SCUDDER FUND INC, 497, 1998-05-08

SCUDDER FUND INC
497, 1998-05-08

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Scudder Fund, Inc. (the "Corporation") 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. Each Fund 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 combined Statement of Additional
Information dated May 1, 1998, as amended from time to time, may be obtained
without charge by writing Scudder Kemper Investments, Inc., 222 S. Riverside
Plaza, 26th Floor, Attn: Institutional Funds, Client Services, Chicago, IL 60606
or calling 1-800-537-3177. 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
Institutional Shares

- ------------------------------
o Scudder Money Market Series

o Scudder Tax Free
Money Market Series

o Scudder Government
Money Market Series
- ------------------------------

Prospectus
May 1, 1998

As Revised May 6, 1998

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: 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 fiscal year ended December 31, 1998.

Investment management fee (after waiver) 0.20%*** 0.15%*** 0.10%***
12b-1 fees NONE NONE NONE
Other expenses 0.06% 0.22% 0.21%
----- ----- -----
Total operating expenses (after waiver) 0.26%*** 0.37%*** 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 $ 4 $ 3

Three Years $ 8 $12 $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 April 30, 1999, the Adviser has agreed to waive a portion of its
investment management fee (see "Investment Adviser" section of this
prospectus for more information). 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 0.47% and Scudder Government Money Market Series
0.46% for the fiscal year ending December 31, 1998.

2
<PAGE>

Financial highlights

Scudder Institutional Shares/Money Market Series

The following table includes selected data for a share of the Institutional
Shares class outstanding throughout the period 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, 1997, which
may be obtained without charge by writing or calling Scudder Investor
Services, Inc.

<TABLE>
<CAPTION>
For the Period
August 4, 1997
(commencement
of sale of
Institutional
Shares) to
December 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C>
---------------
Net asset value, beginning of period ............................................. $1.000
---------------
Net investment income ............................................................ .022
Distributions from net investment income ......................................... (.022)
---------------
Net asset value, end of period ................................................... $1.000
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................. 2.25**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................... 338
Ratio of operating expenses, net to average daily net assets (%) ................. .26*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) .................................................................... .31*
Ratio of net investment income to average daily net assets (%) ................... 5.39*
</TABLE>

(a) Total return is higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized

3
<PAGE>

Financial highlights

Scudder Institutional Shares/Tax Free Money Market Series

<TABLE>
<CAPTION>
For the Period
August 4, 1997
(commencement
of sale of
Institutional
Shares) to
December 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C>
---------------
Net asset value, beginning of period ............................................ $1.000
---------------
Net investment income ........................................................... 0.014
Distributions from net income ................................................... (0.014)
---------------
Net asset value, end of period .................................................. $1.000
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................ 1.40**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .......................................... 94
Ratio of operating expenses, net to average daily net assets (%) ................ .37*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ................................................................... .46*
Ratio of net investment income to average daily net assets (%) .................. 3.36*
</TABLE>

(a) Total return is higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized

4
<PAGE>

Financial highlights

Scudder Institutional Shares/Government Money Market Series

<TABLE>
<CAPTION>
For the Period
August 4, 1997
(commencement
of sale of
Institutional
Shares) to
December 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C>
---------------
Net asset value, beginning of period ............................................ $1.000
---------------
Net investment income ........................................................... .022
Distributions from net investment income ........................................ (.022)
---------------
Net asset value, end of period .................................................. $1.000
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................ 2.17**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .......................................... 54
Ratio of operating expenses, net to average daily net assets (%) ................ .31*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ................................................................... .46*
Ratio of net investment income to average daily net assets (%) .................. 5.21*
</TABLE>

(a) Total return is higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized

5
<PAGE>

A message from the President

Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide, managing more than $200 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts. It is one of the ten
largest mutual fund companies in the U.S.

We helped pioneer money market investing back in 1974. Today, money funds are
not just a sideline, they're one of our areas of focus. Our experienced money
market team currently manages over $17 billion. This makes Scudder Kemper one of
the largest money fund managers in the country.

Millions of shareholders have come to rely on Scudder Kemper Investments'
prudent money management philosophy. Our track record of delivering competitive
yields and maximum stability has covered more that 20 years of interest rate
volatility. We look forward to welcoming you as a shareholder.

/s/ Edmond D. Villani

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 $1 million
o 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 Institutional Shares? 9
Additional information about policies
and investments 10
Distribution and performance information 13
Fund organization 14
Transaction information 16
Shareholder benefits 20
Purchases and redemptions 22
Directors and Officers 23
How to contact Scudder Back cover

<PAGE>

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"). Each 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. 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.

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 agreements). 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
Kemper Investments, 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.

7
<PAGE>

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
Corporation ("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 Corporation'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 Corporation'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 has
certain risks associated with them. For a more complete description, please
refer to the Funds' combined 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
obligation would also affect the other obligations. For example, certain
municipal obligations accrue interest that is paid from revenues of

8
<PAGE>

similar types of 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.

In addition, the Fund may enter into certain 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 has
certain risks associated with it. For a more complete description, please refer
to the Funds' combined 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.

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
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.

9
<PAGE>

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 certain investment restrictions which are designed to reduce each
Fund's investment risk. Fundamental investment restrictions may not be changed
without a vote of shareholders; non-fundamental investment restrictions may be
changed by a vote of the Corporation's Board of Directors. A complete
description of these and other policies and restrictions is contained under
"Investment Restrictions" in the Funds' Statement of Additional Information.

