Filed electronically with the Securities and Exchange Commission on
March 2, 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. 26
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 22
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) 295-2567
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),
on ____________ pursuant to paragraph (b),
60 days after filing pursuant to paragraph (a)(1),
X on May 1, 1998 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
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 HIGHLIGHTS
Financial DISTRIBUTION AND PERFORMANCE
Information INFORMATION
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN SCUDDER PREMIUM MONEY
Registrant MARKET SHARES OF THE FUND?
ADDITIONAL INFORMATION ABOUT
POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of FINANCIAL HIGHLIGHTS
the 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 DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION
SHAREHOLDER BENEFITS-SAILT-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
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 ORGANIZATION OF THE FUNDS
Information and
History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES
Policies PORTFOLIO TRANSACTIONS-Brokerage
Commissions, Portfolio Turnover
14. Management of the INVESTMENT ADVISER
Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons DIRECTORS AND OFFICERS
and Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts,
Other Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock and ORGANIZATION OF THE FUNDS
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY
Securities Being THE FUND-Dividend and Capital
Offered 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 FINANCIAL STATEMENTS
Statements
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 HIGHLIGHTS
Financial DISTRIBUTION AND PERFORMANCE
Information INFORMATION
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN MANAGED SHARES?
Registrant ADDITIONAL INFORMATION ABOUT
POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of FINANCIAL HIGHLIGHTS
the 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 DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION
SHAREHOLDER BENEFITS-SAILT-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
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 ORGANIZATION OF THE FUNDS
Information and
History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES
Policies PORTFOLIO TRANSACTIONS-Brokerage
Commissions, Portfolio Turnover
14. Management of the INVESTMENT ADVISER
Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons DIRECTORS AND OFFICERS
and Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts,
Other Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock and ORGANIZATION OF THE FUNDS
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY
Securities Being THE FUND-Dividend and Capital
Offered 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 FINANCIAL STATEMENTS
Statements
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 HIGHLIGHTS
Financial DISTRIBUTION AND PERFORMANCE
Information INFORMATION
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN INSTITUTIONAL SHARES?
Registrant ADDITIONAL INFORMATION ABOUT
POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of FINANCIAL HIGHLIGHTS
the 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 DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital
Securities 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
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 ORGANIZATION OF THE FUNDS
Information and
History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES
Policies PORTFOLIO TRANSACTIONS-Brokerage
Commissions, Portfolio Turnover
14. Management of the INVESTMENT ADVISER
Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons DIRECTORS AND OFFICERS
and Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts,
Other Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock and ORGANIZATION OF THE FUNDS
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY
Securities Being THE FUND-Dividend and Capital
Offered 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 FINANCIAL STATEMENTS
Statements
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 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 3.
- ------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ------------------------------
[PRINTED WITH SOY INK LOGO] [RECYCLE LOGO] Printed on recycled paper
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>
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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, 1997.
Investment management fee (after waiver) ____%***
12b-1 fees NONE
Other expenses ____%
-----
Total operating expenses (after waiver) ____%***
=====
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
------ -------
$ $
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 June 30, 1998 the Adviser has agreed to waive a portion of its
investment management fee. If the Adviser had not agreed to waive a
portion of the investment management fee, the investment management fee
would be ____% and it is estimated that the total operating expenses for
the Shares would be ____% for the initial fiscal period.
- --------------------------------------------------------------------------------
- --
2
<PAGE>
- ---------------------------------------
A message from the President
- ---------------------------------------
[PHOTO]
Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.
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 45 no-load mutual fund portfolios. 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 the professional
service representatives of Scudder Investor Relations, easy exchange among
funds, shareholder reports, informative newsletters and the walk-in convenience
of Scudder Investor Centers.
/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 ......................................... 4
Why invest in Scudder Premium Money
Market Shares of the Fund? .............................................. 5
Additional information about policies
and investments ......................................................... 6
Distribution and performance information ................................... 8
Fund organization .......................................................... 9
Transaction information .................................................... 11
Shareholder benefits ....................................................... 15
Purchases .................................................................. 17
Exchanges and redemptions .................................................. 18
Directors and Officers ..................................................... 20
Investment products and services ........................................... 21
How to contact Scudder ..................................................... 22
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3
<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
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4
<PAGE>
early withdrawal penalties that vary with market conditions and the remaining
maturity of the obligations.
Generally, the commercial paper purchased by the Fund consists of direct
obligations of domestic corporate issuers, including bank holding companies,
whose obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's"), "A-1" or higher by Standard & Poor's
("S&P") or "F-1" by Fitch Investors Service, Inc. ("Fitch"), (ii) issued or
guaranteed as to principal and interest by issuers having an existing debt
security rating of "Aa" or higher by Moody's or "AA" or higher by S&P or Fitch,
or (iii) securities that, if not rated, are of comparable investment quality as
determined by the Adviser in accordance with procedures adopted by the Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such as notes,
bonds and debentures that are rated "Aa" or higher by Moody's or "AA" or higher
by S&P or Fitch, and variable amount master demand notes. A variable amount
master demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder. Its amount
may from time to time be increased by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer and is payable on demand. The rate of
interest varies pursuant to an agreed-upon formula. Generally, master demand
notes are not rated by a rating agency. However, the Fund may invest in a master
demand note that, if not rated, is in the opinion of the Adviser of investment
quality comparable to rated securities in which the Fund may invest.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's Board of
Directors. Should an issue of securities cease to be rated or if its rating is
reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may invest in variable or floating rate obligations,
obligations backed by bank letters of credit, when-issued securities and
securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
- ---------------------------------------
Why invest in Scudder Premium
Money Market Shares of the Fund?
- ---------------------------------------
Scudder Premium Money Market Shares of the Fund may be appropriate for investors
desiring monthly income, yet who are also concerned about stability of their
investment principal. A money market fund may be a good choice for investors who
want their assets to grow in a stable investment, investors who want to keep
their "nest egg" safe and handy, or those who are simply looking to "park" their
investment capital for a limited period.
Scudder Premium Money Market Shares are designed for investors who have the
resources to maintain higher account balances and, in return, may be rewarded
with above-average money fund income. The minimum initial investment in Shares
of the Fund is $25,000 per account. By requiring larger account balances, the
Fund strives to reduce the impact of fixed recordkeeping and other costs on
overall expenses of this class of shares, leading to a potentially higher return
for shareholders.
The Fund also offers all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, monthly
income, and ready access to their money. A shareholder can
--
5
<PAGE>
purchase or redeem shares on a daily basis, in a variety of ways.
- ---------------------------------------
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 listing of
investment restrictions is contained under "Investment Restrictions" in the
Fund's 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, although the Fund may engage up to 5% of
total assets in reverse repurchase agreements or dollar rolls.
As a matter of fundamental policy, the Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities, 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.
The high quality securities in which the Fund invests are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest categories by at least two rating agencies
(or one, if only one rating agency has rated the security) and which do not
qualify as first tier securities are second tier securities. The Adviser may
determine, pursuant to procedures approved by the Board of Directors, that an
unrated security is equivalent to a first tier or second tier security. The Fund
will not invest more than 5% of its total assets in second tier securities or
more than 1% of its total assets in second tier securities of a single issuer.
Obligations of U.S. Government agencies and instrumentalities
Obligations of U.S. Government agencies and instrumentalities are debt
securities issued or guaranteed by U.S. Government-sponsored enterprises and
federal agencies. Some of such obligations are supported by (a) the full faith
and credit of the U.S. Treasury (such as Government National Mortgage
Association participation certificates), (b) the limited authority of the issuer
to borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Bank), (c) the authority of the U.S. Government to purchase certain obligations
of the issuer (such as securities of the Federal National Mortgage Association)
or (d) only the credit of the issuer. In the case of obligations not backed by
the full faith and credit of the U.S. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, which agency may be privately owned. The Fund will invest in
obligations of U.S. Government agencies and instrumentalities only when the
Adviser is satisfied that the credit risk with respect to the issuer is minimal.
Floating and variable rate instruments
Certain of the obligations that the Fund may purchase have a floating or
variable rate of interest. Such obligations bear interest at rates that are not
fixed, but which vary with changes in specified market rates or indices, such as
the Prime Rate, and at specified intervals.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase
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6
<PAGE>
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.
Letters of credit
Municipal obligations, including certificates of participation, commercial paper
and other short-term obligations may be backed by an irrevocable letter of
credit of a bank which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks which, in the opinion
of the Adviser, are of investment quality comparable to other permitted
investments of the Fund may be used for letter of credit backed investments.
Securities with put rights
The Fund may enter into put transactions with respect to obligations held in
their portfolios with broker/dealers pursuant to a rule under the Investment
Company Act of 1940 (the "1940 Act"), and with commercial banks.
The right of the Fund to exercise a put is unconditional and unqualified. A put
is not transferable by the Fund, although the Fund may sell the underlying
securities to a third party at any time. If necessary and advisable, the Fund
may pay for certain puts either separately in cash or by paying a higher price
for portfolio securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities). The Fund
expects, however, that puts generally will be available without the payment of
any direct or indirect consideration.
The Fund may enter into puts only with banks or broker/dealers that, in the
opinion of the Adviser, present minimal credit risks. The ability of the Fund to
exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
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7
<PAGE>
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 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
- --
8
<PAGE>
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. (the
"Corporation"), an open-end management investment company registered under the
1940 Act. The Corporation was formed in June 1982 as a Maryland corporation.
The Corporation's activities are supervised by its Board of Directors. The Board
of Directors, under applicable laws of the State of Maryland, in addition to
supervising the actions of the Corporation's Adviser and Distributor, as set
forth below, decides upon matters of general policy.
The Corporation has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds.
