Filed electronically with the Securities and Exchange Commission
on April 30, 1998
File No. 2-78122
File No. 811-3495
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----
Post-Effective Amendment No. 27
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 23
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Scudder Fund, Inc.
--------------------------------------------------
(Exact name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
----------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-3033
--------------
Thomas F. McDonough
Scudder Kemper Investments, Inc.
Two International Place, Boston MA 02110
-----------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b),
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X on May 1, 1998 pursuant to paragraph (b),
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60 days after filing pursuant to paragraph (a)(1),
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on May 1, 1998 pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on __________ pursuant to paragraph (a)(2) of Rule 485.
-----
<PAGE>
SCUDDER FUND, INC.
SCUDDER MONEY MARKET SERIES
SCUDDER PREMIUM MONEY MARKET SHARES
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE
INFORMATION
4. General Description INVESTMENT OBJECTIVE AND POLICIES
of Registrant WHY INVEST IN SCUDDER PREMIUM MONEY
MARKET SHARES OF THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES
AND INVESTMENTS
FUND ORGANIZATION
5. Management of the FINANCIAL HIGHLIGHTS
Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser,
Transfer agent
SHAREHOLDER BENEFITS--A team approach
to investing
DIRECTORS AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of Fund
Performance
6. Capital Stock and DISTRIBUTION AND PERFORMANCE
Other Securities INFORMATION--Dividends and capital
gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line,
Dividend reinvestment plan, T.D.D.
service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of PURCHASES
Securities Being FUND ORGANIZATION--Underwriter
Offered TRANSACTION INFORMATION--Purchasing
shares, Share price, Processing
time, Minimum balances, Third
party transactions
SHAREHOLDER BENEFITS--Dividend
reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT
PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming
shares, Tax identification number,
Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 1
<PAGE>
SCUDDER PREMIUM MONEY MARKET SHARES
(continued)
PART B
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information ORGANIZATION OF THE FUNDS
and History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Brokerage
Commissions, Portfolio Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts,
Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage
and Other Practices Commissions, Portfolio Turnover
18. Capital Stock and ORGANIZATION OF THE FUNDS
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUND
Offered --Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 2
<PAGE>
SCUDDER FUND, INC.
SCUDDER MANAGED SHARES
SCUDDER MONEY MARKET SERIES
SCUDDER TAX FREE MONEY MARKET SERIES
SCUDDER GOVERNMENT MONEY MARKET SERIES
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE
INFORMATION
4. General Description INVESTMENT OBJECTIVE AND POLICIES of
Registrant WHY INVEST IN MANAGED SHARES?
ADDITIONAL INFORMATION ABOUT POLICIES
AND INVESTMENTS
FUND ORGANIZATION
5. Management of the FINANCIAL HIGHLIGHTS
Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser,
Transfer agent
SHAREHOLDER BENEFITS--A team approach
to investing
DIRECTORS AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of Fund
Performance
6. Capital Stock and DISTRIBUTION AND PERFORMANCE
Other Securities INFORMATION--Dividends and capital
gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line,
Dividend reinvestment plan
HOW TO CONTACT SCUDDER
7. Purchase of PURCHASES
Securities Being FUND ORGANIZATION--Underwriter
Offered TRANSACTION INFORMATION--Purchasing
shares, Share price, Processing
time, Minimum balances, Third
party transactions
SHAREHOLDER BENEFITS--Dividend
reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT
PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming
shares, Tax identification number,
Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 3
<PAGE>
SCUDDER MANAGED SHARES
(continued)
PART B
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information ORGANIZATION OF THE FUNDS
and History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Brokerage
Commissions, Portfolio Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts,
Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage
and Other Practices Commissions, Portfolio Turnover
18. Capital Stock and ORGANIZATION OF THE FUNDS
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE
Offered FUND--Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 4
<PAGE>
SCUDDER FUND, INC.
SCUDDER INSTITUTIONAL SHARES
SCUDDER MONEY MARKET SERIES
SCUDDER TAX FREE MONEY MARKET SERIES
SCUDDER GOVERNMENT MONEY MARKET SERIES
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE
INFORMATION
4. General Description INVESTMENT OBJECTIVE AND POLICIES
of Registrant WHY INVEST IN INSTITUTIONAL SHARES?
ADDITIONAL INFORMATION ABOUT POLICIES
AND INVESTMENTS
FUND ORGANIZATION
5. Management of the FINANCIAL HIGHLIGHTS
Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser,
Transfer agent
SHAREHOLDER BENEFITS--A team approach
to investing
DIRECTORS AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of Fund
Performance
6. Capital Stock and DISTRIBUTION AND PERFORMANCE
Other Securities INFORMATION--Dividends and capital
gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION
SHAREHOLDER BENEFITS--Dividend
reinvestment plan
HOW TO CONTACT SCUDDER
7. Purchase of PURCHASES AND REDEMPTIONS
Securities Being FUND ORGANIZATION--Underwriter
Offered TRANSACTION INFORMATION--Purchasing
shares, Share price, Minimum
balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend
reinvestment plan
8. Redemption or PURCHASES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming
shares, Tax identification number,
Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 5
<PAGE>
SCUDDER INSTITUTIONAL SHARES
(continued)
PART B
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information ORGANIZATION OF THE FUNDS
and History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Brokerage
Commissions, Portfolio Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts,
Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage
and Other Practices Commissions, Portfolio Turnover
18. Capital Stock and ORGANIZATION OF THE FUNDS
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE
Offered FUND--Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 6
<PAGE>
Scudder Money Market Series
Scudder Fund, Inc. is an open-end management investment company comprised of
three diversified money market portfolios. Scudder Premium Money Market Shares
offered herein is a class of Scudder Money Market Series, a portfolio of Scudder
Fund, Inc.
This prospectus sets forth concisely the information about Scudder Premium Money
Market Shares that a prospective investor should know before investing. Please
retain it for future reference.
Shares of Scudder Money Market Series are not insured or guaranteed by the U.S.
Government. Scudder Money Market Series seeks to maintain a constant net asset
value of $1.00 per share, but there can be no assurance that a stable net asset
value will be maintained.
If you require more detailed information, a combined Statement of Additional
Information dated May 1, 1998, as amended from time to time, may be obtained
without charge by writing Scudder Investor Services, Inc., Two International
Place, Boston, MA 02110-4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
- -------------------------------
NOT FDIC- / MAY LOSE VALUE
INSURED / NO BANK GUARANTEE
- -------------------------------
SCUDDER (logo)
Scudder
Premium Money
Market Shares
Prospectus
May 1, 1998
A pure no-load(TM) (no sales charges) mutual fund portfolio seeking to provide
high money market income with preservation of capital and liquidity.
<PAGE>
Expense information
How to compare a Scudder Family of Funds pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Premium Money Market Shares (the "Shares"), a
class of Scudder Money Market Series (the "Fund")*. By reviewing this table and
those in other mutual funds' prospectuses, you can compare the fees and
expenses with those of other funds. With Scudder's pure no-load(TM) funds, you
pay no commissions to purchase or redeem shares, or to exchange from one fund
to another. As a result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE**
Fees to exchange shares NONE
2) Annual operating expenses: Estimated expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the initial fiscal period ending
December 31, 1998.
Investment management fee (after waiver) 0.20%***
12b-1 fees NONE
Other expenses 0.18%
-----
Total operating expenses (after waiver) 0.38%***
=====
Example
Based on the estimated level of total operating expenses listed above, the
total expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its
net investment income to shareholders. (As noted above, the Fund has no
redemption fees of any kind.)
1 Year 3 Years
------ -------
$4 $12
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual
expenses and return vary from year to year and may be higher or lower than
those shown.
* The information set forth on this page relates only to the Fund's Scudder
Premium Money Market Shares. The Fund also offers two other classes of
shares, Scudder Money Market Managed Shares and Scudder Money Market
Institutional Shares, which may have different fees and expenses (which may
affect performance), have different minimum investment requirements and are
entitled to different services. Information about these other classes may
be obtained by contacting Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470.
** You may redeem by writing or calling the Fund or by Write-A-Check. If you
wish to receive your redemption proceeds via wire, there is a $5 wire
service fee. For additional information, please refer to "Transaction
information--Redeeming shares."
*** Until April 30, 1999 the Adviser has agreed to waive a portion of its
investment management fee. (See the "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
would be 0.25% and it is estimated that the total operating expenses for
the Shares would be 0.43% for the year ending December 31, 1998.
2
<PAGE>
Financial highlights
The following table includes selected data for a share of the Premium Money
Market 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
July 7, 1997
(commencement
of sale of
Premium Shares) to
December 31, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period .................................................... $1.000
-------------------
Net investment income ................................................................... .026
Distributions from net investment income ................................................ (.026)
-------------------
Net asset value, end of period .......................................................... $1.000
- -------------------------------------------------------------------------------------------------------------
Total Return (%) (a) .................................................................... 2.62**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................. 335
Ratio of operating expenses, net to average daily net assets (%) ........................ .38*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ........................................................................... .43*
Ratio of net investment income to average daily net assets (%) .......................... 5.50*
</TABLE>
(a) Total return is higher due to the maintenance of Fund expenses.
* Annualized
** Not annualized
3
<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 offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 50 no-load mutual fund portfolios or classes of
shares. We also manage the mutual funds in a special program for the American
Association of Retired Persons, as well as the fund options available through
Scudder Horizon Plan, a tax-advantaged variable annuity. We also advise The
Japan Fund, and numerous other open- and closed-end funds that invest in this
country and other countries around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to shareholders include toll-free access to professional
representatives, easy exchange among the Scudder Family of Funds, shareholder
reports, informative newsletters and the walk-in convenience of Scudder Investor
Centers.
Funds or fund classes in the Scudder Family of Funds are offered without
commissions to purchase or redeem shares or to exchange from one fund to
another. There are no 12b-1 fees either, which many other funds now charge to
support their marketing efforts. All of your investment goes to work for you. We
look forward to welcoming you as a shareholder.
/s/ Edmond D. Villani
Scudder Premium Money Market Shares
Scudder Money Market Series
Investment objective
o seeks as high a level of current income as is consistent with its
investment policies and with preservation of capital and liquidity
Investment characteristics
o stable $1.00 share price
o convenient, daily liquidity
o $25,000 initial minimum investment
o dividends declared daily and paid monthly
Contents
Investment objectives and policies 5
Why invest in Scudder Premium Money
Market Shares of the Fund? 6
Additional information about policies
and investments 7
Distribution and performance information 9
Fund organization 10
Transaction information 12
Shareholder benefits 16
Purchases 18
Exchanges and redemptions 19
Directors and Officers 21
Investment products and services 22
How to contact Scudder 23
4
<PAGE>
Investment objectives and policies
Investment objectives
Scudder Money Market Series (the "Fund"), a diversified series of Scudder Fund,
Inc. (the "Corporation"), an open-end management investment company, seeks to
provide investors with as high a level of current income as is consistent with
its investment policies and with preservation of capital and liquidity.
The Fund invests exclusively in a broad range of short-term money market
instruments that have remaining maturities of not more than 397 calendar days
and certain repurchase agreements. These money market securities consist of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, taxable and tax-exempt municipal obligations, corporate and
bank obligations, certificates of deposit, bankers' acceptances and variable
amount master demand notes.
The Fund will maintain a dollar-weighted average maturity of 90 days or less in
an effort to maintain a constant net asset value of $1.00 per share, but there
is no assurance that it will be able to do so.
Amendments have been adopted to the federal rules regulating quality, maturity
and diversification requirements of money market funds. Money market funds must
comply with the revised rule by July 1, 1998. The Fund intends to be in
compliance with the amended requirements by that date.
Except as otherwise indicated, the Fund's investment objectives and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objectives, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objectives will be
met.
Investments
The bank obligations in which the Fund may invest include negotiable
certificates of deposit, bankers' acceptances, fixed time deposits or other
short-term bank obligations. Generally, the Fund may not invest less than 25% of
the current value of its total assets in bank obligations (including bank
obligations subject to repurchase 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 Fund's 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.
Fixed time deposits may be withdrawn on demand by the investor but may be
subject to early withdrawal penalties that vary with market
5
<PAGE>
conditions and the remaining maturity of the obligations.
Generally, the commercial paper purchased by the Fund consists of direct
obligations of domestic corporate issuers, including bank holding companies,
whose obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investor Services, 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 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 have
certain risks associated with them. For a more complete description, please
refer to the Fund's combined Statement of Additional Information.
Why invest in Scudder Premium Money Market Shares of the Fund?
Scudder Premium Money Market Shares (the "Shares") of the Fund may be
appropriate for investors desiring monthly income, yet who are also concerned
about stability of their investment principal. A money market fund may be a good
choice for investors who want their assets to grow in a stable investment,
investors who want to keep their "nest egg" safe and handy, or those who are
simply looking to "park" their investment capital for a limited period.
Scudder Premium Money Market Shares are designed for investors who have the
resources to maintain higher account balances and, in return, may be rewarded
with above-average money fund income. The minimum initial investment in Shares
of the Fund is $25,000 per account. By requiring larger account balances, the
Fund strives to reduce the impact of fixed recordkeeping and other costs on
overall expenses of this class of shares, leading to a potentially higher return
for shareholders.
The Fund also offers all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, monthly
income and ready access to their money. A shareholder can purchase or redeem
shares on a daily basis, in a variety of ways.
6
<PAGE>
Additional information about policies and investments
Investment restrictions
The Fund has certain investment restrictions which are designed to reduce the
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 Fund's combined Statement of Additional
Information.
As a matter of fundamental policy, the Fund may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy, the
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, the Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities or
interests in indebtedness or through repurchase agreements. The Fund has adopted
a non-fundamental policy restricting the lending of portfolio securities to no
more than 5% of total assets.
As permitted under the current federal rule regulating money market funds, the
high quality securities in which the Fund invests are divided into "first tier"
and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest 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. The
Adviser may determine, pursuant to procedures approved by the Board of
Directors, that an unrated security is equivalent to a first tier or second tier
security. The Fund will not invest more than 5% of its total assets in
securities issued by a single issuer. The Fund will not 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.
Obligations of U.S. Government agencies and instrumentalities
Obligations of U.S. Government agencies and instrumentalities are debt
securities issued or guaranteed by U.S. Government-sponsored enterprises and
federal agencies. Some of such obligations are supported by (a) the full faith
and credit of the U.S. Treasury (such as Government National Mortgage
Association participation certificates), (b) the limited authority of the issuer
to borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Bank), (c) the authority of the U.S. Government to purchase certain obligations
of the issuer (such as securities of the Federal National Mortgage Association)
or (d) only the credit of the issuer. In the case of obligations not backed by
the full faith and credit of the U.S. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, which agency may be privately owned. The Fund will invest in
obligations of U.S. Government agencies and instrumentalities only when the
Adviser is satisfied that the credit risk with respect to the issuer is minimal.
Floating and variable rate instruments
Certain of the obligations that the Fund may purchase have a floating or
variable rate of interest. Such obligations bear interest at rates that are not
fixed, but which vary with changes in specified market rates or indices, such as
the Prime Rate, and at specified intervals.
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Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase those securities at a specified time and price. If the
seller under a repurchase agreement becomes insolvent, the Fund's right to
dispose of the securities might be restricted, or the value of the securities
may decline before the Fund is able to dispose of them. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase under a repurchase agreement, the Fund may
encounter delay and incur costs, including a decline in the value of the
securities, before being able to sell the securities.
Municipal obligations
Municipal obligations, which are debt obligations issued by or on behalf of
states, cities, municipalities and other public authorities, and may be general
obligation, revenue, or industrial development bonds, include municipal bonds,
municipal notes and municipal commercial paper.
The Fund's investments in municipal bonds are limited to bonds that are rated at
the date of purchase "Aa" or better by Moody's or "AA" or higher by S&P or
Fitch.
The Fund's investments in municipal notes will be limited to notes that are
rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in the
case of an issue having a variable rate demand feature) by Moody's, "SP-1" or
"SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of 270
days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. The Fund may invest in
municipal commercial paper that is rated at the date of purchase "P-1" or "P-2"
by Moody's, "A-1" or "A-2" or "A-1+" by S&P or "F-1" by Fitch. If a municipal
obligation is not rated, the Fund may purchase the obligation if, in the opinion
of the Adviser, it is of investment quality comparable to other rated
investments that are permitted in the Fund.
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 Fund may be used for letter of credit backed investments.
Securities with put rights
The Fund may enter into put transactions with respect to obligations held in
their portfolios with broker/dealers pursuant to a rule under the Investment
Company Act of 1940 (the "1940 Act"), and with commercial banks.
The right of the Fund to exercise a put is unconditional and unqualified. A put
is not transferable by the Fund, although the Fund may sell the underlying
securities to a third party at any time. If necessary and advisable, the Fund
may pay for certain puts either separately in cash or by paying a higher price
for portfolio securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities). The Fund
expects, however, that puts generally will be
8
<PAGE>
available without the payment of any direct or indirect consideration.
The Fund may enter into puts only with banks or broker/dealers that, in the
opinion of the Adviser, present minimal credit risks. The ability of the Fund to
exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
The Fund intends to enter into puts solely to maintain liquidity and do not
intend to exercise their rights thereunder for trading purposes. The puts will
only be for periods substantially less than the life of the underlying security.
The acquisition of a put will not affect the valuation by the Fund of the
underlying security. The actual put will be valued at zero in determining net
asset value of the Fund. Where the Fund pays directly or indirectly for a put,
its cost will be reflected as an unrealized loss for the period during which the
put is held by the Fund and will be reflected in realized gain or loss when the
put is exercised or expires. If the value of the underlying security increases,
the potential for unrealized or realized gain is reduced by the cost of the put.
The maturity of a municipal obligation purchased by the Fund will not be
considered shortened by any put to which such obligation is subject.
Third party puts
The Fund may also purchase long-term fixed rate bonds that have been coupled
with an option granted by a third party financial institution allowing the Fund
at specified intervals, not exceeding 397 calendar days, to tender (or "put")
the bonds to the institution and receive the face value thereof (plus accrued
interest). These third party puts are available in several different forms, may
be represented by custodial receipts or trust certificates and may be combined
with other features such as interest rate swaps. The Fund receives a short-term
rate of interest (which is periodically reset), and the interest rate
differential between that rate and the fixed rate on the bond is retained by the
financial institution. The financial institution granting the option does not
provide credit enhancement, and in the event that there is a default in the
payment of principal or interest, or downgrading of a bond to below investment
grade, or a loss of the bond's tax-exempt status, the put option will terminate
automatically. The risk to the Fund will be that of holding such a long-term
bond and the dollar-weighted average maturity of the Fund would be adversely
affected.
When-issued securities
The Fund may purchase securities on a when-issued basis, in which case delivery
and payment normally take place within 45 days after the date of the commitment
to purchase. The Fund will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date if it is deemed advisable. When-issued
securities are subject to market fluctuation and no income accrues to the
purchaser prior to issuance. The purchase price and the interest rate that will
be received on debt securities are fixed at the time the purchaser enters into
the commitment. Purchasing a security on a when-issued basis can involve a risk
that the market price at the time of delivery may be lower than the agreed upon
purchase price, in which case there could be an unrealized loss at the time of
delivery.
Distribution and performance information
Dividends and capital gains distribution
Dividends are declared daily and distributed monthly to shareholders. The Fund
may take into account capital gains and losses (other than long-term capital
gains) in its daily
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dividend declaration. The Fund may make additional distributions for tax
purposes, if necessary. Any dividends or capital gains distributions declared in
October, November or December with a record date in such a month and paid during
the following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. According
to preference, shareholders may receive distributions in cash or have them
reinvested in additional Scudder Premium Money Market Shares of the Fund. If an
investment is in the form of a retirement plan, all dividends and capital gains
distributions must be reinvested into the shareholder's account. Dividends
ordinarily will vary from one class of the Fund to another.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares. 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.
The Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of the performance of the Fund's Scudder Premium
Money Market Shares may be included in advertisements, sales literature or
shareholder reports. Performance information is computed separately for each
class of Fund shares in accordance with formulae prescribed by the Securities
and Exchange Commission. Performance figures will vary in part because of the
different expense structures of the Fund's different classes of shares. All
performance figures are historical, show the performance of a hypothetical
investment and are not intended to indicate future performance. The "yield" of a
class of the Fund refers to income generated by an investment in that class over
a specified seven-day period. Yield is expressed as an annualized percentage.
The "effective yield" of a class of the Fund is expressed similarly but, when
annualized, the income earned by an investment in that class is assumed to be
reinvested and will reflect the effects of compounding. "Total return" is the
change in value of an investment in a class of the Fund for a specified period.
The "average annual total return" is the average annual compound rate of return
of an investment in a particular class of the Fund assuming the investment has
been held for the life of the Fund as of a stated ending date. "Cumulative total
return" represents the cumulative change in value of an investment in a
particular class of the Fund for various periods. All types of total return
calculations assume that all dividends and capital gains distributions during
the period were reinvested in the relevant class of shares of the Fund.
Performance will vary based upon, among other things, changes in market
conditions and the level of the Fund's expenses as well as particular class
expenses.
Fund organization
Scudder Money Market Series is a diversified series of Scudder Fund, Inc., an
open-end management investment company registered under the 1940 Act. The
Corporation was formed in June 1982 as a Maryland corporation.
The Corporation's activities are supervised by its Board of Directors. The Board
of Directors, under applicable laws of the State of Maryland, in addition to
supervising the actions of the Corporation's Adviser and Distributor, as set
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<PAGE>
forth below, decides upon matters of general policy.
The Corporation has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds.
Under the Plan, shares of each class represent an equal pro rata interest in a
particular Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of shares shall bear its own "class
expenses; (3) each class shall have exclusive voting rights on any matter
submitted to shareholders that relates to its administrative services,
shareholder services or distribution arrangements; (4) each class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class; (5) each
class may have separate and distinct exchange privileges; (6) each class may
have different conversion features, and (7) each class may have separate account
size requirements. Expenses currently designated as "Class Expenses" by the
Corporation's Board of Directors under the Plan include, for example, transfer
agent fees attributable to a specific class, and certain securities registration
fees.
In addition to the Scudder Premium Money Market Shares class offered herein, the
Fund offers two other classes of shares, Scudder Managed Shares and Scudder
Institutional Shares, which may have different fees and expenses (which may
affect performance), may have different minimum investment requirements and are
entitled to different services. Additional information about these other classes
of shares of the Fund may be obtained by contacting Scudder Investor Services,
Inc.
Each share of the Scudder Premium Money Market Shares class of the Fund shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters that such shares (or class of shares) shall be entitled to vote.
Shareholders of the Fund shall vote together on any matter, except to the extent
otherwise required by the 1940 Act, or when the Board of Directors of the
Corporation has determined that the matter affects only the interest of
shareholders of one or more classes of the Fund, in which case only the
shareholders of such class or classes of the Fund shall be entitled to vote
thereon. Any matter shall be deemed to have been effectively acted upon with
respect to the Fund if acted upon as provided in Rule 18f-2 under the 1940 Act,
or any successor rule, and in the Corporation's Articles of Incorporation.
The Corporation is not required to and has no current intention of holding
annual shareholder meetings, although meetings may be called for purposes such
as electing or removing Directors, changing fundamental investment policies or
approving an investment advisory agreement. Shareholders will be assisted in
communicating with other shareholders in connection with removing a Director as
if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Corporation retains the investment management firm of Scudder 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 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,
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<PAGE>
Zurich owns approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
The Adviser receives a management fee at an annual rate equal to 0.25% of the
average daily net assets of the Fund. Management fees are computed daily and
paid monthly. The Adviser has agreed to waive 0.05% of its management fee until
April 30, 1999. In addition, from time to time, the Adviser may voluntarily
waive certain additional expenses of the Fund. 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.
Like other mutual funds and financial and business organizations worldwide, the
Fund could be adversely affected if computer systems on which the Fund relies,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Fund's business and
operations. The Adviser has commenced a review of the Year 2000 Issue as it may
affect the Fund and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose securities are
held by the Fund or on global markets or economies generally.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts, 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order.
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<PAGE>
Purchases are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone or by "Write-A-Check" prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund and class in which the money is to be invested,
- -- the account number of the fund and class, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $1,000 or more to your existing
account by wire.
By exchange. Premium Shares of the Fund may be exchanged for shares of other
funds in the Scudder Family of Funds, unless otherwise determined by the Board
of Directors. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Minimum account requirements may be
different for other Scudder Funds. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the New York
Stock Exchange (the "Exchange"), shares will be purchased at the net asset value
per share calculated at the close of trading on the day of your call. "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
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transaction. "QuickBuy" transactions are not available for most retirement plan
accounts. However, "QuickBuy" transactions are available for Scudder IRA
accounts.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information on your application, call 1-800-225-5163 for
more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "QuickSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "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.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
By "Write-A-Check." You may redeem shares by writing checks against your account
balance for at least $1,000. Your Fund investments will continue to earn
dividends until your check is presented to the Fund for payment.
Checks will be returned by the Fund's transfer agent if there are insufficient
shares to meet the withdrawal amount. You should not attempt to
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<PAGE>
close an account by check because the exact balance at the time the check clears
will not be known when the check is written.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions of the Fund's Scudder Premium Money Market Shares,
including exchanges, are made at net asset value. Scudder Fund Accounting
Corporation determines net asset value per share as of 4:00 p.m., the close of
regular trading on the Exchange, on each day the Exchange is open for trading.
Net asset value per share is calculated by dividing the total value of net
assets of the Scudder Premium Money Market Shares, less all liabilities of such
Shares, by the total number of the Shares outstanding. In calculating the net
asset value per share, the Fund uses the amortized cost value.
Processing time
Purchases made by wire and received by the Fund's transfer agent before 4:00
p.m. on any business day are executed at 4:00 p.m. on that day and begin earning
income the same day. Purchases made by check are executed on the day the check
is received in good order by the Fund's transfer agent and begin earning income
on the next business day. Redemption requests received in good order by the
Fund's transfer agent by 4:00 p.m. are executed at the net asset value
calculated at the close of regular trading on that day and will earn a dividend
on the redeemed shares that day. If a redemption request is received by 4:00
p.m., proceeds will normally be wired that day, if requested by the shareholder,
but no dividend will be earned on the redeemed shares on that day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
The Corporation and Scudder Investor Services each 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 the Fund to
withhold 31% of taxable dividends, capital gains distributions and, if the Fund
fails to maintain a constant net asset value per share, redemption and exchange
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. The Fund reserves the right to reject new account
applications without a correct certified Social Security or tax identification
number. The Fund also reserves the right, following 30 days' notice, to redeem
all shares in accounts without a correct certified Social Security or tax
identification number. A shareholder may avoid involuntary redemption by
providing the Fund with a tax identification number during the 30-day notice
period.
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<PAGE>
Minimum balances
Initial minimum investment in the Fund is $25,000. Shareholders should maintain
a share balance worth at least $15,000 (which minimum amount may be changed by
the Board of Directors).
Shareholders whose account balance falls below $15,000 for at least 30 days will
be given 60 days' notice to bring the account back up to $15,000 or more. Where
a reduction in value has occurred due to a redemption or exchange out of the
account and the account balance is not increased in 60 days, Scudder reserves
the right to redeem all shares and close the account and send the proceeds to
the shareholder's address of record. Reductions in value that result solely from
market activity will not trigger an involuntary redemption.
Please refer to "Exchanges and Redemptions-- Other Information" in the Fund's
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 Fund is managed by a team of investment professionals, each of whom each
plays an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the Fund's
portfolio. They are supported by 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 Share 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. Mr Rachwalski has been responsible for the trading
and portfolio management of money market funds since 1974.
John W. Stuebe, Portfolio Manager, has been a fixed income trader for money
market securities since 1979. Mr. Stuebe currently specializes in and trades for
the taxable, non-government money market funds.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds or classes thereof. For
more information, please call 1-800-225-5163.) Telephone
16
<PAGE>
and fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder Kemper Investments, Inc., combines the benefits of a
customized portfolio of no-load mutual funds with ongoing portfolio monitoring
and individualized service, for an annual fee of generally 1.25% or less of
assets. In addition, it draws upon the Adviser's more than 75-year heritage of
providing investment counsel to large corporate and private clients. If you have
$100,000 or more to invest initially and would like more information about
Personal Counsel, please call 1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You will receive a detailed statement summarizing account activity, including
dividend and capital gain reinvestment, purchases and redemptions. All of your
statements should be retained to help you keep track of account activity and the
cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
17
<PAGE>
Purchases
<TABLE>
<CAPTION>
Opening Minimum initial investment: $25,000
an account
<S> <C> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application
with the help of a Scudder representative. Investor Center
locations are listed under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $1,000; IRAs $100
additional
shares
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
Scudder Funds." Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
<S> <C> <C>
Exchanging Minimum investments: $25,000 to establish a new account in Scudder Premium
shares Money Market Shares; $1,000 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
For information o By Mail Print or type your instructions and include:
on exchanging to or Fax - the name of the Fund and the account number you are exchanging from;
other Scudder - your name(s) and address as they appear on your account;
Funds, see - the dollar amount or number of shares you wish to exchange;
"Transaction - the name of the Fund you are exchanging into;
Information-- - your signature(s) as it appears on your account; and
By exchange." - a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA 02107-2291 Braintree, MA 02184
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
o By "Write- You may redeem shares by writing checks against your account
A-Check" balance as often as you like for at least $100, but not more than
$5,000,000.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
19
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples filing jointly, even if only
one spouse has earned income). Many people can deduct all or part of their
contributions from their taxable income, and all investment earnings accrue
on a tax-deferred basis. The Scudder No-Fee IRA charges you no annual
custodial fee.
o Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying
individuals to accumulate investment earnings tax free. Unlike a
traditional IRA, with a Roth IRA, if you meet the distribution
requirements, you can withdraw your money without paying any taxes on the
earnings. No tax deduction is allowed for contributions to a Roth IRA. The
Scudder Roth IRA charges you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA and most Profit
Sharing or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
20
<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
*Scudder Kemper Investments, Inc.