As a matter of fundamental policy, each Fund may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy,
each Fund may not borrow money in an amount greater than 5% of total assets,
except for temporary or emergency purposes.

As a matter of fundamental policy, each Fund may not make loans except through
the lending of portfolio securities or the purchase of debt securities,
interests in indebtedness or through repurchase agreements. Each Fund has
adopted a non-fundamental policy restricting the lending of portfolio securities
to no more than 5% of total assets.

As permitted under current federal rule regulating money market funds, 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 short-term rating 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 short-term rating 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.
Included among second tier securities are a type referred to as "conduit
securities." A conduit security is a security issued by a municipality which
involves an agreement providing for repayment of the security by a person other
than the municipal issuer. 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. None of the Funds will invest more than 5% of its
total assets in securities issued by the issuer of the 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 the greater of 1% of
total assets or $1 million in second tier securities of a single issuer. Scudder
Tax Free Money Market Series will not invest more than 5% of its total assets in
second tier conduit securities or more than the greater of 1% of its total
assets or $1 million in second tier conduit 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

10
<PAGE>

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
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.

Corporate obligations

Investment in corporate debt obligations involves credit and interest rate risk.
The value of fixed-income investments will fluctuate with changes in interest
rates and bond market conditions, tending to rise as interest rates decline and
to decline as interest rates rise. Corporate debt obligations generally offer
less current yield than securities of lower quality, but lower-quality
securities generally have less liquidity, greater credit and market risk, and,
as a result, more price volatility. Longer term bonds are, however, generally
more volatile than bonds with shorter maturities.

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

11
<PAGE>

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, a 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.

Commercial paper

Commercial paper represents short-term unsecured promissory notes issued in
bearer form by bank holding companies, corporations and finance companies. The
Fund may invest in commercial paper that is rated Prime-1 by Moody's or A-1 by
S&P or, if not rated by Moody's or S&P, is issued by companies having an
outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.

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

Each Fund may enter into put transactions with respect to obligations held in
its portfolio with broker/dealers pursuant to a rule under the Investment
Company Act of 1940 (the "1940 Act"), and with commercial banks.

The right of a Fund to exercise a put is unconditional and unqualified. A put is
not transferable by a Fund, although the Fund may sell the underlying securities
to a third party at any time. If necessary and advisable, any Fund may pay for
certain puts either separately in cash or by paying a higher price for portfolio
securities that are acquired subject to such a put (thus reducing the yield to
maturity otherwise available for the same securities). The Funds expect,
however, that puts generally will be available without the payment of any direct
or indirect consideration.

Each 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 a 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, a Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.

Each Fund intends to enter into puts solely to maintain liquidity and does not
intend to exercise its 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 a 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

Each Fund may also purchase long-term fixed rate bonds that have been coupled
with an option granted by a third party financial institution

12
<PAGE>

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. 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. A 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 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 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 to individual
shareholders at a maximum 20% or 28% capital gains rate (depending on the Fund's
holding period for the assets giving rise to the gain), 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

13
<PAGE>

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 to
individual shareholders at a maximum 20% or 28% capital gains rate (depending on
the Fund's holding period for the assets giving rise to the gain), 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.

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., 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

14
<PAGE>

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
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 Kemper
Investments, Inc., a Delaware corporation formerly known as Scudder, Stevens &
Clark, Inc., to manage its daily investment and business affairs subject to the
policies established by the Board of Directors. The Directors have overall
responsibility for the management of the Fund under Maryland law.

Scudder, Stevens & Clark, Inc. ("Scudder"), and Zurich Insurance Company
("Zurich"), an international insurance and financial services organization, have
formed a new global

15
<PAGE>

investment organization by combining Scudder's business with that of Zurich's
subsidiary, Zurich Kemper Investments, Inc. and Scudder has changed its name to
Scudder Kemper Investments, Inc. As a result of the transaction, Zurich owns
approximately 70% of the Adviser, with the balance owned by the Adviser's
officers and employees.

The Adviser receives from each Fund a management fee of 0.25% of each Fund's
average daily net assets. Until April 30, 1999, 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. In
addition, from time to time, the Adviser may voluntarily waive certain
additional expenses of Scudder Money Market Series. The level of this voluntary
waiver is in the Adviser's discretion and is in addition to the Adviser's
agreement to waive a portion of its investment management fee.

Under the Investment Management Agreement with the Adviser, the Fund is
responsible for all of its expenses, including fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of the Fund's accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and governmental fees; the fees and expenses of
the transfer agent; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Trustees, officers and employees
of the Trust who are not affiliated with the Adviser; the cost of printing and
distributing reports and notices to shareholders; and the fees and disbursements
of custodians.

All of the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.

Scudder Kemper Investments, Inc., is located at Two International Place, Boston,
Massachusetts.

Transfer agent

Scudder Service Corporation, c/o Client Services, 222 South Riverside, 26th
Floor, Chicago, IL 60606, 800-537-3177, 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.

Custodian

State Street Bank and Trust Company is the Fund's custodian.

Transaction information

Purchasing shares

It is each Fund's policy not to accept initial investments in its Institutional
Shares class of shares 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 on behalf of a Fund 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 on behalf of a Fund. Investment minimums may also be
waived for Directors and Officers of the Corporation. The Corporation and the

16
<PAGE>

Distributor each reserves 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 Client Services'
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."

Initial purchase by wire

1. Shareholders may open an account by calling toll-free from any
continental state: 1-800-537-3177. 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
DDA#9902-810-2
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 Kemper Investments, Inc.
222 South Riverside Plaza, 26th Floor
Attn: Institutional Funds, Client Services
Chicago, IL 60606

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.