Under the Plan, shares of each class represent an equal pro rata interest in a
particular Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of
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9
<PAGE>
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, Zurich owns approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
Pursuant to its Investment Advisory Agreement (the "Agreement") with the
Corporation on behalf of the Fund, the Adviser regularly provides the Fund with
investment research, advice and supervision and continuously furnishes an
investment program for the Fund, consistent with the Fund's investment
objectives and policies. The Agreement further provides that the Adviser will
pay the compensation and certain expenses of all officers and certain employees
of
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10
<PAGE>
the Corporation and make available to the Fund such of the Adviser's directors,
officers and employees as are reasonably necessary for the Fund's operations or
as may be duly elected officers or directors of the Corporation. Under the
Agreement, the Adviser pays the Fund's office rent and will provide investment
advisory research and statistical facilities and all clerical services relating
to research, statistical and investment work. The Adviser, including the
Adviser's employees who serve the Fund, may render investment advice, management
and other services to others.
The Fund will bear all expenses not specifically assumed by the Adviser under
the terms of the Agreement, including, among others, the fee payable to the
Adviser as investment adviser, the fees of the Directors who are not "affiliated
persons" (as defined in the 1940 Act) of the Adviser, the expenses of all
Directors and the fees and out-of-pocket expenses of the Corporation's Custodian
and its Transfer Agent. For a more complete description of the expenses to be
borne by the Fund, see "Investment Adviser" and "Distributor" in the Statement
of Additional Information.
The Adviser receives a management fee at an annual rate equal to 0.25% of the
average daily net assets of the Fund. Management fees are computed daily and
paid monthly. The Adviser has agreed to waive 0.05% of its management fee until
June 30, 1998.
Scudder Kemper Investments, Inc. is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts, 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the
Corporation's principal underwriter. Scudder Investor Services, Inc. confirms,
as agent, all purchases of shares of the Fund. Scudder Investor Relations is a
telephone information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
- ---------------------------------------
Transaction information
- ---------------------------------------
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone or by "Write-A-Check" prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
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11
<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.
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 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.
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.
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12
<PAGE>
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 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
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13
<PAGE>
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 reserve the right to reject
purchases of shares (including exchanges) for any reason.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and 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.
Minimum balances
Initial minimum investment in the Fund is $25,000. Shareholders should maintain
a share balance worth at least $15,000 (which minimum amount may be changed by
the Board of Directors).
Shareholders whose account balance falls below $15,000 for at least 30 days will
be given 60 days' notice to bring the account back up to $15,000 or more. Where
a reduction in value has occurred due to a redemption or exchange out of the
account and the account balance is not increased in 60 days, Scudder reserves
the right to redeem all shares and close the account and send the proceeds to
the shareholder's address of record. Reductions in value that result solely from
market activity will not trigger an involuntary redemption.
Please refer to "Exchanges and Redemptions-- Other Information" in the Fund's
Statement of Additional Information for more information.
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14
<PAGE>
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 who each play an
important role in the Fund's management process. Team members work together to
develop investment strategies and select securities for the Fund's portfolio.
They are supported by 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. Frank joined Zurich Kemper's Fixed Income
Department in 1973 as its Money Market Specialist. He has been responsible for
the trading and portfolio management of Zurich Kemper's money market fund since
its initial offering in 1974. John W. Stuebe, Portfolio Manager, joined Zurich
Kemper in 1979 as a Fixed Income Trader for Money Market Securities. He is
currently a Specialist and Trader for the Fund Manager's 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 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 pure no-load Scudder
- --
15
<PAGE>
Funds with ongoing portfolio monitoring and individualized service, for an
annual fee of generally 1% or less of assets (with a $1,000 minimum). 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.
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.
- --
16
<PAGE>
- ---------------------------------------
Purchases
- ---------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
<S> <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.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.
<S> <C> <C>
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
Scudder Funds." complete 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 aregular basis 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>
--
17
<PAGE>
- ---------------------------------------
Exchanges and redemptions
- ---------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
<S> <C> <C>
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).
o By Mail Print or type your instructions and include:
or Fax the name of the Fund and the account number you are exchanging from;
your name(s) and address as they appear on your account;
the dollar amount or number of shares you wish to exchange;
the name of the Fund you are exchanging into;
your signature(s) as it appears on your account; and
a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
- ------------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
o By "Write- You may redeem shares by writing checks against your account balance as
A-Check 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>
- --
18
<PAGE>
- ---------------------------------------
Scudder tax-advantaged
retirement plans
- ---------------------------------------
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples 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.
--
19
<PAGE>
- --------------------------------------------------------------------------------
Directors and Officers
- --------------------------------------------------------------------------------
<TO BE UPDATED BY SCUDDER>
- --
20
<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 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 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 foreign stock exchanges.
--
21
<PAGE>
- --------------------------------------------------------------------------------
How to contact Scudder
- --------------------------------------------------------------------------------
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be found
in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.
- --
22
<PAGE>
Scudder Fund, Inc. is an open-end management investment company comprised of
three diversified money market portfolios: Scudder Money Market Series, Scudder
Tax Free Money Market Series and Scudder Government Money Market Series (the
"Funds"). Each Fund offers an Managed Shares class of shares (the "Managed
Shares"), described herein.
This prospectus sets forth concisely the information about the Managed
Shares of Scudder Money Market Series, Scudder Tax Free Money Market Series and
Scudder Government Money Market Series, that a prospective investor should know
before investing. Please retain it for future reference.
Shares offered by the Funds are not insured or guaranteed by the U.S.
Government. The Funds seek to maintain a constant net asset value of $1.00 per
share, but there can be no assurance that a stable net asset value will be
maintained.
If you require more detailed information, a Statement of Additional Information
dated 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 1-800-854-8525. The Statement, which is incorporated by
reference into this prospectus, has been filed with the Securities and Exchange
Commission and is available along with other related materials on the SEC's
Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 6.
- ---------------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ---------------------------------------
new [PRINTED WITH SOY INK LOGO] [RECYCLE LOGO] Printed on recycled paper
code
here
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.
Scudder
Scudder Scudder Government
Money Tax Free Money
Market Money Market Market
Series Series Series
------ ------ ------
Sales commissions to purchase shares
(sales load) NONE NONE NONE
Commissions to reinvest dividends NONE NONE NONE
Redemption fees NONE** NONE** NONE**
Fees to exchange shares NONE NONE NONE
2) Annual operating expenses: Expenses paid by each Fund before it
distributes its net investment income, expressed as a percentage of the
average daily net assets for the fiscal year ended December 31, 1997.
Investment management fee (after waiver) % % %
12b-1 fees NONE NONE NONE
Other expenses % % %
-- -- --
Total operating expenses (after waiver) % % %
== == ==
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 $ $ $
Three Years $ $ $
Five Years $ $ $
Ten Years $ $ $
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."
- --------------------------------------------------------------------------------
- --
2
<PAGE>
- ---------------------------------------
Financial highlights
- ---------------------------------------
Scudder Money Market Series
- --------------------------------------------------------------------------------
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information derived
from the audited financial statements.*
If you would like more detailed information concerning Fund performance, audited
financial statements are available in the Annual Report dated December 31, 1996
and may be obtained without charge by writing or calling Scudder Investor
Services, Inc.
[TABLE TO BE UPDATED]
- --------------------------------------------------------------------------------
--
3
<PAGE>
- ---------------------------------------
Financial highlights
- ---------------------------------------
Scudder Tax Free Money Market Series
- --------------------------------------------------------------------------------
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information derived
from the audited financial statements. *
If you would like more detailed information concerning Fund performance, audited
financial statements are available in the Annual Report dated December 31, 1996
and may be obtained without charge by writing or calling Scudder Investor
Services, Inc.
[TABLE TO BE UPDATED]
- --------------------------------------------------------------------------------
- --
4
<PAGE>
- ---------------------------------------
Financial highlights
- ---------------------------------------
Scudder Government Money Market Series
- --------------------------------------------------------------------------------
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each year and other performance information derived
from the audited financial statements.*
If you would like more detailed information concerning Fund performance, audited
financial statements are available in the Annual Report dated December 31, 1996
and may be obtained without charge by writing or calling Scudder Investor
Services, Inc.
[TABLE TO BE UPDATED]
- --------------------------------------------------------------------------------
--
5
<PAGE>
- ---------------------------------------
A message from the President
- ---------------------------------------
[PHOTO OMITTED]
Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.
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 45 no-load mutual fund portfolios. 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 the professional
service representatives of Scudder Investor Relations, easy exchange among
funds, shareholder reports, informative newsletters and the walk-in convenience
of Scudder Investor Centers.
The Scudder Family of Funds includes those Funds, or classes of Funds, advised
by Scudder Kemper Investments, Inc., that 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
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 ...................................... 9
Scudder Money Market Series ............................................. 9
Scudder Tax Free Money Market Series .................................... 10
Scudder Government Money Market Series .................................. 11
Why invest in Managed Shares? ........................................... 12
Additional information about policies
and investments ....................................................... 12
Distribution and performance information ................................ 15
Fund organization ....................................................... 17
Transaction information ................................................. 19
Shareholder benefits .................................................... 23
Purchases ............................................................... 26
Exchanges and redemptions ............................................... 28
Directors and Officers .................................................. 32
Investment products and services ........................................ 26
How to contact Scudder .................................................. 27
- --
6
<PAGE>
- ---------------------------------------
Investment objectives and policies
- ---------------------------------------
Set forth below is a description of the investment objectives and policies of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series (the "Funds"). The Funds seek to provide
investors with as high a level of current income as is consistent with its
investment policies and with preservation of capital and liquidity. In addition,
Scudder Tax Free Money Market Series seeks to provide current income that is
exempt from federal income taxes.
Each Fund will maintain a dollar-weighted average maturity of 90 days or less in
an effort to maintain a constant net asset value of $1.00 per share, but there
is no assurance that each will be able to do so.
Amendments have been 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, 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
--
7
<PAGE>
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 conditions and the
remaining maturity of the obligations.