21
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. +++ +++A no-load variable
annuity contract provided by Charter National Life Insurance Company and its
affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. #These
funds, advised by Scudder Kemper Investments, Inc., are traded on the New York
Stock Exchange and, in some cases, on various foreign stock exchanges.
22
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
</TABLE>
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
23
<PAGE>
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 a Managed Shares class (the
"Managed Shares"), described herein.
This prospectus sets forth concisely the information about the Managed Shares of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series, that a prospective investor should know before
investing. Please retain it for future reference.
Shares offered by the Funds are not insured or guaranteed by the U.S.
Government. 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 Investor Services, Inc., Two International
Place, Boston, MA 02110-4103 or calling 1-800-553-6360. 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 (logo)
Scudder
Managed Shares
- ------------------------------
o Scudder Money Market Series
o Scudder Tax Free
Money Market Series
o Scudder Government
Money Market Series
- ------------------------------
Prospectus
May 1, 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 Family of Funds pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in the Funds.* By reviewing this table and those in other
mutual funds' prospectuses, you can compare each Fund's fees and expenses with
those of other funds. With Scudder's pure no-load(TM) funds, you pay no
commissions to purchase or redeem shares, or to exchange from one Fund to
another. As a result, all of your investment goes to work for you. 1)
Shareholder transaction expenses: Expenses charged directly to your individual
account for various transactions.
<TABLE>
<CAPTION>
Scudder Scudder
Scudder Tax Free Government
Money Market Money Market Money Market
Series Series Series
------ ------ ------
<S> <C> <C> <C>
Sales commissions to purchase shares (sales load) NONE NONE NONE
Commissions to reinvest dividends NONE NONE NONE
Redemption fees** NONE NONE NONE
Fees to exchange shares NONE NONE NONE
2) Annual operating expenses: Expenses incurred 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, 1997.***
Investment management fee (after waiver) 0.20% 0.15% 0.10%
12b-1 fees NONE NONE NONE
Other expenses 0.24% 0.35% 0.55%
----- ----- -----
Total operating expenses (after waiver) 0.44% 0.50% 0.65%
===== ===== =====
Example
Based on the level of total operating expenses listed above, the total expenses
relating to a $1,000 investment, assuming a 5% annual return and redemption at
the end of each period, are listed below. Investors do not pay these expenses
directly; they are paid by each Fund before it distributes its net investment
income to shareholders. (As noted above, each Fund has no redemption fees of
any kind.)
One Year $5 $5 $7
Three Years $14 $16 $21
Five Years $25 $28 $36
Ten Years $55 $63 $81
</TABLE>
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
* The information on this page relates only to each Fund's class of Managed
Shares. Each of the Funds also offers a class of Institutional Shares, and
in addition, Scudder Money Market Series offers a class of Premium Money
Market Shares. These classes of shares may have different fees and expenses
(which may affect performance), have different minimum investment
requirements and are entitled to different services. Information about
these other classes may be obtained by contacting Scudder Investor
Services, Inc., Two International Place, Boston, MA 02110-4103 or calling
1-800-854-8525.
** You may redeem by writing or calling the Fund or by Write-A-Check. If you
wish to receive your redemption proceeds via wire, there is a $5 wire fee
for redemptions under $1,000 with the exception of sweep accounts. For
additional information, please refer to "Transaction information--Redeeming
shares."
*** Until July 7, 1997, the Adviser waived a portion of its investment
management fee for each of Scudder Money Market Series and Scudder
Government Money Market Series so that the annualized expenses of each Fund
did not exceed 0.55% of average daily net assets. Effective July 7, 1997
until April 30, 1999, the Adviser has agreed to waive a portion of its
investment management fee for all three Funds (see "Investment Adviser"
section of this prospectus for more information). The expenses shown above
are restated to reflect what each Fund would have paid during the fiscal
year ended December 31, 1997 if such waivers had been in effect throughout
the period. Absent such waivers, the investment management fee for each
Fund would have been 0.25% and total operating expenses for each Fund would
have been 0.49%, 0.60% and 0.80%, for Scudder Money Market Series, Scudder
Tax Free Money Market Series and Scudder Government Money Market Series,
respectively. Actual expenses for Scudder Money Market Series, Scudder Tax
Free Money Market Series and Scudder Government Money Market Series for the
fiscal year ended December 31, 1997 were, respectively: investment
management fee: 0.32%, 0.33% and 0.33%; other expenses: 0.27%, 0.41% and
0.51%; and total operating expenses: 0.59%, 0.74% and 0.84%.
2
<PAGE>
Financial highlights
Scudder Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information
derived from the audited financial statements.* If you would like more
detailed information concerning Fund performance, audited financial statements
are available in the Annual Report dated December 31, 1997, which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ........ .051 .049 .054 .038 .028 .037 .059 .076 .086 .070
Distributions from net
investment
income .................... (.051) (.049) (.054) (.038) (.028) (.037) (.059) (.076) (.086) (.070)
Net asset value, end of ----------------------------------------------------------------------------------------
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ......... 5.21 4.97 5.57 3.86 2.81 3.74 6.07 7.92 8.93 7.21
Ratios and Supplemental Data
Net assets, end of period
($ millions) .............. 369 431 372 367 324 305 347 385 331 389
Ratio of operating expenses,
net to average daily net
assets (%) ................ .49 .55 .55 .55 .55 .55 .55 .67 .72 .65
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ................ .59 .62 .68 .68 .66 .64 .64 .70 .72 .65
Ratio of net investment income
to average daily net
assets (%) ................ 5.00 4.86 5.45 3.84 2.78 3.76 5.93 7.64 8.56 6.95
</TABLE>
(a) Total returns are higher due to maintenance of the Fund's expenses for the
years ended December 31, 1990 to December 31, 1997.
* Effective July 7, 1997, Scudder Money Market Series (formerly known as the
Managed Cash Fund) was divided into three classes, of which Scudder Money
Market Managed Shares is one. Shares of the Fund outstanding on such date
were redesignated as the Managed Shares of the Fund. The data set forth
above reflects the investment performance of the Fund prior to such
redesignation.
3
<PAGE>
Financial highlights
Scudder Tax Free Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information
derived from the audited financial statements.* If you would like more
detailed information concerning Fund performance, audited financial statements
are available in the Annual Report dated December 31, 1997, which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------------------
Net investment income ....... .030 .028 .032 .023 .018 .025 .042 .053 .057 .049
Distributions from net
investment income
and net realized
capital gains ............ (.030) (.028) (.032) (.023) (.018) (.025) (.042) (.053) (.057) (.049)
Net asset value, ----------------------------------------------------------------------------------------------------
end of period ............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............ 3.07(a) 2.88 3.30 2.29 1.85 2.56 4.20 5.47 5.91 4.98
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 177 165 138 125 107 91 107 135 137 261
Ratio of operating expenses,
net to average daily
net assets (%) ........... .65 .72 .79 .77 .78 .77 .75 .77 .76 .60
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ............... .74 .72 .79 .77 .78 .77 .75 .77 .76 .60
Ratio of net investment
income to average
daily net assets (%) ..... 2.99 2.84 3.25 2.26 1.83 2.54 4.14 5.33 5.72 4.85
</TABLE>
(a) Total return is higher due to the maintenance of the Fund's expenses.
* Effective July 7, 1997, Scudder Tax Free Money Market Series (formerly
known as Managed Tax-Free Fund) was divided into two classes, of which
Scudder Tax Free Money Market Managed Shares is one. Shares of the Fund
outstanding on such date were redesignated as the Managed Shares of the
Fund. The data set forth above reflects the investment performance of the
Fund prior to such redesignation.
4
<PAGE>
Financial highlights
Scudder Government Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information
derived from the audited financial statements.* If you would like more
detailed information concerning Fund performance, audited financial statements
are available in the Annual Report dated December 31, 1997, which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ....... .049 .048 .054 .037 .026 .035 .056 .075 .084 .069
Distributions from net
investment
income ................... (.049) (.048) (.054) (.037) (.026) (.035) (.056) (.075) (.084) (.069)
Net asset value, end of ----------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........ 5.02 4.91 5.49 3.75 2.68 3.51 5.65 7.73 8.81 7.13
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 29 28 50 69 92 151 87 82 64 409
Ratio of operating expenses,
net to average daily net
assets (%) ............... .55 .55 .55 .55 .55 .55 .55 .73 .75 .69
Ratio of operating expenses
before expense reductions,
to average daily net
assets (%) ............... .84 .77 .86 .84 .77 .76 .80 .80 .80 .69
Ratio of net investment
income to average daily
net assets (%) ........... 4.93 4.81 5.36 3.61 2.65 3.39 5.54 7.48 8.42 6.83
</TABLE>
(a) Total returns are higher, for the periods indicated, due to maintenance of
the Fund's expenses, except for the year ended December 31, 1988.
* Effective July 7, 1997, Scudder Government Money Market Series (formerly
known as the Managed Government Securities Fund) was divided into two
classes, of which Scudder Government Money Market Managed Shares is one.
Shares of the Fund outstanding on such date were redesignated as the
Managed Shares of the Fund. The data set forth above reflects the
investment performance of the Fund prior to such redesignation.
5
<PAGE>
A message from 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 offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 50 no-load mutual fund portfolios or classes of
shares. We also manage the mutual funds in a special program for the American
Association of Retired Persons, as well as the fund options available through
Scudder Horizon Plan, a tax-advantaged variable annuity. We also advise The
Japan Fund, and numerous other open- and closed-end funds that invest in this
country and other countries around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to shareholders include toll-free access to professional
representatives, easy exchange among the Scudder Family of Funds, shareholder
reports, informative newsletters and the walk-in convenience of Scudder Investor
Centers.
Funds or fund classes in the Scudder Family of Funds are offered without
commissions to purchase or redeem shares or to exchange from one fund to
another. There are no 12b-1 fees either, which many other funds now charge to
support their marketing efforts. All of your investment goes to work for you. We
look forward to welcoming you as a shareholder.
/s/ Edmond D. Villani
Scudder Managed Shares
Three pure no-load(TM) (no sales charges) mutual funds, each investing in
different types of money market investments.
Investment objectives
o Scudder Money Market Series
seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity.
o Scudder Tax Free Money Market Series
seeks as high a level of current income that cannot be subjected to federal
income tax as is consistent with its investment policies and with
preservation of capital and liquidity.
o Scudder Government Money Market Series
seeks as high a level of current income as is consistent with its investment
policies and with preservation of capital and liquidity.
Investment characteristics
o stable $1.00 share price
o convenient, daily liquidity
o $100,000 minimum investment
o dividends declared daily and paid monthly
Contents
Investment objectives and policies 7
Scudder Money Market Series 7
Scudder Tax Free Money Market Series 8
Scudder Government Money Market Series 9
Why invest in Managed Shares? 9
Additional information about policies
and investments 10
Distribution and performance information 13
Fund organization 14
Transaction information 16
Shareholder benefits 20
Purchases 22
Exchanges and redemptions 23
Directors and Officers 25
Investment products and services 26
How to contact Scudder 27
6
<PAGE>
Investment objectives and policies
Set forth below is a description of the investment objectives and policies of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series (the "Funds"). 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 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. 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 Fund's 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,
7
<PAGE>
foreign banks are not subject to examination by any U.S. Government agency or
instrumentality.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties that vary with market conditions and the
remaining maturity of the obligations.
Generally, the commercial paper purchased by the Fund consists of direct
obligations of domestic corporate issuers, including bank holding companies,
which obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investor Services, 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.
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 enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices has
certain risks associated with them. 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.
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.
Why invest in Managed Shares?
The Managed Shares class of each Fund is designed for investors who have the
resources and ability to maintain higher account balances and, in return, may be
rewarded with above average money fund income. The minimum initial investment in
each Fund's Managed Shares class is $100,000 per account. By requiring larger
account balances, each Fund strives to reduce the impact of fixed recordkeeping
and other costs on overall expenses of this class of shares, leading to
potentially higher returns for Managed Shares shareholders.
Each Fund also offers all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share
9
<PAGE>
price objective, participation in a broad range of high quality money market
securities, and easy access to their money. A shareholder can purchase or redeem
shares on a daily basis, in a variety of ways.
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.
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, the purchase of debt securities, or
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. A complete description of these and other
policies and restrictions is contained under "Investment Restrictions" in the
Funds' combined Statement of Additional Information.
The high quality securities in which the Funds invest are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest short-term 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 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
10
<PAGE>
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 at a specified time and price. If the seller under a
repurchase agreement becomes insolvent, a Fund's right to dispose of the
securities might be restricted, or the value of the securities may decline
before a Fund is able to dispose of them. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
securities before repurchase under a repurchase agreement, a Fund may encounter
delay and incur costs, including a decline in the value of the securities,
before being able to sell the securities.
Municipal obligations
Municipal obligations, which are debt obligations issued by or on behalf of
states, cities, municipalities and other public authorities, and may be general
obligation, revenue, or industrial development bonds, include municipal bonds,
municipal notes and municipal commercial paper.
Scudder Tax Free Money Market Series may invest in excess of 25% of its assets
in industrial development bonds subject to the Fund's fundamental investment
policy requiring that it maintain at least 80% of the value of its total assets
in obligations that are exempt from federal income tax and are not subject to
the alternative minimum tax. For purposes of the Fund's fundamental investment
limitation regarding concentration of investments in any one industry,
industrial development bonds will be considered representative of the industry
for which purpose that bond was issued.
Scudder Money Market Series' and Scudder Tax Free Money Market Series'
investments in municipal bonds are limited to bonds that are rated at the date
of purchase "Aa" or higher by Moody's or "AA" or higher by S&P or Fitch.
The Funds' investments in municipal notes will be limited to notes that are
rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in the
case of an issue having a variable rate demand feature) by Moody's, "SP-1" or
"SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of 270
days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. The Funds may invest
in municipal commercial paper that is rated at a 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
11
<PAGE>
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 a Fund 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 portfolios with broker/dealers pursuant to a rule under the Investment
Company Act of 1940, (the "1940 Act") and with commercial banks.
The right of 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 Fund. 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 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
12
<PAGE>
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 Managed Shares of the same Fund. If an investment is in the form of a
retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account. Dividends ordinarily will vary from
one class of a Fund to another.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares.
Long-term capital gains distributions, if any, are taxable 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 tax. However, distributions may be subject to state
and local income taxes. A portion of the Fund's income, including income from
repurchase agreements, gains from options, and market discount bonds, may be
taxable to shareholders as ordinary income. Distributions of tax-exempt income
are taken into consideration in computing the portion, if any, of Social
Security and railroad retirement benefits subject to federal and, in some cases,
state taxes.
Each Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of performance of the Managed Shares of a Fund may
be included in advertisements, sales literature or shareholder reports.
Performance information is computed separately for each class of each Fund in
accordance with formulae prescribed by the Securities and Exchange Commission.
Performance figures will vary in part because of the different expense
structures of each Fund's different classes of shares. All performance figures
13
<PAGE>
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "yield" of a class of a Fund refers
to income generated by an investment in that class over a specified seven-day
period. Yield is expressed as an annualized percentage. The "effective yield" of
a class of a Fund is expressed similarly but, when annualized, the income earned
by an investment in that class is assumed to be reinvested and will reflect the
effects of compounding. "Total return" is the change in value of an investment
in a class of a Fund for a specified period. The "average annual total return"
is the average annual compound rate of return of an investment in a particular
class of a Fund assuming the investment has been held for one year, five years
and ten years as of a stated ending date. "Cumulative total return" represents
the cumulative change in value of an investment in a particular class of a Fund
for various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
the relevant class of shares of a Fund.
Scudder Tax Free Money Market Series' tax-equivalent yield is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Fund's yield, assuming
certain tax brackets for the Fund shareholder. Yield for the Fund is expressed
as an annualized percentage. The "effective yield" of Scudder Tax Free Money
Market Series is expressed similarly but, when annualized, the income earned by
an investment in the Fund is assumed to be reinvested and will reflect the
effects of compounding. The yield of Scudder Tax Free Money Market Series refers
to the income generated by an investment in the Fund over a specified seven-day
period.
Performance will vary based upon, among other things, changes in market
conditions and the level of a Fund's expenses as well as particular class
expenses.
Fund organization
Each Fund is a diversified series of Scudder Fund, Inc., an open-end management
investment company registered under the 1940 Act. The Corporation was formed in
June 1982 as a Maryland corporation.
The Corporation's activities are supervised by its Board of Directors. The Board
of Directors, under applicable laws of the State of Maryland, in addition to
supervising the actions of the Adviser and Distributor, as set forth below,
decides upon matters of general policy.
The Corporation has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds. The plan was approved by the Corporation's Board of
Directors at a meeting on April 24, 1997.
Under the Plan, shares of each class represent an equal pro rata interest in a
particular Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of shares shall bear its own "class
expenses;" (3) each class shall have exclusive voting rights on any matter
submitted to shareholders that relates to its administrative services,
shareholder services, or distribution arrangements; (4) each class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class; (5) each
class may have separate and distinct exchange privileges; (6) each class may
have different conversion features, and (7) each class may have separate account
size requirements. Expenses currently designated as "Class Expenses" by the
Corporation's Board of
14
<PAGE>
Directors under the Plan include, for example, transfer agent fees attributable
to a specific class, and certain securities registration fees.
In addition to the Managed Shares class offered herein, each of Scudder Tax Free
Money Market and Scudder Government Money Market Series offers another class of
shares, Institutional Shares, and Scudder Money Market Series offers two other
classes of shares, Institutional Shares and Premium Money Market Shares. Each of
these other classes of shares may have different fees and expenses (which may
affect performance), may have different minimum investment requirements and are
entitled to different services. Additional information about these other classes
of shares of the Funds may be obtained by contacting the Distributor at the
address or number listed herein.
Each share of the Managed Shares class of each Fund shall be entitled to one
vote (or fraction thereof in respect of a fractional share) on matters that such
shares (or class of shares) shall be entitled to vote. Shareholders of each Fund
shall vote together on any matter, except to the extent otherwise required by
the 1940 Act, or when the Board of Directors of the Corporation has determined
that the matter affects only the interest of shareholders of one or more classes
of a Fund, in which case only the shareholders of such class or classes of that
Fund shall be entitled to voter thereon. Any matter shall be deemed to have been
effectively acted upon with respect to a Fund if acted upon as provided in Rule
18f-2 under the 1940 Act, or any successor rule, and in the Corporation's
Articles of Incorporation.
The Corporation is not required to and has no current intention of holding
annual shareholder meetings, although meetings may be called for purposes such
as electing or removing Directors, changing fundamental investment policies or
approving an investment advisory agreement. Shareholders will be assisted in
communicating with other shareholders in connection with removing a Director as
if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Corporation retains the investment management firm of Scudder 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 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.
Each Fund pays the Adviser an annual fee of 0.25% of the 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.
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.
15
<PAGE>
Scudder Kemper Investments, Inc., is located at Two International Place, Boston,
Massachusetts.
Like other mutual funds and financial and business organizations worldwide, the
Funds could be adversely affected if computer systems on which the Funds rely,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Funds' business and
operations. The Adviser has commenced a review of the Year 2000 Issue as it may
affect the Funds and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose securities are
held by the Funds or on global markets or economies generally.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Funds.
Each Fund, on behalf of its Managed Shares class, may enter into arrangements
with banks and other institutions which are omnibus account holders of shares of
the Managed Shares class providing for the payment of fees to the institution
for servicing and maintaining accounts of beneficial owners of the omnibus
account. Such payments are expenses of the respective Managed Shares class only.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Funds'
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Funds. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining each Fund's daily net asset value per share and maintaining the
general accounting records of the Funds.
Custodian
State Street Bank and Trust Company is the Funds' custodian.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after a
Fund's transfer agent receives the purchase request in good order. Purchases are
made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
a Fund may hold redemption proceeds until the purchase check has cleared. If you
purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone or by "Write-A-Check" prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-553-6360 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
16
<PAGE>
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund and class in which the money is to be invested,
- -- the account number of the fund and class, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $1,000 or more to your existing
account by wire with the exception of a sweep account.
By exchange. Managed Shares of each Fund may be exchanged for Managed Shares of
any other Fund of the Corporation or for shares of other Funds in the Scudder
Family of Funds, unless otherwise determined by the Directors. Your new account
will have the same registration and address as your existing account. Minimum
account requirements may be different for other Scudder funds.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-553-6360 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-343-2890 for more information.
To purchase additional shares, call 1-800-343-2890. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the 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 New York Stock Exchange (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, a 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.
Redeeming shares
The Funds allow you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information on your application, call 1-800-343-2890 for
more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
17
<PAGE>
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Funds' transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "QuickSell,"
call 1-800-343-2890 for more information.
To redeem shares, call 1-800-343-2890. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "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.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (Each Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-553-6360.
By "Write-A-Check." You may redeem shares by writing checks against your account
balance for at least $1,000. Your Fund investments will continue to earn
dividends until your check is presented to the particular Fund for payment.
Checks will be returned by the Funds' transfer agent if there are insufficient
shares to meet the withdrawal amount. You should not attempt to close an account
by check because the exact balance at the time the check clears will not be
known when the check is written.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Funds use procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If a Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
18
<PAGE>
Share price
Purchases and redemptions of a Fund's Managed Shares, including exchanges, are
made at net asset value. Scudder Fund Accounting Corporation determines net
asset value per share as of 4:00 p.m., the close of regular trading on the
Exchange, on each day the Exchange is open for trading for Scudder Money Market
Series and Scudder Government Money Market Series and at 2:00 p.m. for the
Scudder Tax Free Money Market Series. Net asset value per share is calculated by
dividing the total value of net assets attributable to a class, less all
liabilities attributable to that class, by the total number of shares
outstanding for the class.
In calculating the net asset value per share, each Fund uses the amortized cost
method to value its portfolio securities.
Processing time
Purchases made by wire and received by the Funds' transfer agent before noon on
any business day are executed at 4:00 p.m. (2:00 p.m. for the Scudder Tax Free
Money Market Series) on that day and begin earning income the same day.
Purchases made by check are executed on the day the check is received in good
order by the Funds' transfer agent and begin earning income on the next business
day. Redemption requests received in good order by the Funds' transfer agent by
4:00 p.m. (2:00 p.m. for the Scudder Tax Free Money Market Series) are executed
at the net asset value calculated at the close of regular trading on that day
and will earn a dividend on the redeemed shares that day. If a redemption
request is received by 4:00 p.m. (2:00 p.m. for the Scudder Tax Free Money
Market Series), proceeds will normally be wired that day, if requested by the
shareholder, but no dividend will be earned on the redeemed shares on that day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-553-6360.
The Funds will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
The Corporation and Scudder Preferred Services Group 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 and, if a Fund
fails to maintain a constant net asset value per share, redemption and exchange
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 $100,000, which
amount may be changed by the Board of Directors.
Shareholders whose account balance falls below $100,000 for at least 30 days
will be given 60 days' notice to bring the account back up to $100,000 or more.
Where a reduction in value has occurred due to a redemption or exchange out of
an account and the account balance is not increased within 60 days, Scudder
reserves the right to redeem all shares and close the account and send the
proceeds to the shareholder's address of record. Reductions in value that result
19
<PAGE>
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
Each Fund is managed by a team of investment professionals, each of whom plays
an important role in the Fund's management process. Team members work together
to develop investment strategies and select securities for 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. Mr. Rachwalski has been responsible for the trading
and portfolio management of money market funds since 1974.
John W. Stuebe, Portfolio Manager, has been a fixed income trader for money
market securities since 1979. Mr. Stuebe currently specializes in and trades for
the 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.
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 five
years' experience working in tax-exempt money fund investments.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds or classes thereof. For
more information, please call 1-800-225-5163.) Telephone and fax redemptions and
exchanges are subject to termination and
20
<PAGE>
their terms are subject to change at any time by the Fund or the transfer agent.
In some cases, the transfer agent or Scudder Investor Services, Inc. may impose
additional conditions on telephone transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder Kemper Investments, Inc., combines the benefits of a
customized portfolio of no-load mutual funds with ongoing portfolio monitoring
and individualized service, for an annual fee of generally 1.25% or less of
assets. In addition, it draws upon the Adviser's more than 75-year heritage of
providing investment counsel to large corporate and private clients. If you have
$100,000 or more to invest initially and would like more information about
Personal Counsel, please call 1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You will receive a detailed statement summarizing account activity, including
dividend and capital gain reinvestment, purchases and redemptions. All of your
statements should be retained to help you keep track of account activity and the
cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
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<PAGE>
Purchases
<TABLE>
<CAPTION>
Opening Minimum initial investment: $100,000; IRAs $100,000
an account
<S> <C> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular, express, registered,
or certified mail to:
The Scudder Funds
66 Brooks Drive
Braintree, MA 02184
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application
with the help of a Scudder representative. Investor Center
locations are listed under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $1,000; IRAs $100
additional
shares
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
Scudder Funds." Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
<S> <C> <C>
Exchanging Minimum investments: $100,000 to establish a new account in Scudder Premium
shares $1,000 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
For information o By Mail Print or type your instructions and include:
on exchanging to or Fax - the name of the Fund and the account number you are exchanging from;
other Scudder - your name(s) and address as they appear on your account;
Funds, see - the dollar amount or number of shares you wish to exchange;
"Transaction - the name of the Fund you are exchanging into;
Information-- - your signature(s) as it appears on your account; and
By exchange." - a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA 02107-2291 Braintree, MA 02184
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
o By "Write- You may redeem shares by writing checks against your account
A-Check" balance as often as you like for at least $100, but not more than
$5,000,000.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
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<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples filing jointly, even if only
one spouse has earned income). Many people can deduct all or part of their
contributions from their taxable income, and all investment earnings accrue
on a tax-deferred basis. The Scudder No-Fee IRA charges you no annual
custodial fee.
o Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying
individuals to accumulate investment earnings tax free. Unlike a
traditional IRA, with a Roth IRA, if you meet the distribution
requirements, you can withdraw your money without paying any taxes on the
earnings. No tax deduction is allowed for contributions to a Roth IRA. The
Scudder Roth IRA charges you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to
o SEP-IRA accounts is adjusted each year for inflation. The Scudder SEP-IRA
charges you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA and most Profit
Sharing or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
24
<PAGE>
Directors and Officers
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
* Scudder Kemper Investments, Inc.
25
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. +++ +++A no-load variable
annuity contract provided by Charter National Life Insurance Company and its
affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. #These
funds, advised by Scudder Kemper Investments, Inc., are traded on the New York
Stock Exchange and, in some cases, on various foreign stock exchanges.
26
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
</TABLE>
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
27
<PAGE>
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
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
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 ........................................................... 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
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 .................................................. $1.000
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................ 2.17**
Ratios and Supplemental Data
Net assets, end of period ($ 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.
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 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.
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.
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.
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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.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Funds' combined Statement of Additional
Information.
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
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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
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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
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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
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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
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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
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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
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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.
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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
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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.
- --------------------------------------------------------------------------------
Statement of Additional Information
May 1, 1998
- --------------------------------------------------------------------------------
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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............................................................................6
PURCHASING SHARES.....................................................................................................7
Wire Transfer of Federal Funds...............................................................................7
Additional Information About Making Subsequent Investments by QuickBuy.......................................8
Share Certificates...........................................................................................8
EXCHANGES AND REDEMPTIONS.............................................................................................8
Exchanges....................................................................................................9
Redemption by Telephone.....................................................................................10
Redemption By QuickSell.....................................................................................10
Redemption by Mail or Fax...................................................................................11
Redemption by Write-a-Check.................................................................................11
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................12
The Pure No-Load(TM) Concept................................................................................12
Dividend and Capital Gain Distribution Options..............................................................13
Scudder Investor Centers....................................................................................13
Reports to Shareholders.....................................................................................13
Diversification.............................................................................................13
Transaction Summaries.......................................................................................13
THE SCUDDER FAMILY OF FUNDS..........................................................................................14
SPECIAL PLAN ACCOUNTS................................................................................................19
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.......................................................................22
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........................................................................................25
Comparison of Fund Performance..............................................................................25
THE PROGRAM..........................................................................................................28
ORGANIZATION OF THE FUNDS............................................................................................28
INVESTMENT ADVISER...................................................................................................30
Personal Investments by Employees of the Adviser............................................................31
DISTRIBUTOR..........................................................................................................32
</TABLE>
i
<PAGE>
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
<S> <C>
DIRECTORS AND OFFICERS...............................................................................................32
REMUNERATION.........................................................................................................34
Responsibilities of the Board--Board and Committee Meetings.................................................34
Compensation of Officers and Directors......................................................................34
TAXES ...............................................................................................................35
PORTFOLIO TRANSACTIONS...............................................................................................37
NET ASSET VALUE......................................................................................................38
ADDITIONAL INFORMATION...............................................................................................38
Experts.....................................................................................................38
Other Information...........................................................................................39
FINANCIAL STATEMENTS.................................................................................................40
</TABLE>
APPENDIX
ii
<PAGE>
THE FUNDS AND THEIR OBJECTIVES
(See "Investment objectives and policies" and "Additional information
about policies and investments" in the Funds' Prospectuses)
General Investment Objectives and Policies
Scudder Money Market Series ("Cash Fund"), Scudder Tax Free Money Market
Series ("Tax Free Fund") and Scudder Government Money Market Series ("Government
Fund") (collectively, the "Funds") are the three 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.
The bank obligations in which the Fund may invest include negotiable
certificates of deposit, bankers' acceptances, fixed time deposits or other
short-term bank obligations. The Fund limits its investments in U.S. bank
<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.
