,000 1,900,000
A1+ San Antonio, Electric & Gas City Public Services, TECP, Series 1995A,
3.55%, 2/13/97 .................................................... 1,000,000 1,000,000
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2a)
- ------ --------- ---------
<S> <C> <C>
A1+ San Antonio, Water System Revenue, TECP, Series 1995, 3.6%, 2/7/97 ... $ 1,500,000 $ 1,500,000
SP1+ State of Texas TRAN, Series 1996, 4.75%, 8/29/97 ..................... 4,000,000 4,030,082
MIG1 Texas Association of School Boards, Certificates of Participation TAN,
Series 1996 FSA Insured, 4.75%, 8/29/97 ........................... 1,000,000 1,005,202
-----------
TOTAL TEXAS ................................................... 20,476,433
-----------
VERMONT
SS&C Vermont Industrial Development, Vermont Marble Company, Series 1984,
VRDN, 3.795%, 12/1/04 ............................................. 3,575,000 3,575,000
MIG1 Vermont Student Assistance Corporation, VRDN, 3.65%, 1/1/04 .......... 2,500,000 2,500,000
-----------
TOTAL VERMONT ................................................. 6,075,000
-----------
VIRGINIA
MIG1 Henrico County, Industrial Development Authority Revenue, Health
Facility Hermitage Project, VRDN, 5.1%, 5/1/24 .................... 400,000 400,000
A1+ Peninsula Port Authority, Coal Terminal Revenue, Dominio Terminal
Project, VRDN, 4.85%, 7/1/16 ...................................... 1,600,000 1,600,000
SS&C Peninsula Port Authority, Shell Oil, VRDN, 5%, 12/1/05 ............... 1,800,000 1,800,000
MIG1 Town of Louisa, Pollution Control Revenue, Virginia Electric
Power Company 1987 TECP, 3.8%, 1/14/97 ............................ 1,000,000 1,000,000
-----------
TOTAL VIRGINIA ................................................ 4,800,000
-----------
WASHINGTON
A1+ Washington Health Care Facilities Authority, Sisters of Providence, VRDN,
Series 1985 B, 5%, 10/1/05 ........................................ 1,590,000 1,590,000
A1+ Washington Public Power Supply Authority, Projects #1 & #3, Series 1993
A-3, VRDN, 3.95%, 7/1/18 ......................................... 1,895,000 1,895,000
-----------
TOTAL WASHINGTON .............................................. 3,485,000
-----------
TOTAL INVESTMENT PORTFOLIO -- 100.7% (cost $166,674,031) ............. 166,674,031
-----------
OTHER ASSETS AND LIABILITIES -- (0.7)%
Cash .......................................................................................... 74,550
Receivable for Investments sold ............................................................... 200,000
Receivable for capital stock sold ............................................................. 10,612
Interest receivable and other assets .......................................................... 1,137,650
Dividend payable .............................................................................. (379,040)
Payable for investments purchased ............................................................. (2,053,095)
Payable for capital stock redeemed ............................................................ (11,000)
Management fee payable (note 4) ............................................................... (51,144)
Accrued expenses (note 4) ..................................................................... (149,175)
-----------
(1,220,642)
-----------
</TABLE>
See notes to financial statements.
11
<PAGE>
MANAGED TAX-FREE FUND (CONTINUED)
<TABLE>
<CAPTION>
CREDIT VALUE
RATING* (NOTE 2a)
- ------ ---------
<S> <C>
NET ASSETS -- 100.0%
Applicable to 165,453,389 shares of $.001 par value Capital Stock outstanding;
1,000,000,000 shares authorized (note 7) ...................................................... $165,453,389
============
NET ASSET VALUE PER SHARE ..................................................................... $1.00
=====
</TABLE>
** Cost for federal income tax purposes.
* CREDIT RATINGS (UNAUDITED) SHOWN ARE EITHER BY MOODY'S INVESTORS SERVICE,
INC., STANDARD & POOR'S CORPORATION OR SCUDDER, STEVENS & CLARK
MOODY'S STANDARD &
POOR'S
P1 A1/A1+ Commercial paper of the highest quality.
MIG1 SP1/SP1+ Short-term tax-exempt instrument of the best quality
with strong protection.
VMIG1 Short-term tax-exempt variable rate demand instrument of
the best quality with strong protection.