Generally, the commercial paper purchased by the Fund consists of direct
obligations of domestic corporate issuers, including bank holding companies,
which obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's"), "A-1" or higher by Standard & Poor's
("S&P") or "F-1" by Fitch Investors Service, Inc. ("Fitch"), (ii) issued or
guaranteed as to principal and interest by issuers having an existing debt
security rating of "Aa" or higher by Moody's or "AA" or higher by S&P or Fitch,
or (iii) securities that, if not rated, are of comparable investment quality as
determined by the Adviser in accordance with procedures adopted by the Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such as notes,
bonds and debentures that are rated "Aa" or higher by Moody's or "AA" or higher
by S&P or Fitch, and variable amount master demand notes. A variable amount
master demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder. Its amount
may from time to time be increased by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer and is payable on demand. The rate of
interest varies pursuant to an agreed-upon formula. Generally, master demand
notes are not rated by a rating agency. However, the Fund may invest in a master
demand note that, if not rated, is in the opinion of the Adviser of an
investment quality comparable to rated securities in which the Fund may invest.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's Board of
Directors. Should an issue of securities cease to be rated or if its rating is
reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may invest in variable or floating rate obligations,
obligations backed by bank letters of credit, when-issued securities and
securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
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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
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8
<PAGE>
municipal obligations that are related in such a way that an economic, business
or political development or change affecting one such obligation would also
affect the other obligations. For example, certain municipal obligations accrue
interest that is paid from revenues of similar type projects; other municipal
obligations have issuers located in the same state.
The Fund may elect, pending the investment of proceeds of sales of shares or
proceeds from sales of portfolio securities or in anticipation of redemptions,
or to maintain a "defensive" posture when, in the opinion of the Adviser, it is
advisable to do so because of market conditions, to invest temporarily up to 20%
of the current value of its total assets in cash reserves or taxable securities.
Under ordinary market conditions, the Fund will maintain at least 80% of the
value of its total assets in obligations that are exempt from federal income tax
and are not subject to the alternative minimum tax. The foregoing constitutes a
fundamental policy that cannot be changed without the approval of a majority of
the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater number of
investors, issuers and market makers than the market for municipal obligations.
The more limited marketability of municipal obligations may make it difficult in
certain circumstances to dispose of large investments advantageously. In
addition, certain municipal obligations might lose tax-exempt status in the
event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's Board of
Directors. Should an issue of securities cease to be rated or if its rating is
reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
- ---------------------------------------
Scudder Government
Money Market Series
- ---------------------------------------
Scudder Government Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Fund invests exclusively in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities that have remaining maturities of not more than 397 calendar
days and certain repurchase agreements.
In addition, the Fund may invest in variable or floating rate obligations,
when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Fund's Statement of Additional Information.
- ---------------------------------------
Why invest in Managed Shares?
- ---------------------------------------
The Managed Shares class of each Fund is designed for investors who have the
resources and ability to maintain higher account balances and, in return, may be
rewarded with above average money fund income. The minimum initial investment in
each Fund's Managed Shares class is $100,000 per account. By requiring larger
account balances, each Fund strives to reduce the impact of fixed recordkeeping
and other costs on overall expenses of this class of shares, leading to
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9
<PAGE>
potentially higher returns for Managed Shares shareholders.
The Funds also offer all of the traditional benefits of a money market mutual
fund. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, and easy
access to their money. A shareholder can purchase or redeem shares on a daily
basis, in a variety of ways.
- ---------------------------------------
Additional information about
policies and investments
- ---------------------------------------
Investment restrictions
The Funds have certain investment restrictions which are designed to reduce the
Funds' 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 Trustees. A complete listing of
investment restrictions is contained under "Investment Restrictions" in the
Funds' Statement of Additional Information.
As a matter of fundamental policy, the Funds may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy, the
Funds may not borrow money in an amount greater than 5% of total assets, except
for temporary or emergency purposes, although the Funds may engage up to 5% of
total assets in reverse repurchase agreements or dollar rolls.
As a matter of fundamental policy, the Funds may not make loans except through
the lending of portfolio securities, the purchase of debt securities, interests
in indebtedness or through repurchase agreements. The Funds have adopted a
non-fundamental policy restricting the lending of portfolio securities to no
more than 5% of total assets.
The high quality securities in which the Funds invest are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest categories by at least two rating agencies
(or one, if only one rating agency has rated the security) and which do not
qualify as first tier securities are second tier securities. The Adviser may
determine, pursuant to procedures approved by the Directors, that an unrated
security is equivalent to a first tier or second tier security. Neither Scudder
Money Market Series nor Scudder Government Money Market Series will invest more
than 5% of its total assets in second tier securities or more than 1% of its
total assets in second tier securities of a single issuer. Scudder Tax Free
Money Market Series is able to invest without limit in second tier securities.
Obligations of U.S. Government agencies and instrumentalities
Obligations of U.S. Government agencies and instrumentalities are debt
securities issued or guaranteed by U.S. Government-sponsored enterprises and
federal agencies. Some of such obligations are supported by (a) the full faith
and credit of the U.S. Treasury (such as Government National Mortgage
Association participation certificates), (b) the limited authority of the issuer
to borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Bank), (c) the authority of the U.S. Government to purchase certain obligations
of the issuer (such as securities of the Federal National Mortgage Association)
or (d) only the credit of the issuer. In the case of obligations not backed by
the full faith and credit of the U.S. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, which agency may be privately owned. The Funds will invest in
obligations of U.S. Government agencies and instrumentalities only when the
Adviser is satisfied that the credit risk with respect to the issuer is minimal.
- --
10
<PAGE>
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.
Municipal obligations
Municipal obligations, which are debt obligations issued by or on behalf of
states, cities, municipalities and other public authorities, and may be general
obligation, revenue, or industrial development bonds, include municipal bonds,
municipal notes and municipal commercial paper.
Scudder Tax Free Money Market Series may invest in excess of 25% of its assets
in industrial development bonds subject to the Fund's fundamental investment
policy requiring that it maintain at least 80% of the value of its total assets
in obligations that are exempt from federal income tax and are not subject to
the alternative minimum tax. For purposes of the Fund's fundamental investment
limitation regarding concentration of investments in any one industry,
industrial development bonds will be considered representative of the industry
for which purpose that bond was issued.
Scudder Money Market Series' and Scudder Tax Free Money Market Series'
investments in municipal bonds are limited to bonds that are rated at the date
of purchase "Aa" or higher by Moody's or "AA" or higher by S&P or Fitch.
The Funds' investments in municipal notes will be limited to notes that are
rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in the
case of an issue having a variable rate demand feature) by Moody's, "SP-1" or
"SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of 270
days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. The Funds may invest
in municipal commercial paper that is rated at the date of purchase "P-1" or
"P-2" by Moody's, "A-1" or "A-2" or "A-1+" by S&P or "F-1" by Fitch. If a
municipal obligation is not rated, the Funds may purchase the obligation if, in
the opinion of the Adviser, it is of investment quality comparable to other
rated investments that are permitted in the Funds.
Letters of credit
Municipal obligations, including certificates of participation, commercial paper
and other short-term obligations may be backed by an irrevocable letter of
credit of a bank which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks which, in the opinion
of the Adviser, are of investment quality comparable to other permitted
investments of the Funds may be used for letter of credit backed investments.
Securities with put rights
The Funds may enter into put transactions with respect to obligations held in
their portfolios with broker/dealers pursuant to a rule under the Investment
Company Act of 1940, (the "1940 Act") and with commercial banks.
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11
<PAGE>
The right of the Funds to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although the Fund may sell the underlying
securities to a third party at any time. If necessary and advisable, any Fund
may pay for certain puts either separately in cash or by paying a higher price
for portfolio securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities). The Funds
expect, however, that puts generally will be available without the payment of
any direct or indirect consideration.
The Funds may enter into puts only with banks or broker/dealers that, in the
opinion of the Adviser, present minimal credit risks. The ability of the Funds
to exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
The Funds intend to enter into puts solely to maintain liquidity and do not
intend to exercise their rights thereunder for trading purposes. The puts will
only be for periods substantially less than the life of the underlying security.
The acquisition of a put will not affect the valuation by the Fund of the
underlying security. The actual put will be valued at zero in determining net
asset value of the Funds. Where a Fund pays directly or indirectly for a put,
its cost will be reflected as an unrealized loss for the period during which the
put is held by the Fund and will be reflected in realized gain or loss when the
put is exercised or expires. If the value of the underlying security increases,
the potential for unrealized or realized gain is reduced by the cost of the put.
The maturity of a municipal obligation purchased by a Fund will not be
considered shortened by any put to which such obligation is subject.
Third party puts
The Funds may also purchase long-term fixed rate bonds that have been coupled
with an option granted by a third party financial institution allowing a Fund at
specified intervals, not exceeding 397 calendar days, to tender (or "put") the
bonds to the institution and receive the face value thereof (plus accrued
interest). These third party puts are available in several different forms, may
be represented by custodial receipts or trust certificates and may be combined
with other features such as interest rate swaps. A Fund receives a short-term
rate of interest (which is periodically reset), and the interest rate
differential between that rate and the fixed rate on the bond is retained by the
financial institution. The financial institution granting the option does not
provide credit enhancement, and in the event that there is a default in the
payment of principal or interest, or downgrading of a bond to below investment
grade, or a loss of the bond's tax-exempt status, the put option will terminate
automatically, the risk to a Fund will be that of holding such a long-term bond
and the dollar-weighted average maturity of the Fund would be adversely
affected.
When-issued securities
Each Fund may purchase securities on a when-issued basis, in which case delivery
and payment normally take place within 45 days after the date of the commitment
to purchase. The Funds will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date if it is deemed advisable. When-issued
securities are subject to market fluctuation and no income accrues to the
purchaser prior to issuance. The purchase price and the interest rate that will
be received on debt securities are fixed at the time the purchaser enters into
the commitment.
- --
12
<PAGE>
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. 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 Managed Shares of a Fund may
be included in advertisements, sales literature or shareholder reports.
Performance information is computed separately for each class of each Fund in
accordance with formulae prescribed by the Securities and Exchange Commission.