17
<PAGE>

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 correct Social
Security or taxpayer identification numbers. A shareholder may avoid involuntary
redemption by providing Scudder Fund, Inc. with a correct 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
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMPsm"). Signature guarantees
by notaries public are not acceptable. Further documentation, such as copies of
corporate resolutions and instruments of authority, may be requested from
corporations, administrators, executors, personal representatives, trustees or
custodians to evidence the authority of the person or entity making the
redemption request.

4. Mail the letter to the Transfer Agent at the address set forth under
"Purchasing shares."

Checks for redemption proceeds will normally be mailed the day following receipt
of the request in proper form, although the 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

18
<PAGE>

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: 1-800-537-3177, or

2. Fax your request to 1-800-537-9960, or

3. 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
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 Institutional Client Services each reserves 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 each Fund to
withhold 31% of taxable dividends, capital gains distributions, if a Fund fails
to maintain a constant net asset value per share, and redemption and exchange

19
<PAGE>

proceeds from accounts (other than those of certain exempt payees) without a
correct 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 correct 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 correct certified Social Security or tax
identification number. A shareholder may avoid involuntary redemption by
providing a 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 the Funds'
combined 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 Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your 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 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 the Adviser's large staff of economists, research
analysts, traders, and other investment specialists who work in offices across
the United States and abroad. The Adviser believes its team approach benefits
Fund investors by bringing together many disciplines and leveraging its
extensive resources.

Lead Portfolio Manager Frank J. Rachwalski, Jr. assumed responsibility for
setting the Fund's investment strategy and for overseeing the Fund's day-to-day
management in January, 1998. Frank joined the Adviser's Fixed Income Department
in 1973 as its Money Market Specialist. He has been responsible for the trading
and portfolio management of Scudder Kemper's money market fund since its initial
offering in 1974.

John W. Stuebe, Portfolio Manager, joined the Adviser in 1979 as a Fixed Income
Trader for Money Market Securities. Mr. Stuebe is currently a Specialist and
Trader for the Fund Manager's taxable, non-government money market funds.

Mitchell W. Wilner, Portfolio Manager for Scudder Government Money Market
Series, joined the Adviser in 1992 as a Fixed Income Research Analyst and has 11
years' experience working with short-term fixed income investments.

20
<PAGE>

Jerri I. Cohen, Portfolio Manager for Scudder Tax-Free Money Market Series,
joined the Adviser in 1981 as a Money Fund Accounting Supervisor and has 5
years' experience working in tax-exempt money fund investments.

Dividend reinvestment plan

You may have dividends and distributions automatically reinvested in additional
Institutional Shares of each Fund. Please call 1-800-537-3177 to request this
feature.

Shareholder reports

Each Fund sends to its shareholders, semiannually, reports showing the
investments in the Fund and other information (including unaudited financial
statements) pertaining to the Fund. An annual report, containing financial
statements audited by independent accountants, is sent to shareholders each
year.

21
<PAGE>

<TABLE>
<CAPTION>
Purchases and redemptions

-----------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $1,000,000
an account

<S> <C> <C> <C>
Make checks o By Mail Send your completed and signed application and check by regular,
payable to "The express, registered or certified mail to:
Scudder Funds."
Scudder Kemper Investments, Inc.
222 South Riverside Plaza, 26th Floor
Attn: Institutional Funds, Client Services
Chicago, IL 60606

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
payable to "The o By Mail Send a check with a purchase application, or with a letter of
Scudder Funds." instruction including your account number and the complete Fund
name and class, to the address listed above.

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone
shares or Fax To speak with a service representative, call 1-800-537-3177 from
8:30 a.m. to 6 p.m. eastern time. To fax your request, call
1-800-537-9960 and include the information listed below.

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 redeemingfrom;
- 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 mail redemptions over
$100,000.
See Transaction information--Redeeming shares.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

22
<PAGE>

Directors and Officers

Daniel Pierce*
President

Dr. Rosita P. Chang
Director; Professor of Finance, University of
Rhode Island

Dr. J. D. Hammond
Director; Dean, Smeal College of Business
Administration, Pennsylvania State University

Richard M. Hunt
Director; University Marshal and
Senior Lecturer, Harvard University

Edgar R. Fiedler
Director; Vice President and Economic
Counsellor, The Conference Board, Inc.

Peter B. Freeman
Director; Corporate Director and Trustee

Thomas W. Joseph*
Vice President and Assistant Secretary

Thomas F. McDonough*
Vice President, Secretary and Treasurer

Jerard K. Hartman*
Vice President

Frank J. Rachwalski, Jr.*
Vice President

David B. Wines*
Vice President

Kathryn L. Quirk*
Vice President

John R. Hebble*
Assistant Treasurer

Caroline Pearson*
Assistant Secretary

* Sudder Kemper Investments, Inc.

23
<PAGE>

How to contact Scudder

Account Set-up, Service and Information:

Institutional Funds Client Services
1-800-537-3177

Other Scudder Funds
1-800-225-5163

Correspondence:

Fax: 1-800-537-9960

Mail: Scudder Kemper Investments
222 S. Riverside Plaza -- 26th Floor
Attn: Institutional Funds -- Client Services
Chicago, IL 60606

<PAGE>

SCUDDER FUND, INC.
Two International Place
Boston, MA 02110-4103
1-800-553-6360

Scudder Fund, Inc. is a professionally managed, open-end,
diversified management investment company comprised of three diversified
money market investment portfolios.