ABBREVIATIONS USED IN THE STATEMENT:
TECP Tax Exempt Commercial Paper VRDN Variable Rate Demand Note
GO General Obligation RAN Revenue Anticipation Note
TAN Tax Anticipation Note TRAN Tax Revenue Anticipation Note
SS&C These securities are not rated by either Moody's or
Standard & Poor's. Scudder has determined that these
securities are of comparable quality to rated acceptable
notes on a cash flow basis and are of appropriate credit
for the standards required by the Fund's investment
objective.
See notes to financial statements.
12
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MANAGED
GOVERNMENT MANAGED MANAGED
SECURITIES CASH TAX-FREE
FUND FUND FUND
---------- ------- --------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 3,767,953 $ 20,334,389 $ 5,235,778
------------ ------------ -----------
EXPENSES (note 2c):
Management fee (note 4) 281,243 1,502,570 587,278
Shareholder services (notes 4, 5 and 6) 164,973 627,468 331,052
Directors' fees and expenses (note 4) 9,174 12,877 12,742
Custodian and accounting fees (note 4) 49,201 98,383 74,340
Professional services 6,196 39,394 20,298
Reports to shareholders 3,480 17,828 6,467
Registration fees 13,934 23,652 15,441
Miscellaneous 9,779 18,533 11,496
------------ ------------ -----------
Total expenses before reductions 537,980 2,340,705 1,059,114
Expense reductions (note 4) (150,102) (274,989) --
------------ ------------ -----------
Expenses, net 387,878 2,065,716 1,059,114
------------ ------------ -----------
NET INVESTMENT INCOME AND INCREASE IN NET
ASSETS FROM OPERATIONS $ 3,380,075 $ 18,268,673 $ 4,176,664
============ ============ ===========
</TABLE>
See notes to financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
MANAGED GOVERNMENT
SECURITIES FUND
-------------------------------
1996 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income and increase
in net assets from operations ........ $ 3,380,075 $ 3,681,354
Dividends (notes 2b and 2d) ............. (3,380,075) (3,681,354)
------------- -------------
-- --
------------- -------------
CAPITAL STOCK TRANSACTIONS (note 7):
Proceeds from sale of shares ............ 475,466,734 229,035,361
Net asset value of shares issued in
reinvestment of dividends ............ 2,288,409 2,961,712
------------- -------------
477,755,143 231,997,073
Cost of shares redeemed ................. (499,812,580) (250,578,326)
------------- -------------
Increase (decrease) in net assets
from capital stock transactions ...... (22,057,437) (18,581,253)
------------- -------------
Total increase (decrease) in net assets .... (22,057,437) (18,581,253)
NET ASSETS:
Beginning of year .......................... 49,975,724 68,556,977
------------- -------------
End of year ................................ $ 27,918,287 $ 49,975,724
============= =============
See notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
MANAGED CASH FUND MANAGED CASH FUND
----------------------------------- ----------------------------------
1996 1995 1996 1995
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income and increase
in net assets from operations ........ $ 18,268,673 $ 20,682,893 $ 4,176,664 $ 4,313,224
Dividends (notes 2b and 2d) ............. (18,268,673) (20,682,893) (4,176,664) (4,313,224)
---------------- --------------- --------------- ---------------
-- -- -- --
---------------- --------------- --------------- ---------------
CAPITAL STOCK TRANSACTIONS (note 7):
Proceeds from sale of shares ............ 2,285,419,535 2,168,020,988 605,388,558 561,389,929
Net asset value of shares issued in
reinvestment of dividends ............ 10,791,498 11,385,987 2,369,718 2,171,918
---------------- --------------- --------------- ---------------
2,296,211,033 2,179,406,975 607,758,276 563,561,847
Cost of shares redeemed ................. (2,236,431,853) (2,174,994,810) (580,696,936) (549,766,530)
---------------- --------------- --------------- ---------------
Increase (decrease) in net assets
from capital stock transactions ...... 59,779,180 4,412,165 27,061,340 13,795,317
---------------- --------------- --------------- ---------------
Total increase (decrease) in net assets .... 59,779,180 4,412,165 27,061,340 13,795,317
NET ASSETS:
Beginning of year .......................... 371,519,095 367,106,930 138,392,049 124,596,732
---------------- --------------- --------------- ---------------
End of year ................................ $ 431,298,275 $ 371,519,095 $ 165,453,389 $ 138,392,049
================ =============== =============== ===============
</TABLE>
See notes to financial statements.