Performance figures will vary in part because of the different expense
structures of each Fund's different classes of shares. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "yield" of a class of a Fund refers
to income generated by an investment in that class over a specified seven-day
period. Yield is expressed as an annualized percentage. The "effective yield" of
a
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13
<PAGE>
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. (the "Corporation"), an
open-end management investment company registered under the 1940 Act. The
Corporation was formed in June 1982 as a Maryland corporation.
The Corporation's activities are supervised by its Board of Directors. The Board
of Directors, under applicable laws of the State of Maryland, in addition to
supervising the actions of the Adviser and Distributor, as set forth below,
decides upon matters of general policy.
The Corporation has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds. The plan was approved by the Corporation's Board of
Directors at a meeting on April 24, 1997.
Under the Plan, shares of each class represent an equal pro rata interest in a
particular Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of shares shall bear its own "class
expenses;" (3) each class shall have exclusive voting rights on any matter
submitted to shareholders that relates to its administrative services,
shareholder services, or distribution arrangements; (4) each class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class; (5) each
class may have separate and distinct exchange privileges; (6) each class may
have different conversion features, and (7) each class may have separate account
size requirements. Expenses currently designated as "Class Expenses" by the
Corporation's Board of Directors under the Plan include, for example, transfer
agent fees attributable to a specific class, and certain securities registration
fees.
In addition to the Managed Shares class offered herein, each of Scudder Tax Free
Money Market and Scudder Government Money Market Series offers another class of
shares, Institutional Shares, and Scudder Money Market Series offers two other
classes of shares, Institutional Shares
- --
14
<PAGE>
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.
Pursuant to its Investment Advisory Agreement (the "Agreement") with the
Corporation on behalf of each Fund, the Adviser regularly provides each Fund
with investment research, advice and supervision and continuously furnishes an
investment program for each Fund consistent with its investment objectives and
policies. The Agreement further provides that the Adviser will pay the
compensation and certain expenses of all officers and certain employees of the
Corporation and make available to each Fund such of the Adviser's directors,
officers and employees as are reasonably necessary for the Fund's operations or
as may be duly elected officers or directors of the Corporation. Under the
Agreement, the Adviser pays each Fund's office rent and will provide investment
advisory research and statistical facilities and all clerical services relating
to research, statistical and investment work. The Adviser, including the
Adviser's employees who serve the Funds, may render investment advice,
management and other services to others.
Each Fund will bear all expenses not specifically assumed by the Adviser under
the terms of the Agreements, including, among others, the fee payable to the
Adviser as investment adviser, the fees of the Directors who are not "affiliated
persons" (as defined in the 1940 Act) of the Adviser, the expenses of all
Directors and the fees
--
15
<PAGE>
and out-of-pocket expenses of the Corporation's Custodian and its Transfer
Agent. For a more complete description of the expenses to be borne by each Fund,
see "Investment Adviser" and "Distributor" in the Statement of Additional
Information.
The Adviser received a management fee from each of Scudder Money Market Series,
Scudder Tax Free Money Market Series and Scudder Government Money Market Series
of 0.40% for the first $1.5 billion of each Fund's average daily net assets and
0.35% for all assets thereafter, for the fiscal year ended December 31, 1997.
The Adviser receives an annual fee of 0.25% of each Fund's average daily net
assets. Until December 31, 1997, the Adviser has agreed to a management fee
waiver of 0.05%, 0.10% and 0.15% for the Scudder Money Market Series, Scudder
Tax Free Money Market Series and Scudder Government Money Market Series,
respectively. Management fees are computed daily and paid monthly.
Scudder Kemper Investments, Inc., is located at
Two International Place, Boston, Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Funds.
Each Fund, on behalf of its Managed Shares class, may enter into arrangements
with banks and other institutions which are omnibus account holders of shares of
the Managed Shares class providing for the payment of fees to the institution
for servicing and maintaining accounts of beneficial owners of the omnibus
account. Such payments are expenses of the respective Managed Shares class only.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the
Corporation's principal underwriter. Scudder Investor Services, Inc. confirms,
as agent, all purchases of shares of the Funds.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining each Fund's daily net asset value per share and maintaining the
general accounting records of the Funds.
Custodian
State Street Bank and Trust Company is the Funds' custodian.
- ---------------------------------------
Transaction information
- ---------------------------------------
Purchasing shares
Purchases are executed at the next calculated net asset value per share after a
Fund's transfer agent receives the purchase request in good order. Purchases are
made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
a Fund may hold redemption proceeds until the purchase check has cleared. If you
purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone or by "Write-A-Check" prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-854-8525 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
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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 1-800-854-8525 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By "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 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.
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 1-800-225-5163 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.
--
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
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 1-800-854-8525.
By "Write-A-Check." You may redeem shares by writing checks against your account
balance for at least $1,000. Your Fund investments will continue to earn
dividends until your check is presented to the Fund for payment.
Checks will be returned by the Fund's transfer agent if there are insufficient
shares to meet the withdrawal amount. You should not attempt to close an account
by check because the exact balance at the time the check clears will not be
known when the check is written.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Funds use procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If a Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
- --
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 1-800-854-8525.
The Funds will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
The Corporation and Scudder Financial Intermediary Services Group each reserve
the right to reject purchases of shares (including exchanges) for any reason.
Tax identification number
Be sure to complete the Tax Identification Number section of 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 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.
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' 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. Scudder 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 Zurich Kemper's Fixed Income
Department in 1973 as its Money Market Specialist. He has been responsible for
the trading and portfolio management of Zurich Kemper's money market fund since
its initial offering in 1974. John W. Stuebe, Portfolio Manager, joined Zurich
Kemper in 1979 as a Fixed Income Trader for Money Market Securities. He is
currently a Specialist and Trader for the Fund Manager's 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 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
- --
20
<PAGE>
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 pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). 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.
--
21
<PAGE>
- ---------------------------------------
Purchases
- ---------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
<S> <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.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.
<S> <C> <C>
Make checks o By Mail Send a check with a Scudder investment slip, or with a
payable to "The instruction including your account number and the
Scudder Funds." complete 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 aregular basis 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>
- ---------------------------------------
Exchanges and redemptions
- ---------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
<S> <C> <C>
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).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds The Sudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA 02107-2291 Braintree, MA 02184
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
o By "Write- You may redeem shares by writing checks against your account balance as often
A-Check" as you like for at least $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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23
<PAGE>
- ---------------------------------------
Scudder tax-advantaged
retirement plans
- ---------------------------------------
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples 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.
- --
24
<PAGE>
- ---------------------------------------
Directors and Officers
- ---------------------------------------
[TO BE UPDATED]
--
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
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. +++ +++ 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>
- --------------------------------------------------------------------------------
How to contact Scudder
- --------------------------------------------------------------------------------
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to
obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be found
in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
--
27
<PAGE>
Scudder Fund, Inc. is an open-end management investment company comprised of
three diversified money market portfolios: Scudder Money Market Series, Scudder
Tax Free Money Market Series and Scudder Government Money Market Series (the
"Funds"). Each Fund offers an institutional class of shares (the "Institutional
Shares"), described herein.
This prospectus sets forth concisely the information about the Institutional
Shares of Scudder Money Market Series, Scudder Tax Free Money Market Series and
Scudder Government Money Market Series, that a prospective investor should know
before investing. Please retain it for future reference.
Shares offered by the Funds are not insured or guaranteed by the U.S.
Government. The Funds seek to maintain a constant net asset value of $1.00 per
share, but there can be no assurance that a stable net asset value will be
maintained.
If you require more detailed information, a Statement of Additional Information
dated 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 1-800-854-8525. The Statement, which is incorporated by
reference into this prospectus, has been filed with the Securities and Exchange
Commission and is available along with other related materials on the SEC's
Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 3.
- ----------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ----------------------------
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SCUDDER [LOGO]
Scudder
Institutional Shares
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o Scudder Money Market Series
o Scudder Tax Free
Money Market Series
o Scudder Government
Money Market Series
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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.
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Expense information
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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 Tax Free Scudder Government
Money Market Money Market Money Market
Series Series Series
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<S> <C> <C> <C>
Sales commissions to purchase shares (sales load) NONE NONE NONE
Commissions to reinvest dividends NONE NONE NONE
Redemption fees NONE NONE NONE
Fees to exchange shares** NONE NONE NONE
2) Annual operating expenses: Estimated expenses paid by each Fund before it
distributes its net investment income, expressed as a percentage of the
average daily net assets for the initial fiscal period ended December 31,
1997.
Investment management fee (after waiver) 0.20%*** 0.15%*** 0.10%***
12b-1 fees NONE NONE NONE
Other expenses 0.06% 0.14% 0.21%
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Total operating expenses (after waiver) 0.26%*** 0.29%*** 0.31%***
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Example
Based on the estimated level of total operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Fund before it distributes its
net investment income to shareholders. (As noted above, the Funds have no
redemption fees of any kind.)
One Year $ 3 $ 3 $ 3
Three Years $ 8 $ 9 $10
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 June 30, 1998, the Adviser has agreed to waive a portion of its
investment management fee. If the Adviser had not agreed to waive a
portion of the investment management fee, the investment management fee
for the Institutional Shares class of each Fund would be 0.25%, and it is
estimated that the total operating expenses for the Institutional Shares
class of each Fund would be: Scudder Money Market Series 0.31%, Scudder
Tax Free Money Market Series 0.39% and Scudder Government Money Market
Series 0.46% for the initial fiscal period.
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A message from the President
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[PHOTO]
Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.
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 45 no-load mutual fund portfolios. 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 the professional
service representatives of Scudder Investor Relations, easy exchange among
funds, shareholder reports, informative newsletters and the walk-in convenience
of Scudder Investor Centers.
/s/ Edmond D. Villani
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Scudder Institutional Shares
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Three pure no-load(TM) (no sales charges) mutual funds each investing in
different types of money market investments:
Investment objectives
o Scudder Money Market Series
seeks as high a level of current income as is consistent with its
investment policies and with preservation of capital and liquidity.
o Scudder Tax Free Money Market Series
seeks as high a level of current income that cannot be subjected to
federal income tax as is consistent with its investment policies and with
preservation of capital and liquidity.
o Scudder Government Money Market Series
seeks as high a level of current income as is consistent with its
investment policies and with preservation of capital and liquidity.