SCUDDER MONEY MARKET SERIES
SCUDDER TAX FREE MONEY MARKET SERIES
SCUDDER GOVERNMENT MONEY MARKET SERIES

Mutual fund portfolios, each seeking to provide high
money-market income with preservation of capital
and liquidity through investments in different
types of instruments.

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Statement of Additional Information

May 1, 1998

As Revised May 6, 1998

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This combined Statement of Additional Information is not a prospectus
and should be read in conjunction with the applicable prospectuses of Scudder
Fund, Inc. dated May 1, 1998, 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.

TABLE OF CONTENTS
Page

THE FUNDS AND THEIR OBJECTIVES........................................................................................1
General Investment Objectives and Policies...................................................................1
Master/feeder structure......................................................................................1
Cash Fund....................................................................................................1
Tax Free Fund................................................................................................3
Government Fund..............................................................................................4
Investment Restrictions......................................................................................4

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES............................................................................5

PURCHASING SHARES.....................................................................................................6
Wire Transfer of Federal Funds...............................................................................7
Additional Information About Making Subsequent Investments by QuickBuy.......................................7
Share Certificates...........................................................................................8

EXCHANGES AND REDEMPTIONS.............................................................................................8
Exchanges....................................................................................................8
Redemption by Telephone......................................................................................9
Redemption By QuickSell.....................................................................................10
Redemption by Mail or Fax...................................................................................10
Redemption by Write-a-Check.................................................................................11

FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................11
The Pure No-Load(TM) Concept................................................................................11
Dividend and Capital Gain Distribution Options..............................................................12
Scudder Investor Centers....................................................................................12
Reports to Shareholders.....................................................................................13
Diversification.............................................................................................13
Transaction Summaries.......................................................................................13
Internet access.............................................................................................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 Roth IRA: Individual Retirement Account............................................................20
Scudder 403(b) Plan........................................................................................ 21
Automatic Withdrawal Plan...................................................................................21
Group or Salary Deduction Plan..............................................................................21
Uniform Transfers/Gifts to Minors Act.......................................................................21

DIVIDENDS........................................................................................................... 22

PERFORMANCE INFORMATION..............................................................................................22
Yield.......................................................................................................22
Effective Yield.............................................................................................23
Average Annual Total Return.................................................................................23
Cumulative Total Return.....................................................................................24
Total Return................................................................................................24
Tax-Equivalent Yield........................................................................................24
Comparison of Fund Performance............................................................................. 25

THE PROGRAM..........................................................................................................28

ORGANIZATION OF THE FUNDS............................................................................................28

INVESTMENT ADVISER...................................................................................................29
Personal Investments by Employees of the Adviser............................................................31

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DISTRIBUTOR......................................................................................................... 32

DIRECTORS AND OFFICERS...............................................................................................32

REMUNERATION.........................................................................................................34
Responsibilities of the Board--Board and Committee Meetings.................................................34
Compensation of Officers and Directors..................................................................... 35

TAXES................................................................................................................35

PORTFOLIO TRANSACTIONS...............................................................................................37

NET ASSET VALUE......................................................................................................38

ADDITIONAL INFORMATION.............................................................................................. 39
Experts.................................................................................................... 39
Other Information.......................................................................................... 39

FINANCIAL STATEMENTS................................................................................................ 40

APPENDIX
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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 diversified
investment portfolios comprising Scudder Fund, Inc. (the "Corporation"), a
professionally managed open-end, diversified management investment company. Each
Fund seeks to provide investors with as high a level of current income as is
consistent with its 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 Kemper Investments, Inc. (the
"Adviser"), a leading provider of U.S. and international investment management
services for clients throughout the world. See "Investment Adviser."

Master/feeder structure

The Board of Directors has the discretion to retain the current
distribution arrangement for each Fund while investing in a master fund in a
master/feeder fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities, invests most
or all of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.

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.

<PAGE>

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 is limited by its
nonfundamental policy to the amount of its total assets that may be in
investments that are not illiquid 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.

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 Corporation ("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 Corporation'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.

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<PAGE>

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.

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.

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 types of projects; other
municipal obligations have issuers located in the same state.

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<PAGE>

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.

The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In addition, certain municipal obligations might lose tax-exempt
status in the event of a change in the tax laws.

In addition, the Fund may enter into repurchase agreements, and invest
in variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features. 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.

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<PAGE>

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
taxes and are not subject to the alternative minimum tax. The foregoing
constitutes a fundamental policy that cannot be changed without the approval of
a majority of the outstanding shares of the Fund.

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, a Fund.

Each Fund has elected to be classified as a diversified series of an
open-end investment company.

In addition, as a matter of fundamental policy, each Fund may not:

(1) borrow money, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

(2) issue senior securities, except as permitted under the 1940
Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

(3) engage in the business of underwriting securities issued by
others, except to the extent that the Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities;

(4) purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages
or investments secured by real estate or interests therein,
except that the Fund reserves freedom of action to hold and to
sell real estate acquired as a result of the Fund's ownership
of securities;

(5) purchase physical commodities or contracts relating to
physical commodities;

(6) make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests
in indebtedness in accordance with the Fund's objective and
policies may be deemed to be loans; or

(7) concentrate its investments in a particular industry, as that
term is used in the 1940 Act, as amended, and as interpreted
or modified by regulatory authority having jurisdiction, from
time to time.

As a matter of nonfundamental policy, each Fund currently does not intend to:

(1) borrow money in an amount greater than 5% of its total assets,
except for temporary or emergency purposes; or

(2) lend portfolio securities in an amount greater than 5% of its
total assets.