2
<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.
The Fund's investments in municipal notes will be limited to notes that
are rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in
the case of an issue having a variable rate demand feature) by Moody's, "SP-1"
or "SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of
270 days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. The Fund may invest in
municipal commercial paper that is rated at the date of purchase "P-1" or "P-2"
by Moody's, "A-1" or "A-2" or "A-1+" by S&P or "F-1" by Fitch.
If a municipal obligation is not rated, the Fund may purchase the
obligation if, in the opinion of the Adviser, it is of investment quality
comparable to other rated investments that are permitted in the Fund. From time
to time the Fund may invest 25% or more of the current value of its total assets
in municipal obligations that are related in such a way that an economic,
business or political development or change affecting one such obligation would
also affect the other obligations. For example, certain municipal obligations
accrue interest that is paid from revenues of similar types of projects; other
municipal obligations have issuers located in the same state.
3
<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.
All of the securities in which the Fund will invest must meet credit
standards applied by the Adviser pursuant to procedures established by the Board
of Directors. Should an issue of securities cease to be rated or if its rating
is reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors of
the Corporation determine that such disposal would not be in the best interests
of the Fund.
In addition, the Fund may enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features. The Fund
intends to take the position that it is the owner of any municipal obligation
acquired with a put feature, and that tax-exempt interest earned with respect to
such municipal obligations will be tax-exempt in its hands. There is no
assurance that the Internal Revenue Service will agree with such position in any
particular case. Additionally, the federal income tax treatment of certain other
aspects of these investments, including the treatment of tender fees and swap
payments, in relation to various regulated investment company tax provisions is
unclear.
Government Fund
The Government Fund seeks to provide investors with as high a level of
current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Fund invests exclusively in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities that have remaining maturities of not more than 397 calendar
days and certain repurchase agreements.
In addition, the Fund may invest in variable or floating rate obligations,
when-issued securities and securities with put features.
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the Investment Company Act of 1940 (the "1940
Act") and the rules thereunder and as used in this Statement of Additional
Information, means the lesser of (1) 67% or more of the voting securities
present at such meeting, if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Fund.
4
<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 income
taxes and are not subject to the alternative minimum tax. The foregoing
constitutes a fundamental policy that cannot be changed without the approval of
a majority of the outstanding shares of the Fund.
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 non-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; or
(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;
(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 may not:
(1) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by
engaging in reverse repurchase agreements, dollar rolls, or
other investments or transactions described in the Fund's
registration statement which may be deemed to be borrowings;
(2) purchase securities on margin or make short sales, except (i)
short sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with
futures contracts, options or other permitted investments,
(iv) that transactions in futures contracts and options shall
not be deemed to constitute selling securities short, and (v)
that the Fund may obtain such short-term credits as may be
necessary for the clearance of securities transactions;
(3) purchase options, unless the aggregate premiums paid on all
such options held by the Fund at any time do not exceed 20% of
its total assets; or sell put options, if as a result, the
aggregate value of the obligations underlying such put options
would exceed 50% of its total assets;
(4) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to such futures
contracts entered into on behalf of the Fund and the premiums
paid for such options on futures contracts does not exceed 5%
of the fair
5
<PAGE>
market value of the Fund's total assets; provided that in the
case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing
the 5% limit;
(5) purchase warrants if as a result, such securities, taken at
the lower of cost or market value, would represent more than
5% of the value of the Fund's total assets (for this purpose,
warrants acquired in units or attached to securities will be
deemed to have no value); and
(6) 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.
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
6
<PAGE>
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,
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.
7
<PAGE>
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.
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.
8
<PAGE>
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.
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.
9
<PAGE>
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.
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 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.
10
<PAGE>
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).
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.
11
<PAGE>
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.
Because Scudder funds do not pay any asset-based sales charges or service
fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of investing
$10,000 in a Scudder pure no-load fund over investing the same amount in a load
fund that collects an 8.50% front-end load, a load fund that collects only a
0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25% 12b-1
and/or service fee. The hypothetical figures in the chart show the value of an
account assuming a constant 10% rate of return over the time periods indicated
and reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
====================================================================================================================
Scudder Load Fund with 0.75% No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund 12b-1 Fee 0.25% 12b-1 Fee
====================================================================================================================
<S> <C> <C> <C> <C>
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.
12
<PAGE>
Dividend and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income, or distributions from realized capital
gains in additional shares of the same class of the Fund. A change of
instructions for the method of payment must be received by the Fund's transfer
agent at least 5 days prior to a dividend record date. Shareholders may change
their dividend option either by calling 1-800-225-5163 or by sending written
instructions to the Transfer Agent. Please include your account number with your
written request. See "How to contact Scudder" in the prospectus for the address.
Reinvestment is usually made at the closing net asset value determined on
the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distributions of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the same class of the relevant Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gains distributions automatically deposited to their personal
bank account usually within three business days after a Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by the
Distributor. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or obtain assistance
with opening an account, adding monies or special options to existing accounts,
making exchanges within the Scudder Family of Funds, redeeming shares or opening
retirement plans. Checks should not be mailed to the Centers but should be
mailed to "The Scudder Funds" at the address listed under "How to contact
Scudder" in the Funds' prospectuses.
Reports to Shareholders
All three Funds issue to their respective shareholders annual and
semiannual financial statements (audited annually by independent accountants),
including a list of investments held and statements of assets and liabilities,
operations, changes in net assets and financial highlights for that Fund, as the
case may be.
Diversification
A shareholder's investment represents an interest in a large, diversified
portfolio of carefully selected securities. Diversification may protect
investors against the possible risks associated with concentrating in fewer
securities.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available to
shareholders. The summaries may be obtained by calling 1-800-225-5163.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
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."
13
<PAGE>
Investors can easily establish a "Personal Page," that presents price
information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties on
Prodigy since 1988 and has participated since 1994 in GALT's Networth "financial
marketplace" site on the Internet. The firm made Scudder Funds information
available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions for
an account, with trade dates, type and amount of transaction, share price and
number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call Me(TM) feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Funds' prospectuses.)
The Scudder Family of Funds is America's first family of mutual funds and
the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
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
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<PAGE>
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 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 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 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.
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.
- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
15
<PAGE>
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.
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.
- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
16
<PAGE>
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.
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.
- ----------
** Only the Scudder Shares are part of the Scudder Family of Funds.
17
<PAGE>
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.
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
- ----------
** Only the Scudder Shares are part of the Scudder Family of Funds.
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<PAGE>
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
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
19
<PAGE>
contributing what would otherwise be the maximum tax-deductible contribution he
or she could make, the individual will be eligible to contribute the difference
to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
<TABLE>
<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.
20
<PAGE>
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.
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.
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<PAGE>
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Corporation reserves the right, after notice has been given to the
shareholder and Custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
DIVIDENDS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Funds' Prospectuses)
The Corporation declares dividends on the outstanding shares of each Fund
from each Fund's net investment income at the close of each business day to
shareholders of record at 2:00 p.m. for the Tax Free Fund and 4:00 p.m. for the
Cash Fund and Government Fund on the day of declaration. Realized capital gains
and losses (other than long-term capital gains) may be taken into account in
determining the daily distribution. Shares purchased will begin earning
dividends on the day the purchase order is executed and shares redeemed will
earn dividends through the previous day. Net investment income for a Saturday,
Sunday or holiday will be declared as a dividend on the previous business day to
shareholders of record at 2:00 p.m. for the Tax Free Fund and 4:00 p.m. for the
Cash Fund and Government Fund on that day.
Investment income for a Fund includes, among other things, interest income
and accretion of market and original issue discount and amortization of premium.
Dividends declared in and attributable to the preceding month will be paid
on the first business day of each month. Net realized capital gains, after
utilization of capital loss carryforwards, if any, will be distributed annually,
although an additional distribution may be necessary to prevent the application
of a federal excise tax. Dividends and distributions will be invested in
additional shares of the same class of the Fund at net asset value and credited
to the shareholder's account on the payment date or, at the shareholder's
election, paid in cash. Dividend checks and Statements of Account will be mailed
approximately two business days after the payment date. Each Fund forwards to
the Custodian the monies for dividends to be paid in cash on the payment date.
Shareholders who redeem all their shares prior to a dividend payment will
receive, in addition to the redemption proceeds, dividends declared but unpaid.
Shareholders who redeem only a portion of their shares will be entitled to all
dividends declared but unpaid on such shares on the next dividend payment date.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance information"
in the Funds' Prospectuses)
From time to time, quotations of each Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. Performance information will be calculated separately for each class
of a Fund's shares. Because each class of shares is subject to different
expenses, the net yield of each class of a particular Fund for the same period
may differ. Performance information enumerated below is provided at the Fund
level since each Fund consisted of one class of shares (which class was
redesignated as the Managed Shares Class) on December 31, 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
__% for the Money Market, __% for the Tax Free Fund and __% for the Government
Fund; for the Managed
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Shares were __% for the Money Market Fund, __% for the Tax Free Fund and __% for
the Government Fund; and __% 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.
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 __% for the Money Market,
__% for the Tax Free Fund and __% for the Government Fund; for the Managed
Shares were __% for the Money Market Fund, __% for the Tax Free Fund and __% for
the Government Fund; and __% 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.
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Average Annual Total Return for periods ended December 31, 1997
One Year Five Years Ten Years
Institutional Class of Shares*
Scudder Money Market Series N/A N/A N/A
Scudder Tax Free Money Market Series N/A N/A N/A
Scudder Government Money Market Series N/A N/A N/A
Managed Class of Shares N/A N/A N/A
Scudder Money Market Series 5.21 4.48 5.61
Scudder Tax Free Money Market Series 5.02 4.37 5.45
Scudder Government Money Market Series
Premium Class of Shares* N/A N/A N/A
* since inception
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
One Year Five Years Ten Years
Institutional Class of Shares
Cash Fund
Tax Free Fund
Government Fund
Managed Class of Shares
Cash Fund
Tax Free Fund
Government Fund
Premium Money Market Shares
* One Year Cumulative Total Return for the Cash Fund and the Government Fund
would have been approximately ____% and ____%, respectively, had expenses not
been maintained. Return for Five Years would have been lower had expenses not
been maintained.
Total Return
Total return is the rate of return on an investment for a specified period
of time calculated in the same manner as cumulative total return.
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<PAGE>
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 ____% to receive after-tax
income equal to the ____% tax-free yield of 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.
25
<PAGE>
Unlike mutual funds, certificates of deposit are insured up to $100,000 by the
U.S. government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment and
money market funds seek stability of principal, these investments are considered
to be less risky than investments in either bond or equity funds, which may
involve the loss of principal. However, all long-term investments, including
investments in bank products, may be subject to inflation risk, which is the
risk of erosion of the value of an investment as prices increase over a long
time period. The risks/returns associated with an investment in bond or equity
funds depend upon many factors. For bond funds these factors include, but are
not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
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.
26
<PAGE>
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.
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.
27
<PAGE>
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.
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
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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
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.
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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
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 $___ 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 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
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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.
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 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>
Position with
Underwriter, Scudder
Position with Investor Services,
Name (Age) and Address Corporation Principal Occupation** Inc.
- ---------------------- ----------- ---------------------- ----------------------
<S> <C> <C> <C>
Daniel Pierce (64)+*# President Managing Director of Scudder Vice President,
Kemper Investments, Inc. Director and Assistant
Treasurer
Dr. Rosita P. Chang (43) Trustee Professor of Finance, --
PACAP Research Center University of Rhode Island
College of Business
Administration
University of Rhode Island
7 Lippitt Road
Kingston, RI 02881-0802
Dr. J. D. Hammond (64) Trustee Dean, Smeal College of --
801 Business Administration Bldg. Business Administration,
Pennsylvania State University Pennsylvania State University
University Park, PA 16802
Edgar R. Fiedler (69)# Director Senior Fellow and Economic --
50023 Brogden Counsellor, The Conference
Chapel Hill, NC 27514 Board, Inc.
Peter B. Freeman (65) Director Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI 02906
Richard M. Hunt (71) Director University Marshal and
University Marshal's Office Senior Lecturer, Harvard
Wadsworth House University
1341 Massachusetts Avenue
Harvard University
Cambridge, MA 02138
Jerard K. Hartman (65)++ Vice President Managing Director of Scudder --
Kemper Investments, Inc.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Position with
Underwriter, Scudder
Position with Investor Services,
Name (Age) and Address Corporation Principal Occupation** Inc.
- ---------------------- ----------- ---------------------- ----------------------
<S> <C> <C> <C>
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. 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
</TABLE>
* 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
Directors of the Corporation not affiliated with the Adviser receive from
the Corporation an annual fee and a fee for each Board of Directors and Board
Committee meeting attended and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings. Directors who are affiliated with the
Adviser do not receive compensation from the Corporation, but the Corporation
may reimburse such Directors for all out-of-pocket expenses relating to
attendance at meetings.
As of ____________, the Directors and officers of the Corporation, as a
group, owned less than 1% of the outstanding shares of each Fund of the
Corporation, except for Peter B. Freeman, who owned ____% of the Cash Fund.
As of ____________, the following shareholders of record held more than
five percent of such Fund:
Cash Fund. State Street Bank and Trust Co., North Quincy, MA 02171-1753,
Chemical Bank, Jericho, NY 10017-2014, Wilmington Trust Company, Wilmington DE
19801, Citibank, Long Island City, NY 11120, Lucian T. Baldwin III Trust,
Winnetka, IL 60093-4223, Cudd & Co., New York, NY 10036, Hare & Co., New York,
NY 10005, and Scudder Trust Company, Two International Place, Boston, MA
02110-4103 held of record ____%, ____%, ____%, ____%, ____%, ____%, ____% and
____%, respectively, of the outstanding shares of the Cash Fund.
33
<PAGE>
Tax Free Fund. Chemical Bank, Jericho, NY 10017-2014, Cudd & Co., New
York, NY 10036, Hare & Co., New York, NY 10005, and State Street Bank and Trust
Co., North Quincy, MA 02171-1753 held of record ____%, ____%, ____% and ____%,
respectively, of the outstanding shares of the Tax Free Fund.
Government Fund. No shareholder of record held more than 5% of the
outstanding shares of the Government Fund.
As of ____________, no other persons, to the knowledge of management,
owned of record or beneficially more than 5% of the outstanding shares of any
Fund. To the extent that any of the above institutions is the beneficial owner
of more than 25% of the outstanding shares of the Corporation or a Fund, it may
be deemed to be a "control" person of the Corporation or such Fund for purposes
of the 1940 Act.
REMUNERATION
Responsibilities of the Board--Board and Committee Meetings
The Board of Directors is responsible for the general oversight of each
Fund's business. A majority of the Board's members are not affiliated with
Scudder 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.
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.
34
<PAGE>
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)
* Scudder Fund, Inc. consists of the Cash Fund, Tax Free Fund and Government
Fund.
** Mr. Fiedler received $238,270 through a deferred compensation program.
As of December 31, 1997, Mr. Fiedler had a total of $________ 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 $________ accrued in a deferred compensation
program for serving on the Board of Directors of Scudder Institutional
Fund, Inc.
*** Mr. Lear retired from the Fund _________.
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
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.
35
<PAGE>
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."
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.
36
<PAGE>
Each Fund may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable distributions (other than redemption proceeds, provided
the Fund maintains a constant net asset value per share) payable to shareholders
who fail to provide the Fund with their correct taxpayer identification number
or to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code generally are
exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the shareholder's U.S. federal
income tax liability.
The tax consequences to a foreign shareholder of an investment in a Fund
may be different from those described herein. Foreign shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
Fund shareholders may be subject to state and local taxes on their Fund
distributions, including distributions from the Tax Free Fund. In many states,
Fund distributions which are derived from interest on certain U.S. Government
obligations are exempt from taxation. Shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund. Persons who may be "substantial users" (or "related
persons" of substantial users) of facilities financed by industrial development
bonds should consult their tax advisers before purchasing shares of the Tax Free
Fund. The term "substantial user" generally includes any "non-exempt person" who
regularly uses in his or her trade or business a part of a facility financed by
industrial development bonds. Generally, an individual will not be a "related
person" of a substantial user under the Code unless the person or his or her
immediate family owns directly or indirectly in the aggregate more than a 50%
equity interest in the substantial user.
PORTFOLIO TRANSACTIONS
Subject to the supervision of the Board of Directors, the Adviser is
primarily responsible for the investment decisions of each of the Funds and the
placing of such Funds' portfolio transactions. In placing orders, it is the
policy of the Adviser to obtain the most favorable net results, taking into
account such factors as price, size of order, difficulty of execution and skill
required of the executing broker. While the Adviser will generally seek
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
To the maximum extent feasible, the Adviser places orders for portfolio
transactions for the Funds through the Distributor, which in turn places orders
on behalf of the Funds. The Distributor receives no commissions, fees or other
remuneration from the Funds for this service. Allocation of portfolio
transactions by the Distributor is supervised by the Adviser.
The Funds' purchases and sales of portfolio securities are generally
placed by the Adviser with the issuer or a primary market maker for these
securities on a net basis, without any brokerage commissions being paid by the
Funds. Trading, however, does involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid and
asked prices. Transaction costs may also include fees paid to third parties for
information as to potential purchasers or sellers of securities but only for the
purpose of seeking for the Funds the most favorable net results, including such
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
37
<PAGE>
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, 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
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,
38
<PAGE>
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
</TABLE>
Each Fund has a fiscal year end of December 31.
The law firm of Dechert Price & Rhoads is counsel to the Funds.
Information enumerated below is provided at the Fund level since each Fund
consisted of one class of shares (which class was redesignated as the Managed
Shares Class) on December 31, 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, remained unpaid at December
31, 1996.
Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Corporation and as such
performs the customary services of a transfer agent and dividend disbursing
agent. These services include, but are not limited to: (i) receiving for
acceptance in proper form orders for the purchase or redemption of Fund shares
and promptly effecting such orders; (ii) recording purchases of Fund shares and,
if requested, issuing stock certificates; (iii) reinvesting dividends and
distributions in additional shares or transmitting payments therefor; (iv)
receiving for acceptance in proper form transfer requests and effecting such
transfers; (v) responding to shareholder inquiries and correspondence regarding
shareholder account status; (vi) reporting abandoned property to the various
states; and (vii) recording and monitoring daily the issuance in each state of
shares of each Fund of the Corporation. The Service Corporation applies monthly
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:
39
<PAGE>
Government
Money Market Tax Free Money Money Market
Series Market Series 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
======== ======== ========
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 has approved
a name change of the Funds from Managed Cash Fund, Managed Tax-Free Fund and
Managed Government Securities Fund to Scudder Money Market Series, Scudder Tax
Free Money Market Series and Scudder Government Money Market Series,
respectively. In addition, the Board of Directors has subdivided Scudder Money
Market Series, Scudder Tax Free Money Market Series and Scudder Government Money
Market Series into classes. Shares of each Fund outstanding as of July 7, 1997
have been redesignated as shares of the Managed Class of the respective Fund.
Furthermore, with respect to the Scudder Tax Free Money Market Series and
Scudder Government Money Market Series one additional class was created of
"Institutional Shares," with respect to the Scudder Money Market Series two
additional classes were created, the "Institutional Shares" and the "Premium
Money Market Shares."
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".
<PAGE>
Scudder
Premium Money
Market Shares
Annual Report
December 31, 1997
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund portfolio seeking to provide
high money market income with preservation of capital and liquidity.
SCUDDER (logo)
<PAGE>
Scudder Premium Money Market Shares
- --------------------------------------------------------------------------------
Date of Inception: 7/7/97 Total Net Assets as of Ticker Symbol: SPMXX
12/31/97: $334.8 million
- --------------------------------------------------------------------------------
o Scudder Premium Money Market Shares maintained its $1.00 share price and
provided a total return of 2.62% for the period of slightly less than six months
from their inception on July 7, 1997 through December 31, 1997.
o The Premium Shares' 30-day net annualized yield at the end of December 1997
was 5.32%.
o As inflation fears cooled and it became apparent that the Fed would maintain
its hands-off policy on interest rates, we gradually extended the Shares'
average maturity, before trimming back slightly toward year end.
Table of Contents
3 Letter from the Fund's President 19 Report of Independent Accountants
4 Portfolio Management Discussion 20 Tax Information
7 Investment Portfolio 21 Stockholder Meeting Results
10 Financial Statements 24 Officers and Directors
13 Financial Highlights 25 Investment Products and Services
16 Notes to Financial Statements 26 Scudder Solutions
2 - Scudder Premium Money Market Shares
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to present the initial annual report for Scudder Premium
Money Market Shares, covering the abbreviated period from their inception on
July 7, 1997 through December 31, 1997.
The U.S. economy -- buoyed by moderate growth, strong employment, low
inflation and healthy corporate profits -- continued to enjoy strong performance
over the initial period of operations for Scudder Premium Money Market Shares.
In fact, the U.S. economy can now lay claim to one of the longest expansions on
record -- 6 1/2 years -- a growth trend which we believe shows no sign of ending
soon.
Although inflation remains under control, there is still a chance that the
Federal Reserve Board could raise interest rates in the coming months, which
would quickly affect market returns. This conclusion is based on the belief that
the Federal Reserve Board could view the tight labor market as a potential
inflation danger (unemployment levels are at a 25-year low) and that the
economy's underlying strength may lead to even stronger growth.
If such a scenario comes to pass, we believe you can rest assured that
Scudder Premium Money Market Shares offers a safe haven from market volatility.
The Shares seek to maintain a stable $1.00 share price -- no matter what the
market conditions -- through investment in short-maturity and high-quality money
market securities. In addition, their low expense structure is designed to
increase returns for investors who are able to maintain a substantial account
balance.
Finally, as you may know, the Premium Shares' investment adviser has
changed its name to Scudder Kemper Investments, Inc., from Scudder, Stevens &
Clark, Inc., pursuant to the acquisition of a majority interest in Scudder,
Stevens & Clark by Zurich Insurance Company, and the combining of Scudder's
business with that of Zurich Kemper Investments, Inc. In addition, there is a
new management team as of January 1, 1998, Frank J. Rachwalski, Jr. and John W.
Stuebe. We are pleased that they are bringing their extensive knowledge and
expertise to the Shares. We thank David Wines, the lead portfolio manager since
the Shares' inception, and the other team members, for their past efforts.
Thank you for choosing Scudder Premium Money Market Shares to help meet
your investment needs. If you should have any questions regarding your
investment, or any of the Scudder Funds, please do not hesitate to call Investor
Relations at 1-800-225-2470, or visit our Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Premium Money Market Shares
3 - Scudder Premium Money Market Shares
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Fueled by a near-perfect economic environment, the broader U.S. stock market
continued its record run during Scudder Premium Money Market Shares' initial
months of operation, experiencing only short-lived setbacks along the way.
Encouraged, too, by relatively stable rates and low inflation -- and undoubtedly
heartened by the declining government budget deficit, which is currently at a
20-year low -- bonds ended the year with solid, though not stellar, performance.
The stock market's fresh gains -- which come on top of significant increases in
1995 and 1996 -- leave many investors wary of what might come next. Uncertainty
in the bond market in the months ahead remains a given as well, as investors
keep a close watch on inflation and the Federal Reserve Board's actions.
During this period of record growth -- and uncertainty in the fixed-income
markets -- the Shares' investments in short-term, high-quality securities
provided a balance to more aggressive stock and bond holdings. The Premium
Shares maintained their $1.00 price throughout the period and were able to
provide a positive total return of 2.62% for the period of nearly six months
beginning with the Shares' July 7, 1997 inception and ending December 31, 1997.
The Shares' 30-day net annualized yield at the end of December was 5.32%.
Average Maturity Gradually
Extended to Capture
Higher Yields
During the course of the year, we kept a watchful eye on the Federal Reserve
Board, in anticipation of further interest rate hikes. (The Fed raised the
federal funds rate -- a key short-term interest rate -- in March, but left rates
untouched for the remainder of the year.) As inflation fears cooled and it
became apparent that the Fed would maintain its hands-off policy on rates, we
gradually extended the Fund's average maturity.
Shorter maturities are generally sought for the stability and liquidity they can
provide -- the primary goals of the Premium Shares. Yet, in a relatively stable
interest rate environment, we seek out longer maturities which tend to offer
higher yields in exchange for slightly higher risk. In contrast, when we expect
rates to rise, we typically shorten the portfolio's average maturity, so that
issues coming due can be reinvested at higher rates.
The Shares' average maturity hovered in the 75-85 day range for much of the
period. We did, however, pull back slightly on the average maturity at year-end
- -- not for any economic reason, but rather to maintain liquidity. This, of
course, was a seasonal consideration -- we anticipated heavier than normal cash
flows out of the Shares as investors withdrew money for holiday shopping, tax
payments or credit card bills.
4 - Scudder Premium Money Market Shares
<PAGE>
A Flexible Portfolio
As always, the portfolio consists of a varied mix of high-quality money market
instruments, including commercial paper, certificates of deposit issued by major
banks, U.S. government securities and short-term obligations from highly rated
companies.
The Shares continue to be significantly over-weighted in commercial paper
because it tends to offer some of the highest money market yields available.
Commercial paper also boosts stability by allowing us to lock in relatively
attractive rates over a period of one to three months. At the end of December,
commercial paper and Certificates of Deposit accounted for approximately 60% of
the portfolio.
Uncertain Investment
Climate Ahead
Looking ahead, we believe that interest rates are likely to remain flat, as the
economy continues on its slow, steady, non-inflationary growth path. While this
scenario is extremely positive for the long term, it is unlikely that 1998 will
see a repeat of the last three years' outstanding stock market performance.
Consensus estimates call for a modest 2.5% growth in gross domestic product. The
meltdown in many smaller Asian economies and growing problems in Japan may hold
back growth in the U.S. to that level. Weaker markets for exports and
competition from cheaper foreign goods sold in devalued currencies will likely
provide a head wind in the near term. In fact, Southeast Asia's problems may
reverberate throughout the world for some time, bringing volatility to both the
stock and bond markets.
5 - Scudder Premium Money Market Shares
<PAGE>
Another potential bump in the road to lower interest rates -- and continued bond
market strength -- are growing problems among Japanese banks that may cause them
to sell sizable amounts of their massive U.S.
bond portfolios.
In an uncertain investment climate such as this, the Premium Shares offer the
safety and stability of short-term, high-quality money market instruments. We
continue to believe in the value of owning a short-term investment vehicle, like
the Premium Shares, as part of a well-diversified portfolio.
In the months ahead, the management team will continue to collect economic data
and carefully monitor the investment climate as the Shares seek high current
income consistent with preservation of capital and liquidity.
Sincerely,
Your Portfolio Management Team
/s/David B. Wines /s/Debra A. Hanson
David B. Wines Debra A. Hanson
Lead Portfolio Manager Portfolio Manager
/s/K. Sue Cote
K. Sue Cote
Portfolio Manager
Scudder Premium Money
Market Shares:
A Team Approach to Investing
Scudder Premium Money Market Shares is managed by a team of Scudder Kemper
Investments, Inc. (SKI) professionals who each play an important role in the
management process. Team members work together to develop investment
strategies and select securities for the Shares. They are supported by a large
staff of economists, research analysts, traders, and other investment
specialists who work in our offices across the United States and abroad. We
believe our team approach benefits investors by bringing together many
disciplines and leveraging SKI's extensive resources. Since the Shares'
inception on July 7, 1997, the portfolio management team has consisted of the
following individuals, who managed the Shares during the period covered in
this report.
David Wines, Lead Portfolio Manager, who joined SKI in 1996, focuses on
overall investment strategy. Debra A. Hanson, Portfolio Manager, works on the
development and execution of investment strategy. K. Sue Cote, Portfolio
Manager, joined SKI in 1983 and has 13 years' experience working with
short-term fixed-income investments.
6 - Scudder Premium Money Market Shares
<PAGE>
Investment Portfolio as of December 31, 1997
Money Market Series
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 21.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/97 at 6.5%, to be
repurchased at $100,036,111 on 1/2/98, collateralized by a $50,000,000 U.S. Treasury
Note, 6.75%, 5/31/99 and a $48,878,000 U.S. Treasury Note, 6.25%, 3/31/99 ............. 100,000,000 100,000,000
Repurchase Agreement with Salomon Brothers dated 12/31/97 at 6.7%, to be
repurchased at $75,027,917 on 1/2/98, collateralized by $79,830,000 U.S. Treasury
Bills, 10/15/98 ....................................................................... 75,000,000 75,000,000
Repurchase Agreement with State Street Bank and Trust Company dated 12/31/97 at 6%, to be
repurchased at $49,586,523 on 1/2/98, collateralized by a $39,610,000 U.S. Treasury
Bond, 8.125%, 8/15/19 ................................................................. 49,570,000 49,570,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $224,570,000) 224,570,000
- ------------------------------------------------------------------------------------------------------------------------------
Commercial Paper 42.0%
- ------------------------------------------------------------------------------------------------------------------------------
AVCO Financial, 1/14/98 ................................................................. 10,000,000 9,980,139
American General Finance Corp., 5.812%, 3/18/98 ......................................... 40,000,000 40,000,000
Associates Corp NA, 3/24/98 ............................................................. 40,000,000 39,482,489
Bank of Montreal, 1/22/98 ............................................................... 30,000,000 29,903,663
Bank of Nova Scotia, 2/3/98 ............................................................. 25,000,000 24,872,469
Bankers Trust, 5.97%, 8/28/98 ........................................................... 10,000,000 9,998,436
Barclay's Bank PLC BA, 2/9/98 ........................................................... 8,000,000 7,952,247
Bell Atlantic Financial Services, 1/27/98 ............................................... 40,000,000 39,831,000
Ciesco, L.P., 2/23/98 ................................................................... 20,000,000 19,833,639
Corporate Asset Fund, 1/14/98 ........................................................... 20,000,000 19,959,700
Dai Ichi Kangyo Bank, 1/27/98 ........................................................... 10,000,000 9,959,700
Dai Ichi Kangyo NY Bank, 1/28/98 ........................................................ 19,000,000 18,919,060
FCAR Owner Trust I, 1/5/98 .............................................................. 20,000,000 19,987,511
Ford Credit Receivables, 1/27/98 ........................................................ 10,000,000 9,960,206
Ford Motor Credit Co.,1/6/98 ............................................................ 10,000,000 9,992,194
General Electric Capital Corp., 4/15/98 ................................................. 20,000,000 19,673,556
General Electric Capital, 1/8/98 ........................................................ 20,000,000 19,978,611
New Center Asset Trust, 2/18/98 ......................................................... 10,000,000 9,924,000
New Center Asset Trust, 2/25/98 ......................................................... 20,000,000 19,830,722
Prudential Funding, 3/26/98 ............................................................. 20,000,000 19,741,933
Public Service Co. of Colorado, 1/15/98 ................................................. 8,000,000 7,982,329
Republic of New York, 1/6/98 ............................................................ 20,000,000 19,984,618
</TABLE>
The accompanying notes are an integral part of the financial statements.