Investment characteristics
o stable $1.00 share price
o easy liquidity
o $1 million minimum investment
o dividends declared daily and paid monthly
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Contents
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Investment objectives and policies ......................................... 4
Scudder Money Market Series ................................................ 4
Scudder Tax Free Money Market Series ....................................... 5
Scudder Government Money Market Series ..................................... 6
Why invest in Institutional Shares? ........................................ 6
Additional information about policies
and investments ......................................................... 7
Distribution and performance information ................................... 10
Fund organization .......................................................... 11
Transaction information .................................................... 13
Shareholder benefits ....................................................... 17
Purchases and redemptions .................................................. 18
Directors and Officers ..................................................... 19
How to contact Scudder ............................................. Back cover
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Investment objectives and policies
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Set forth below is a description of the investment objectives and policies of
Scudder Money Market Series, Scudder Tax Free Money Market Series and Scudder
Government Money Market Series (the "Funds"). The Funds seek to provide
investors with as high a level of current income as is consistent with its
investment policies and with preservation of capital and liquidity. In addition,
Scudder Tax Free Money Market Series seeks to provide current income that is
exempt from federal income taxes.
Each Fund will maintain a dollar-weighted average maturity of 90 days or less in
an effort to maintain a constant net asset value of $1.00 per share, but there
is no assurance that it will be able to do so.
Amendments have been 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, 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.
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Scudder Money Market Series
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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 agreement). 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
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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 conditions and the
remaining maturity of the obligations.
Generally, the commercial paper purchased by the Fund consists of direct
obligations of domestic corporate issuers, including bank holding companies,
which obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's"), "A-1" or higher by Standard & Poor's
("S&P") or "F-1" by Fitch Investors Service, Inc. ("Fitch"), (ii) issued or
guaranteed as to principal and interest by issuers having an existing debt
security rating of "Aa" or higher by Moody's or "AA" or higher by S&P or Fitch,
or (iii) securities that, if not rated, are of comparable investment quality as
determined by the Adviser in accordance with procedures adopted by the Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such as notes,
bonds and debentures that are rated "Aa" or higher by Moody's or "AA" or higher
by S&P or Fitch, and variable amount master demand notes. A variable amount
master demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder. Its amount
may from time to time be increased by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer and is payable on demand. The rate of
interest varies pursuant to an agreed-upon formula. Generally, master demand
notes are not rated by a rating agency. However, the Fund may invest in a master
demand note that, if not rated, is in the opinion of the Adviser of an
investment quality comparable to rated securities in which the Fund may invest.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's Board of
Directors. Should an issue of securities cease to be rated or if its rating is
reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may invest in variable or floating rate obligations,
obligations backed by bank letters of credit, when-issued securities and
securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Funds' Statement of Additional Information.
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Scudder Tax Free Money
Market Series
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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
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in municipal obligations that are related in such a way that an economic,
business or political development or change affecting one such obligation would
also affect the other obligations. For example, certain municipal obligations
accrue interest that is paid from revenues of similar type projects; other
municipal obligations have issuers located in the same state.
The Fund may elect, pending the investment of proceeds of sales of shares or
proceeds from sales of portfolio securities or in anticipation of redemptions,
or to maintain a "defensive" posture when, in the opinion of the Adviser, it is
advisable to do so because of market conditions, to invest temporarily up to 20%
of the current value of its total assets in cash reserves or taxable securities.
Under ordinary market conditions, the Fund will maintain at least 80% of the
value of its total assets in obligations that are exempt from federal income tax
and are not subject to the alternative minimum tax. The foregoing constitutes a
fundamental policy that cannot be changed without the approval of a majority of
the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater number of
investors, issuers and market makers than the market for municipal obligations.
The more limited marketability of municipal obligations may make it difficult in
certain circumstances to dispose of large investments advantageously. In
addition, certain municipal obligations might lose tax-exempt status in the
event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit standards
applied by the Adviser pursuant to procedures established by the Fund's Board of
Directors. Should an issue of securities cease to be rated or if its rating is
reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors
determine that such disposal would not be in the best interests of the Fund.
In addition, the Fund may enter into repurchase agreements, and invest in
variable or floating rate obligations, obligations backed by bank letters of
credit, when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Funds' Statement of Additional Information.
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Scudder Government Money Market Series
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Scudder Government Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Fund invests exclusively in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities that have remaining maturities of not more than 397 calendar
days and certain repurchase agreements.
In addition, the Fund may invest in variable or floating rate obligations,
when-issued securities and securities with put features.
Each of the above-referenced eligible investments and investment practices have
certain risks associated with them. For a more complete description, please
refer to the Funds' Statement of Additional Information.
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Why invest in Institutional Shares?
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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
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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. Investors enjoy the benefit of a stable $1.00 share price objective,
participation in a broad range of high quality money market securities, monthly
income, and ready access to their money. A shareholder can purchase or redeem
shares on a daily basis, in a variety of ways.
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Additional information about
policies and investments
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Investment restrictions
The Funds have certain investment restrictions which are designed to reduce the
Funds' 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 listing of
investment restrictions is contained under "Investment Restrictions" in the
Funds' Statement of Additional Information.
As a matter of fundamental policy, the Funds may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy, the
Funds may not borrow money in an amount greater than 5% of total assets, except
for temporary or emergency purposes, although the Funds may engage up to 5% of
total assets in reverse repurchase agreements or dollar rolls.
As a matter of fundamental policy, the Funds may not make loans except through
the lending of portfolio securities, the purchase of debt securities, interests
in indebtedness or through repurchase agreements. The Funds have 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' Statement of Additional
Information.
The high quality securities in which the Funds invest are divided into "first
tier" and "second tier" securities. First tier securities are those securities
generally rated in the highest category by at least two rating agencies (or one,
if only one rating agency has rated the security). Securities which are
generally rated in the two highest categories by at least two rating agencies
(or one, if only one rating agency has rated the security) and which do not
qualify as first tier securities are second tier securities. The Adviser may
determine, pursuant to procedures approved by the Directors, that an unrated
security is equivalent to a first tier or second tier security. Neither Scudder
Money Market Series nor Scudder Government Money Market Series will invest more
than 5% of its total assets in second tier securities or more than 1% of its
total assets in second tier securities of a single issuer. Scudder Tax Free
Series is able to invest without limit in second tier securities.
Obligations of U.S. Government agencies and instrumentalities
Obligations of U.S. Government agencies and instrumentalities are debt
securities issued or guaranteed by U.S. Government-sponsored enterprises and
federal agencies. Some of such obligations are supported by (a) the full faith
and credit of the U.S. Treasury (such as Government National Mortgage
Association participation certificates), (b) the limited authority of the issuer
to borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Bank), (c) the authority of the U.S. Government to purchase certain obligations
of the issuer (such as securities of the Federal National Mortgage Association)
or (d) only the credit of the issuer. In the case of obligations not backed by
the full faith and credit of the U.S. Government, the investor must look
principally to the agency
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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.
Municipal obligations
Municipal obligations, which are debt obligations issued by or on behalf of
states, cities, municipalities and other public authorities, and may be general
obligation, revenue, or industrial development bonds, include municipal bonds,
municipal notes and municipal commercial paper.
Scudder Tax Free Money Market Series may invest in excess of 25% of its assets
in industrial development bonds subject to the Fund's fundamental investment
policy requiring that it maintain at least 80% of the value of its total assets
in obligations that are exempt from federal income tax and are not subject to
the alternative minimum tax. For purposes of the Fund's fundamental investment
limitation regarding concentration of investments in any one industry,
industrial development bonds will be considered representative of the industry
for which purpose that bond was issued.
Scudder Money Market Series' and Scudder Tax Free Money Market Series'
investments in municipal bonds are limited to bonds that are rated at the date
of purchase "Aa" or higher by Moody's or "AA" or higher by S&P or Fitch.
The Funds' investments in municipal notes will be limited to notes that are
rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in the
case of an issue having a variable rate demand feature) by Moody's, "SP-1" or
"SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity of 270
days or less that is issued to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term debt. The Funds may invest
in municipal commercial paper that is rated at the date of purchase "P-1" or
"P-2" by Moody's, "A-1" or "A-2" or "A-1+" by S&P or "F-1" by Fitch. If a
municipal obligation is not rated, the Funds may purchase the obligation if, in
the opinion of the Adviser, it is of investment quality comparable to other
rated investments that are permitted in the Funds.
Letters of credit
Municipal obligations, including certificates of participation, commercial paper
and other short-term obligations may be backed by an irrevocable letter of
credit of a bank which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks which, in the opinion
of the Adviser, are of investment quality comparable to other
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permitted investments of the Funds may be used for letter of credit backed
investments.
Securities with put rights
The Funds may enter into put transactions with respect to obligations held in
their portfolios with broker/dealers pursuant to a rule under the Investment
Company Act of 1940 (the "1940 Act"), and with commercial banks.
The right of the Funds to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although the Fund may sell the underlying
securities to a third party at any time. If necessary and advisable, any Fund
may pay for certain puts either separately in cash or by paying a higher price
for portfolio securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities). The Funds
expect, however, that puts generally will be available without the payment of
any direct or indirect consideration.
The Funds may enter into puts only with banks or broker/dealers that, in the
opinion of the Adviser, present minimal credit risks. The ability of the Funds
to exercise a put will depend on the ability of the bank or broker/dealer to pay
for the underlying securities at the time the put is exercised. In the event
that a bank or broker/dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.
The Funds intend to enter into puts solely to maintain liquidity and do not
intend to exercise their rights thereunder for trading purposes. The puts will
only be for periods substantially less than the life of the underlying security.
The acquisition of a put will not affect the valuation by the Fund of the
underlying security. The actual put will be valued at zero in determining net
asset value of the Funds. Where a Fund pays directly or indirectly for a put,
its cost will be reflected as an unrealized loss for the period during which the
put is held by the Fund and will be reflected in realized gain or loss when the
put is exercised or expires. If the value of the underlying security increases,
the potential for unrealized or realized gain is reduced by the cost of the put.