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.

5
<PAGE>

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 the issuer's 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 by the issuers 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 5% of the current value
of its total assets. Loans of securities by a Fund will be subject to
termination at the Fund's or the borrower's option. Each Fund may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the 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 Corporation. The Funds,

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Scudder Investor Services, Inc. and Scudder Financial Intermediary Services
Group each reserves 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 of such class 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.

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 QuickBuy

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
Exchange, normally 4 p.m. eastern time. 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 Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. QuickBuy 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 QuickBuy 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. QuickBuy transactions are not
available for most retirement plan accounts. However, QuickBuy transactions are
available for Scudder IRA accounts.

In order to request purchases by QuickBuy, 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 QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.

7
<PAGE>

Each Fund employs 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 each 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 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.

The Funds have authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Funds' shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on each Fund's behalf. Orders for purchase or redemption will be deemed
to have been received by a Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between a Fund and the
broker, ordinarily orders will be priced at that Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of a Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Directors and the Distributor, also the Funds' principal underwriter,
each has the right to limit the amount of purchases by, and to refuse to sell
to, any person. The Directors and the Distributor may suspend or terminate the
offering of shares of a Fund at any time for any reason.

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.

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 the
Funds' prospectuses.

8
<PAGE>

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 reserves 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 the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated. The exchange privilege may not be
available for certain Scudder funds or classes thereof. For more information,
please call 1-800-225-5163.

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
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.

9
<PAGE>

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 QuickSell

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickSell program may sell shares of the Fund by telephone. To sell
shares by QuickSell, shareholders should call before the close of regular
trading on the Exchange, normally 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 two or three business days following your call. For
requests received by the close of regular trading on the Exchange, normally 4
p.m. eastern time, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. QuickSell 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. QuickSell transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.

In order to request redemptions by QuickSell, 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 QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing an QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.

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

Redemption by 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 the
Funds' prospectuses.

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).

10
<PAGE>

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.

FEATURES AND SERVICES OFFERED BY THE FUNDS

(See "Shareholder benefits" in the Funds' prospectuses.)

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.

11
<PAGE>

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.

======================== ---------------------- ---------------------- ---------------------- ======================
YEARS ScudderPure No-Load(TM) 8.50% Load Fund Load Fund with 0.75% No-Load Fund with
Fund 12b-1 Fee 0.25% 12b-1 Fee
======================== ---------------------- ---------------------- ---------------------- ======================

10 $25,937 $23,733 $24,222 $25,354
======================== ---------------------- ---------------------- ---------------------- ======================

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.

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 for Premium
and Managed Classes of Shares may change their dividend option by calling
1-800-225-5163 and 1-800-537-3177 for Institutional Class of Shares or for all
classes 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

12
<PAGE>

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 for
Premium and Managed Classes of Shares and 1-800-537-3177 for Institutional Class
of Shares.

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.

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.

13
<PAGE>

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.

MONEY MARKET

Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current
income. The Fund seeks to maintain a constant net asset value of $1.00
per share, although in certain circumstances this may not be possible,
and declares dividends daily.

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. SCIT seeks to maintain a
constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible, and declares dividends daily.

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, but there is no
assurance that it will be able to do so. 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 seeks
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. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.

TAX FREE MONEY MARKET

Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt
from regular federal income tax and stability of principal through
investments primarily in municipal securities. STFMF seeks to maintain
a constant net asset value of $1.00 per share, although in extreme
circumstances this may not be possible.

Scudder California Tax Free Money Fund* seeks stability of capital and
the maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value
will be maintained.

- ---------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

14
<PAGE>

Scudder New York Tax Free Money Fund* seeks stability of capital and
the maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There
can be no assurance that the stable net asset value will be maintained.

TAX FREE

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 Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation. The Fund will invest primarily in high-grade,
intermediate-term bonds.

Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.

Scudder High Yield Tax Free Fund seeks to provide a high level of
interest income, exempt from regular federal income tax, from an
actively managed portfolio consisting primarily of investment-grade
municipal securities.

Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and
regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of California municipal securities.

Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a
professionally managed portfolio consisting primarily of
investment-grade municipal securities.

Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income
tax and regular federal income tax. The Fund is a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.

Scudder New York Tax Free Fund* seeks to provide New York taxpayers
with income exempt from New York State and New York City personal
income taxes and regular federal income tax. The Fund is a
professionally managed portfolio consisting primarily of New York
municipal securities.

Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income
tax. The Fund is a professionally managed portfolio consisting
primarily of investment-grade municipal securities.

Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal
securities.

U.S. INCOME

Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.

Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.

- ---------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

15
<PAGE>

Scudder GNMA Fund seeks to provide high current income primarily from
U.S. Government guaranteed mortgage-backed (Ginnie Mae) securities.

Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.

Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.

GLOBAL INCOME

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 International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. 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 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 by
governments and corporations in emerging markets.

ASSET ALLOCATION

Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will 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 to provide investors
with 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 for investors. Total return consists of any capital appreciation
plus dividend income and interest. To achieve this objective, the
Portfolio invests in a select mix of established international and
global Scudder funds.

U.S. GROWTH AND INCOME

Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund
also seeks long-term preservation of capital through a quality-oriented
approach that is designed to reduce risk.

Scudder Growth and Income Fund seeks long-term growth of capital,
current income, and growth of income.

Scudder S&P 500 Index Fund seeks to provide investment results that,
before expenses, correspond to the total return of common stocks
publicly traded in the United States, as represented by the Standard &
Poor's 500 Composite Stock Price Index.