7 - Scudder Premium Money Market Shares
<PAGE>
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Royal Bank Canada, 2/11/98 ............................................................. 8,900,000 8,844,150
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $436,592,372) 436,592,372
- ------------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit 22.4% ...........................................................
- ------------------------------------------------------------------------------------------------------------------------------
Bank of America, 5.95%, 10/22/98 ........................................................ 10,000,000 9,996,151
Bank of Nova Scotia, 5.793%, 10/1/98 .................................................... 10,000,000 9,994,453
Bank of Nova Scotia, 5.715%, 10/30/98 ................................................... 10,000,000 9,991,384
Bankers Trust Company, 6.24%, 4/2/98 .................................................... 4,500,000 4,503,400
Banque National de Paris, 5.89%, 9/10/98 ................................................ 15,000,000 14,999,537
Banque National de Paris, 5.9%, 10/21/98 ................................................ 15,000,000 15,009,692
Canadian Imperial, 5.81%, 3/11/98 ....................................................... 25,000,000 25,001,889
Daichi Kangyo Bank, 5.78%, 1/27/98 ...................................................... 10,000,000 10,000,563
First National Bank of Boston, 5.61%, 1/5/98 ............................................ 25,000,000 25,000,000
Lasalle National Bank, 5.91%, 8/12/98 ................................................... 10,000,000 10,001,169
Morgan Guaranty Trust Co., 5.87%, 8/6/98 ................................................ 20,000,000 19,998,644
National Westminster Bank, 5.855%, 8/7/98 ............................................... 20,000,000 19,997,143
Societe Generale, 5.75%, 1/5/98 ......................................................... 20,000,000 19,999,754
Societe Generale, 5.8%, 1/29/98 ......................................................... 19,000,000 19,000,000
Societe Generale, 5.91%, 9/4/98 ......................................................... 10,000,000 9,998,396
Sumitomo Bank Ltd., 5.63%, 1/8/98 ....................................................... 9,000,000 9,000,017
- ------------------------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit (Cost $232,492,192) 232,492,192
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Government Agency Obligations 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assoc., 5.51%, 3/14/98*
(Cost $14,981,673) .................................................................... 15,000,000 14,981,673
Short-Term Notes 12.6%
- ------------------------------------------------------------------------------------------------------------------------------
American Express Centurion Bank, 5.6419%, 1/24/98* ...................................... 10,000,000 10,000,000
Bank of America NT&SA, 5.87%, 1/5/98 .................................................... 15,000,000 15,000,317
Bank One, Columbus, N.A., 5.50%, 1/6/98* ................................................ 20,000,000 19,995,660
Bankers Trust Co. Medium Term Note, 5.71%, 1/1/98* ...................................... 25,000,000 24,999,389
First National Bank of Maryland, 5.95%, 10/22/98 ........................................ 14,850,000 14,857,587
IBM Credit Corp, 5.9%, 2/15/98 .......................................................... 10,000,000 10,022,812
Lockheed Martin Corp., 6.625%, 6/15/98 .................................................. 8,000,000 8,025,859
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - Scudder Premium Money Market Shares
<PAGE>
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MMR Funding I, 5.18%, 1/1/98* ........................................................... 5,500,000 5,500,000
Student Loan Marketing Assoc., 5.619%, 1/6/98* .......................................... 22,400,000 22,398,187
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Notes (Cost $130,799,811) 130,799,811
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,039,436,048) (a) 1,039,436,048
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes is $1,039,436,048.
* Floating rate security; date shown is next interest rate change.
The accompanying notes are an integral part of the financial statements.
9 - Scudder Premium Money Market Shares
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at value (including repurchase agreements of
$224,570,000) (cost $1,039,436,048).................................... $1,039,436,048
Cash .................................................................. 559,470
Receivable for Fund shares sold ....................................... 397,856
Interest receivable ................................................... 6,032,437
Reimbursement due from Adviser ........................................ 84,364
Other assets .......................................................... 44,566
----------------
Total assets .......................................................... 1,046,554,741
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Dividends payable ..................................................... 4,544,673
Accrued management fee ................................................ 123,101
Other payables and accrued expenses ................................... 358,252
----------------
Total liabilities ..................................................... 5,026,026
-------------------------------------------------------------------------------------------------------------
Net assets, at value $1,041,528,715
-------------------------------------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------------------------
Managed Shares:
Net assets applicable to shares outstanding ......................... $ 368,915,638
Shares outstanding of capital stock, $.001 par value, 800,000,000
shares authorized ................................................. 368,915,638
Net Asset Value, offering and redemption price per share -----
(net assets / shares oustanding) .................................. $1.00
Institutional Shares: -----
Net assets applicable to shares outstanding ......................... $ 337,824,146
Shares outstanding of capital stock, $.001 par value, 800,000,000
shares authorized ................................................. 337,824,146
Net Asset Value, offering and redemption price per share -----
(net assets / shares oustanding) .................................. $1.00
Premium Money Market Shares: -----
Net assets applicable to shares outstanding ......................... $ 334,788,931
Shares outstanding of capital stock, $.001 par value, 2,000,000,000
shares authorized ................................................. 334,788,931
Net Asset Value, offering and redemption price per share -----
(net assets / shares oustanding) .................................. $1.00
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Premium Money Market Shares
<PAGE>
Statement of Operations
year ended December 31, 1997
<TABLE>
<CAPTION>
Investment Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest .............................................................. $31,972,083
-----------------
Expenses:
Management fee ........................................................ 1,676,376
Shareholders services ................................................. 735,033
Directors' fees and expenses .......................................... 14,498
Custodian and accounting fees ......................................... 145,605
Reports to shareholders ............................................... 47,389
Auditing .............................................................. 23,642
Legal ................................................................. 73,167
Registration fees ..................................................... 77,718
Other ................................................................. 15,814
-----------------
Total expenses before reductions ...................................... 2,809,242
Expense reductions .................................................... (459,300)
-----------------
Expenses, net ......................................................... 2,349,942
---------------------------------------------------------------------------------------------
Net investment income 29,622,141
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $29,622,141
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Premium Money Market Shares
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................................. $ 29,622,141 $ 18,268,673
---------------- ---------------
Distributions to shareholders from:
Net investment income (Managed Shares) ................................ (16,811,273) (18,268,673)
---------------- ---------------
Net investment income (Institutional Shares) .......................... (8,101,246) --
---------------- ---------------
Net investment income (Premium Money Market Shares) ................... (4,709,622) --
---------------- ---------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold ............................................. 1,604,556,971 2,285,419,535
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................................... 7,105,515 10,791,498
Cost of shares redeemed ............................................... (1,674,045,123) (2,236,431,853)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................................ (62,382,637) 59,779,180
---------------- ---------------
Institutional Shares*:
Proceeds from shares sold ............................................. 697,521,385 --
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................................... 1,796,954 --
Cost of shares redeemed ............................................... (361,494,193) --
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions .......................................................... 337,824,146 --
---------------- ---------------
Premium Money Market Shares**:
Proceeds from shares sold ............................................. 612,133,352 --
Net asset value of shares issued to shareholders in
reinvestment of distributions ......................................... 2,900,558 --
Cost of shares redeemed ............................................... (280,244,979) --
---------------- ---------------
Net increase in net assets from Fund share transactions ............... 334,788,931 --
---------------- ---------------
Increase (decrease) in net assets ..................................... 610,230,440 59,779,180
Net assets at beginning of period ..................................... 431,298,275 371,519,095
---------------- ---------------
Net assets at end of period ........................................... $1,041,528,715 $431,298,275
---------------- ---------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional Shares)
to December 31, 1997.
** For the period July 7, 1997 (commencement of sale of Premium Money Market
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
12 - Scudder Premium Money Market Shares
<PAGE>
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of --------------------------------------------------------------------------------------------
period ...................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
--------------------------------------------------------------------------------------------
Net investment income .......... .051 .049 .054 .038 .028 .037 .059 .076 .086 .070
Distributions from net
investment income ........... (.051) (.049) (.054) (.038) (.028) (.037) (.059) (.076) (.086) (.070)
--------------------------------------------------------------------------------------------
Net asset value, end of period.. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........... 5.21 4.97 5.57 3.86 2.81 3.74 6.07 7.92 8.93 7.21
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................ 369 431 372 367 324 305 347 385 331 389
Ratio of operating expenses,
net to average daily net
assets (%) .................. .49 .55 .55 .55 .55 .55 .55 .67 .72 .65
Ratio of operating expenses
before expense reductions to
average daily net assets (%).. .59 .62 .68 .68 .66 .64 .64 .70 .72 .65
Ratio of net investment income
to average daily net
assets (%) ................... 5.00 4.86 5.45 3.84 2.78 3.76 5.93 7.64 8.56 6.95
</TABLE>
(a) Total returns are higher due to maintenance of the Fund's expenses for the
years ended December 31, 1990 to December 31, 1997.
* Effective July 7, 1997, Scudder Money Market Series (formerly known as the
Managed Cash Fund) was divided into three classes, of which Scudder Money
Market Managed Shares is one. Shares of the Fund outstanding on such date
were redesignated as the Managed Shares of the Fund. The data set forth
above reflects the investment performance of the Fund prior to such
redesignation.
13 - Scudder Premium Money Market Shares
<PAGE>
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 financial statements.
Institutional Shares
<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
The accompanying notes are an integral part of the financial statements.
14 - Scudder Premium Money Market Shares
<PAGE>
The following table includes selected data for a share of the Premium Money
Market Shares class outstanding throughout the period and other performance
information derived from the financial statements.
Premium Money Market Shares
<TABLE>
<CAPTION>
For the Period
July 7, 1997
(commencement
of sale of
Premium Shares) to
December 31, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period .................................................... $1.000
-------------------
Net investment income ................................................................... .026
Distributions from net investment income ................................................ (.026)
-------------------
Net asset value, end of period .......................................................... $1.000
- -------------------------------------------------------------------------------------------------------------
Total Return (%) (a) .................................................................... 2.62**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................. 335
Ratio of operating expenses, net to average daily net assets (%) ........................ .38*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ........................................................................... .43*
Ratio of net investment income to average daily net assets (%) .......................... 5.50*
</TABLE>
(a) Total return is higher due to the maintenance of Fund expenses.
* Annualized
** Not annualized
15 - Scudder Premium Money Market Shares
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Fund, Inc. (the "Company") is an open-end diversified 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 (collectively, the "Funds"). The Board of
Directors of the Company has approved a multi-class system for each Fund
effective July 7, 1997, such that Scudder Tax Free Money Market Series (formerly
known as Managed Tax-Free Fund) and Scudder Government Money Market Series
(formerly known as Managed Government Securities Fund) may offer two classes of
shares, Institutional Class and Managed Class and Scudder Money Market Series
(formerly known as Managed Cash Fund) may offer three classes of shares,
Institutional Class, Managed Class and Premium Money Market Class.
Security Valuation. The Funds values its investments using the amortized cost
method, which involves initially valuing an investment at its cost and
thereafter assuming a constant amortization to maturity of any premium or
discount. This method results in a value approximating market.
Federal Income Taxes. The Company's policy is to qualify the Fund as a regulated
investment company under Subchapter M of the Internal Revenue Code, as amended,
and to distribute all taxable and tax-exempt income, including any realized net
capital gains, to shareholders. Therefore, no Federal income tax provision is
required.
Dividends. Dividends from net investment income are declared each business day
to shareholders of record that day for payment on the first business day of the
following month.
Other. Investment transactions are recorded on trade dates. Interest income,
including the accretion or amortization of discount or premium, is recorded on
the accrual basis. Discounts or premiums on securities purchased are accreted or
amortized, respectively, on a straight line basis over the life of the
respective securities. Distributions to shareholders are recorded on the
ex-dividend dates.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
B. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Company's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Company and Scudder Kemper
was approved by the Company's Board of Directors and by the Company's
Shareholders. The Management Agreement, which is effective December 31, 1997, is
the same in all material respects as the corresponding previous Investment
Management Agreement, except that Scudder Kemper is the new investment adviser
to the Company.
16 - Scudder Premium Money Market Shares
<PAGE>
The Company retains Scudder Kemper as investment manager for the Fund, pursuant
to investment advisory agreements between Scudder Kemper and the Company on
behalf of the Fund. For the period January 1, 1997 until July 7, 1997 the
Adviser received an investment management fee 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. Through July 7, 1997 the Adviser agreed to waive a
portion of its investment management fee to the extent necessary so that
annualized expenses of the Fund do not exceed 0.55% of average daily net assets.
Effective July 7, 1997 the Adviser receives an investment management fee at an
annual rate of 0.25% of average daily net assets for the Fund. For the period
July 7, 1997 to December 31, 1997 the Adviser has agreed to waive a portion of
its investment management fee to the extent necessary so that the total
annualized expenses of the Fund do not exceed 0.20%.
For the year ended December 31, 1997, the Adviser did not impose fees of
$374,936 and did impose fees of $1,301,440, of which $123,101 remains unpaid.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. Each
class of the Fund has entered into a Transfer Agency and Service Agreement with
SSC. SSC receives account fees that vary according to the account size and type
of account of the shareholders of the respective classes. For the year ended
December 31, 1997 the following amounts were charged:
Premium Class $ 60,124
Managed Class 192,796
Institutional Class 23,214
-----------
$ 276,134
===========
The Fund has special arrangements with certain banks, institutions and other
persons under which it receives compensation from the Fund and the Adviser for
performing shareholder servicing functions for their customers who own shares in
the Fund. Effective July 7, 1997, the Adviser has agreed to reimburse the Fund
for amounts payable by the Scudder Managed Class Shares, such that the fees in
basis points paid by the class will be no greater than the total transfer agent
fee payable to SSC. For the period July 7, 1997 to December 31, 1997, the
Adviser's reimbursement payable aggregated $84,364.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Fund. For the year ended
December 31, 1997, the amount charged to the Fund by SFAC aggregated $109,482,
of which $12,144 remains unpaid at December 31, 1997.
The Company has a compensation arrangement under which payment of directors'
fees may be deferred. Interest is accrued (based on the rate of return earned on
the 90 day Treasury Bill as determined at the beginning of each calendar
quarter) on the deferred balances and is included in "Directors' fees and
expenses." The accumulated balance of deferred directors' fees and interest
thereon relating to the Fund aggregated $81,892, an applicable portion of which
is included in accrued expenses of the Fund.
17 - Scudder Premium Money Market Shares
<PAGE>
Other. Printing and postage expenses related to preparing and distributing
material such as shareholder reports, prospectuses and proxy materials to
current shareholders are charged to each class based on number of shareholder
accounts. For the year ended December 31, 1997, the following amounts were paid:
Premium Class $ 14,880
Managed Class 26,866
Institutional Class 7,749
----------
$ 49,495
==========
The accompanying notes are an integral part of the financial statements.
18 - Scudder Premium Money Market Shares
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Scudder Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Money Market Series (a portfolio of
Scudder Fund, Inc., hereafter referred to as the "Fund") at December 31, 1997,
the results of its operations for the year then ended, the changes in its net
assets for the two years in the period then ended and the financial highlights
for the ten years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 23, 1998
19 - Scudder Premium Money Market Shares
<PAGE>
Tax Information
The total amount of dividends declared in 1997 by the Scudder Money Market
Series is taxable as ordinary dividend income for Federal income tax purposes.
None of this amount qualifies for the dividends received deduction available to
corporations.
20 - Scudder Premium Money Market Shares
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder Premium Money
Market Shares (the "Fund") was held on October 23, 1997, at the offices of
Scudder Kemper Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), 25th
Floor, 345 Park Avenue (at 51st Street), New York, New York 10154. The following
matters were voted upon by the stockholders (the resulting votes for each matter
are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
37,425,237 1,936,064 9,241,258 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 46,130,269 2,472,290
Edgar R. Fiedler 46,218,567 2,383,992
Peter B. Freeman 46,218,567 2,383,992
Dr. J. D. Hammond 46,245,038 2,357,521
Richard M. Hunt 46,245,038 2,357,521
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
42,396,228 3,053,622 3,152,708 0
21 - Scudder Premium Money Market Shares
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 36,630,374 2,004,194 9,967,991 0
4.2 Borrowing 36,285,774 2,004,194 10,312,591 0
4.3 Senior securities 36,630,374 2,004,194 9,967,991 0
4.4 Concentration 36,630,374 2,004,194 9,967,991 0
4.5 Underwriting of securities 36,630,374 2,004,194 9,967,991 0
4.6 Investment in real estate 36,630,374 2,004,194 9,967,991 0
4.7 Purchase of physical commodities 36,630,374 2,004,194 9,967,991 0
4.8 Loans 36,630,374 2,004,194 9,967,991 0
4.9 Equity or convertible securities 36,630,374 2,004,194 9,967,991 0
4.10 Exercising control or management 36,630,374 2,004,194 9,967,991 0
4.11 Restricted securities 36,630,374 2,004,194 9,967,991 0
4.12 10% of total assets in illiquid 36,630,374 2,004,194 9,967,991 0
securities
4.13 Purchase on margin or short sales 36,630,374 2,004,194 9,967,991 0
4.14 Puts, calls, warrants, or options 36,630,374 2,004,194 9,967,991 0
4.15 Pledging or mortgaging assets 36,630,374 2,004,194 9,967,991 0
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
46,315,780 617,772 1,669,007
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
22 - Scudder Premium Money Market Shares
<PAGE>
This Page
intentionally
left blank.
23 - Scudder Premium Money Market Shares
<PAGE>
Officers and Directors
Dr. Rosita P. Chang
Director; Professor of Finance,
University of Rhode Island
Edgar R. Fiedler
Director; Senior Fellow and
Economic Counsellor, The
Conference Board, Inc.
Peter B. Freeman
Director; Corporate Director and
Trustee
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
Daniel Pierce*
President
K. Sue Cote*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President and Assistant
Secretary
Thomas F. McDonough*
Vice President and Secretary
Kathryn L. Quirk*
Vice President
David B. Wines*
Vice President
*Scudder Kemper Investments, Inc.
24 - Scudder Premium Money Market Shares
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.
25 - Scudder Premium Money Market Shares
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Premium Money Market Shares
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
27 - Scudder Premium Money Market Shares
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
Premium Money Market Shares are not insured or guaranteed by the U.S.
Government. The Fund seeks to maintain a constant net asset value of $1.00 per
share, but there can be no assurance that the stable net asset value will be
maintained.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
[LOGO]
<PAGE>
Scudder
Managed Shares
Scudder Money Market Series
Scudder Tax Free Money Market Series
Scudder Government Money Market Series
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Distributor
Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 9242
Boston, Massachusetts 02205
Legal Counsel
Dechert Price & Rhoads
Boston, Massachusetts 02109
-----------------
Scudder Managed Shares are not insured or guaranteed by the U.S. Government.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
but there can be no assurance that the stable net asset value will be
maintained.
This report is for the information of the shareholders. Its use in
connection with any offering of the Company's shares is authorized only in
case of a concurrent or prior delivery of the Company's current prospectus.
Scudder
Managed Shares
Scudder Money
Market Series
Scudder Tax Free Money
Market Series
Scudder Government
Money Market Series
Annual Report
December 31, 1997
<PAGE>
<TABLE>
<CAPTION>
Board of Directors
<S> <C>
DANIEL PIERCE(1) President; Managing Director, Scudder Kemper Investments, Inc.
EDGAR R. FIEDLER(1) (2) (3) Senior Fellow and Economic Counsellor, The Conference Board, Inc.
PETER B. FREEMAN(2) (3) Corporate Director and Trustee
ROBERT W. LEAR(2) (3) Executive-in-Residence and Visiting Professor, Columbia
University Graduate School of Business
(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee
- --------------------------------------------------------------------------------
Officers
DANIEL PIERCE President
STEPHEN L. AKERS Vice President
K. SUE COTE Vice President
CAROL L. FRANKLIN Vice President
JERARD K. HARTMAN Vice President
KATHRYN L. QUIRK Vice President
THOMAS W. JOSEPH Vice President and Assistant Secretary
THOMAS F. McDONOUGH Vice President and Secretary
</TABLE>
2
<PAGE>
Dear Shareholder:
Scudder Managed Shares is a class of shares in three different money market
mutual fund portfolios: Money Market Series, Tax Free Money Market Series, and
Government Money Market Series. Each of these money market portfolios seeks to
provide a high level of current income while preserving capital and maintaining
liquidity.
All three funds seek to maintain a net asset value of $1.00, and have done so
since their inception. (There is no guarantee, of course, that each fund will
maintain stable net asset values.)
Tables showing dividend payments and other financial information for the 12
months ended December 31, 1997 can be found within this report. In addition,
please see the following pages for financial statements as of December 31, 1997,
as well as a list of each Fund's investments.
If you have any questions concerning any of these funds, please call toll free
(800) 854-8525 from any continental state.
/s/Daniel Pierce
Daniel Pierce
Chairman
3
<PAGE>
Scudder Managed Shares/Money Market Series
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 21.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/97 at 6.5%,
to be repurchased at $100,036,111 on 1/2/98, collateralized by a $50,000,000
U.S. Treasury Note, 6.75%, 5/31/99 and a $48,878,000 U.S. Treasury Note,
6.25%, 3/31/99 ........................................................................ 100,000,000 100,000,000
Repurchase Agreement with Salomon Brothers dated 12/31/97 at 6.7%, to be
repurchased at $75,027,917 on 1/2/98, collateralized by $79,830,000 U.S.
Treasury Bills, 10/15/98 .............................................................. 75,000,000 75,000,000
Repurchase Agreement with State Street Bank and Trust Company dated 12/31/97
at 6%, to be repurchased at $49,586,523 on 1/2/98, collateralized by a
$39,610,000 U.S. Treasury Bond, 8.125%, 8/15/19 ....................................... 49,570,000 49,570,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $224,570,000) 224,570,000
- ------------------------------------------------------------------------------------------------------------------------------
Commercial Paper 42.0%
- ------------------------------------------------------------------------------------------------------------------------------
AVCO Financial, 1/14/98 ................................................................. 10,000,000 9,980,139
American General Finance Corp., 5.812%, 3/18/98 ......................................... 40,000,000 40,000,000
Associates Corp NA, 3/24/98 ............................................................. 40,000,000 39,482,489
Bank of Montreal, 1/22/98 ............................................................... 30,000,000 29,903,663
Bank of Nova Scotia, 2/3/98 ............................................................. 25,000,000 24,872,469
Bankers Trust, 5.97%, 8/28/98 ........................................................... 10,000,000 9,998,436
Barclay's Bank PLC BA, 2/9/98 ........................................................... 8,000,000 7,952,247
Bell Atlantic Financial Services, 1/27/98 ............................................... 40,000,000 39,831,000
Ciesco, L.P., 2/23/98 ................................................................... 20,000,000 19,833,639
Corporate Asset Fund, 1/14/98 ........................................................... 20,000,000 19,959,700
Dai Ichi Kangyo Bank, 1/27/98 ........................................................... 10,000,000 9,959,700
Dai Ichi Kangyo NY Bank, 1/28/98 ........................................................ 19,000,000 18,919,060
FCAR Owner Trust I, 1/5/98 .............................................................. 20,000,000 19,987,511
Ford Credit Receivables, 1/27/98 ........................................................ 10,000,000 9,960,206
Ford Motor Credit Co.,1/6/98 ............................................................ 10,000,000 9,992,194
General Electric Capital Corp., 4/15/98 ................................................. 20,000,000 19,673,556
General Electric Capital, 1/8/98 ........................................................ 20,000,000 19,978,611
New Center Asset Trust, 2/18/98 ......................................................... 10,000,000 9,924,000
New Center Asset Trust, 2/25/98 ......................................................... 20,000,000 19,830,722
Prudential Funding, 3/26/98 ............................................................. 20,000,000 19,741,933
Public Service Co. of Colorado, 1/15/98 ................................................. 8,000,000 7,982,329
Republic of New York, 1/6/98 ............................................................ 20,000,000 19,984,618
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Scudder Managed Shares/Money Market Series
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Royal Bank Canada, 2/11/98 ............................................................. 8,900,000 8,844,150
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $436,592,372) 436,592,372
- ------------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit 22.4%
- ------------------------------------------------------------------------------------------------------------------------------
Bank of America, 5.95%, 10/22/98 ........................................................ 10,000,000 9,996,151
Bank of Nova Scotia, 5.793%, 10/1/98 .................................................... 10,000,000 9,994,453
Bank of Nova Scotia, 5.715%, 10/30/98 ................................................... 10,000,000 9,991,384
Bankers Trust Company, 6.24%, 4/2/98 .................................................... 4,500,000 4,503,400
Banque National de Paris, 5.89%, 9/10/98 ................................................ 15,000,000 14,999,537
Banque National de Paris, 5.9%, 10/21/98 ................................................ 15,000,000 15,009,692
Canadian Imperial, 5.81%, 3/11/98 ....................................................... 25,000,000 25,001,889
Daichi Kangyo Bank, 5.78%, 1/27/98 ...................................................... 10,000,000 10,000,563
First National Bank of Boston, 5.61%, 1/5/98 ............................................ 25,000,000 25,000,000
Lasalle National Bank, 5.91%, 8/12/98 ................................................... 10,000,000 10,001,169
Morgan Guaranty Trust Co., 5.87%, 8/6/98 ................................................ 20,000,000 19,998,644
National Westminster Bank, 5.855%, 8/7/98 ............................................... 20,000,000 19,997,143
Societe Generale, 5.75%, 1/5/98 ......................................................... 20,000,000 19,999,754
Societe Generale, 5.8%, 1/29/98 ......................................................... 19,000,000 19,000,000
Societe Generale, 5.91%, 9/4/98 ......................................................... 10,000,000 9,998,396
Sumitomo Bank Ltd., 5.63%, 1/8/98 ....................................................... 9,000,000 9,000,017
- ------------------------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit (Cost $232,492,192) 232,492,192
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Government Agency Obligations 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assoc., 5.51%, 3/14/98* ------------
(Cost $14,981,673) .................................................................... 15,000,000 14,981,673
------------
Short-Term Notes 12.6%
- ------------------------------------------------------------------------------------------------------------------------------
American Express Centurion Bank, 5.6419%, 1/24/98* ...................................... 10,000,000 10,000,000
Bank of America NT&SA, 5.87%, 1/5/98 .................................................... 15,000,000 15,000,317
Bank One, Columbus, N.A., 5.50%, 1/6/98* ................................................ 20,000,000 19,995,660
Bankers Trust Co. Medium Term Note, 5.71%, 1/1/98* ...................................... 25,000,000 24,999,389
First National Bank of Maryland, 5.95%, 10/22/98 ........................................ 14,850,000 14,857,587
IBM Credit Corp, 5.9%, 2/15/98 .......................................................... 10,000,000 10,022,812
Lockheed Martin Corp., 6.625%, 6/15/98 .................................................. 8,000,000 8,025,859
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Scudder Managed Shares/Money Market Series
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MMR Funding I, 5.18%, 1/1/98* ........................................................... 5,500,000 5,500,000
Student Loan Marketing Assoc., 5.619%, 1/6/98* .......................................... 22,400,000 22,398,187
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Notes (Cost $130,799,811) 130,799,811
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,039,436,048) (a) 1,039,436,048
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes is $1,039,436,048.