The maturity of a municipal obligation purchased by a Fund will not be
considered shortened by any put to which such obligation is subject.
Third party puts
The Funds may also purchase long-term fixed rate bonds that have been coupled
with an option granted by a third party financial institution allowing a Fund at
specified intervals, not exceeding 397 calendar days, to tender (or "put") the
bonds to the institution and receive the face value thereof (plus accrued
interest). These third party puts are available in several different forms, may
be represented by custodial receipts or trust certificates and may be combined
with other features such as interest rate swaps. A Fund receives a short-term
rate of interest (which is periodically reset), and the interest rate
differential between that rate and the fixed rate on the bond is retained by the
financial institution. The financial institution granting the option does not
provide credit enhancement, and in the event that there is a default in the
payment of principal or interest, or downgrading of a bond to below investment
grade, or a loss of the bond's tax-exempt status, the put option will terminate
automatically, the risk to a Fund will be that of holding such a long-term bond
and the dollar-weighted average maturity of the Fund would be adversely
affected.
When-issued securities
Each Fund may purchase securities on a when-issued basis, in which case delivery
and payment normally take place within 45 days after the date of the commitment
to purchase. The Funds will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date if it is
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deemed advisable. When-issued securities are subject to market fluctuation and
no income accrues to the purchaser prior to issuance. The purchase price and the
interest rate that will be received on debt securities are fixed at the time the
purchaser enters into the commitment. Purchasing a security on a when-issued
basis can involve a risk that the market price at the time of delivery may be
lower than the agreed upon purchase price, in which case there could be an
unrealized loss at the time of delivery.
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Distribution and performance
information
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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 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
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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. (the "Corporation"), an
open-end management investment company registered under the 1940 Act. The
Corporation was formed in June 1982 as a Maryland Corporation.
The Corporation's activities are supervised by its Board of Directors. The Board
of Directors, under applicable laws of the State of Maryland, in addition to
supervising the actions of the Adviser and Distributor, as set forth below,
decides upon matters of general policy.
The Corporation has adopted a plan (the "Plan") pursuant to Rule 18f-3 under the
1940 Act to permit the Corporation to establish a multiple class distribution
system for all of its Funds.
Under the Plan, shares of each class represent an equal pro rata interest in
that Fund and, generally, shall have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (1) each class shall have a different
designation; (2) each class of shares shall bear its own "class expenses;" (3)
each class shall have exclusive voting rights on any matter submitted to
shareholders that relates to its administrative services, shareholder services
or distribution arrangements; (4) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class; (5) each class may have separate
and distinct exchange privileges; (6) each class may have different conversion
features, and (7) each class may have separate account size requirements.
Expenses currently designated as "Class Expenses" by the Corporation's Board of
Directors under the Plan include, for example, transfer agent fees attributable
to a specific class, and certain securities registration fees.
In addition to the Institutional Shares class offered herein, each of Scudder
Tax Free Money
--
11
<PAGE>
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 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.
Pursuant to its Investment Advisory Agreement (the "Agreement") with the
Corporation on behalf of each Fund, the Adviser regularly provides each Fund
with investment research, advice and supervision and continuously furnishes an
investment program for each Fund consistent with its investment objectives and
policies. The Agreement further provides that the Adviser will pay the
compensation and certain expenses of all officers and certain employees of the
Corporation and make available to each Fund such of the Adviser's directors,
officers and employees as are reasonably necessary for the Fund's operations or
as may be duly elected officers or directors of the Corporation. Under the
Agreement, the Adviser pays each Fund's office rent and will provide investment
advisory research and statistical facilities and all clerical services relating
to research, statistical and investment work. The Adviser, including the
Adviser's employees who serve the Funds, may render investment advice,
management and other services to others.
Each Fund will bear all expenses not specifically assumed by the Adviser under
the terms of the Agreements, including, among others, the fee
- --
12
<PAGE>
payable to the Adviser as investment adviser, the fees of the Directors who are
not "affiliated persons" (as defined in the 1940 Act) of the Adviser, the
expenses of all Directors and the fees and out-of-pocket expenses of the
Corporation's Custodian and its Transfer Agent. For a more complete description
of the expenses to be borne by each Fund, see "Investment Adviser" and
"Distributor" in the Statement of Additional Information.
The Adviser receives from each Fund a management fee of 0.25% of each Fund's
average daily net assets. Until June 30, 1998, the Adviser has agreed to a
management fee waiver of 0.05%, 0.10% and 0.15% for the Scudder Money Market
Series, Scudder Tax Free Money Market Series and Scudder Government Money Market
Series, respectively. Management fees are computed daily and paid monthly.
Scudder Kemper Investments, Inc., is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02106, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Funds.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the
Corporation's principal underwriter. Scudder Investor Services, Inc. confirms,
as agent, all purchases of shares of the Funds.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining each Fund's daily net asset value per share and maintaining the
general accounting records of the Funds.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
- ----------------------------------------
Transaction information
- ----------------------------------------
Purchasing shares
It is the Funds' policy for the Institutional Shares not to accept initial
investments in amounts below $1,000,000. The minimum investment requirements may
be waived or lowered for investments effected through banks and other
institutions that have entered into special arrangements with the Corporation
and for investments effected on a group basis by certain other entities and
their employees, such as pursuant to a payroll deduction plan and for
investments made in an Individual Retirement Account offered by the Corporation.
Investment minimums may also be waived for Directors and Officers of the
Corporation. The Corporation and the Distributor each reserve the right to
reject any purchase order. All funds will be invested in full and fractional
shares.
Shares of any Fund may be purchased by writing or calling the Corporation's
Transfer Agent. Orders for shares of a Fund will be executed at the net asset
value per share next determined after an order has become effective. See "Share
Price."
Orders for shares of a Fund will become effective when an investor's bank wire
order or check is received by the custodian or when a check is converted into
federal funds. Orders will be executed at 4:00 p.m. (eastern time) on the same
day if a bank wire or check is converted to federal funds or a federal funds'
wire is received by 4:00 p.m. (2:00 p.m. for Scudder Tax Free Money Market
Series). In addition, if investors known to the Corporation notify the
Corporation by 4:00 p.m. (2:00 p.m. for Scudder Tax Free Money Market Series)
that they intend to wire federal funds to purchase shares of a Fund on any
business day and if monies are received in time to be invested, orders will be
executed at the net asset value per share determined at 4:00 p.m. at the close
of regular trading on the New York
--
13
<PAGE>
Stock Exchange (the "Exchange") on each day the Exchange is open for trading,
and at 2:00 p.m. for Scudder Tax Free Money Market Series. Wire transmissions
may, however, be subject to delays of several hours, in which event the
effectiveness of the order will be delayed. Payments transmitted by a bank wire
other than the Federal Reserve Wire System may take longer to be converted into
federal funds.
By check
Checks drawn on a non-member bank or a foreign bank may take substantially
longer to be converted into federal funds and, accordingly, may delay the
execution of an order. Checks must be payable in U.S. dollars and will be
accepted subject to collection at full face value.
By investing in a Fund, a shareholder appoints the Transfer Agent to establish
an open account to which all shares purchased will be credited, together with
any dividends and capital gains distributions that are paid in additional
shares. See "Distribution and performance information--Dividends and capital
gains distributions."
By wire
1. Shareholders may open an account by calling toll-free from any
continental state: 1-800-854-8525. Give the Fund(s) and class to be invested in,
name(s) in which the account is to be registered, address, Social Security or
taxpayer identification number, dividend payment election, amount to be wired,
name of the wiring bank and name and telephone number of the person to be
contacted in connection with the order. An account number will then be assigned.
2. Instruct the wiring bank to transmit the specified amount to:
State Street Bank and Trust Company
Boston, Massachusetts
ABA Number 011000028
DDA#9903-555-2
Attention: [Name of Fund(s) and class(es)]
Account (name(s) in which registered)
Account Number (as assigned by telephone)
and amount invested in each Fund
3. Complete a Purchase Application. Indicate the services to be used. A
completed Purchase Application must be received by the Transfer Agent before the
Expedited Redemption can be used. Mail the Purchase Application to:
Scudder Service Corporation
66 Brooks Drive
Braintree, Massachusetts 02184
Additional purchases by wire
Instruct the wiring bank to transmit the specified amount to the Custodian with
the information stated above.
Initial purchase by mail
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and check payable to "The Scudder Funds"
to the Transfer Agent at the address set forth above.
Additional purchases by mail
1. Make a check payable to the Fund whose shares are to be purchased.
Write the shareholder's Fund account number on the check.
2. Mail the check to the Transfer Agent at the address set forth above.
Redeeming shares
Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of any Fund will be redeemed at their next determined net asset value.
See "Share Price." For the shareholder's convenience, Scudder Fund, Inc. has
established several different redemption procedures.
Payment of redemption proceeds may be made in securities, subject to regulation
by some state securities commissions. The Corporation may suspend the right of
redemption during any period when (i) trading on the Exchange is restricted or
the Exchange is closed, other than customary weekend and holiday closings, (ii)
the SEC has by order permitted such suspension or (iii) an emergency, as defined
by rules of the SEC,
- --
14
<PAGE>
exists making disposal of portfolio securities or determination of the value of
the net assets of the Funds not reasonably practicable.
A shareholder's account in a Fund remains open for up to one year following
complete redemption, and all costs during the period will be borne by that Fund.
The Corporation also reserves the right, following 30 days' notice to
shareholders, to redeem all shares in accounts without certified Social Security
or taxpayer identification numbers. A shareholder may avoid involuntary
redemption by providing Scudder Fund, Inc. with a taxpayer identification number
during the 30-day notice period.
Redemption by mail
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number and give
Social Security or taxpayer identification number (where applicable).
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $100,000 or more, the
signature(s) must be guaranteed by a commercial bank that is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing. In
addition, signatures may be guaranteed by other Eligible Guarantor Institutions,
i.e., other banks, other brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. The Transfer Agent, however, may reject redemption
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMP(sm)"). 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
of record. The Custodian may benefit from the use of redemption proceeds until
the check issued to a redeeming shareholder for such proceeds has cleared.