16
<PAGE>

Scudder Real Estate Investment Fund seeks long-term capital growth and
current income by investing primarily in equity securities of companies
in the real estate industry.

U.S. GROWTH

Value

Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.

Scudder Value Fund** seeks long-term growth of capital through
investment in undervalued equity securities.

Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.

Growth

Scudder Classic Growth Fund** seeks to provide long-term growth of
capital with reduced share price volatility compared to other growth
mutual funds.

Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.

Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.

SCUDDER CHOICE SERIES

Scudder Financial Services Fund seeks long-term growth of capital
primarily through investment in equity securities of financial services
companies.

Scudder Health Care Fund seeks long-term growth of capital primarily
through investment in securities of companies that are engaged in the
development, production or distribution of products or services related
to the treatment or prevention of diseases and other medical problems.

Scudder Technology Fund seeks long-term growth of capital primarily
through investment in securities of companies engaged in the
development, production or distribution of technology-related products
or services.

GLOBAL GROWTH

Worldwide

Scudder Global Fund seeks long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt
securities convertible into common stocks.

- ----------------------
** Only the Scudder Shares are part of the Scudder Family of Funds.

17
<PAGE>

Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.

Scudder International Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity
securities.

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 Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.

Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.

Regional

Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.

Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.

Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.

The Japan Fund, Inc. seeks long-term capital appreciation by
investing primarily in equity securities (including American
Depository Receipts) of Japanese companies.

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. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. For more information, please call
1-800-225-5163.

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. The

- -----------------
** Only the Scudder Shares are part of the Scudder Family of Funds.

18
<PAGE>

discussions of the plans below describe only certain aspects of the federal
income tax treatment of the plans. The state tax treatment may be different and
may vary from state to state. It is advisable for an investor considering the
funding of the investment plans 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 as to form.

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.)

19
<PAGE>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of -------------------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
<S> <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>

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>
<CAPTION>
- --------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of -------------------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
<S> <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 Roth IRA: Individual Retirement Account

Shares of the Funds may be purchased as the underlying investment for a
Roth individual Retirement Account which meets the requirements of Section 408A
of the Internal Revenue Code.

A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.

An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.

All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions of earnings from a Roth IRA
are taxable and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical expenses, the
purchase of health insurance for an unemployed individual and education
expenses.

An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.

20
<PAGE>

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 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
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.

21
<PAGE>

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 based on the
following periods: Institutional Class of Shares from July 7, 1997 through
December 31, 1997, Managed Class of Shares from December 31, 1996 through
December 31, 1997 and Premium Class of Shares from August 4, 1997 through
December 31, 1997. These performance figures may be calculated in the following
manner:

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, 1997 for the Institutional Shares were
5.66% for the Money Market, 3.74% for the Tax Free Fund and 5.48% for the
Government Fund; for the Managed Shares were 5.45% for the Money Market Fund,
3.65% for the Tax Free Fund and 5.07% for the Government Fund; and 5.50% for the
Premium Money Market Shares. Each Fund's yield may fluctuate daily and does not
provide a basis for determining future yields. The foregoing yields were
computed separately for each class of each Fund 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.

22
<PAGE>

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 a 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, 1997 for the Institutional Shares were 5.66% for the Money Market,
3.74% for the Tax Free Fund and 5.48% for the Government Fund; for the Managed
Shares were 5.45% for the Money Market Fund, 3.65% for the Tax Free Fund and
5.07% for the Government Fund; and 5.50% for the Premium Money Market Shares.

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
and is calculated separately for each class of each Fund. 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 the same class of Fund shares. Average annual total
return is calculated by finding the average annual compound rates of return of a
hypothetical investment over such periods, according to the following formula
(average annual total return is then expressed as a percentage):

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

Average Annual Total Return for periods ended December 31, 1997

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Since One Year** Five Years** Ten Years**
Inception*

Institutional Class of Shares

Scudder Money Market Series 2.25% N/A N/A N/A
Scudder Tax Free Money Market Series 1.40% N/A N/A N/A
Scudder Government Money Market Series 2.17% N/A N/A N/A

Managed Class of Shares

Scudder Money Market Series N/A 5.21% 4.48% 5.61%
Scudder Tax Free Money Market Series N/A 3.07% 2.67% 3.64%
Scudder Government Money Market Series N/A 5.02% 4.37% 5.45%
Premium Class of Shares 2.62% N/A N/A N/A

23
<PAGE>

* The Institutional Class of each Fund and the Premium Class of Cash Fund
commenced operations on July 7, 1997, and August 4, 1997, respectively.
** Since the inception date of the Institutional Class of each Fund and
the Premium Class of Cash Fund, no shares of either class were
outstanding during the relevant time periods.
</TABLE>

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 separately for
each class of shares of a Fund 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, 1997

Since One Year** Five Years** Ten Years**
Inception*

Institutional Class of Shares

Money Market Fund 2.25% N/A N/A N/A
Tax Free Fund 1.40% N/A N/A N/A
Government Fund 2.17% N/A N/A N/A

Managed Class of Shares

Money Market Fund N/A 5.21% 24.50% 72.67%
Tax Free Fund N/A 3.07% 14.10% 43.00%
Government Fund N/A 5.02% 23.83% 70.07%
Premium Money Market Shares 2.62% N/A N/A N/A
</TABLE>

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 separately
for each class of shares of a Fund 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 39.6% would need to earn a taxable yield of 6.08% to receive after-tax

24
<PAGE>

income equal to the 3.67% tax-free yield of Institutional Class of Shares for
Scudder Tax Free Money Market Series for the 7-day period ended December 31,
1997.