* Floating rate security; date shown is next interest rate change.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama
Stevenson, AL, Industrial Development Board, Daily Demand Note, 5%, 11/1/16 .... 1,000,000 A1+ 1,000,000
Alaska
Alaska Housing Finance Corp., General Mortgage Revenue, Series 1991-A, Weekly
Demand Note, 3.8%, 6/1/26 .................................................... 3,000,000 A1+ 3,000,000
Valdez, AK, Marine Terminal Revenue, ARCO Transportation Alaska, Inc. Project,
Series 1994, TECP, 3.75%, 2/17/98 ............................................ 2,000,000 MIG1 2,000,000
Valdez, AK, Marine Terminal Revenue, Exxon Pipeline Project B, Daily Demand
Note, 5%, 12/1/33 ............................................................ 2,700,000 A1+ 2,700,000
Valdez, AK, Marine Terminal Revenue, Series 1993 A, Daily Demand Note, 5%,
12/1/33 ...................................................................... 4,500,000 A1+ 4,500,000
Arizona
Apache County, AZ, Industrial Development Revenue Tuscan Electric Co.,
Springerville Project, Series 1985 A, Weekly Demand Note, 3.75%, 12/1/20 ..... 500,000 A1+ 500,000
Maricopa County, AZ, Pollution Control Authority, Daily Demand Note,
4.8%, 5/1/29 ................................................................. 800,000 A1+ 800,000
Maricopa County, AZ, Pollution Control Authority, Palos Verde Project, Series
1985 F, TECP, 3.8%, 1/20/98 .................................................. 2,100,000 A1 2,100,000
Pima County Industrial Development Authority, Series 1985, SFE Technologies,
Weekly Demand Note, 4.65%, 12/1/05 ........................................... 1,500,000 VMIG1 1,500,000
Pinal County, AZ, Pollution Control Revenue, Magma Copper, Series 1984, Daily
Demand Note, 4.95%, 12/1/09 .................................................. 2,600,000 A1+ 2,600,000
Scottsdale, AZ, Industrial Development Authority, Hospital Revenue, Scottsdale
Hospital, Weekly Demand Note, 3.65%, 9/1/22 .................................. 3,000,000 A1+ 3,000,000
California
City of Riverside, CA, Countrywood Apartments, Multi-Family Revenue,
Series 1985 D, Weekly Demand Bonds, 4.25%, 11/1/30 ........................... 1,500,000 A1 1,500,000
Corona Multi-Family Housing Revenue, Weekly Demand Note, 4.25%, 2/1/05 ......... 1,900,000 A1 1,900,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.8%, 12/1/05 ................................. 4,800,000 A1+ 4,800,000
Kern County, CA, Board of Education, Tax and Revenue Anticipation Notes,
Series 1998, 4.5%, 7/7/98 ................................................... 2,000,000 SP1+ 2,006,077
Los Angeles County, CA, Tax and Revenue Anticipation Notes, Series
1997 A, 4.5%, 6/30/98 ........................................................ 9,000,000 SP1+ 9,032,538
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Agency,
Weekly Demand Bonds, 4.25%, 6/1/05 ........................................... 1,900,000 A1 1,900,000
Colorado
Clear Creek County, CO, Colorado Counties Financing Program, Series 1988,
Weekly Demand Note, 3.65%, 6/1/98 ............................................ 60,000 A1+ 60,000
Moffat County, Colorado Pollution Control, Pacific Projects, Daily Demand Note,
5.1%, 5/1/13 ................................................................. 2,650,000 VMIG1 2,650,000
Connecticut
Hartford Redevelopment Agency, Underwood Towers Project, Weekly Demand Note,
3.95%, 6/1/20 ................................................................ 2,000,000 A1+ 2,000,000
District Of Columbia
District of Columbia, General Obligation, Series B1, Daily Demand Note, 4.99%,
6/1/03 ....................................................................... 9,500,000 A1+ 9,500,000
District of Columbia, Transportation Authority, 4.5%, 9/30/98 .................. 1,500,000 SP1+ 1,506,770
Florida
Dade County, FL, Water and Sewer System Revenue, Series 1994, Weekly Demand
Note, 3.65%, 10/5/22 ......................................................... 2,000,000 A1+ 2,000,000
Jacksonville, FL, Pollution Control Authority, Floriod Power and Light, TECP,
3.65%, 2/11/98 ............................................................... 2,000,000 A1 2,000,000
Pinellas, FL, Educational Facilities Authority, Refunding Pooled Loan,
Series 1985, TECP, 3.75%, 2/23/98 ............................................ 2,000,000 A1 2,000,000
University of Northern Florida Capital Improvement Revenue, Weekly Demand Note,
4.2%, 11/1/24 ................................................................ 2,000,000 VMIG1 2,000,000
Georgia
Burke County, GA, Development Authority, Pollution Control Georgia Power,
Series 1995-2, Weekly Demand Note, 4.8%, 4/1/25 .............................. 6,700,000 VMIG1 6,700,000
Burke County, GA, Development Authority, Pollution Control Revenue, Weekly
Demand Bonds, 3.65%, 1/1/16 .................................................. 1,200,000 A1+ 1,200,000
Burke County, GA, Pollution Control Revenue, Ogelthorpe Power, Vogtle Project,
Series 1994-A, Weekly Demand Note, 3.65%, 1/1/19 ............................. 1,000,000 A1+ 1,000,000
DeKalb Private Hospital Authority, Egleston Children's Hospital at Emory
University, 1994 Series B, Weekly Demand Note, 3.7%, 3/1/24 .................. 1,400,000 A1+ 1,400,000
Georgia Pooled Hospitals Equipment Loan Program, Series 1991, Daily
Demand Note, 4.95%, 3/1/01 ................................................... 1,748,000 A1+ 1,748,000
Turner County, GA, Industrial Development Revenue Coats & Clark Inc.
Series 1984, VRDN, 4.1%, 10/1/98 ............................................. 800,000 A1+ 800,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Idaho
Idaho Health Facilities Authority Revenue, St. Lukes Regional Medical Center
Project, Series 1995, Daily Demand Note, 5.1%, 5/1/22 ........................ 3,820,000 VMIG1 3,820,000
Idaho Tax Anticipation Notes, Series 1997, 4.625%, 6/30/98 ..................... 1,000,000 MIG1 1,003,715
Illinois
Chicago, Illinois O'Hare International Airport, General Airport Second Lien,
Series A, Weekly Demand Note, 3.7%, 1/1/15 ................................... 1,500,000 A1+ 1,500,000
Illinois Educational Facilities, Pooled Financing Program, TECP, 3.75%,
2/25/98 ...................................................................... 2,500,000 A1+ 2,500,000
Illinois Educational Facilities Authority, University Pooled Finance Program,
Weekly Demand Note, 3.8%, 12/1/05 ............................................ 1,770,000 VMIG1 1,770,000
Illinois Health Facilities Authority, Rush Presbyterian St. Lukes Hospital,
Series 1989 A, TECP, 3.75%, 3/23/98 .......................................... 1,500,000 A1+ 1,500,000
Indiana
Indiana Bond Bank, Advance Funding Notes, Series 1997 A-2, 4.25%, 1/21/98 ...... 1,000,000 MIG1 1,000,291
Iowa
Iowa Schools, Cash Anticipation Program, Series 1997 A, 4.5%, 6/26/98 .......... 2,000,000 SP1+ 2,005,798
Kansas
Burlington, KS, Power and Light Pollution Control Revenue, TECP, 3.75%,
3/3/98 ....................................................................... 2,000,000 A1 2,000,000
Kentucky
Mayfield, KY, Multi-City Lease Revenue Kentucky League of Cities Funding Trust,
Weekly Demand Note, Series 1996, 3.9%, 7/1/26 ................................ 2,000,000 VMIG1 2,000,000
Louisiana
Louisiana Public Facilities Authority Hospital Revenue, Willis Knighton Medical
Center, Weekly Demand Note, 3.7%, 9/1/25 ..................................... 3,000,000 VMIG1 3,000,000
West Baton Rouge, Louisiana Industrial District #3, Series 1987, TECP, 3.8%,
1/21/98 ...................................................................... 1,400,000 P1 1,400,000
Massachusetts
Massachusetts Bay Transportation Authority, Series 1997 B, 4.5%, 9/4/98 ........ 2,000,000 MIG2 2,008,169
Massachusetts Health & Educational Facilities Authority, Series D, Weekly
Demand Note, 5%, 1/1/35 ...................................................... 6,800,000 A1+ 6,800,000
Minnesota
Southern Minnesota Municipal Power Agency, Power Supply System, TECP,
Series B, 3.7%, 3/11/98 ...................................................... 800,000 P1 800,000
Missouri
Columbia, MO, Special Obligation, Weekly Demand Note, 3.7%, 6/1/08 ............. 2,700,000 VMIG1 2,700,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Missouri Health & Educational Facilities Authority, VRDN, 5%, 9/1/30 ........... 5,000,000 VMIG1 5,000,000
St. Louis County, MO, Industrial Development Authority, Kirkwood Project,
Series 1985, Weekly Demand Note, 4.275%, 12/1/15 ............................. 1,000,000 P1 1,000,000
Montana
Montana State, Tax and Revenue Anticipation Notes, Series 1997 C, 4.5%,
6/30/98 ...................................................................... 1,500,000 SP1+ 1,504,897
Nebraska
Nebraska Public Power District (All Districts), Series 1996, TECP, 3.7%,
3/10/98 ...................................................................... 2,060,000 P1 2,060,000
New Mexico
Albuquerque, NM, Gross Receipts/Lodgers Tax, Series 1991, Weekly Demand Note,
3.7%, 7/1/22 ................................................................. 2,000,000 A1+ 2,000,000
Belen Industrial Revenue Refunding Bond, United Desiccants Project, Weekly
Demand Note, 4%, 4/1/00 ...................................................... 700,000 SK 700,000
New York
Municipal Assistance Corp for New York City, Series K1, Weekly Demand Note,
3.55%, 7/1/08 ................................................................ 1,000,000 A1+ 1,000,000
New York City, NY, General Obligation Unlimited, Daily Demand Note, 5%,
8/15/05 ...................................................................... 7,100,000 A1+ 7,100,000
New York City, NY, Municipal Water Finance Authority, Series C, Daily Demand
Note, 5.1%, 6/15/23 .......................................................... 5,000,000 VMIG1 5,000,000
New York State Energy Research & Development Authority, Pollution Control
Revenue, Orange & Rockland Utilities Project, Weekly Demand Note, 3.55%,
8/1/15 ....................................................................... 1,000,000 VMIG1 1,000,000
Suffolk County, NY, TAN, 4.25%, 8/13/98 ........................................ 8,000,000 SP1+ 8,030,240
North Carolina
North Carolina Medical Care Common Hospital Revenues, Series 1985, Weekly
Demand Note, 3.75%, 12/1/25 .................................................. 8,100,000 A1+ 8,100,000
North Dakota
Grand Forks, ND, Hospital Facilities Revenue, Daily Demand Note, 5.1%,
12/1/16 ...................................................................... 2,400,000 VMIG1 2,400,000
Ohio
Cuyahoga County, OH, Health & Education, University Hospital of Cleveland,
Daily Demand Note, 5.2%, 1/1/16 .............................................. 3,800,000 VMIG1 3,800,000
Ohio State, Air Quality Development Authority Revenue Cincinnati Gas and
Electric, Daily Demand Note, 5%, 9/1/30 ...................................... 2,400,000 A1+ 2,400,000
Ohio State University Revenue, General Receipts Bonds, Weekly Variable Rate
Demand Bond, Series 1986 B, 4.05%, 12/1/06 ................................... 2,900,000 A1+ 2,900,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oregon
Oregon General Obligation, Series 1973-G, Weekly Demand Note, 3.65%, 12/1/18 ... 1,900,000 VMIG1 1,900,000
Pennsylvania
Delaware Valley, PA, Regional Finance Authority, Weekly Demand Note, 3.65%,
12/1/20 ...................................................................... 1,600,000 VMIG1 1,600,000
Elk County Pennsylvania Industrial Development Authority, Series 1989, VRDN,
4.415%, 3/1/04 ............................................................... 1,750,000 SK 1,750,000
Emmaus, PA, General Authority Local Government, Revenue Bond Pool Program,
Weekly Demand Note, 3.8%, 3/1/24 ............................................. 1,000,000 A1+ 1,000,000
Philadelphia, PA, Tax and Revenue Anticipation Note, Series 1997A, 4.5%,
6/30/98 ...................................................................... 2,000,000 MIG1 2,004,741
Philadelphia, PA, School District, Tax and Revenue Anticipation Notes,
Series 1993A, 4.5%, 7/1/98 ................................................... 2,000,000 SK 2,005,939
Temple University of the Commonwealth, PA, Higher Education, Series 1997,
4.75%, 5/18/98 ............................................................... 2,000,000 SP1+ 2,006,135
South Carolina
South Carolina Public Service Authority Revenue, Weekly Demand Note, 4.25%,
1/1/23 ....................................................................... 2,000,000 A1+ 2,000,000
Tennessee
Clarksville, TN, Public Building Authority Pooled Financing, Series 1990,
Weekly Demand Note, 3.65%, 7/1/13 ............................................ 2,585,000 VMIG1 2,585,000
Franklin, TN, Industrial Development Revenue, Franklin Oaks Apartments, Weekly
Demand Note, Series 1985, 4.15%, 12/15/21 .................................... 5,500,000 VMIG1 5,500,000
Metropolitan Nashville Airport Authority, TN, Special Facilities Revenue,
American Airlines, Variable Rate Demand Note, 5%, 10/1/12 .................... 1,500,000 A1+ 1,500,000
Texas
Austin, TX, Utility Systems Revenue, TECP, 3.75%, 3/24/98 ...................... 3,000,000 A1+ 3,000,000
Grapevine, TX, Industrial Development Authority Corp., Series B1, Daily Demand
Note, 5%, 12/1/24 ............................................................ 600,000 P1 600,000
Harris County, TX, Health Facilities Authority, St. Lukes, Daily Demand Note,
5%, 2/15/27 .................................................................. 10,000,000 A1+ 10,000,000
Harris County, TX, Pollution Control Revenue (Exxon Project) 1984 Series A,
Daily Demand Note, 5%, 3/1/24 ................................................ 1,900,000 A1+ 1,900,000
Harris County, TX, Tax Anticipation Note, Series 1997, 4.25%, 2/27/98 .......... 1,000,000 MIG1 1,000,808
Lone Star, TX, Airport Improvement Authority, Daily Demand Note, Series
1995 A-3, 5%, 12/1/14 ........................................................ 1,300,000 VMIG1 1,300,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Port Development Corp., TX, Marine Terminal Refunding Revenue, Stolt Terminals,
Series 1989, Weekly Demand Note, 3.7%, 1/15/14 ............................... 1,500,000 A+ 1,500,000
San Antonio, TX, Electric & Gas City Public Services, TECP, 3.75%, 1/14/98 ..... 1,500,000 P1 1,499,929
San Antonio, TX, Electric & Gas Public Services, Variable Rate Note, 3.8%,
2/1/20 ....................................................................... 2,700,000 A1+ 2,700,000
San Antonio, TX, Industrial Development Authority, River Center Associates
Project, Weekly Demand Note, 4.25%, 12/1/12 .................................. 2,800,000 SK 2,800,000
State of Texas, General Obligation, Veterans Housing Assistance Refunding
Bonds, Series 1995, Weekly Demand Note, 3.65%, 12/1/16 ....................... 2,400,000 A1+ 2,400,000
State of Texas, Tax and Revenue Anticipation Note, Series 1998A, 4.75%,
8/31/98 ...................................................................... 10,000,000 MIG1 10,063,440
Texas State Water Development Board, Weekly Demand Note, 4.9%, 3/1/15 .......... 7,900,000 A1+ 7,900,000
Utah
Intermountain Power Agency, Power Supply Revenue Bonds, Series 1985F, TECP,
3.7%, 2/11/98 ................................................................ 1,700,000 A1+ 1,700,000
Salt Lake City, UT, Pollution Control Revenue, British Petroleum Station
Project, Series 1994 B, Daily Demand Note, 4.9%, 8/1/07 ...................... 4,000,000 P1 4,000,000
State of Utah, General Obligation, Highway, TECP, Series 1997 B, 3.75%,
2/4/98 ....................................................................... 2,000,000 A1+ 2,000,000
Vermont
Vermont Industrial Development Authority, Mount Snow, Limited Series 1904,
VRDN, 4.415%, 4/1/99 ......................................................... 435,000 SK 435,000
Vermont Industrial Development, Vermont Marble Company, Series 1984, VRDN,
4.415%, 12/1/04 .............................................................. 3,575,000 SK 3,575,000
Vermont Student Assistance Corporation, Student Loan Revenue, VRDN, 3.8%,
1/1/04 ....................................................................... 4,915,000 VMIG1 4,915,000
Washington
State of Washington Various Purpose General Obligation, Series 1996 B, Weekly
Demand Note, 3.6%, 6/1/20 .................................................... 2,400,000 A1+ 2,400,000
Washington Healthcare Facilities Authority Revenue, Fred Hutchinson Cancer
Center, Variable Rate Demand Note, Series 1996, 5.1%, 1/1/23 ................. 7,800,000 VMIG1 7,800,000
Washington Motor Vehicle Fuel Tax, General Obligation, Series 1996, 5%,
7/1/98 ....................................................................... 1,000,000 SK 1,005,610
Washington Public Power Supply System, Projects #1 and #3, Refunding Revenue,
Series 1993-1A1, Weekly Demand Note, 3.75%, 7/1/18 ........................... 1,475,000 VMIG1 1,475,000
Washington State Public Power Supply System, Nuclear Project #1, 1993
Series 1A-1, Weekly Demand Note, 3.65%, 7/1/17 ............................... 4,700,000 A1 4,700,000
Wisconsin
Wausau, WI, Pollution Control Revenue, Minnesota Mining and Manufacturing,
Series 1982, Weekly Demand Notes, 4.428%, 8/1/17 ............................. 500,000 AAA 500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wyoming
Uinta County, WY, Pollution Control, Chevron Series 1992, Series Demand Note,
5%, 12/1/22 .................................................................. 4,500,000 VMIG1 4,500,000
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $280,728,097) (a) 280,728,097
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes was $280,728,097.
(b) Credit ratings (unaudited) shown are either by Moody's Investors Service,
Inc., Standard & Poor's Corporation or Scudder Kemper
Moody's Standard & Poor's
P1 A1/A1+ Commercial paper of the highest quality.
MIG1
MIG2 SP1/SP1+ Short-term tax-exempt instrument of the
best quality with strong protection.
VMIG1 Short-term tax-exempt variable rate demand
instrument of the best quality with
strong protection.
Abbreviations used in the statement:
TECP Tax Exempt Commercial Paper VRDN Variable Rate Demand Note
GO General Obligation RAN Revenue Anticipation Note
TAN Tax Anticipation Note TRAN Tax Revenue Anticipation Note
SK These securities are not rated by either Moody's or Standard & Poor's.
Scudder Kemper has determined that these securities are of comparable
quality to rated acceptable notes on a cash flow basis and are of
appropriate credit for the standards required by the Fund's investment
objective.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Scudder Managed Shares/Government Money Market Series
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 9.6%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and Trust Company dated 12/31/97 at 6%,
to be repurchased at $8,073,690 on 1/2/98, collateralized by a $8,245,000 U.S. ------------
Treasury Note, 5.625%, 12/31/99 (Cost $8,071,000) ..................................... 8,071,000 8,071,000
------------
U.S. Government Agency Obligations 90.4%
- ------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, Discount Note, 1/7/98 ........................................... 5,000,000 4,995,507
Federal Home Loan Bank, Discount Note, 1/14/98 .......................................... 2,000,000 1,996,078
Federal Home Loan Bank, Discount Note, 2/11/98 .......................................... 5,000,000 4,967,940
Federal Home Loan Bank, Discount Note, 3/6/98 ........................................... 4,000,000 3,961,316
Federal Home Loan Bank, Discount Note, 3/16/98 .......................................... 2,000,000 1,978,047
Federal Home Loan Bank, Discount Note, 4/13/98 .......................................... 2,000,000 1,969,287
Federal Home Loan Bank, Discount Note, 5/1/98 ........................................... 2,000,000 1,963,933
Federal Home Loan Mortgage, Discount Note, 1/30/98 ...................................... 4,000,000 3,981,666
Federal Home Loan Mortgage, Discount Note, 2/6/98 ....................................... 4,000,000 3,978,119
Federal Home Loan Mortgage, Discount Note, 2/11/98 ...................................... 2,000,000 1,987,529
Federal Home Loan Mortgage, Discount Note, with various maturities to 2/27/98 ........... 5,000,000 4,959,902
Federal Home Loan Mortgage, Discount Note, 3/11/98 ...................................... 1,000,000 989,439
Federal National Mortgage Assoc., Discount Note, with various maturities to 8/10/98 ..... 33,985,000 33,483,615
Federal National Mortgage Assoc., 5.51%, 3/14/98* ....................................... 5,000,000 5,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Obligations (Cost $76,212,378) 76,212,378
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $84,283,378) (a) 84,283,378
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes was $84,283,378.
* Floating rate security; date shown is next interest rate change.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Scudder Managed Shares
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Tax Free Government
Money Money Money
Assets Market Series Market Series Market Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments, at value (for cost, see accompanying
lists of investment portfolios) ................ $1,039,436,048 $ 280,728,097 $ 84,283,378
Cash ............................................. 559,470 152,979 2,867
Receivable for Fund shares sold .................. 397,856 -- 2,419
Receivable for investments sold .................. -- 385,000 --
Interest receivable .............................. 6,032,437 1,642,523 14,934
Reimbursement due from Adviser ................... 84,364 51,279 17,786
Other assets ..................................... 44,566 31,271 46,401
---------------- ---------------- ----------------
Total assets ..................................... 1,046,554,741 282,991,149 84,367,785
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................ -- 12,030,240 --
Dividends payable ................................ 4,544,673 499,189 377,487
Accrued management fee ........................... 123,101 11,560 66,141
Other payables and accrued expenses .............. 358,252 225,126 54,018
---------------- ---------------- ----------------
Total liabilities ................................ 5,026,026 12,766,115 497,646
---------------------------------------------------- ---------------- ---------------- ----------------
Net assets, at value ............................. $1,041,528,715 $ 270,225,034 $ 83,870,139
---------------------------------------------------- ---------------- ---------------- ----------------
Net Asset Value
- ---------------------------------------------------------------------------------------------------------------------------
Managed Shares:
Net assets applicable to shares outstanding .... $ 368,915,638 $ 176,519,670 $ 29,439,077
Shares outstanding of capital stock, $.001 par
value, 800,000,000, 500,000,000, and
1,500,000,000 shares authorized .............. 368,915,638 176,519,670 29,439,077
Net Asset Value, offering and redemption price ---------------- ---------------- ----------------
per share (net assets / shares outstanding) .. $1.00 $1.00 $1.00
---------------- ---------------- ----------------
Institutional Shares:
Net assets applicable to shares outstanding .... $ 337,824,146 $ 93,705,364 $ 54,431,062
Shares outstanding of capital stock, $.001 par
value, 800,000,000, 500,000,000, and
1,500,000,000 shares authorized .............. 337,824,146 93,705,364 54,431,062
Net Asset Value, offering and redemption price ---------------- ---------------- ----------------
per share (net assets / shares outstanding) .. $1.00 $1.00 $1.00
---------------- ---------------- ----------------
Premium Money Market Shares:
Net assets applicable to shares outstanding .... $ 334,788,931
Shares outstanding of capital stock, $.001 par
value, 2,000,000,000 shares authorized ....... 334,788,931
Net Asset Value, offering and redemption price ----------------
per share (net assets / shares outstanding) .. $1.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Scudder Managed Shares
Financial Statements
Statement of Operations
year ended December 31, 1997
<TABLE>
<CAPTION>
Tax Free Government
Money Money Money
Investment Income Market Series Market Series Market Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest ........................................... $ 31,972,083 $ 4,866,249 $ 3,380,968
---------------- ---------------- ----------------
Expenses:
Management fee ..................................... 1,676,376 406,470 141,462
Shareholder services ............................... 735,033 239,629 121,051
Directors' fees and expenses ....................... 14,498 14,465 10,463
Custodian and accounting fees ...................... 145,605 68,147 58,130
Reports to shareholders ............................ 47,389 11,016 7,312
Auditing ........................................... 23,642 20,615 27,915
Legal .............................................. 73,167 37,908 27,331
Registration fees .................................. 77,718 30,156 28,095
Other .............................................. 15,814 45,472 11,612
---------------- ---------------- ----------------
Total expenses before reductions ................... 2,809,242 873,878 433,371
Expense reductions ................................. (459,300) (120,461) (147,306)
---------------- ---------------- ----------------
Expenses, net ...................................... 2,349,942 753,417 286,065
----------------------------------------------------- ---------------- ---------------- ----------------
Net investment income 29,622,141 4,112,832 3,094,903
----------------------------------------------------- ---------------- ---------------- ----------------
----------------------------------------------------- ---------------- ---------------- ----------------
Net increase in net assets resulting from
operations $ 29,622,141 $ 4,112,832 $ 3,094,903
----------------------------------------------------- ---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Scudder Managed Shares
Financial Statements
Statements of Changes to Net Assets
Money Market Series
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 29,622,141 $ 18,268,673
---------------- ----------------
Distributions to shareholders from:
Net investment income (Managed Shares) ........................ (16,811,273) (18,268,673)
---------------- ----------------
Net investment income (Institutional Shares) .................. (8,101,246) --
---------------- ----------------
Net investment income (Premium Money Market Shares) ........... (4,709,622) --
---------------- ----------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold ..................................... 1,604,556,971 2,285,419,535
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 7,105,515 10,791,498
Cost of shares redeemed ....................................... (1,674,045,123) (2,236,431,853)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... (62,382,637) 59,779,180
---------------- ----------------
Institutional Shares*:
Proceeds from shares sold ..................................... 697,521,385 --
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 1,796,954 --
Cost of shares redeemed ....................................... (361,494,193) --
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... 337,824,146 --
---------------- ----------------
Premium Money Market Shares**:
Proceeds from shares sold ..................................... 612,133,352 --
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 2,900,558 --
Cost of shares redeemed ....................................... (280,244,979) --
---------------- ----------------
Net increase in net assets from Fund share transactions ....... 334,788,931 --
---------------- ----------------
Increase (decrease) in net assets ............................. 610,230,440 59,779,180
Net assets at beginning of period ............................. 431,298,275 371,519,095
---------------- ----------------
Net assets at end of period ................................... $1,041,528,715 $431,298,275
---------------- ----------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
** For the period July 7, 1997 (commencement of sale of Premium Money Market
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Scudder Managed Shares
Financial Statements
Statements of Changes to Net Assets
Tax Free Money Market Series
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 4,112,832 $ 4,176,664
--------------- ---------------
Distributions to shareholders from:
Net investment income (Managed Shares) ................. (2,806,394) (4,176,664)
--------------- ---------------
Net investment income (Institutional Shares) ........... (1,306,438) --
--------------- ---------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold .............................. 378,820,759 605,388,558
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 640,423 2,369,718
Cost of shares redeemed ................................ (368,394,901) (580,696,936)
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 11,066,281 27,061,340
--------------- ---------------
Institutional Shares*:
Proceeds from shares sold .............................. 159,246,687 --
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 30,480 --
Cost of shares redeemed ................................ (65,571,803) --
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 93,705,364 --
--------------- ---------------
Increase (decrease) in net assets ...................... 104,771,645 27,061,340
Net assets at beginning of period ...................... 165,453,389 138,392,049
--------------- ---------------
Net assets at end of period ............................ $270,225,034 $165,453,389
--------------- ---------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Scudder Managed Shares
Financial Statements
Statements of Changes to Net Assets
Government Money Market Series
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 3,094,903 $ 3,380,075
--------------- ---------------
Distributions to shareholders from:
Net investment income (Managed Shares) ................. (1,921,752) (3,380,075)
--------------- ---------------
Net investment income (Institutional Shares) ........... (1,173,151) --
--------------- ---------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold .............................. 204,615,796 475,466,734
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 426,890 2,288,409
Cost of shares redeemed ................................ (203,521,896) (499,812,580)
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 1,520,790 (22,057,437)
--------------- ---------------
Institutional Shares*:
Proceeds from shares sold .............................. 115,334,278 --
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 449 --
Cost of shares redeemed ................................ (60,903,665) --
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 54,431,062 --
--------------- ---------------
Increase (decrease) in net assets ...................... 55,951,852 (22,057,437)
Net assets at beginning of period ...................... 27,918,287 49,975,724
--------------- ---------------
Net assets at end of period ............................ $ 83,870,139 $ 27,918,287
--------------- ---------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Scudder Managed Shares/Money Market Series
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ........ .051 .049 .054 .038 .028 .037 .059 .076 .086 .070
Distributions from net
investment
income .................... (.051) (.049) (.054) (.038) (.028) (.037) (.059) (.076) (.086) (.070)
Net asset value, end of ----------------------------------------------------------------------------------------
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ......... 5.21 4.97 5.57 3.86 2.81 3.74 6.07 7.92 8.93 7.21
Ratios and Supplemental Data
Net assets, end of period
($ millions) .............. 369 431 372 367 324 305 347 385 331 389
Ratio of operating expenses,
net to average daily net
assets (%) ................ .49 .55 .55 .55 .55 .55 .55 .67 .72 .65
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ................ .59 .62 .68 .68 .66 .64 .64 .70 .72 .65
Ratio of net investment income
to average daily net
assets (%) ................ 5.00 4.86 5.45 3.84 2.78 3.76 5.93 7.64 8.56 6.95
</TABLE>
(a) Total returns are higher due to maintenance of the Fund's expenses for the
years ended December 31, 1990 to December 31, 1997.
* Effective July 7, 1997, Scudder Money Market Series (formerly known as the
Managed Cash Fund) was divided into three classes, of which Scudder Money
Market Managed Shares is one. Shares of the Fund outstanding on such date
were redesignated as the Managed Shares of the Fund. The data set forth
above reflects the investment performance of the Fund prior to such
redesignation.
20
<PAGE>
Scudder Managed 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 financial statements.
Institutional Shares
<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
21
<PAGE>
Scudder Managed Shares/Money Market Series
The following table includes selected data for a share of the Premium Money
Market Shares class outstanding throughout the period and other performance
information derived from the financial statements.
Premium Money Market Shares
<TABLE>
<CAPTION>
For the Period
July 7, 1997
(commencement
of sale of
Premium Shares) to
December 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period ............................................. $1.000
-------------------
Net investment income ............................................................ .026
Distributions from net investment income ......................................... (.026)
-------------------
Net asset value, end of period ................................................... $1.000
-------------------
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................. 2.62**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................... 335
Ratio of operating expenses, net to average daily net assets (%) ................. .38*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) .................................................................... .43*
Ratio of net investment income to average daily net assets (%) ................... 5.50*
</TABLE>
(a) Total return is higher due to the maintenance of Fund expenses.