When proceeds of a redemption are to be paid to someone other than the
shareholder, either by wire or check, the signature(s) on the letter of
instruction must be guaranteed regardless of the amount of the redemption.
Redemption by Expedited Redemption Service
If Expedited Redemption Service has been elected on the Purchase Application on
file with the Transfer Agent, redemption of shares may be requested by
telephoning the Transfer Agent on any day Scudder Fund, Inc. and the Custodian
are open for business.
No redemption of shares purchased by check will be permitted pursuant to the
Expedited Redemption Service until seven business days after those shares have
been credited to the shareholder's account.
1. Telephone the request to the Transfer Agent by calling toll-free from
any continental state: 1-800-854-8525, or
2. Mail the request to the Transfer Agent at the address set forth under
"Purchasing shares."
Proceeds of Expedited Redemptions will be wired to the shareholder's bank
indicated in the Purchase Application. If an Expedited
--
15
<PAGE>
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 Scudder Financial Intermediary Services Group each reserve
the right to reject purchases of shares, including exchanges, for any reason.
Tax identification number
Be sure to complete the Tax Identification Number section of 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 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.
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
- --
16
<PAGE>
address of record. Reductions in value that result solely from market activity
will not trigger an involuntary redemption.
Please refer to "Exchanges and Redemptions--Other information" in each Funds'
Statement of Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
- ----------------------------------------
Shareholder benefits
- ----------------------------------------
Experienced professional management
Scudder 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 Zurich Kemper's Fixed Income
Department in 1973 as its Money Market Specialist. He has been responsible for
the trading and portfolio management of Zurich Kemper's money market fund since
its initial offering in 1974. John W. Stuebe, Portfolio Manager, joined Zurich
Kemper in 1979 as a Fixed Income Trader for Money Market Securities. He is
currently a Specialist and Trader for the Fund Manager's taxable, non-government
money market funds.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Institutional Shares of each Fund. Please call 1-800-854-8525 to request this
feature.
Shareholder reports
Each Fund sends to its shareholders, semiannually, reports showing the
investments in the Funds and other information (including unaudited financial
statements) pertaining to the Funds. An annual report, containing financial
statements audited by independent accountants, is sent to shareholders each
year.
--
17
<PAGE>
- ---------------------------------------
Purchases and redemptions
- ---------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $1,000,000
an account
<S> <C> <C>
Make checks o By Mail Send your completed and signed application and check by regular, express,
payable to "The registered or certified mail to:
Scudder Funds."
The Scudder Shareholders Service Center
66 Brooks Drive
Braintree, Massachusetts 02184
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.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: no minimum
additional
shares
<S> <C> <C>
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
Scudder Funds." complete 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.
- ------------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-854-8525 from
8 a.m. to 6 p.m. eastern time.
o By Mail Send your instructions for redemption to the appropriate address or fax number
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.
</TABLE>
- --
18
<PAGE>
- ---------------------------------------
Directors and Officers
- ---------------------------------------
<NAMES TO BE UPDATED BY SCUDDER>
--
19
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Financial Intermediary Services Group --
1-800-854-8525 Please address all correspondence to:
Scudder Shareholder Service Center
66 Brooks Drive
Braintree, Massachusetts
02184
<PAGE>
SCUDDER FUND, INC.
345 Park Avenue
New York, New York 10154
1-800-854-8525
Scudder Fund, Inc. is a professionally managed, open-end,
diversified management investment company comprised of three money market
investment portfolios.
SCUDDER MONEY MARKET SERIES
SCUDDER TAX FREE MONEY MARKET SERIES
SCUDDER GOVERNMENT MONEY MARKET SERIES
Mutual fund portfolios seeking to provide high money-market
income with preservation of capital and liquidity through investments
in different instruments.
- --------------------------------------------------------------------------------
Statement of Additional Information
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 July 7, 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
Page
THE FUNDS AND THEIR OBJECTIVES....................................... 1
General Investment Objectives and Policies...................... 1
Master/feeder structure......................................... 1
Cash Fund....................................................... 1
Tax Free Fund................................................... 3
Government Fund................................................. 4
Invetment Restrictions.......................................... 4
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES........................... 6
PUCHASING SHARES..................................................... 7
Wire Transfer of Federal Funds.................................. 7
Additional Information About Making Subsequent Investments by
QuickBuy................................................... 7
Share Certificates.............................................. 8
EXCHANGES AND REDEMPTIONS............................................ 8
Exchanges....................................................... 9
Redemption by Telephone......................................... 9
Redemption by QuickSell.........................................10
Redemption by Mail or Fax.......................................11
Redemption by Write-a-Check.....................................11
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................11
The Pure No-Load(TM) Concept....................................11
Dividend and Capital Gain Distribution Options..................12
Scudder Investor Centers........................................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...........................21
DIVIDENDS............................................................22
PERFORMANCE INFORMATION..............................................22
Yield...........................................................22
Effective Yield.................................................23
Average Annual Total Return.....................................23
Cumulative Total Return.........................................24
Total Return....................................................24
Tax-Equivalent Yield............................................24
Comparison of Fund Performance..................................24
THE PROGRAM..........................................................28
ORGANIZATION OF THE FUNDS............................................28
INVESTMENT ADVISER...................................................29
Personal Investments by Employees of the Adviser................31
DISTRIBUTOR..........................................................31
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
DIRECTORS AND OFFICERS ..............................................31
REMUNERATION.........................................................33
Responsibilities of the Board--Board and Committee Meetings.....33
Compensation of Officers and Directors..........................34
TAXES................................................................34
PORTFOLIO TRANSACTIONS...............................................37
NET ASSET VALUE......................................................38
ADDITIONAL INFORMATION...............................................38
Experts.........................................................38
Open Information................................................39
FINANCIAL STATEMENTS.................................................40
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 investment
portfolios comprising Scudder Fund, Inc. (the "Corporation"), a professionally
managed open-end, diversified management investment company. The Funds seek to
provide investors with as high a level of current income as is consistent with
their investment objectives and policies and with preservation of capital and
liquidity. In addition, the Tax Free Fund also seeks to provide current income
that is exempt from federal income taxes. There can be no assurance that any of
the Funds will achieve its investment objectives.
Each of the Funds offers classes of shares as follows: Scudder Money
Market Series offers Premium Money Market Shares, Managed Shares and
Institutional Shares; Scudder Tax Free Money Market Series offers Managed Shares
and Institutional Shares; and Scudder Government Money Market Series offers
Managed Shares and Institutional Shares.
Securities in which the Funds invest may not yield as high a level of
current income as securities of lower quality and longer maturities which
generally have less liquidity and greater market risk. Each Fund will maintain a
dollar-weighted average maturity of 90 days or less in an effort to maintain a
constant net asset value of $1.00 per share, but there is no assurance that each
will be able to do so.
Except as otherwise indicated, each Fund's investment objectives and
policies are not fundamental and may be changed without a vote of shareholders.
The Funds' investment adviser is Scudder 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 the Fund while investing in a master fund in a
master/feeder 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 readily marketable including fixed time deposits
subject to withdrawal penalties maturing in more than seven calendar days.
The Fund may invest in U.S. dollar-denominated certificates of deposit
and promissory notes issued by Canadian affiliates of U.S. banks under
circumstances where the instruments are guaranteed as to principal and interest
by the U.S. bank. While foreign obligations generally involve greater risks than
those of domestic obligations, such as risks relating to liquidity,
marketability, foreign taxation, nationalization and exchange controls,
generally the Adviser believes that these risks are substantially less in the
case of instruments issued by Canadian affiliates that are guaranteed by U.S.
banks than in the case of other foreign money market instruments.
The Fund may invest in U.S. dollar-denominated obligations of foreign
banks. There is no limitation on the amount of the Fund's assets that may be
invested in obligations of foreign banks that meet the conditions set forth
above. Such investments may involve greater risks than those affecting U.S.
banks or Canadian affiliates of U.S. banks. In addition, foreign banks are not
subject to examination by any U.S. Government agency or instrumentality.
Except for obligations of foreign banks and foreign branches of U.S.
banks, the Fund will not invest in the securities of foreign issuers. Generally,
the Fund may not invest less than 25% of the current value of its total assets
in bank obligations (including bank obligations subject to repurchase
agreements).
Generally, the commercial paper purchased by the Fund is limited to
direct obligations of domestic corporate issuers, including bank holding
companies, which obligations, at the time of investment, are (i) rated "P-1" by
Moody's Investors Service, Inc. ("Moody's"), "A-1" or better by Standard &
Poor's ("S&P") or "F-1" by Fitch Investors Service, Inc. ("Fitch"), (ii) issued
or guaranteed as to principal and interest by issuers having an existing debt
security rating of "Aa" or better by Moody's or "AA" or better by S&P or Fitch,
or (iii) securities that, if not rated, are of comparable investment quality as
determined by the Adviser in accordance with procedures adopted by the Fund's
Board of Directors.
The Fund may invest in non-convertible corporate debt securities such
as notes, bonds and debentures that have remaining maturities of not more than
397 calendar days and that are rated "Aa" or better by Moody's or "AA" or better
by S&P or Fitch, and variable amount master demand notes. A variable amount
master demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder. Its amount
may from time to time be increased by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer and is payable on demand. The rate of
interest varies pursuant to an agreed-upon formula. Generally, master demand
notes are not rated by a rating agency. However, the Fund may invest in a master
demand note that, if not rated, is in the opinion of the Adviser of an
investment quality comparable to rated securities in which the Fund may invest.
The Adviser monitors the issuers of such master demand notes on a daily basis.
Transfer of such notes is usually restricted by the issuer, and there is no
secondary trading market for such notes. The Fund may not invest in a master
demand note if, as a result, more than 10% of the value of its total net assets
would be invested in such notes.