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 Corporation, 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

25
<PAGE>

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
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.

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.

26
<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.

SmartMoney, 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.

27
<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)
shares of Capital Stock were classified as shares of Scudder Money Market

28
<PAGE>

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, class 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 class or 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.

INVESTMENT ADVISER

(See "Fund organization--Investment adviser" in the Funds' Prospectuses)

Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the predecessor
of which is Scudder, Stevens & Clark, Inc., is one of the most experienced

29
<PAGE>

investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Adviser introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, Scudder,
Stevens & Clark, Inc. ("Scudder") entered into an agreement with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich agreed to form
an alliance. On December 31, 1997, Zurich acquired a majority interest in
Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.

Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings have
resulted from its operations as an insurer as well as from its ownership of its
subsidiaries and affiliated companies (the "Zurich Insurance Group"). Zurich and
the Zurich Insurance Group provide an extensive range of insurance products and
services and have branch offices and subsidiaries in more than 40 countries
throughout the world. As of December 31, 1997, the Adviser and its affiliates
had in excess of $200 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. 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 each Fund. 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 Investment Management Agreements ("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 had 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 beginning July 7, 1997 and extending to April 30,
1999 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.

30
<PAGE>

In addition, from time to time, the Adviser may voluntarily absorb
certain additional expenses of Scudder Money Market Series. The level of this
voluntary absorption shall be in the Adviser's discretion and is in addition to
the Adviser's agreement to waive a portion of its investment management fee.

For the Corporation's fiscal year ended December 31, 1997, the Adviser
did not impose fees of $374,936, $69,182, and $129,520 and did impose fees of
$1,301,440, $337,288, and $11,942, of which $123,101, $11,560, and $66,141,
remain unpaid, for the Money Market Series, Tax Free Money Market Series, and
Government Money Market Series, respectively.

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
$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.

Each 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.

Each 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.

31
<PAGE>

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 may enter into agreements with other broker/dealers
for the distribution of Fund shares. 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 each Fund. In addition, the Underwriting Agreement
obligates the Distributor to pay certain expenses in connection with the
offering of the shares of each 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. The Distributor may enter
into agreements with other broker dealers for the distribution of fund shares.

DIRECTORS AND OFFICERS

The principal occupations of the Directors and executive officers of
the Corporation for the past five years are listed below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>

Name (Age) and Address Position with Principal Occupation** Position with
Corporation Underwriter, Scudder
Investor Services,
Inc.

Daniel Pierce (64)+*# President Managing Director of Scudder Vice President,
Kemper Investments, Inc. Director and Assistant
Treasurer

Dr. Rosita P. Chang (43)PACAP Trustee Professor of Finance, --
Research CenterCollege of University of Rhode Island
Business
AdministrationUniversity of Rhode
Island7 Lippitt RoadKingston, RI
02881-0802

Dr. J. D. Hammond (64)801 Trustee Dean, Smeal College of --
Business Administration Business Administration,
Bldg.Pennsylvania State Pennsylvania State University
UniversityUniversity Park, PA
16802

Edgar R. Fiedler (69)#50023 Director Senior Fellow and Economic --
BrogdenChapel Hill, NC 27514 Counsellor, The Conference
Board, Inc.

Peter B. Freeman (65)100 Alumni Director Corporate Director and --
AvenueProvidence, RI 02906 Trustee

32
<PAGE>
Name (Age) and Address Position with Principal Occupation** Position with
Corporation Underwriter, Scudder
Investor Services,
Inc.

Richard M. Hunt (71)University Director University Marshal and
Marshal's OfficeWadsworth Senior Lecturer, Harvard
House1341 Massachusetts University
AvenueHarvard
UniversityCambridge, MA 02138

Jerard K. Hartman (65)++ Vice President Managing Director of Scudder --
Kemper Investments, Inc.

Thomas W. Joseph (58)+ Vice President and Senior Vice President of Vice President,
Assistant Secretary Scudder Kemper Investments, Director, Treasurer
Inc. and Assistant Clerk

Thomas F. McDonough (51)+ Vice President, Senior Vice President of Assistant Clerk
Treasurer and Scudder Kemper Investments,
Secretary Inc.

Frank J. Rachwalski, Jr. (53)+++ Vice President Senior Vice President of --
Scudder Kemper Investments,
Inc.

John R. Hebble (39)+ Assistant Treasurer Senior Vice President of --
Scudder Kemper Investments,
Inc.

Caroline Pearson (35)+ Assistant Secretary Director, Mutual Fund --
Administration, Scudder
Kemper Investments, Inc.

David B. Wines (42)++++ Vice President Senior Vice President of --
Scudder Kemper Investments,
Inc.

Kathryn L. Quirk (45)++ Vice President Managing Director of Scudder Senior Vice President,
Kemper Investments, Inc. Director and Clerk

* Mr. Pierce is considered by the Corporation to be a person who is an
"interested person" 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 and Fiedler are members of the Executive Committee.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York

+++ Address: 222 South Riverside Plaza, Chicago, Illinois
++++ Address: 333 South Hope Street, 37th Floor, Los Angeles, California

</TABLE>

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

33
<PAGE>

Corporation may reimburse such Directors for all out-of-pocket expenses relating
to attendance at meetings.

As of March 31, 1998, the Directors and Officers of the Company, as a
group, owned less than 1% of the outstanding shares of the Portfolio as of the
commencement of operations.