* Annualized
** Not annualized
22
<PAGE>
Scudder Managed Shares/Tax Free Money Market Series
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------------------
Net investment income ....... .030 .028 .032 .023 .018 .025 .042 .053 .057 .049
Distributions from net
investment income
and net realized
capital gains ............ (.030) (.028) (.032) (.023) (.018) (.025) (.042) (.053) (.057) (.049)
Net asset value, ----------------------------------------------------------------------------------------------------
end of period ............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............ 3.07(a) 2.88 3.30 2.29 1.85 2.56 4.20 5.47 5.91 4.98
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 177 165 138 125 107 91 107 135 137 261
Ratio of operating expenses,
net to average daily
net assets (%) ........... .65 .72 .79 .77 .78 .77 .75 .77 .76 .60
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ............... .74 .72 .79 .77 .78 .77 .75 .77 .76 .60
Ratio of net investment
income to average
daily net assets (%) ..... 2.99 2.84 3.25 2.26 1.83 2.54 4.14 5.33 5.72 4.85
</TABLE>
(a) Total return is higher due to the maintenance of the Fund's expenses.
* Effective July 7, 1997, Scudder Tax Free Money Market Series (formerly
known as Managed Tax-Free Fund) was divided into two classes, of which
Scudder Tax Free Money Market Managed Shares is one. Shares of the Fund
outstanding on such date were redesignated as the Managed Shares of the
Fund. The data set forth above reflects the investment performance of the
Fund prior to such redesignation.
23
<PAGE>
Scudder Managed Shares/Tax Free 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 financial statements.
Institutional Shares
<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
24
<PAGE>
Scudder Managed Shares/Government Money Market Series
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ....... .049 .048 .054 .037 .026 .035 .056 .075 .084 .069
Distributions from net
investment
income ................... (.049) (.048) (.054) (.037) (.026) (.035) (.056) (.075) (.084) (.069)
Net asset value, end of ----------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........ 5.02 4.91 5.49 3.75 2.68 3.51 5.65 7.73 8.81 7.13
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 29 28 50 69 92 151 87 82 64 409
Ratio of operating expenses,
net to average daily net
assets (%) ............... .55 .55 .55 .55 .55 .55 .55 .73 .75 .69
Ratio of operating expenses
before expense reductions,
to average daily net
assets (%) ............... .84 .77 .86 .84 .77 .76 .80 .80 .80 .69
Ratio of net investment
income to average daily
net assets (%) ........... 4.93 4.81 5.36 3.61 2.65 3.39 5.54 7.48 8.42 6.83
</TABLE>
(a) Total returns are higher, for the periods indicated, due to maintenance of
the Fund's expenses, except for the year ended December 31, 1988.
* Effective July 7, 1997, Scudder Government Money Market Series (formerly
known as the Managed Government Securities Fund) was divided into two
classes, of which Scudder Government Money Market Managed Shares is one.
Shares of the Fund outstanding on such date were redesignated as the
Managed Shares of the Fund. The data set forth above reflects the
investment performance of the Fund prior to such redesignation.
25
<PAGE>
Scudder Managed Shares/Government 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 financial statements.
Institutional Shares
<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
26
<PAGE>
Scudder Managed Shares
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Fund, Inc. (the "Company") is an open-end diversified management
investment company comprised of three diversified money market portfolios:
Scudder Money Market Series (formerly known as Managed Cash Fund), Scudder Tax
Free Money Market Series (formerly known as Managed Tax Free Fund), and Scudder
Government Money Market Series (formerly known as Managed Government Securities
Fund) (collectively, the "Funds"). The Board of Directors of the Company has
approved a multi-class system for each Fund effective July 7, 1997, such that
Scudder Tax Free Money Market Series and Scudder Government Money Market Series
may offer two classes of shares, Institutional Class and Managed Class and
Scudder Money Market Series may offer three classes of shares, Institutional
Class, Managed Class and Premium Money Market Class.
Security Valuation. Each of the Funds values its investments using the amortized
cost method, which involves initially valuing an investment at its cost and
thereafter assuming a constant amortization to maturity of any premium or
discount. This method results in a value approximating market.
Federal Income Taxes. The Company's policy is to qualify each Fund as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended, and to distribute all taxable and tax-exempt income, including any
realized net capital gains, to shareholders. Therefore, no Federal income tax
provision is required.
Dividends Dividends from net investment income are declared each business day to
shareholders of record that day for payment on the first business day of the
following month.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Other Investment transactions are recorded on trade dates. Interest income,
including the accretion or amortization of discount or premium, is recorded on
the accrual basis. Discounts or premiums on securities purchased are accreted or
amortized, respectively, on a straight line basis over the life of the
respective securities. Distributions to shareholders are recorded on the
ex-dividend dates.
B. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Company's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Company and Scudder Kemper
was approved by the Company's Board of Directors and by the Company's
Shareholders. The Management Agreement, which is effective December 31, 1997, is
the same in all material respects as the corresponding previous Investment
Management Agreement, except that Scudder Kemper is the new investment adviser
to the Company.
27
<PAGE>
The Company retains Scudder Kemper as investment manager for the Funds, pursuant
to investment advisory agreements between Scudder Kemper and the Company on
behalf of each such Fund. For the period January 1, 1997 through July 7, 1997,
the Adviser received an investment 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. Through July 7, 1997, the Adviser
agreed to waive a portion of its investment management fee for each of the Money
Market Series and the Government Money Market Series to the extent necessary so
that annualized expenses of each Fund would not exceed 0.55% of average daily
net assets. Effective July 7, 1997, the Adviser receives an investment
management fee at an annual rate of 0.25% of average daily net assets for each
Fund. For the period July 7, 1997 to December 31, 1997, the Adviser has agreed
to waive a portion of its investment management fee for each of the Money Market
Series, Tax Free Money Market Series, and Government Money Market Series to the
extent necessary so that the total annualized investment management fee of each
Fund does not exceed 0.20%, 0.15%, and 0.10%, respectively.
For the 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.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. Each
class of the Funds has entered into a Transfer Agency and Service Agreement with
SSC. SSC receives account fees that vary according to the account size and type
of account of the shareholders of the respective classes. For the year ended
December 31, 1997 the following amounts were charged:
Government
Tax Free Money
Money Market Money Market Market
Series Series 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
========== ========== ==========
Each of the Funds has special arrangements with certain banks, institutions and
other persons under which they receive compensation from the Funds and the
Adviser for performing shareholder servicing functions for their customers who
own shares in the Funds. Effective July 7, 1997, the Adviser has agreed to
reimburse the Funds for amounts payable by the Scudder Managed Class Shares,
such that the fees in basis points paid by the class will be no greater than the
total transfer agent fee payable to SSC. For the period July 7, 1997 to December
31, 1997, the Adviser's reimbursement payable aggregated $84,364 for the Money
Market Series, $51,279 for the Tax Free Money Market Series, and $17,786 for the
Government Money Market Series.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Funds. For the year ended
December 31, 1997, the amount charged to the Funds by SFAC aggregated $109,482
for the Money Market Series, $56,782 for the Tax Free
28
<PAGE>
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.
The Company has a compensation arrangement under which payment of directors'
fees may be deferred. Interest is accrued (based on the rate of return earned on
the 90 day Treasury Bill as determined at the beginning of each calendar
quarter) on the deferred balances and is included in "Directors' fees and
expenses." The accumulated balance of deferred directors' fees and interest
thereon relating to the Funds constituting the Company aggregated $224,106, an
applicable portion of which is included in accrued expenses of each such Fund.
Other. Printing and postage expenses related to preparing and distributing
material such as shareholder reports, prospectuses and proxy materials to
current shareholders are charged to each class based on number of shareholder
accounts. For the year ended December 31, 1997, the following amounts were paid:
<TABLE>
<CAPTION>
Money Tax Free Government Money
Market Money Market Market
Series Series Series
<S> <C> <C> <C>
Managed Class $ 26,866 $ 4,782 $ 4,782
Institutional Class 7,749 2,530 2,530
Premium Class 14,880 -- --
---------- ---------- ----------
$ 49,495 $ 7,312 $ 7,312
========== ========== ==========
</TABLE>
29
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Scudder Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Government Money Market Series,
Money Market Series and Tax Free Money Market Series (each a separate portfolio
of Scudder Fund, Inc., hereafter referred to as the "Fund") at December 31,
1997, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the ten years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures when confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 23, 1998
30
<PAGE>
Tax Information (Unaudited)
The total amount of dividends declared in 1997 by each of the Government Money
Market Series Portfolio and Money Market Series Portfolio of Scudder Fund, Inc.
are taxable as ordinary dividend income for Federal income tax purposes. None of
this amount qualifies for the dividends received deduction available to
corporations.
All of the dividends from the Tax Free Money Market Series Portfolio declared in
1997 are exempt from Federal income tax. However, in accordance with the
Internal Revenue Code, you are required to report them on your 1997 Federal
income tax return.
Although dividend income from the Tax Free Money Market Series Portfolio is
exempt from Federal taxation, it may not be exempt from state or local taxation.
You should consult your tax advisor as to the state and local tax status of the
dividends you received.
31
<PAGE>
Stockholder Meeting Results
Money Market Series
A Special Meeting of Stockholders (the "Meeting") of the Scudder Money Market
Series of Scudder Managed Shares (the "Fund") was held on October 23, 1997, at
the offices of Scudder Kemper Investments, Inc. (formerly Scudder, Stevens &
Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street), New York, New York
10154. The following matters were voted upon by the stockholders (the resulting
votes for each matter are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
175,547,170 411,924 229,520 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 175,875,670 312,944
Edgar R. Fiedler 175,875,607 313,007
Peter B. Freeman 175,875,607 313,007
Dr. J. D. Hammond 175,875,670 312,944
Richard M. Hunt 175,875,670 312,944
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
172,875,135 1,901,974 1,411,505 0
32
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 173,304,153 1,390,710 1,493,751 0
4.2 Borrowing 172,888,831 1,806,032 1,493,751 0
4.3 Senior securities 173,304,153 1,390,710 1,493,751 0
4.4 Concentration 173,287,079 1,407,784 1,493,751 0
4.5 Underwriting of securities 173,304,153 1,390,710 1,493,751 0
4.6 Investment in real estate 173,304,153 1,390,710 1,493,751 0
4.7 Purchase of physical commodities 173,304,153 1,390,710 1,493,751 0
4.8 Loans 173,304,153 1,390,710 1,493,751 0
4.9 Equity or convertible securities 173,304,153 1,390,710 1,493,751 0
4.10 Exercising control or management 173,304,153 1,390,710 1,493,751 0
4.11 Restricted securities 173,304,153 1,390,710 1,493,751 0
4.12 10% of total assets in illiquid 173,304,153 1,390,710 1,493,751 0
securities
4.13 Purchase on margin or short sales 173,304,153 1,390,710 1,493,751 0
4.14 Puts, calls, warrants, or options 173,304,153 1,390,710 1,493,751 0
4.15 Pledging or mortgaging assets 173,304,153 1,390,710 1,493,751 0
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
175,617,462 167,527 403,625
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
33
<PAGE>
Stockholder Meeting Results
Tax Free Money Market Series
A Special Meeting of Stockholders (the "Meeting") of the Scudder Tax Free Money
Market Series of Scudder Managed Shares (the "Fund") was held on October 23,
1997, at the offices of Scudder Kemper Investments, Inc. (formerly Scudder,
Stevens & Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street), New York,
New York 10154. The following matters were voted upon by the stockholders (the
resulting votes for each matter are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
57,703,670 147,430 5,963 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 57,827,018 30,045
Edgar R. Fiedler 57,827,018 30,045
Peter B. Freeman 57,827,018 30,045
Dr. J. D. Hammond 57,827,018 30,045
Richard M. Hunt 57,827,018 30,045
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
57,376,741 152,725 134,041 193,556
34
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 57,185,307 238,898 239,302 193,556
4.2 Borrowing 57,185,307 238,898 239,302 193,556
4.3 Senior securities 57,185,307 238,898 239,302 193,556
4.4 Concentration 57,185,307 238,898 239,302 193,556
4.5 Underwriting of securities 57,185,307 238,898 239,302 193,556
4.6 Investment in real estate 57,185,307 238,898 239,302 193,556
4.7 Purchase of physical commodities 57,185,307 238,898 239,302 193,556
4.8 Loans 57,185,307 238,898 239,302 193,556
4.9 Equity or convertible securities 57,185,307 238,898 239,302 193,556
4.10 Exercising control or management 57,185,307 238,898 239,302 193,556
4.11 Restricted securities 57,185,307 238,898 239,302 193,556
4.12 10% of total assets in illiquid 57,185,307 238,898 239,302 193,556
securities
4.13 Purchase on margin or short sales 57,185,307 238,898 239,302 193,556
4.14 Puts, calls, warrants, or options 57,185,307 238,898 239,302 193,556
4.15 Pledging or mortgaging assets 57,185,307 238,898 239,302 193,556
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
57,840,510 0 16,553
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
35
<PAGE>
Stockholder Meeting Results
Government Money Market Series
A Special Meeting of Stockholders (the "Meeting") of the Scudder Government
Money Market Series of Scudder Managed Shares ("the Fund") was held on October
23, 1997, at the offices of Scudder Kemper Investments, Inc. (formerly Scudder,
Stevens & Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street), New York,
New York 10154. The following matters were voted upon by the stockholders (the
resulting votes for each matter are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
12,773,672 52,242 36,096 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 12,836,307 25,703
Edgar R. Fiedler 12,836,307 25,703
Peter B. Freeman 12,836,307 25,703
Dr. J. D. Hammond 12,836,307 25,703
Richard M. Hunt 12,836,307 25,703
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
12,555,083 239,740 67,187 0
36
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 12,568,925 240,623 52,462 0
4.2 Borrowing 12,568,925 240,623 52,462 0
4.3 Senior securities 12,568,925 230,695 62,390 0
4.4 Concentration 12,568,925 230,695 62,390 0
4.5 Underwriting of securities 12,568,925 230,695 62,390 0
4.6 Investment in real estate 12,568,925 230,695 62,390 0
4.7 Purchases of physical commodities 12,568,925 230,695 62,390 0
4.8 Loans 12,568,925 230,695 62,390 0
4.9 Equity or convertible securities 12,568,925 230,695 62,390 0
4.10 Exercising control or management 12,568,925 230,695 62,390 0
4.11 Restricted securities 12,568,925 230,695 62,390 0
4.12 10% of total assets in illiquid 12,568,925 230,695 62,390 0
securities
4.13 Purchase on margin or short sales 12,568,925 230,695 62,390 0
4.14 Puts, calls, warrants, or options 12,568,925 230,695 62,390 0
4.15 Pledging or mortgaging assets 12,568,925 230,695 62,390 0
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
12,725,878 516 135,616
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
37
<PAGE>
This Page
Intentionally
Left Blank
38
<PAGE>
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., 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, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective, the
firm seeks opportunities in markets throughout the world to meet the needs of
investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER (logo)
<PAGE>
Scudder
Institutional Shares
Scudder Money Market Series
Scudder Tax Free Money Market Series
Scudder Government Money Market Series
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Distributor
Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 9242
Boston, Massachusetts 02205
Legal Counsel
Dechert Price & Rhoads
Boston, Massachusetts 02109
-----------------
Scudder Institutional Shares are not insured or guaranteed by the U.S.
Government. The Fund seeks to maintain a constant net asset value of $1.00
per share, but there can be no assurance that the stable net asset value
will be maintained.
This report is for the information of the shareholders. Its use in
connection with any offering of the Company's shares is authorized only in
case of a concurrent or prior delivery of the Company's current prospectus.
Scudder
Institutional Shares
Scudder Money
Market Series
Scudder Tax Free Money
Market Series
Scudder Government
Money Market Series
Annual Report
December 31, 1997
<PAGE>
<TABLE>
<CAPTION>
Board of Directors
<S> <C>
DR. ROSITA P. CHANG Director; Professor of Finance, University of Rhode Island
EDGAR R. FIEDLER(1) (2) (3) Director; Senior Fellow and Economic Counsellor, The Conference
Board, Inc.
PETER B. FREEMAN(2) (3) Director; Corporate Director and Trustee
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
DANIEL PIERCE(1) President
(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee
- --------------------------------------------------------------------------------
Officers
DANIEL PIERCE President
K. SUE COTE Vice President
JERARD K. HARTMAN Vice President
THOMAS W. JOSEPH Vice President and Assistant Secretary
THOMAS F. McDONOUGH Vice President and Secretary
KATHRYN L. QUIRK Vice President
DAVID B. WINES Vice President
</TABLE>
2
<PAGE>
Dear Shareholder:
Scudder Institutional Shares is a class of shares in three different money
market mutual fund portfolios: Scudder Money Market Series, Scudder Government
Money Market Series, and Scudder Tax Free Money Market Series. Each of these
money market portfolios seeks to provide a high level of current income while
preserving capital and maintaining liquidity.
All three portfolios seek to maintain a net asset value of $1.00, and have
done so since their inception. (There is no guarantee, of course, that each will
maintain stable net asset values.)
Please see the following pages for financial statements as of December 31,
1997, as well as a list of each portfolio's investments.
If you have questions concerning any series of Scudder Institutional
Shares, please call toll free (800) 854-8525 from any continental state.
/s/Daniel Pierce
Daniel Pierce
Chairman
3
<PAGE>
Scudder Institutional Shares/Money Market Series
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 21.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/97 at 6.5%,
to be repurchased at $100,036,111 on 1/2/98, collateralized by a $50,000,000
U.S. Treasury Note, 6.75%, 5/31/99 and a $48,878,000 U.S. Treasury Note,
6.25%, 3/31/99 ........................................................................ 100,000,000 100,000,000
Repurchase Agreement with Salomon Brothers dated 12/31/97 at 6.7%, to be
repurchased at $75,027,917 on 1/2/98, collateralized by $79,830,000 U.S.
Treasury Bills, 10/15/98 .............................................................. 75,000,000 75,000,000
Repurchase Agreement with State Street Bank and Trust Company dated 12/31/97
at 6%, to be repurchased at $49,586,523 on 1/2/98, collateralized by a
$39,610,000 U.S. Treasury Bond, 8.125%, 8/15/19 ....................................... 49,570,000 49,570,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $224,570,000) 224,570,000
- ------------------------------------------------------------------------------------------------------------------------------
Commercial Paper 42.0%
- ------------------------------------------------------------------------------------------------------------------------------
AVCO Financial, 1/14/98 ................................................................. 10,000,000 9,980,139
American General Finance Corp., 5.812%, 3/18/98 ......................................... 40,000,000 40,000,000
Associates Corp NA, 3/24/98 ............................................................. 40,000,000 39,482,489
Bank of Montreal, 1/22/98 ............................................................... 30,000,000 29,903,663
Bank of Nova Scotia, 2/3/98 ............................................................. 25,000,000 24,872,469
Bankers Trust, 5.97%, 8/28/98 ........................................................... 10,000,000 9,998,436
Barclay's Bank PLC BA, 2/9/98 ........................................................... 8,000,000 7,952,247
Bell Atlantic Financial Services, 1/27/98 ............................................... 40,000,000 39,831,000
Ciesco, L.P., 2/23/98 ................................................................... 20,000,000 19,833,639
Corporate Asset Fund, 1/14/98 ........................................................... 20,000,000 19,959,700
Dai Ichi Kangyo Bank, 1/27/98 ........................................................... 10,000,000 9,959,700
Dai Ichi Kangyo NY Bank, 1/28/98 ........................................................ 19,000,000 18,919,060
FCAR Owner Trust I, 1/5/98 .............................................................. 20,000,000 19,987,511
Ford Credit Receivables, 1/27/98 ........................................................ 10,000,000 9,960,206
Ford Motor Credit Co.,1/6/98 ............................................................ 10,000,000 9,992,194
General Electric Capital Corp., 4/15/98 ................................................. 20,000,000 19,673,556
General Electric Capital, 1/8/98 ........................................................ 20,000,000 19,978,611
New Center Asset Trust, 2/18/98 ......................................................... 10,000,000 9,924,000
New Center Asset Trust, 2/25/98 ......................................................... 20,000,000 19,830,722
Prudential Funding, 3/26/98 ............................................................. 20,000,000 19,741,933
Public Service Co. of Colorado, 1/15/98 ................................................. 8,000,000 7,982,329
Republic of New York, 1/6/98 ............................................................ 20,000,000 19,984,618
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Scudder Institutional Shares/Money Market Series
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Royal Bank Canada, 2/11/98 ............................................................. 8,900,000 8,844,150
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $436,592,372) 436,592,372
- ------------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit 22.4%
- ------------------------------------------------------------------------------------------------------------------------------
Bank of America, 5.95%, 10/22/98 ........................................................ 10,000,000 9,996,151
Bank of Nova Scotia, 5.793%, 10/1/98 .................................................... 10,000,000 9,994,453
Bank of Nova Scotia, 5.715%, 10/30/98 ................................................... 10,000,000 9,991,384
Bankers Trust Company, 6.24%, 4/2/98 .................................................... 4,500,000 4,503,400
Banque National de Paris, 5.89%, 9/10/98 ................................................ 15,000,000 14,999,537
Banque National de Paris, 5.9%, 10/21/98 ................................................ 15,000,000 15,009,692
Canadian Imperial, 5.81%, 3/11/98 ....................................................... 25,000,000 25,001,889
Daichi Kangyo Bank, 5.78%, 1/27/98 ...................................................... 10,000,000 10,000,563
First National Bank of Boston, 5.61%, 1/5/98 ............................................ 25,000,000 25,000,000
Lasalle National Bank, 5.91%, 8/12/98 ................................................... 10,000,000 10,001,169
Morgan Guaranty Trust Co., 5.87%, 8/6/98 ................................................ 20,000,000 19,998,644
National Westminster Bank, 5.855%, 8/7/98 ............................................... 20,000,000 19,997,143
Societe Generale, 5.75%, 1/5/98 ......................................................... 20,000,000 19,999,754
Societe Generale, 5.8%, 1/29/98 ......................................................... 19,000,000 19,000,000
Societe Generale, 5.91%, 9/4/98 ......................................................... 10,000,000 9,998,396
Sumitomo Bank Ltd., 5.63%, 1/8/98 ....................................................... 9,000,000 9,000,017
- ------------------------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit (Cost $232,492,192) 232,492,192
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Government Agency Obligations 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assoc., 5.51%, 3/14/98*
(Cost $14,981,673) .................................................................... 15,000,000 14,981,673
Short-Term Notes 12.6%
- ------------------------------------------------------------------------------------------------------------------------------
American Express Centurion Bank, 5.6419%, 1/24/98* ...................................... 10,000,000 10,000,000
Bank of America NT&SA, 5.87%, 1/5/98 .................................................... 15,000,000 15,000,317
Bank One, Columbus, N.A., 5.50%, 1/6/98* ................................................ 20,000,000 19,995,660
Bankers Trust Co. Medium Term Note, 5.71%, 1/1/98* ...................................... 25,000,000 24,999,389
First National Bank of Maryland, 5.95%, 10/22/98 ........................................ 14,850,000 14,857,587
IBM Credit Corp, 5.9%, 2/15/98 .......................................................... 10,000,000 10,022,812
Lockheed Martin Corp., 6.625%, 6/15/98 .................................................. 8,000,000 8,025,859
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Scudder Institutional Shares/Money Market Series
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MMR Funding I, 5.18%, 1/1/98* ........................................................... 5,500,000 5,500,000
Student Loan Marketing Assoc., 5.619%, 1/6/98* .......................................... 22,400,000 22,398,187
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Notes (Cost $130,799,811) 130,799,811
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,039,436,048) (a) 1,039,436,048
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes is $1,039,436,048.
* Floating rate security; date shown is next interest rate change.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama
Stevenson, AL, Industrial Development Board, Daily Demand Note, 5%, 11/1/16 .... 1,000,000 A1+ 1,000,000
Alaska
Alaska Housing Finance Corp., General Mortgage Revenue, Series 1991-A, Weekly
Demand Note, 3.8%, 6/1/26 .................................................... 3,000,000 A1+ 3,000,000
Valdez, AK, Marine Terminal Revenue, ARCO Transportation Alaska, Inc. Project,
Series 1994, TECP, 3.75%, 2/17/98 ............................................ 2,000,000 MIG1 2,000,000
Valdez, AK, Marine Terminal Revenue, Exxon Pipeline Project B, Daily Demand
Note, 5%, 12/1/33 ............................................................ 2,700,000 A1+ 2,700,000
Valdez, AK, Marine Terminal Revenue, Series 1993 A, Daily Demand Note, 5%,
12/1/33 ...................................................................... 4,500,000 A1+ 4,500,000
Arizona
Apache County, AZ, Industrial Development Revenue Tuscan Electric Co.,
Springerville Project, Series 1985 A, Weekly Demand Note, 3.75%, 12/1/20 ..... 500,000 A1+ 500,000
Maricopa County, AZ, Pollution Control Authority, Daily Demand Note,
4.8%, 5/1/29 ................................................................. 800,000 A1+ 800,000
Maricopa County, AZ, Pollution Control Authority, Palos Verde Project, Series
1985 F, TECP, 3.8%, 1/20/98 .................................................. 2,100,000 A1 2,100,000
Pima County Industrial Development Authority, Series 1985, SFE Technologies,
Weekly Demand Note, 4.65%, 12/1/05 ........................................... 1,500,000 VMIG1 1,500,000
Pinal County, AZ, Pollution Control Revenue, Magma Copper, Series 1984, Daily
Demand Note, 4.95%, 12/1/09 .................................................. 2,600,000 A1+ 2,600,000
Scottsdale, AZ, Industrial Development Authority, Hospital Revenue, Scottsdale
Hospital, Weekly Demand Note, 3.65%, 9/1/22 .................................. 3,000,000 A1+ 3,000,000
California
City of Riverside, CA, Countrywood Apartments, Multi-Family Revenue,
Series 1985 D, Weekly Demand Bonds, 4.25%, 11/1/30 ........................... 1,500,000 A1 1,500,000
Corona Multi-Family Housing Revenue, Weekly Demand Note, 4.25%, 2/1/05 ......... 1,900,000 A1 1,900,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.8%, 12/1/05 ................................. 4,800,000 A1+ 4,800,000
Kern County, CA, Board of Education, Tax and Revenue Anticipation Notes,
Series 1998, 4.5%, 7/7/98 ................................................... 2,000,000 SP1+ 2,006,077
Los Angeles County, CA, Tax and Revenue Anticipation Notes, Series
1997 A, 4.5%, 6/30/98 ........................................................ 9,000,000 SP1+ 9,032,538
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Agency,
Weekly Demand Bonds, 4.25%, 6/1/05 ........................................... 1,900,000 A1 1,900,000
Colorado
Clear Creek County, CO, Colorado Counties Financing Program, Series 1988,
Weekly Demand Note, 3.65%, 6/1/98 ............................................ 60,000 A1+ 60,000
Moffat County, Colorado Pollution Control, Pacific Projects, Daily Demand Note,
5.1%, 5/1/13 ................................................................. 2,650,000 VMIG1 2,650,000
Connecticut
Hartford Redevelopment Agency, Underwood Towers Project, Weekly Demand Note,
3.95%, 6/1/20 ................................................................ 2,000,000 A1+ 2,000,000
District Of Columbia
District of Columbia, General Obligation, Series B1, Daily Demand Note, 4.99%,
6/1/03 ....................................................................... 9,500,000 A1+ 9,500,000
District of Columbia, Transportation Authority, 4.5%, 9/30/98 .................. 1,500,000 SP1+ 1,506,770
Florida
Dade County, FL, Water and Sewer System Revenue, Series 1994, Weekly Demand
Note, 3.65%, 10/5/22 ......................................................... 2,000,000 A1+ 2,000,000
Jacksonville, FL, Pollution Control Authority, Floriod Power and Light, TECP,
3.65%, 2/11/98 ............................................................... 2,000,000 A1 2,000,000
Pinellas, FL, Educational Facilities Authority, Refunding Pooled Loan,
Series 1985, TECP, 3.75%, 2/23/98 ............................................ 2,000,000 A1 2,000,000
University of Northern Florida Capital Improvement Revenue, Weekly Demand Note,
4.2%, 11/1/24 ................................................................ 2,000,000 VMIG1 2,000,000
Georgia
Burke County, GA, Development Authority, Pollution Control Georgia Power,
Series 1995-2, Weekly Demand Note, 4.8%, 4/1/25 .............................. 6,700,000 VMIG1 6,700,000
Burke County, GA, Development Authority, Pollution Control Revenue, Weekly
Demand Bonds, 3.65%, 1/1/16 .................................................. 1,200,000 A1+ 1,200,000
Burke County, GA, Pollution Control Revenue, Ogelthorpe Power, Vogtle Project,
Series 1994-A, Weekly Demand Note, 3.65%, 1/1/19 ............................. 1,000,000 A1+ 1,000,000
DeKalb Private Hospital Authority, Egleston Children's Hospital at Emory
University, 1994 Series B, Weekly Demand Note, 3.7%, 3/1/24 .................. 1,400,000 A1+ 1,400,000
Georgia Pooled Hospitals Equipment Loan Program, Series 1991, Daily
Demand Note, 4.95%, 3/1/01 ................................................... 1,748,000 A1+ 1,748,000
Turner County, GA, Industrial Development Revenue Coats & Clark Inc.