15
<PAGE>
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
OPERATING INVESTMENT
NET ASSET NET ASSET EXPENSES INCOME NET ASSETS
VALUE, AT NET VALUE,AT TO AVERAGE TO AVERAGE END OF
BEGINNING INVESTMENT DIVIDENDS END TOTAL DAILY DAILY PERIOD
PERIOD OF PERIOD INCOME PAID OF PERIOD RETURN NET ASSETS(a) NET ASSETS (MILLIONS)
- ---------------------- --------- ---------- --------- --------- ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGED GOVERNMENT
SECURITIES FUND
Year ended 12/31/96 ........ $ 1.00 $ .048 $ (.048) $ 1.00 4.91%* 0.55% 4.81% $28
Year ended 12/31/95 ........ 1.00 .054 (.054) 1.00 5.49* 0.55 5.36 50
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
MANAGED CASH FUND
Year ended 12/31/96 ........ 1.00 .049 (.049) 1.00 4.97* 0.55 4.86 431
Year ended 12/31/95 ........ 1.00 .054 (.054) 1.00 5.57* 0.55 5.45 372
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
MANAGED TAX-FREE FUND
Year ended 12/31/96 ........ 1.00 .028 (.028) 1.00 2.88 0.72 2.84 165
Year ended 12/31/95 ........ 1.00 .032 (.032) 1.00 3.30 0.79 3.25 138
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
</TABLE>
(a) The annualized operating expense ratio including expenses reimbursed,
management fee and other expenses not imposed would have been, for the
Managed Government Securities Fund, and Managed Cash Fund, 0.77%, and 0.62%,
for the year ended December 31, 1996, respectively; 0.86%, and 0.68%, for
the year ended December 31, 1995, respectively; 0.84%, and 0.68%, for the
year ended December 31, 1994, respectively; 0.77%, and 0.66%, for the year
ended December 31, 1993, respectively; 0.76%, and 0.64%, for the year ended
December 31, 1992, respectively.
* Total returns are higher, for the periods indicated, due to the maintenance
of the Fund's expenses.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Scudder Fund, Inc. (the "Company") is an open-end diversified management
investment company which currently includes three active money market investment
portfolios: Managed Government Securities Fund, Managed Cash Fund, and Managed
Tax-Free Fund (collectively, the "Funds"). The Managed Federal Securities Fund
ceased operations on November 29, 1996.
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 Subchapter M of 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.
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.
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 until December 31, 1996, 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.
For the year ended December 31, 1996, Scudder did not impose fees
amounting to $150,102 and $274,989 on the Managed Government Securities Fund and
the Managed Cash Fund, respectively.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Scudder Service Corporation ("SSC"), a subsidiary of Scudder, is the
Company's shareholder service, transfer and dividend disbursing agent. For the
year ended December 31, 1996, the amount charged to the Company by SSC
aggregated $23,477 for the Managed Government Securities Fund, $66,490 for the
Managed Cash Fund, and $23,477 for the Managed Tax-Free Fund, of which $2,292,
$5,556, and $2,292 respectively, remain unpaid at December 31, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder, is
responsible 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, 1996, the amount charged to the Funds by SFAC aggregated $30,000
for the Managed Government Securities Fund, $48,900 for the Managed Cash Fund,
and $39,965 for the Managed Tax-Free Fund, of which $2,500, $4,177, and $3,306,
respectively, remain unpaid at December 31, 1996.
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 $205,224, 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, 1996, payments by the Funds pursuant to these arrangements
aggregated $135,832 for the Managed Government Securities Fund, $536,533 for the
Managed Cash Fund and $301,843 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 Fund 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.
7. CAPITAL STOCK
At December 31, 1996, 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 have been designated for the Managed Tax-Free Fund. Net
paid in capital in excess of par value was $27,890,369, for the Managed
Government Securities Fund, $430,866,977 for the Managed Cash Fund and
$165,287,936 for the Managed Tax-Free Fund.
18
<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
Managed Government 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, 1996, 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, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
when confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 19, 1997
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1996 DIVIDENDS (UNAUDITED)
The total amount of dividends declared in 1996 by each of the Government
Portfolio and Cash Portfolio 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 Tax-Free Portfolio declared in 1996 are
exempt from Federal income tax. However, in accordance with the Internal Revenue
Code, you are required to report them on your 1996 Federal income tax return.
Although dividend income from the Tax-Free Portfolio 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.
- --------------------------------------------------------------------------------
19
<PAGE>
Managed Government
Securities Fund
Managed Cash Fund
Managed Tax-Free Fund
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager
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 9242
Boston, Massachusetts 02205
Legal Counsel
Sullivan & Cromwell
New York, New York
-----------------
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.
MANAGED GOVERNMENT
SECURITIES FUND
MANAGED CASH FUND
MANAGED TAX-FREE FUND
ANNUAL REPORT
DECEMBER 31, 1996