Certain accounts for which the Adviser acts as investment adviser owned
189,946,316 shares in the aggregate, or 24.67% of the outstanding shares of
Scudder Money Market Series on March 31,1998. The Adviser may be deemed to be
the beneficial owner of such shares but disclaims any beneficial ownership in
such shares.

Certain accounts for which the Adviser acts as investment adviser owned
117,920,280 shares in the aggregate, or 50.36% of the outstanding shares of
Scudder Tax Free Money Market Series on March 31,1998. The Adviser may be deemed
to be the beneficial owner of such shares but disclaims any beneficial ownership
in such shares.

Certain accounts for which the Adviser acts as investment adviser owned
12,762,216 shares in the aggregate, or 13.44% of the outstanding shares of
Scudder Government Money Market Series on March 31,1998. The Adviser may be
deemed to be the beneficial owner of such shares but disclaims any beneficial
ownership in such shares.

As of March 31, 1998, the following shareholders held of record more
than five percent of such Fund:

Scudder Money Market Series. Chemical Bank, Jericho, NY 10017-2014 and
State Street Bank & Trust Co., North Quincy, MA 02171-1753, held of record
8.95%, and 6.33% respectively, of the outstanding shares of the Scudder Money
Market Series.

Scudder Tax Free Money Market Series. Chemical Bank, Jericho, NY
10017-2014, Cudd & Co., New York, NY 10036, State Street Bank & Trust Co., North
Quincy, MA 02171-1753 and Citibank, Long Island City, NY 11120, held of record
26.06%, 7.87%, 7.09% and 5.83%, respectively, of the outstanding shares of the
Scudder Tax Free Money Market Series.

Scudder Government Money Market Series. Citibank, N.A., New York, NY
11120 and Cudd & Co., New York, NY 10036, held of record 16.47% and 12.21%,
respectively, of the outstanding shares of the Scudder Government Money Market
Series.

As of March 31, 1998 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 of such Fund for purpose
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 Kemper Investments, 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
other things, each Fund's 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.

34
<PAGE>

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.

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 1997 from the Company and from all of Scudder funds as a group.
<TABLE>
<CAPTION>
<S> <C> <C>

Name Scudder Fund, Inc.* All Scudder Funds

Dr. Rosita P. Chang $926 $31,946 (21 funds)
Edgar R. Fiedler, Director** ----- $269,334 (31 funds)
Peter B. Freeman, Director $8,971 $137,011 (42 funds)
Dr. J.D. Hammond $926 $32,071 (21 funds)
Robert W. Lear, Director*** $8,246 $14,121 (7 funds)
</TABLE>

* Scudder Fund, Inc. consists of the Cash Fund, Tax Free Fund and Government
Fund.

** Mr. Fiedler received $207,395 through a deferred compensation program. As
of December 31, 1997, Mr. Fiedler had a total of $224,106 accrued in a
deferred compensation program for serving on the Board of Directors of the
Company. In addition, as of December 31, 1997, Mr. Fiedler had a total of
$211,577 accrued in a deferred compensation program for serving on the
Board of Directors of Scudder Institutional Fund, Inc.

*** Mr. Lear retired from the Fund October 23, 1997.

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.

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 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

35
<PAGE>

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 an individual shareholder who is not a dealer in securities may be eligible
for reduced capital gains rates, depending on the shareholder's holding period
for the shares. 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 to
individuals at a maximum 20% or 28% capital gains rate (depending on the Fund's
holding period for the assets giving rise to the gain), 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
by shareholders in determining whether their total incomes are large enough to
result in taxation of up to 85 percent 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."

36
<PAGE>

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.

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.

37
<PAGE>

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

38
<PAGE>

deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to Rule 2a-7, the Board is
required to establish procedures designed to stabilize, to the extent reasonably
possible, such Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's portfolio
holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by using
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 Institutional
Shares, the Premium Shares and the Managed Shares Prospectuses and the Financial
Statements incorporated by reference in this Statement of Additional Information
have been audited by Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York 10036, independent accountants, and are included in the
Prospectuses and this Statement of Additional Information in reliance upon the
accompanying report of said firm, which reports are given upon their authority
as experts in accounting and auditing.

Other Information
<TABLE>
<CAPTION>
<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

Each Fund has a fiscal year end of December 31.

The law firm of Dechert Price & Rhoads is counsel to the Funds.
</TABLE>

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, 1997.

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, 1997, the amount charged to the Funds by SFAC aggregated $109,482 for the
Money Market Series, $56,782 for the Tax Free Money Market Series and $51,695
for the Government Money Market Series, of which $12,144, $5,092 and $2,677,
respectively, remain unpaid at December 31, 1997. 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.

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

39
<PAGE>

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
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, 1997.
For the year ended December 31, 1997 the following amounts were charged:
<TABLE>
<CAPTION>
<S> <C> <C> <C>

Money Market Tax Free Money Government
Series Market Series Money Market
Series
Managed Class $192,796 $ 32,322 $ 43,655
Institutional Class 23,214 23,214 23,214
Premium Class 60,124 --- ---

$276,134 $ 55,536 $ 66,869
======== ======== ========

</TABLE>

The Directors of the Corporation have considered the appropriateness of
using this combined Statement of Additional Information for the Funds. There is
a possibility that a Fund might become liable for any misstatement, inaccuracy,
or incomplete disclosure in this Statement of Additional Information concerning
the other Fund.

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 Funds dated December 31, 1997 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 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 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."

40
<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".

41
<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".