Series 1984, VRDN, 4.1%, 10/1/98 ............................................. 800,000 A1+ 800,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Idaho
Idaho Health Facilities Authority Revenue, St. Lukes Regional Medical Center
Project, Series 1995, Daily Demand Note, 5.1%, 5/1/22 ........................ 3,820,000 VMIG1 3,820,000
Idaho Tax Anticipation Notes, Series 1997, 4.625%, 6/30/98 ..................... 1,000,000 MIG1 1,003,715
Illinois
Chicago, Illinois O'Hare International Airport, General Airport Second Lien,
Series A, Weekly Demand Note, 3.7%, 1/1/15 ................................... 1,500,000 A1+ 1,500,000
Illinois Educational Facilities, Pooled Financing Program, TECP, 3.75%,
2/25/98 ...................................................................... 2,500,000 A1+ 2,500,000
Illinois Educational Facilities Authority, University Pooled Finance Program,
Weekly Demand Note, 3.8%, 12/1/05 ............................................ 1,770,000 VMIG1 1,770,000
Illinois Health Facilities Authority, Rush Presbyterian St. Lukes Hospital,
Series 1989 A, TECP, 3.75%, 3/23/98 .......................................... 1,500,000 A1+ 1,500,000
Indiana
Indiana Bond Bank, Advance Funding Notes, Series 1997 A-2, 4.25%, 1/21/98 ...... 1,000,000 MIG1 1,000,291
Iowa
Iowa Schools, Cash Anticipation Program, Series 1997 A, 4.5%, 6/26/98 .......... 2,000,000 SP1+ 2,005,798
Kansas
Burlington, KS, Power and Light Pollution Control Revenue, TECP, 3.75%,
3/3/98 ....................................................................... 2,000,000 A1 2,000,000
Kentucky
Mayfield, KY, Multi-City Lease Revenue Kentucky League of Cities Funding Trust,
Weekly Demand Note, Series 1996, 3.9%, 7/1/26 ................................ 2,000,000 VMIG1 2,000,000
Louisiana
Louisiana Public Facilities Authority Hospital Revenue, Willis Knighton Medical
Center, Weekly Demand Note, 3.7%, 9/1/25 ..................................... 3,000,000 VMIG1 3,000,000
West Baton Rouge, Louisiana Industrial District #3, Series 1987, TECP, 3.8%,
1/21/98 ...................................................................... 1,400,000 P1 1,400,000
Massachusetts
Massachusetts Bay Transportation Authority, Series 1997 B, 4.5%, 9/4/98 ........ 2,000,000 MIG2 2,008,169
Massachusetts Health & Educational Facilities Authority, Series D, Weekly
Demand Note, 5%, 1/1/35 ...................................................... 6,800,000 A1+ 6,800,000
Minnesota
Southern Minnesota Municipal Power Agency, Power Supply System, TECP,
Series B, 3.7%, 3/11/98 ...................................................... 800,000 P1 800,000
Missouri
Columbia, MO, Special Obligation, Weekly Demand Note, 3.7%, 6/1/08 ............. 2,700,000 VMIG1 2,700,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Missouri Health & Educational Facilities Authority, VRDN, 5%, 9/1/30 ........... 5,000,000 VMIG1 5,000,000
St. Louis County, MO, Industrial Development Authority, Kirkwood Project,
Series 1985, Weekly Demand Note, 4.275%, 12/1/15 ............................. 1,000,000 P1 1,000,000
Montana
Montana State, Tax and Revenue Anticipation Notes, Series 1997 C, 4.5%,
6/30/98 ...................................................................... 1,500,000 SP1+ 1,504,897
Nebraska
Nebraska Public Power District (All Districts), Series 1996, TECP, 3.7%,
3/10/98 ...................................................................... 2,060,000 P1 2,060,000
New Mexico
Albuquerque, NM, Gross Receipts/Lodgers Tax, Series 1991, Weekly Demand Note,
3.7%, 7/1/22 ................................................................. 2,000,000 A1+ 2,000,000
Belen Industrial Revenue Refunding Bond, United Desiccants Project, Weekly
Demand Note, 4%, 4/1/00 ...................................................... 700,000 SK 700,000
New York
Municipal Assistance Corp for New York City, Series K1, Weekly Demand Note,
3.55%, 7/1/08 ................................................................ 1,000,000 A1+ 1,000,000
New York City, NY, General Obligation Unlimited, Daily Demand Note, 5%,
8/15/05 ...................................................................... 7,100,000 A1+ 7,100,000
New York City, NY, Municipal Water Finance Authority, Series C, Daily Demand
Note, 5.1%, 6/15/23 .......................................................... 5,000,000 VMIG1 5,000,000
New York State Energy Research & Development Authority, Pollution Control
Revenue, Orange & Rockland Utilities Project, Weekly Demand Note, 3.55%,
8/1/15 ....................................................................... 1,000,000 VMIG1 1,000,000
Suffolk County, NY, TAN, 4.25%, 8/13/98 ........................................ 8,000,000 SP1+ 8,030,240
North Carolina
North Carolina Medical Care Common Hospital Revenues, Series 1985, Weekly
Demand Note, 3.75%, 12/1/25 .................................................. 8,100,000 A1+ 8,100,000
North Dakota
Grand Forks, ND, Hospital Facilities Revenue, Daily Demand Note, 5.1%,
12/1/16 ...................................................................... 2,400,000 VMIG1 2,400,000
Ohio
Cuyahoga County, OH, Health & Education, University Hospital of Cleveland,
Daily Demand Note, 5.2%, 1/1/16 .............................................. 3,800,000 VMIG1 3,800,000
Ohio State, Air Quality Development Authority Revenue Cincinnati Gas and
Electric, Daily Demand Note, 5%, 9/1/30 ...................................... 2,400,000 A1+ 2,400,000
Ohio State University Revenue, General Receipts Bonds, Weekly Variable Rate
Demand Bond, Series 1986 B, 4.05%, 12/1/06 ................................... 2,900,000 A1+ 2,900,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oregon
Oregon General Obligation, Series 1973-G, Weekly Demand Note, 3.65%, 12/1/18 ... 1,900,000 VMIG1 1,900,000
Pennsylvania
Delaware Valley, PA, Regional Finance Authority, Weekly Demand Note, 3.65%,
12/1/20 ...................................................................... 1,600,000 VMIG1 1,600,000
Elk County Pennsylvania Industrial Development Authority, Series 1989, VRDN,
4.415%, 3/1/04 ............................................................... 1,750,000 SK 1,750,000
Emmaus, PA, General Authority Local Government, Revenue Bond Pool Program,
Weekly Demand Note, 3.8%, 3/1/24 ............................................. 1,000,000 A1+ 1,000,000
Philadelphia, PA, Tax and Revenue Anticipation Note, Series 1997A, 4.5%,
6/30/98 ...................................................................... 2,000,000 MIG1 2,004,741
Philadelphia, PA, School District, Tax and Revenue Anticipation Notes,
Series 1993A, 4.5%, 7/1/98 ................................................... 2,000,000 SK 2,005,939
Temple University of the Commonwealth, PA, Higher Education, Series 1997,
4.75%, 5/18/98 ............................................................... 2,000,000 SP1+ 2,006,135
South Carolina
South Carolina Public Service Authority Revenue, Weekly Demand Note, 4.25%,
1/1/23 ....................................................................... 2,000,000 A1+ 2,000,000
Tennessee
Clarksville, TN, Public Building Authority Pooled Financing, Series 1990,
Weekly Demand Note, 3.65%, 7/1/13 ............................................ 2,585,000 VMIG1 2,585,000
Franklin, TN, Industrial Development Revenue, Franklin Oaks Apartments, Weekly
Demand Note, Series 1985, 4.15%, 12/15/21 .................................... 5,500,000 VMIG1 5,500,000
Metropolitan Nashville Airport Authority, TN, Special Facilities Revenue,
American Airlines, Variable Rate Demand Note, 5%, 10/1/12 .................... 1,500,000 A1+ 1,500,000
Texas
Austin, TX, Utility Systems Revenue, TECP, 3.75%, 3/24/98 ...................... 3,000,000 A1+ 3,000,000
Grapevine, TX, Industrial Development Authority Corp., Series B1, Daily Demand
Note, 5%, 12/1/24 ............................................................ 600,000 P1 600,000
Harris County, TX, Health Facilities Authority, St. Lukes, Daily Demand Note,
5%, 2/15/27 .................................................................. 10,000,000 A1+ 10,000,000
Harris County, TX, Pollution Control Revenue (Exxon Project) 1984 Series A,
Daily Demand Note, 5%, 3/1/24 ................................................ 1,900,000 A1+ 1,900,000
Harris County, TX, Tax Anticipation Note, Series 1997, 4.25%, 2/27/98 .......... 1,000,000 MIG1 1,000,808
Lone Star, TX, Airport Improvement Authority, Daily Demand Note, Series
1995 A-3, 5%, 12/1/14 ........................................................ 1,300,000 VMIG1 1,300,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Port Development Corp., TX, Marine Terminal Refunding Revenue, Stolt Terminals,
Series 1989, Weekly Demand Note, 3.7%, 1/15/14 ............................... 1,500,000 A+ 1,500,000
San Antonio, TX, Electric & Gas City Public Services, TECP, 3.75%, 1/14/98 ..... 1,500,000 P1 1,499,929
San Antonio, TX, Electric & Gas Public Services, Variable Rate Note, 3.8%,
2/1/20 ....................................................................... 2,700,000 A1+ 2,700,000
San Antonio, TX, Industrial Development Authority, River Center Associates
Project, Weekly Demand Note, 4.25%, 12/1/12 .................................. 2,800,000 SK 2,800,000
State of Texas, General Obligation, Veterans Housing Assistance Refunding
Bonds, Series 1995, Weekly Demand Note, 3.65%, 12/1/16 ....................... 2,400,000 A1+ 2,400,000
State of Texas, Tax and Revenue Anticipation Note, Series 1998A, 4.75%,
8/31/98 ...................................................................... 10,000,000 MIG1 10,063,440
Texas State Water Development Board, Weekly Demand Note, 4.9%, 3/1/15 .......... 7,900,000 A1+ 7,900,000
Utah
Intermountain Power Agency, Power Supply Revenue Bonds, Series 1985F, TECP,
3.7%, 2/11/98 ................................................................ 1,700,000 A1+ 1,700,000
Salt Lake City, UT, Pollution Control Revenue, British Petroleum Station
Project, Series 1994 B, Daily Demand Note, 4.9%, 8/1/07 ...................... 4,000,000 P1 4,000,000
State of Utah, General Obligation, Highway, TECP, Series 1997 B, 3.75%,
2/4/98 ....................................................................... 2,000,000 A1+ 2,000,000
Vermont
Vermont Industrial Development Authority, Mount Snow, Limited Series 1904,
VRDN, 4.415%, 4/1/99 ......................................................... 435,000 SK 435,000
Vermont Industrial Development, Vermont Marble Company, Series 1984, VRDN,
4.415%, 12/1/04 .............................................................. 3,575,000 SK 3,575,000
Vermont Student Assistance Corporation, Student Loan Revenue, VRDN, 3.8%,
1/1/04 ....................................................................... 4,915,000 VMIG1 4,915,000
Washington
State of Washington Various Purpose General Obligation, Series 1996 B, Weekly
Demand Note, 3.6%, 6/1/20 .................................................... 2,400,000 A1+ 2,400,000
Washington Healthcare Facilities Authority Revenue, Fred Hutchinson Cancer
Center, Variable Rate Demand Note, Series 1996, 5.1%, 1/1/23 ................. 7,800,000 VMIG1 7,800,000
Washington Motor Vehicle Fuel Tax, General Obligation, Series 1996, 5%,
7/1/98 ....................................................................... 1,000,000 SK 1,005,610
Washington Public Power Supply System, Projects #1 and #3, Refunding Revenue,
Series 1993-1A1, Weekly Demand Note, 3.75%, 7/1/18 ........................... 1,475,000 VMIG1 1,475,000
Washington State Public Power Supply System, Nuclear Project #1, 1993
Series 1A-1, Weekly Demand Note, 3.65%, 7/1/17 ............................... 4,700,000 A1 4,700,000
Wisconsin
Wausau, WI, Pollution Control Revenue, Minnesota Mining and Manufacturing,
Series 1982, Weekly Demand Notes, 4.428%, 8/1/17 ............................. 500,000 AAA 500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wyoming
Uinta County, WY, Pollution Control, Chevron Series 1992, Series Demand Note,
5%, 12/1/22 .................................................................. 4,500,000 VMIG1 4,500,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $280,728,097) (a) 280,728,097
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes was $280,728,097.
(b) Credit ratings (unaudited) shown are either by Moody's Investors Service,
Inc., Standard & Poor's Corporation or Scudder Kemper
Moody's Standard & Poor's
P1 A1/A1+ Commercial paper of the highest quality.
MIG1
MIG2 SP1/SP1+ Short-term tax-exempt instrument of the
best quality with strong protection.
VMIG1 Short-term tax-exempt variable rate demand
instrument of the best quality with
strong protection.
Abbreviations used in the statement:
TECP Tax Exempt Commercial Paper VRDN Variable Rate Demand Note
GO General Obligation RAN Revenue Anticipation Note
TAN Tax Anticipation Note TRAN Tax Revenue Anticipation Note
SK These securities are not rated by either Moody's or Standard & Poor's.
Scudder Kemper has determined that these securities are of comparable
quality to rated acceptable notes on a cash flow basis and are of
appropriate credit for the standards required by the Fund's investment
objective.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Scudder Insitutional Shares/Government Money Market Series
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Principal Value ($)
Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 9.6%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and Trust Company dated 12/31/97 at 6%,
to be repurchased at $8,073,690 on 1/2/98, collateralized by a $8,245,000 U.S. ------------
Treasury Note, 5.625%, 12/31/99 (Cost $8,071,000) ..................................... 8,071,000 8,071,000
------------
U.S. Government Agency Obligations 90.4%
- ------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, Discount Note, 1/7/98 ........................................... 5,000,000 4,995,507
Federal Home Loan Bank, Discount Note, 1/14/98 .......................................... 2,000,000 1,996,078
Federal Home Loan Bank, Discount Note, 2/11/98 .......................................... 5,000,000 4,967,940
Federal Home Loan Bank, Discount Note, 3/6/98 ........................................... 4,000,000 3,961,316
Federal Home Loan Bank, Discount Note, 3/16/98 .......................................... 2,000,000 1,978,047
Federal Home Loan Bank, Discount Note, 4/13/98 .......................................... 2,000,000 1,969,287
Federal Home Loan Bank, Discount Note, 5/1/98 ........................................... 2,000,000 1,963,933
Federal Home Loan Mortgage, Discount Note, 1/30/98 ...................................... 4,000,000 3,981,666
Federal Home Loan Mortgage, Discount Note, 2/6/98 ....................................... 4,000,000 3,978,119
Federal Home Loan Mortgage, Discount Note, 2/11/98 ...................................... 2,000,000 1,987,529
Federal Home Loan Mortgage, Discount Note, with various maturities to 2/27/98 ........... 5,000,000 4,959,902
Federal Home Loan Mortgage, Discount Note, 3/11/98 ...................................... 1,000,000 989,439
Federal National Mortgage Assoc., Discount Note, with various maturities to 8/10/98 ..... 33,985,000 33,483,615
Federal National Mortgage Assoc., 5.51%, 3/14/98* ....................................... 5,000,000 5,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Obligations (Cost $76,212,378) 76,212,378
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $84,283,378) (a) 84,283,378
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes was $84,283,378.
* Floating rate security; date shown is next interest rate change.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Scudder Institutional Shares
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Tax Free Government
Money Money Money
Assets Market Series Market Series Market Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments, at value (for cost, see accompanying
lists of investment portfolios) ................ $1,039,436,048 $ 280,728,097 $ 84,283,378
Cash ............................................. 559,470 152,979 2,867
Receivable for Fund shares sold .................. 397,856 -- 2,419
Receivable for investments sold .................. -- 385,000 --
Interest receivable .............................. 6,032,437 1,642,523 14,934
Reimbursement due from Adviser ................... 84,364 51,279 17,786
Other assets ..................................... 44,566 31,271 46,401
---------------- ---------------- ----------------
Total assets ..................................... 1,046,554,741 282,991,149 84,367,785
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................ -- 12,030,240 --
Dividends payable ................................ 4,544,673 499,189 377,487
Accrued management fee ........................... 123,101 11,560 66,141
Other payables and accrued expenses .............. 358,252 225,126 54,018
---------------- ---------------- ----------------
Total liabilities ................................ 5,026,026 12,766,115 497,646
---------------------------------------------------- ---------------- ---------------- ----------------
Net assets, at value ............................. $1,041,528,715 $ 270,225,034 $ 83,870,139
---------------------------------------------------- ---------------- ---------------- ----------------
Net Asset Value
- ---------------------------------------------------------------------------------------------------------------------------
Managed Shares:
Net assets applicable to shares outstanding .... $ 368,915,638 $ 176,519,670 $ 29,439,077
Shares outstanding of capital stock, $.001 par
value, 800,000,000, 500,000,000, and
1,500,000,000 shares authorized .............. 368,915,638 176,519,670 29,439,077
Net Asset Value, offering and redemption price ---------------- ---------------- ----------------
per share (net assets / shares outstanding) .. $1.00 $1.00 $1.00
---------------- ---------------- ----------------
Institutional Shares:
Net assets applicable to shares outstanding .... $ 337,824,146 $ 93,705,364 $ 54,431,062
Shares outstanding of capital stock, $.001 par
value, 800,000,000, 500,000,000, and
1,500,000,000 shares authorized .............. 337,824,146 93,705,364 54,431,062
Net Asset Value, offering and redemption price ---------------- ---------------- ----------------
per share (net assets / shares outstanding) .. $1.00 $1.00 $1.00
---------------- ---------------- ----------------
Premium Money Market Shares:
Net assets applicable to shares outstanding .... $ 334,788,931
Shares outstanding of capital stock, $.001 par
value, 2,000,000,000 shares authorized ....... 334,788,931
Net Asset Value, offering and redemption price ----------------
per share (net assets / shares outstanding) .. $1.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Scudder Institutional Shares
Financial Statements
Statement of Operations
year ended December 31, 1997
<TABLE>
<CAPTION>
Tax Free Government
Money Money Money
Investment Income Market Series Market Series Market Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest ........................................... $ 31,972,083 $ 4,866,249 $ 3,380,968
---------------- ---------------- ----------------
Expenses:
Management fee ..................................... 1,676,376 406,470 141,462
Shareholder services ............................... 735,033 239,629 121,051
Directors' fees and expenses ....................... 14,498 14,465 10,463
Custodian and accounting fees ...................... 145,605 68,147 58,130
Reports to shareholders ............................ 47,389 11,016 7,312
Auditing ........................................... 23,642 20,615 27,915
Legal .............................................. 73,167 37,908 27,331
Registration fees .................................. 77,718 30,156 28,095
Other .............................................. 15,814 45,472 11,612
---------------- ---------------- ----------------
Total expenses before reductions ................... 2,809,242 873,878 433,371
Expense reductions ................................. (459,300) (120,461) (147,306)
---------------- ---------------- ----------------
Expenses, net ...................................... 2,349,942 753,417 286,065
----------------------------------------------------- ---------------- ---------------- ----------------
Net investment income 29,622,141 4,112,832 3,094,903
----------------------------------------------------- ---------------- ---------------- ----------------
----------------------------------------------------- ---------------- ---------------- ----------------
Net increase in net assets resulting from
operations $ 29,622,141 $ 4,112,832 $ 3,094,903
----------------------------------------------------- ---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Scudder Institutional Shares
Financial Statements
Statements of Changes to Net Assets
Money Market Series
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 29,622,141 $ 18,268,673
---------------- ----------------
Distributions to shareholders from:
Net investment income (Managed Shares) ........................ (16,811,273) (18,268,673)
---------------- ----------------
Net investment income (Institutional Shares) .................. (8,101,246) --
---------------- ----------------
Net investment income (Premium Money Market Shares) ........... (4,709,622) --
---------------- ----------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold ..................................... 1,604,556,971 2,285,419,535
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 7,105,515 10,791,498
Cost of shares redeemed ....................................... (1,674,045,123) (2,236,431,853)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... (62,382,637) 59,779,180
---------------- ----------------
Institutional Shares*:
Proceeds from shares sold ..................................... 697,521,385 --
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 1,796,954 --
Cost of shares redeemed ....................................... (361,494,193) --
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... 337,824,146 --
---------------- ----------------
Premium Money Market Shares**:
Proceeds from shares sold ..................................... 612,133,352 --
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 2,900,558 --
Cost of shares redeemed ....................................... (280,244,979) --
---------------- ----------------
Net increase in net assets from Fund share transactions ....... 334,788,931 --
---------------- ----------------
Increase (decrease) in net assets ............................. 610,230,440 59,779,180
Net assets at beginning of period ............................. 431,298,275 371,519,095
---------------- ----------------
Net assets at end of period ................................... $1,041,528,715 $431,298,275
---------------- ----------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
** For the period July 7, 1997 (commencement of sale of Premium Money Market
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Scudder Institutional Shares
Financial Statements
Statements of Changes to Net Assets
Tax Free Money Market Series
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 4,112,832 $ 4,176,664
--------------- ---------------
Distributions to shareholders from:
Net investment income (Managed Shares) ................. (2,806,394) (4,176,664)
--------------- ---------------
Net investment income (Institutional Shares) ........... (1,306,438) --
--------------- ---------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold .............................. 378,820,759 605,388,558
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 640,423 2,369,718
Cost of shares redeemed ................................ (368,394,901) (580,696,936)
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 11,066,281 27,061,340
--------------- ---------------
Institutional Shares*:
Proceeds from shares sold .............................. 159,246,687 --
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 30,480 --
Cost of shares redeemed ................................ (65,571,803) --
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 93,705,364 --
--------------- ---------------
Increase (decrease) in net assets ...................... 104,771,645 27,061,340
Net assets at beginning of period ...................... 165,453,389 138,392,049
--------------- ---------------
Net assets at end of period ............................ $270,225,034 $165,453,389
--------------- ---------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Scudder Institutional Shares
Financial Statements
Statements of Changes to Net Assets
Government Money Market Series
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 3,094,903 $ 3,380,075
--------------- ---------------
Distributions to shareholders from:
Net investment income (Managed Shares) ................. (1,921,752) (3,380,075)
--------------- ---------------
Net investment income (Institutional Shares) ........... (1,173,151) --
--------------- ---------------
Fund share transactions:
Managed Shares:
Proceeds from shares sold .............................. 204,615,796 475,466,734
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 426,890 2,288,409
Cost of shares redeemed ................................ (203,521,896) (499,812,580)
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 1,520,790 (22,057,437)
--------------- ---------------
Institutional Shares*:
Proceeds from shares sold .............................. 115,334,278 --
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 449 --
Cost of shares redeemed ................................ (60,903,665) --
--------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 54,431,062 --
--------------- ---------------
Increase (decrease) in net assets ...................... 55,951,852 (22,057,437)
Net assets at beginning of period ...................... 27,918,287 49,975,724
--------------- ---------------
Net assets at end of period ............................ $ 83,870,139 $ 27,918,287
--------------- ---------------
</TABLE>
* For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Scudder Institutional Shares/Money Market Series
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ........ .051 .049 .054 .038 .028 .037 .059 .076 .086 .070
Distributions from net
investment
income .................... (.051) (.049) (.054) (.038) (.028) (.037) (.059) (.076) (.086) (.070)
Net asset value, end of ----------------------------------------------------------------------------------------
period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ......... 5.21 4.97 5.57 3.86 2.81 3.74 6.07 7.92 8.93 7.21
Ratios and Supplemental Data
Net assets, end of period
($ millions) .............. 369 431 372 367 324 305 347 385 331 389
Ratio of operating expenses,
net to average daily net
assets (%) ................ .49 .55 .55 .55 .55 .55 .55 .67 .72 .65
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ................ .59 .62 .68 .68 .66 .64 .64 .70 .72 .65
Ratio of net investment income
to average daily net
assets (%) ................ 5.00 4.86 5.45 3.84 2.78 3.76 5.93 7.64 8.56 6.95
</TABLE>
(a) Total returns are higher due to maintenance of the Fund's expenses for the
years ended December 31, 1990 to December 31, 1997.
* Effective July 7, 1997, Scudder Money Market Series (formerly known as the
Managed Cash Fund) was divided into three classes, of which Scudder Money
Market Managed Shares is one. Shares of the Fund outstanding on such date
were redesignated as the Managed Shares of the Fund. The data set forth
above reflects the investment performance of the Fund prior to such
redesignation.
20
<PAGE>
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 financial statements.
Institutional Shares
<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
21
<PAGE>
Scudder Institutional Shares/Money Market Series
The following table includes selected data for a share of the Premium Money
Market Shares class outstanding throughout the period and other performance
information derived from the financial statements.
Premium Money Market Shares
<TABLE>
<CAPTION>
For the Period
July 7, 1997
(commencement
of sale of
Premium Shares) to
December 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C>
---------------
Net asset value, beginning of period ............................................. $1.000
---------------
Net investment income ............................................................ .026
Distributions from net investment income ......................................... (.026)
---------------
Net asset value, end of period ................................................... $1.000
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................. 2.62**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................... 335
Ratio of operating expenses, net to average daily net assets (%) ................. .38*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) .................................................................... .43*
Ratio of net investment income to average daily net assets (%) ................... 5.50*
</TABLE>
(a) Total return is higher due to the maintenance of Fund expenses.
* Annualized
** Not annualized
22
<PAGE>
Scudder Institutional Shares/Tax Free Money Market Series
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------------------
Net investment income ....... .030 .028 .032 .023 .018 .025 .042 .053 .057 .049
Distributions from net
investment income
and net realized
capital gains ............ (.030) (.028) (.032) (.023) (.018) (.025) (.042) (.053) (.057) (.049)
Net asset value, ----------------------------------------------------------------------------------------------------
end of period ............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............ 3.07(a) 2.88 3.30 2.29 1.85 2.56 4.20 5.47 5.91 4.98
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 177 165 138 125 107 91 107 135 137 261
Ratio of operating expenses,
net to average daily
net assets (%) ........... .65 .72 .79 .77 .78 .77 .75 .77 .76 .60
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ............... .74 .72 .79 .77 .78 .77 .75 .77 .76 .60
Ratio of net investment
income to average
daily net assets (%) ..... 2.99 2.84 3.25 2.26 1.83 2.54 4.14 5.33 5.72 4.85
</TABLE>
(a) Total return is higher due to the maintenance of the Fund's expenses.
* Effective July 7, 1997, Scudder Tax Free Money Market Series (formerly
known as Managed Tax-Free Fund) was divided into two classes, of which
Scudder Tax Free Money Market Managed Shares is one. Shares of the Fund
outstanding on such date were redesignated as the Managed Shares of the
Fund. The data set forth above reflects the investment performance of the
Fund prior to such redesignation.
23
<PAGE>
Scudder Insitutional Shares/Tax Free 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 financial statements.
Institutional Shares
<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
24
<PAGE>
Scudder Institutional Shares/Government Money Market Series
Financial Highlights
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares*
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ....... .049 .048 .054 .037 .026 .035 .056 .075 .084 .069
Distributions from net
investment
income ................... (.049) (.048) (.054) (.037) (.026) (.035) (.056) (.075) (.084) (.069)
Net asset value, end of ----------------------------------------------------------------------------------------
period ................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ----------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........ 5.02 4.91 5.49 3.75 2.68 3.51 5.65 7.73 8.81 7.13
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 29 28 50 69 92 151 87 82 64 409
Ratio of operating expenses,
net to average daily net
assets (%) ............... .55 .55 .55 .55 .55 .55 .55 .73 .75 .69
Ratio of operating expenses
before expense reductions,
to average daily net
assets (%) ............... .84 .77 .86 .84 .77 .76 .80 .80 .80 .69
Ratio of net investment
income to average daily
net assets (%) ........... 4.93 4.81 5.36 3.61 2.65 3.39 5.54 7.48 8.42 6.83
</TABLE>
(a) Total returns are higher, for the periods indicated, due to maintenance of
the Fund's expenses, except for the year ended December 31, 1988.
* Effective July 7, 1997, Scudder Government Money Market Series (formerly
known as the Managed Government Securities Fund) was divided into two
classes, of which Scudder Government Money Market Managed Shares is one.
Shares of the Fund outstanding on such date were redesignated as the
Managed Shares of the Fund. The data set forth above reflects the
investment performance of the Fund prior to such redesignation.
25
<PAGE>
Scudder Institutional Shares/Government 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 financial statements.
Institutional Shares
<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
26
<PAGE>
Scudder Institutional Shares
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Fund, Inc. (the "Company") is an open-end diversified management
investment company comprised of three diversified money market portfolios:
Scudder Money Market Series (formerly known as Managed Cash Fund), Scudder Tax
Free Money Market Series (formerly known as Managed Tax Free Fund), and Scudder
Government Money Market Series (formerly known as Managed Government Securities
Fund) (collectively, the "Funds"). The Board of Directors of the Company has
approved a multi-class system for each Fund effective July 7, 1997, such that
Scudder Tax Free Money Market Series and Scudder Government Money Market Series
may offer two classes of shares, Institutional Class and Managed Class and
Scudder Money Market Series may offer three classes of shares, Institutional
Class, Managed Class and Premium Money Market Class.
Security Valuation. Each of the Funds values its investments using the amortized
cost method, which involves initially valuing an investment at its cost and
thereafter assuming a constant amortization to maturity of any premium or
discount. This method results in a value approximating market.
Federal Income Taxes. The Company's policy is to qualify each Fund as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended, and to distribute all taxable and tax-exempt income, including any
realized net capital gains, to shareholders. Therefore, no Federal income tax
provision is required.
Dividends. Dividends from net investment income are declared each business day
to shareholders of record that day for payment on the first business day of the
following month.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Other. Investment transactions are recorded on trade dates. Interest income,
including the accretion or amortization of discount or premium, is recorded on
the accrual basis. Discounts or premiums on securities purchased are accreted or
amortized, respectively, on a straight line basis over the life of the
respective securities. Distributions to shareholders are recorded on the
ex-dividend dates.
B. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Company's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Company and Scudder Kemper
was approved by the Company's Board of Directors and by the Company's
Shareholders. The Management Agreement, which is effective December 31, 1997, is
the same in all material respects as the corresponding previous Investment
Management Agreement, except that Scudder Kemper is the new investment adviser
to the Company.
27
<PAGE>
The Company retains Scudder Kemper as investment manager for the Funds, pursuant
to investment advisory agreements between Scudder Kemper and the Company on
behalf of each such Fund. For the period January 1, 1997 through July 7, 1997,
the Adviser received an investment 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. Through July 7, 1997, the Adviser
agreed to waive a portion of its investment management fee for each of the Money
Market Series and the Government Money Market Series to the extent necessary so
that annualized expenses of each Fund would not exceed 0.55% of average daily
net assets. Effective July 7, 1997, the Adviser receives an investment
management fee at an annual rate of 0.25% of average daily net assets for each
Fund. For the period July 7, 1997 to December 31, 1997, the Adviser has agreed
to waive a portion of its investment management fee for each of the Money Market
Series, Tax Free Money Market Series, and Government Money Market Series to the
extent necessary so that the total annualized investment management fee of each
Fund does not exceed 0.20%, 0.15%, and 0.10%, respectively.
For the 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.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. Each
class of the Funds has entered into a Transfer Agency and Service Agreement with
SSC. SSC receives account fees that vary according to the account size and type
of account of the shareholders of the respective classes. For the year ended
December 31, 1997 the following amounts were charged:
Government
Money Market Tax Free Money
Money Market Money Market Market
Series Series 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
========== ========== ==========
Each of the Funds has special arrangements with certain banks, institutions and
other persons under which they receive compensation from the Funds and the
Adviser for performing shareholder servicing functions for their customers who
own shares in the Funds. Effective July 7, 1997, the Adviser has agreed to
reimburse the Funds for amounts payable by the Scudder Managed Class Shares,
such that the fees in basis points paid by the class will be no greater than the
total transfer agent fee payable to SSC. For the period July 7, 1997 to December
31, 1997, the Adviser's reimbursement payable aggregated $84,364 for the Money
Market Series, $51,279 for the Tax Free Money Market Series, and $17,786 for the
Government Money Market Series.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Funds. For the year ended
December 31, 1997, the amount charged to the Funds by SFAC aggregated $109,482
for the Money Market Series, $56,782 for the Tax Free
28
<PAGE>
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.
The Company has a compensation arrangement under which payment of directors'
fees may be deferred. Interest is accrued (based on the rate of return earned on
the 90 day Treasury Bill as determined at the beginning of each calendar
quarter) on the deferred balances and is included in "Directors' fees and
expenses." The accumulated balance of deferred directors' fees and interest
thereon relating to the Funds constituting the Company aggregated $224,106, an
applicable portion of which is included in accrued expenses of each such Fund.
Other. Printing and postage expenses related to preparing and distributing
material such as shareholder reports, prospectuses and proxy materials to
current shareholders are charged to each class based on number of shareholder
accounts. For the year ended December 31, 1997, the following amounts were paid:
<TABLE>
<CAPTION>
Money Market Tax Free Government Money
Series Money Market Market
Series Series
<S> <C> <C> <C>
Managed Class $ 26,866 $ 4,782 $ 4,782
Institutional Class 7,749 2,530 2,530
Premium Class 14,880 -- --
---------- ---------- ----------
$ 49,495 $ 7,312 $ 7,312
========== ========== ==========
</TABLE>
29
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Scudder Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Government Money Market Series,
Money Market Series and Tax Free Money Market Series (each a separate portfolio
of Scudder Fund, Inc., hereafter referred to as the "Fund") at December 31,
1997, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the ten years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures when confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 23, 1998
30
<PAGE>
Tax Information (Unaudited)
The total amount of dividends declared in 1997 by each of the Government Money
Market Series Portfolio and Money Market Series Portfolio of Scudder Fund, Inc.
are taxable as ordinary dividend income for Federal income tax purposes. None of
this amount qualifies for the dividends received deduction available to
corporations.
All of the dividends from the Tax Free Money Market Series Portfolio declared in
1997 are exempt from Federal income tax. However, in accordance with the
Internal Revenue Code, you are required to report them on your 1997 Federal
income tax return.
Although dividend income from the Tax Free Money Market Series Portfolio is
exempt from Federal taxation, it may not be exempt from state or local taxation.
You should consult your tax advisor as to the state and local tax status of the
dividends you received.
31
<PAGE>
Stockholder Meeting Results
Money Market Series
A Special Meeting of Stockholders (the "Meeting") of the Scudder Money Market
Series of Scudder Institutional Shares (the "Fund") was held on October 23,
1997, at the offices of Scudder Kemper Investments, Inc. (formerly Scudder,
Stevens & Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street), New York,
New York 10154. The following matters were voted upon by the stockholders (the
resulting votes for each matter are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
315,119,454 0 0 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 315,119,454 0
Edgar R. Fiedler 315,119,454 0
Peter B. Freeman 315,119,454 0
Dr. J. D. Hammond 315,119,454 0
Richard M. Hunt 315,119,454 0
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
282,519,764 32,599,690 0 0
32
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 282,519,764 32,599,690 0 0
4.2 Borrowing 282,519,764 32,599,690 0 0
4.3 Senior securities 282,519,764 32,599,690 0 0
4.4 Concentration 282,519,764 32,599,690 0 0
4.5 Underwriting of securities 282,519,764 32,599,690 0 0
4.6 Investment in real estate 282,519,764 32,599,690 0 0
4.7 Purchase of physical commodities 282,519,764 32,599,690 0 0
4.8 Loans 282,519,764 32,599,690 0 0
4.9 Equity or convertible securities 282,519,764 32,599,690 0 0
4.10 Exercising control or management 282,519,764 32,599,690 0 0
4.11 Restricted securities 282,519,764 32,599,690 0 0
4.12 10% of total assets in illiquid 282,519,764 32,599,690 0 0
securities
4.13 Purchase on margin or short sales 282,519,764 32,599,690 0 0
4.14 Puts, calls, warrants, or options 282,519,764 32,599,690 0 0
4.15 Pledging or mortgaging assets 282,519,764 32,599,690 0 0
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
315,119,454 0 0
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
33
<PAGE>
Stockholder Meeting Results
Tax Free Money Market Series
A Special Meeting of Stockholders (the "Meeting") of the Scudder Tax Free Money
Market Series of Scudder Institutional Shares (the "Fund") was held on October
23, 1997, at the offices of Scudder Kemper Investments, Inc. (formerly Scudder,
Stevens & Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street), New York,
New York 10154. The following matters were voted upon by the stockholders (the
resulting votes for each matter are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
90,044,677 0 0 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 90,044,677 0
Edgar R. Fiedler 90,044,677 0
Peter B. Freeman 90,044,677 0
Dr. J. D. Hammond 90,044,677 0
Richard M. Hunt 90,044,677 0
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
90,044,677 0 0 0
34
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 90,044,677 0 0 0
4.2 Borrowing 90,044,677 0 0 0
4.3 Senior securities 90,044,677 0 0 0
4.4 Concentration 90,044,677 0 0 0
4.5 Underwriting of securities 90,044,677 0 0 0
4.6 Investment in real estate 90,044,677 0 0 0
4.7 Purchase of physical commodities 90,044,677 0 0 0
4.8 Loans 90,044,677 0 0 0
4.9 Equity or convertible securities 90,044,677 0 0 0
4.10 Exercising control or management 90,044,677 0 0 0
4.11 Restricted securities 90,044,677 0 0 0
4.12 10% of total assets in illiquid 90,044,677 0 0 0
securities
4.13 Purchase on margin or short sales 90,044,677 0 0 0
4.14 Puts, calls, warrants, or options 90,044,677 0 0 0
4.15 Pledging or mortgaging assets 90,044,677 0 0 0
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
90,044,677 0 0
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
35
<PAGE>
Stockholder Meeting Results
Government Money Market Series
A Special Meeting of Stockholders (the "Meeting") of the Scudder Government
Money Market Series of Scudder Institutional Shares (the "Fund") was held on
October 23, 1997, at the offices of Scudder Kemper Investments, Inc. (formerly
Scudder, Stevens & Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street),
New York, New York 10154. The following matters were voted upon by the
stockholders (the resulting votes for each matter are presented below).
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
51,788,981 0 0 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 51,788,981 0
Edgar R. Fiedler 51,788,981 0
Peter B. Freeman 51,788,981 0
Dr. J. D. Hammond 51,788,981 0
Richard M. Hunt 51,788,981 0
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
51,788,981 0 0 0
36
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 51,788,981 0 0 0
4.2 Borrowing 51,788,981 0 0 0
4.3 Senior securities 51,788,981 0 0 0
4.4 Concentration 51,788,981 0 0 0
4.5 Underwriting of securities 51,788,981 0 0 0
4.6 Investment in real estate 51,788,981 0 0 0
4.7 Purchase of physical commodities 51,788,981 0 0 0
4.8 Loans 51,788,981 0 0 0
4.9 Equity or convertible securities 51,788,981 0 0 0
4.10 Exercising control or management 51,788,981 0 0 0
4.11 Restricted securities 51,788,981 0 0 0
4.12 10% of total assets in illiquid 51,788,981 0 0 0
securities
4.13 Purchase on margin or short sales 51,788,981 0 0 0
4.14 Puts, calls, warrants, or options 51,788,981 0 0 0
4.15 Pledging or mortgaging assets 51,788,981 0 0 0
</TABLE>
5. To ratify the selection of Price Waterhouse LLP as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
51,788,981 0 0
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
37
<PAGE>
This Page
Intentionally
Left Blank
38
<PAGE>
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., 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, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective, the
firm seeks opportunities in markets throughout the world to meet the needs of
investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER (logo)
<PAGE>
SCUDDER FUND, INC.
PART C. - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement for the
Managed Shares
For Scudder Money Market Series
For Scudder Tax Free Money Market Series
For Scudder Government Money Market Series
Financial Highlights for the ten fiscal years ended
December 31, 1997
Included in Part A of this Registration Statement for the
Institutional Shares
For Scudder Money Market Series
For Scudder Tax Free Money Market Series
For Scudder Government Money Market Series
Financial Highlights for the period August 4, 1997
(commencement of sale of Institutional shares) to
December 31, 1997
Included in Part A of this Registration Statement for the
Premium Shares
For Scudder Money Market Series
Financial Highlights for the period August 4, 1997
(commencement of sale of Premium shares) to December
31, 1997
Included in Part B of this Registration Statement
For Scudder Money Market Series
For Scudder Tax Free Money Market Series
For Scudder Government Money Market Series
Statement of Net Assets as of December 31, 1997
Statement of Operations for the fiscal year ended
December 31, 1997
Statements of Changes in Net Assets for the two
fiscal years ended December 31, 1996 and 1997
Financial Highlights for the five fiscal years ended
December 31, 1997
Notes to Financial Statements
Report of Independent Accountants
To be filed by amendment
b. Exhibits
1. (a) Articles of Incorporation dated June 16,
1982.
(Incorporated by reference to
Post-Effective Amendment No. 21 to this
Registration Statement.)
(b) Articles Supplementary dated April 28,
1987 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
Part C - Page 1
<PAGE>
(c) Articles of Merger dated April 28, 1987
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(d) Articles Supplementary dated February
20, 1991 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(e) Articles of Transfer dated December 27,
1991 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(f) Articles Supplementary dated February 7,
1992 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(g) Articles of Amendment dated October 14,
1992 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(h) Articles Supplementary for Managed
Intermediate Government Fund dated
January 18, 1993, (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
(i) Articles Supplementary dated April 24,
1995 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(j) Articles Supplementary dated January 25,
1996.
(Incorporated by reference to Exhibit
1(h) to Post-Effective Amendment No. 21
to this Registration Statement.)
(k) Articles of Amendment dated June 12,
1997.
(Incorporated by reference to Exhibit
1(i) to Post-Effective Amendment No. 24
to this Registration Statement.)
(l) Articles Supplementary dated June 12,
1997.
(Incorporated by reference to Exhibit
1(j) to Post-Effective Amendment No. 24
to this Registration Statement.)
2. (a) By-laws as amended through October 24,
1991 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(b) By-laws as amended through July 20, 1995.
(Incorporated by reference to
Post-Effective Amendment No. 21 to this
Registration Statement.)
(c) By-laws as amended through October 24,
1996.
(Incorporated by reference to
Post-Effective Amendment No. 22 to this
Registration Statement.)
3. Not applicable.
4. Form of stock certificate.
(Incorporated by reference to Exhibit 4
to Pre-Effective Amendment No. 1 to this
Registration Statement filed September
28, 1982 and to Post-Effective Amendment
No. 7 to this Registration Statement
filed March 3, 1988.)
5. (a)(1) Investment Advisory Agreement on behalf
of Managed Government Securities Fund
dated May 1, 1989 (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
Part C - Page 2
<PAGE>
(a)(2) Investment Advisory Agreement on behalf
of Managed Cash Fund dated May 1, 1989
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(a)(3) Investment Advisory Agreement on behalf
of Managed Tax-Free Fund dated May 1,
1989 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(a)(4) Form of Investment Advisory Agreement on
behalf of Managed Federal Securities
Fund dated May 1, 1991 (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
(a)(5) Investment Advisory Agreement on behalf
of Managed Intermediate Government Fund
dated January 18, 1993 (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
(a)(6) Investment Advisory Agreement on behalf
of Scudder Money Market Series (Formerly
Known As Managed Cash Fund) dated July
7, 1997.
(Incorporated by reference to Exhibit
5(a)(ix) to Post-Effective Amendment No.
24 to this Registration Statement.)
(a)(7) Investment Advisory Agreement on behalf
of Scudder Tax Free Money Market Series
(Formerly Known As Managed Tax Free
Fund) dated July 7, 1997.
(Incorporated by reference to Exhibit
5(a)(x) to Post-Effective Amendment No.
24 to this Registration Statement.)
(a)(8) Investment Advisory Agreement on behalf
of Scudder Government Money Market
Series (Formerly Known As Managed
Government Securities Fund) dated July
7, 1997.
(Incorporated by reference to Exhibit
5(a)(xi) to Post-Effective Amendment No.
24 to this Registration Statement.)
(a)(9) Investment Advisory Agreement between
the Registrant on behalf of Scudder
Money Market Series (Formerly Known As
Managed Cash Fund) and Scudder Kemper
Investments dated December 31, 1997.
(Incorporated by reference to
Post-Effective Amendment No. 26 to this
Registration Statement.)
(a)(10) Investment Advisory Agreement between
the Registrant on behalf of Scudder Tax
Free Money Market Series (Formerly Known
As Managed Tax Free Fund) and Scudder
Kemper Investments dated December 31,
1997.
(Incorporated by reference to
Post-Effective Amendment No. 26 to this
Registration Statement.)
(a)(11) Investment Advisory Agreement between
the Registrant on behalf of Scudder
Government Money Market Series (Formerly
Known As Managed Government Securities
Fund) Scudder Kemper Investments dated
December 31, 1997.
(Incorporated by reference to
Post-Effective Amendment No. 26 to this
Registration Statement.)
7. Not Applicable.
Part C - Page 3
<PAGE>
8. (a) Form of Custodian Agreement
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(b) Transfer Agency Agreement dated January
1, 1990 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(b)(1) Fee schedule for Exhibit 8(b).
(Incorporated by reference to
Post-Effective Amendment No. 21 to this
Registration Statement.)
(b)(2) Scudder Service Corporation Fee
Information for Services Provided under
Transfer Agency and Service Agreement
dated July 7, 1997.
(Incorporated by reference to
Post-Effective Amendment No. 24 to this
Registration Statement.)
(c)(1) Custodian Agreement with State Street
London Limited dated November 13, 1985
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(c)(2) Sub-Custodian Arrangement with Bankers
Trust (August 1986) (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
(c)(3) Sub-Custodian Agreement with Bankers
Trust Company (August 15, 1989)
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(c)(4) Sub-Custodian Agreement with Irving
Trust Company as amended February 6,
1990 (Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(c)(5) Fee Schedule for Exhibit 8(a).
(Incorporated by reference to Exhibit
8(c)(v) to Post-Effective Amendment No.
20 filed on April 28, 1995.)
9. (b)(1) Fund Accounting Services Agreement
between the Registrant, on behalf of
Managed Cash Fund, and Scudder Fund
Accounting Corporation dated August 1,
1994.
(Incorporated by reference to
Post-Effective Amendment No. 20 filed on
April 28, 1995.)
(b)(2) Fund Accounting Services Agreement
between the Registrant, on behalf of
Managed Federal Securities Fund, and
Scudder Fund Accounting Corporation
dated August 1, 1994
(Incorporated by reference to
Post-Effective Amendment No. 20 filed on
April 28, 1995.)
(b)(3) Fund Accounting Services Agreement
between the Registrant, on behalf of
Managed Government Securities Fund, and
Scudder Fund Accounting Corporation
dated August 1, 1994.
(Incorporated by reference to
Post-Effective Amendment No. 20 filed on
April 28, 1995.)
Part C - Page 4
<PAGE>
(b)(4) Fund Accounting Services Agreement
between the Registrant, on behalf of
Managed Tax-Free Fund, and Scudder Fund
Accounting Corporation dated August 18,
1994.
(Incorporated by reference to
Post-Effective Amendment No. 20 filed on
April 28, 1995.)
(b)(5) Fund Accounting Services Agreement
between the Registrant, on behalf of
Managed Intermediate Government Fund,
and Scudder Fund Accounting Corporation
dated September 22, 1994.
(Incorporated by reference to
Post-Amendment No. 20 filed on April 28,
1995.)
(b)(6) Fund Accounting Fee Schedule between the
Registrant and Scudder Fund Accounting
Corp. dated July 7, 1997.
(Incorporated by reference to
Post-Effective Amendment No. 24 to this
Registration Statement).
10. Inapplicable.
11. Consent of Independent Auditors is filed
herein.
12. Inapplicable.
13. Inapplicable
14. (a) Individual Retirement Account Prototype
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
(b) Self-Employed Individuals Retirement
Plan Prototype (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
(c) Scudder Roth IRA Custodian Disclosure
Statement and Plan Agreement
(Incorporated by reference to
Post-Effective Amendment No. 26 to this
Registration Statement.)
15. Inapplicable.
16. (a) Schedules for Computations of
Performance Quotations (Incorporated by
reference to Post-Effective Amendment
No. 25 to this Registration Statement.)
(b) Schedules for Computations of
Performance Quotations.
(Incorporated by reference to Exhibit
16(c) to Post-Effective Amendment No. 20
to this Registration Statement filed on
April 28, 1995.)
17. Financial Data Schedules.
18. Plan pursuant to Rule 18f-3
(Incorporated by reference to
Post-Effective Amendment No. 25 to this
Registration Statement.)
Power of attorney for Dr. Rosita Chang, Dr. J.D. Hammond, Richard M. Hunt,
Edgar R. Fiedler, Daniel Pierce and Peter B. Freeman are (Incorporated by
reference to Post-Effective Amendment No. 25 to this Registration Statement.)
Part C - Page 5
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
No person is controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
Set forth below is a table showing the number of record holders of
each class of securities of Scudder Fund, Inc. as of April 27, 1998.
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Scudder Money Market Series:
Premium Money Market Shares 3,934
Managed Money Market Shares 1,474
Institutional Money Market Shares 36
Scudder Tax Free Money Market Series:
Tax Free Managed Shares 148
Tax Free Institutional Shares 11
Scudder Government Money Market
Series:
Government Managed Shares 260
Government Institutional Shares 6
Item 27. Indemnification.
As permitted by Sections 17(h) and 17(i) of the Investment Company
Act of 1940, as amended (the "1940 Act"), pursuant to Article IV of
the Registrant's By-Laws (filed as Exhibit No. 2 to the Registration
Statement), officers, directors, employees and representatives of
the Funds may be indemnified against certain liabilities in
connection with the Funds, and pursuant to Section 12 of the
Underwriting Agreement dated January 18, 1989 (filed as Exhibit No.
6(b) to the Registration Statement), Scudder Investor Services, Inc.
(formerly "Scudder Fund Distributors, Inc."), as principal
underwriter of the Registrant, may be indemnified against certain
liabilities that it may incur. Said Article IV of the By-Laws and
Section 12 of the Underwriting Agreement are hereby incorporated by
reference in their entirety.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to
directors, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling
person of the Registrant and the principal underwriter in connection
with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such director, officer or
controlling person or the principal underwriter in connection with
the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business or Other Connections of Investment Adviser
Scudder Kemper Investments, Inc. has stockholders and employees who
are denominated officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for the
purpose of this Item 28.
Part C - Page 6
<PAGE>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder
Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund
Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution
Services, Inc.**
Director and President, Scudder Capital Asset
Corporation**
Director and President, Scudder Capital Stock
Corporation**
Director and President, Scudder Capital Planning
Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper
Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance
Company of Switzerland##
Director, ZKI Holding Corporation xx
Steven Gluckstern Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance
Company of Switzerland##
Director, Zurich Holding Company of America(o)
Rolf Huppi Director, Chairman of the Board, Scudder Kemper
Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance
Company of Switzerland##
Director, Chairman of the Board, Zurich Holding
Company of America(o)
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Director, Chief Legal Officer, Chief Compliance
Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk,
Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund
Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty
Holdings Corporation*
Director & Assistant Clerk, Scudder Service
Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary,
Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder,
Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder
Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder
Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark
Corporation**
Director and Secretary, Scudder, Stevens & Clark
Overseas Corporation(oo)
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder
Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder
Capital Asset Corporation**
Director, Vice President and Secretary, Scudder
Capital Stock Corporation**
Director, Vice President and Secretary, Scudder
Capital Planning Corporation**
Director, Vice President and Secretary, SS&C
Investment Corporation**
Director, Vice President and Secretary, SIS
Investment Corporation**
Director, Vice President and Secretary, SRV
Investment Corporation**
Director, Vice President and Secretary, Scudder
Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Part C - Page 7
<PAGE>
Markus Rohrbasser Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance
Company of Switzerland##
President, Director, Chairman of the Board, ZKI
Holding Corporation xx
Cornelia M. Small Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer,
Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark
Overseas Corporation(oo)
President and Director, Scudder, Stevens & Clark
Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A.
Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
# Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
(oo) 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
(o) Zurich Towers, 1400 American Ln., Schaumburg, IL
P.O. Box 309, Upland House, S. Church St., Grand Cayman,
+ British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Item 29. Principal Underwriters.
(a)
Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other funds
managed by Scudder Kemper Investments, Inc.
(b)
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of this
Item 29.
(1) (2) (3)
Positions and
Name and Principal Position and Offices with Offices with
Business Address Scudder Investor Services, Inc. Registrant
---------------- ------------------------------- ----------
William S. Baughman Vice President None
Two International Place
Boston, MA 02110
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154
Part C - Page 8
<PAGE>
<TABLE>
<CAPTION>
Positions and
Name and Principal Position and Offices with Offices with
Business Address Scudder Investor Services, Inc. Registrant
---------------- ------------------------------- ----------
<S> <C> <C>
Mary Elizabeth Beams Vice President None
Two International Place
Boston, MA 02110
Mark S. Casady Director, President and None
Two International Place Assistant Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior Vice None
Two International Place President
Boston, MA 02110
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and None
345 Park Avenue Assistant Clerk
New York, NY 10154
Philip S. Fortuna Vice President None
101 California Street
San Francisco, CA 94111
William F. Glavin Vice President None
Two International Place
Boston, MA 02110
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Director, Vice President, Vice President and
Two International Place Treasurer Assistant Secretary
Boston, MA 02110 and Assistant Clerk
Thomas F. McDonough Clerk Vice President,
Two International Place Secretary and
Boston, MA 02110 Treasurer
Daniel Pierce Director, Vice President President
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President Vice President
345 Park Avenue and Assistant Clerk
New York, NY 10154
</TABLE>
Part C - Page 9
<PAGE>
Positions and
Name and Principal Position and Offices with Offices with
Business Address Scudder Investor Services, Inc. Registrant
---------------- ------------------------------- ----------
Robert A. Rudell Vice President None
Two International Place
Boston, MA 02110
William M. Thomas Vice President None
Two International Place
Boston, MA 02110
Benjamin Thorndike Vice President None
Two International Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules thereunder
are maintained at the offices of the Custodian, the Transfer Agent,
the Distributor or the Registrant. Documents required by paragraphs
(b)(4), (5), (6), (7), (9), (10), and (11) and (f) of Rule 31a-1
(the "Rule"), will be kept at the offices of the Registrant, 345
Park Avenue, New York, New York; certain documents required to be
kept under paragraphs (b)(1) and (b)(2)(iv) of the Rule will be kept
at the offices of Scudder Service Corporation, Two International
Place, Boston, Massachusetts 02110-4103; documents required to be
kept under paragraph (d) of the Rule will be kept at the offices of
Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103; and the remaining accounts, books and
other documents required by the Rule will be kept at State Street
Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
Inapplicable.
Part C - Page 10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of
New York on the 15th day of April, 1998.
SCUDDER FUND, INC.
By /s/Thomas F. McDonough
--------------------------------
Thomas F. McDonough
Treasurer, Vice President and Secretary
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/Dr. Rosita Chang
- ------------------------------------------
Dr. Rosita Chang* Director April 15, 1998
/s/Dr. J.D. Hammond
- ------------------------------------------
Dr. J.D. Hammond* Director April 15, 1998
/s/Richard M. Hunt
- ------------------------------------------
Richard M. Hunt* Director April 15, 1998
/s/Edgar R. Fiedler
- ------------------------------------------
Edgar R. Fiedler* Director April 15, 1998
/s/Peter B. Freeman
- ------------------------------------------
Peter B. Freeman* Director April 15, 1998
/s/Daniel Pierce
- ------------------------------------------
Daniel Pierce* President (Principal April 15, 1998
Executive Officer)
</TABLE>
*By: /s/Thomas F. McDonough
----------------------
Thomas F. McDonough**
** Attorney-in-fact pursuant to a power of
attorney contained in the signature page
of Post Effective Amendment No. 25.
<PAGE>
File No. 2-78122
File No. 811-3495
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 27
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 23
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER FUND, INC.
<PAGE>
SCUDDER FUND, INC.
EXHIBIT INDEX
Exhibit 11
Exhibit 17
Consent of Independent Accountant
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 27 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 23, 1998, relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Report to Shareholders of Scudder Fund, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to the reference
to us under the heading "Experts" in such Statement of Additional Information.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
April 27, 1998
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Money Market Series - Premium Shares Annual Report for the fiscal year ended
12/31/97 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME>SCUDDER MONEY MARKET SERIES - Premium Shares
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,039,436,048
<INVESTMENTS-AT-VALUE> 1,039,436,048
<RECEIVABLES> 6,514,657
<ASSETS-OTHER> 604,036
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,046,554,741
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,026,026
<TOTAL-LIABILITIES> 5,026,026
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,041,528,715
<SHARES-COMMON-STOCK> 334,788,931
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,041,528,715
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 31,972,083
<OTHER-INCOME> 0
<EXPENSES-NET> 2,349,942
<NET-INVESTMENT-INCOME> 29,622,141
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 29,622,141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,709,622)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 612,133,352
<NUMBER-OF-SHARES-REDEEMED> (280,244,979)
<SHARES-REINVESTED> 2,900,558
<NET-CHANGE-IN-ASSETS> 610,230,440
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,676,376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 175,509,261
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Managed Intermediate Government Fund Annual Report for the fiscal year
ended December 31, 1995 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> MANAGED INTERMEDIATE GOVERNMENT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 11,609,594
<INVESTMENTS-AT-VALUE> 11,739,838
<RECEIVABLES> 143,955
<ASSETS-OTHER> 103,295
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,987,088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 103,856
<TOTAL-LIABILITIES> 103,856
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,394,344
<SHARES-COMMON-STOCK> 1,247,637
<SHARES-COMMON-PRIOR> 2,416,466
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,641,356)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 130,244
<NET-ASSETS> 11,833,232
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 754,614
<OTHER-INCOME> 0
<EXPENSES-NET> 103,018
<NET-INVESTMENT-INCOME> 651,596
<REALIZED-GAINS-CURRENT> 141,607
<APPREC-INCREASE-CURRENT> 338,273
<NET-CHANGE-FROM-OPS> 1,131,476
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (651,596)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 232,670
<NUMBER-OF-SHARES-REDEEMED> 1,458,944
<SHARES-REINVESTED> 57,445
<NET-CHANGE-IN-ASSETS> (10,295,531)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,782,963)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,422
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 203,428
<AVERAGE-NET-ASSETS> 12,834,063
<PER-SHARE-NAV-BEGIN> 9.18
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .34
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.52
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Money Market Series - Institutional Shares Annual Report for the fiscal year
ended 12/31/97 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME>SCUDDER MONEY MARKET SERIES - Institutional Shares
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,039,436,048
<INVESTMENTS-AT-VALUE> 1,039,436,048
<RECEIVABLES> 6,514,657
<ASSETS-OTHER> 604,036
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,046,554,741
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,026,026
<TOTAL-LIABILITIES> 5,026,026
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,041,528,715
<SHARES-COMMON-STOCK> 337,824,146
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,041,528,715
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 31,972,083
<OTHER-INCOME> 0
<EXPENSES-NET> 2,349,942
<NET-INVESTMENT-INCOME> 29,622,141
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 29,622,141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,101,246)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 697,521,385
<NUMBER-OF-SHARES-REDEEMED> (361,494,193)
<SHARES-REINVESTED> 1,796,954
<NET-CHANGE-IN-ASSETS> 610,230,440
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,676,376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 363,262,867
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