Municipal obligations, which are debt obligations issued by or on
behalf of states, cities, municipalities and other public authorities, and may
be general obligation, revenue, or industrial development bonds, include
municipal bonds, municipal notes and municipal commercial paper.
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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 type projects; other
municipal obligations have issuers located in the same state.
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<PAGE>
The floating and variable rate municipal obligations that the Fund may
purchase include certificates of participation in such obligations purchased
from banks. A certificate of participation gives the Fund an undivided interest
in the underlying municipal obligations, usually private activity bonds, in the
proportion that the Fund's interest bears to the total principal amount of such
municipal obligations. Certain of such certificates of participation may carry a
demand feature that would permit the holder to tender them back to the issuer
prior to maturity. The Fund may invest in certificates of participation even if
the underlying municipal obligations carry stated maturities in excess of one
year, if compliance with certain conditions contained in a rule of the
Securities and Exchange Commission (the "SEC") is met. The income received on
certificates of participation constitutes interest from tax-exempt obligations.
The Fund may, pending the investment of proceeds of sales of shares or
proceeds from sales of portfolio securities or in anticipation of redemptions,
or to maintain a "defensive" posture when, in the opinion of the Adviser, it is
advisable to do so because of market conditions, elect to invest temporarily up
to 20% of the current value of its total assets in cash reserves or taxable
securities. Under ordinary market conditions, the Fund will maintain at least
80% of the value of its total assets in obligations that are exempt from federal
income taxes and are not subject to the alternative minimum tax. The foregoing
constitutes a fundamental policy that cannot be changed without the approval of
a majority of the outstanding shares of the Fund.
The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In addition, certain municipal obligations might lose tax-exempt
status in the event of a change in the tax laws.
All of the securities in which the Fund will invest must meet credit
standards applied by the Adviser pursuant to procedures established by the Board
of Directors. Should an issue of securities cease to be rated or if its rating
is reduced below the minimum required for purchase by the Fund, the Adviser will
dispose of any such security, as soon as practicable, unless the Directors of
the 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>
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.
The 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 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
<PAGE>
(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 payments on TANs.
BANs The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the
longer term municipal bond market and the likelihood that the proceeds
of such bond sales will be used to pay the principal of, and interest
on, BANs.
RANs A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an
issuer's ability to meet its obligations on outstanding RANs. In
addition, the possibility that the revenues would, when received, be
used to meet other obligations could affect the ability of the issuer
to pay the principal of, and interest on, RANs.
Loans of Portfolio Securities. Each Fund may lend securities from its
portfolio to brokers, dealers and financial institutions if cash or cash
equivalent collateral, including letters of credit, marked-to-market daily and
equal to at least 100% of the current market value of the securities loaned
(including accrued interest and dividends thereon) plus the interest payable to
the Fund with respect to the loan is maintained by the borrower with the Fund in
a segregated account. In determining whether to lend a security to a particular
broker, dealer or financial institution, the Adviser will consider all relevant
facts and circumstances, including the creditworthiness of the broker, dealer or
financial institution. The Funds will not enter into any security lending
arrangement having a duration of longer than one year. Securities that a Fund
may receive as collateral will not become part of that Fund at the time of the
loan. In the event of a default by the borrower, such Fund will, if permitted by
law, dispose of the collateral except for such part thereof that is a security
in which such Fund is permitted to invest. During the time securities are on
loan, the borrower will pay the Fund any accrued income on those securities, and
the Fund may invest the cash collateral and earn additional income or receive an
agreed upon fee from a borrower that has delivered cash equivalent collateral.
No Fund will lend securities having a value that exceeds 10% of the current
value of its total assets. Loans of securities by a Fund will be subject to
termination at the Fund's or the borrower's option. Each Fund may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Corporation or the
Adviser.
Industry Concentration. To the extent the Cash Fund's investments are
concentrated in the banking industry, the Cash Fund will have correspondingly
greater exposure to the risk factors which are characteristic of such
investments. Sustained increases in interest rates can adversely affect the
availability or liquidity and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the exposure to credit losses. In addition, the value of the investment return
on the Cash Fund's shares could be affected by economic or regulatory
6
<PAGE>
developments in or related to the banking industry, and the effects of
competition within the banking industry as well as with other types of financial
institutions.
The foregoing policies and activities of the Funds are not fundamental
and may be changed by the Board of Directors of the Corporation without the
approval of shareholders.
PURCHASING SHARES
(See "Transaction information--Purchasing shares" in the Funds' Prospectuses)
Each Fund has specific minimum initial investment requirements for each
class of shares. The Premium Shares require a $25,000 minimum initial investment
and a minimum subsequent investment of $1,000. The Managed Shares require a
$100,000 minimum initial investment and a minimum subsequent investment of
$1,000. The Institutional Shares require a $1,000,000 minimum investment and
have no minimum subsequent investment. The minimum investment requirements may
be waived or lowered for investments effected through banks and other
institutions that have entered into special arrangements with the Funds and for
investments effected on a group basis by certain other entities and their
employees, such as pursuant to a payroll deduction plan and for investments made
in an Individual Retirement Account offered by the Funds. Investment minimums
may also be waived for Directors and officers of the Funds. The Funds, Scudder
Investor Services, Inc. and Scudder Financial Intermediary Services Group each
reserve the right to reject any purchase order. All funds will be invested in
full and fractional shares.
Wire Transfer of Federal Funds
Orders for shares of a Fund will become effective when an investor's
bank wire order or check is converted into federal funds (monies credited to the
account of State Street Bank and Trust Company (the "Custodian") with its
registered Federal Reserve Bank). If payment is transmitted by the Federal
Reserve Wire System, the order will become effective upon receipt. Orders will
be executed at 4:00 p.m. for the Cash Fund and the Government Fund (eastern
time) and at 2:00 p.m. for the Tax Free Fund on the same day if a bank wire or
check is converted to federal funds or a federal funds' wire is received by 4:00
p.m. or 2:00 p.m., respectively. In addition, if investors known to the Funds
notify the Funds by 4:00 p.m. for the Cash Fund and the Government Fund and by
2:00 p.m. for the Tax Free Fund that they intend to wire federal funds to
purchase shares of any Fund on any business day and if monies are received in
time to be invested, orders will be executed at the net asset value per share
determined at 4:00 p.m. for the Cash Fund and the Government Fund and at 2:00
p.m. for the Tax Free Fund the same day. Wire transmissions may, however, be
subject to delays of several hours, in which event the effectiveness of the
order will be delayed. Payments by a bank wire other than the Federal Reserve
Wire System may take longer to be converted into federal funds. When payment for
shares is by check drawn on any member of the Federal Reserve System, federal
funds normally become available to the Funds on the business day after the check
is deposited.
Shares of any Fund may be purchased by writing or calling the Transfer
Agent. Orders for shares of a particular class of a Fund will be executed at the
net asset value per share next determined after an order has become effective.
Checks drawn on a non-member bank or a foreign bank may take
substantially longer to be converted into federal funds and, accordingly, may
delay the execution of an order. Checks must be payable in U.S. dollars and will
be accepted subject to collection at full face value.
By investing in a Fund, a shareholder appoints the transfer agent to
establish an open account to which all shares purchased will be credited,
together with any dividends and capital gains distributions that are paid in
additional shares. See "Distribution and performance information--dividends and
capital gains distributions" in the Funds' Prospectuses.
Additional Information About Making Subsequent Investments by QuickBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
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<PAGE>
QuickBuy, shareholders should call before 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 an QuickBuy 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.
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 Trustees 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 Trustees and the Distributor may suspend or terminate the
offering of shares of a Fund at any time for any reason.
EXCHANGES AND REDEMPTIONS
(See "Transaction Information--Exchanges and Redemptions" in the
Funds' Prospectuses)
Payment of redemption proceeds may be made in securities. The
Corporation may suspend the right of redemption with respect to any Fund during
any period when (i) trading on the Exchange is restricted or the Exchange is
closed, other than customary weekend and holiday closings, (ii) the SEC has by
order permitted such suspension or (iii) an emergency, as defined by rules of
the SEC, exists making disposal of portfolio securities or determination of the
value of the net assets of that Fund not reasonably practicable.
A shareholder's Fund account remains open for up to one year following
complete redemption and all costs during the period will be borne by the
Corporation. This permits an investor to resume investments.
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Exchanges
The following information regarding exchanges applies only to Premium
Shares and each Fund's class of Managed Shares. The exchange privileges listed
below do not apply to the Institutional Shares.
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL(TM)) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $25,000 for Premium
Shares, and $100,000 for Managed Shares. Exchanges into other Scudder Funds may
have lower minimum exchange requirements. When an exchange represents an
additional investment into an existing account, the account receiving the
exchange proceeds must have identical registration, tax identification number,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $1,000 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain an original signature guarantee as described
under "Transaction information--Redeeming shares--Signature guarantees" in each
Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Funds and the Transfer Agent each reserve the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Funds employ
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Funds do not follow such
procedures, they may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine. The Funds and the Transfer Agent each reserve the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from 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. For more information, please call
1-800-225-5163.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
9
<PAGE>
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, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. QuickSell requests
received after the close of regular trading on the Exchange will begin their
processing and be redeemed at the net asset value calculated the following
business day. QuickSell transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
10
<PAGE>
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 each
Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
any redemptions to ensure that all necessary documents accompany the request.
When shares are held in the name of a corporation, trust, fiduciary, agent,
attorney or partnership, the Transfer Agent requires, in addition to the stock
power, certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within five days after receipt
by the Transfer Agent of a request for redemption that complies with the above
requirements. Delays of more than seven business days of payment for shares
tendered for repurchase or redemption may result, but only until the purchase
check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.
Redemption by Write-a-Check
The following information regarding Redemption by Write-a-Check applies
only to Premium Shares and each Fund's class of Managed Shares. Redemption by
Write-a-Check does not apply to the Institutional Shares.
All new investors and existing shareholders who apply to State Street
Bank and Trust Company for checks may use them to pay any person, provided that
each check is for at least $1,000 and not more than $5 million. By using the
checks, the shareholder will receive daily dividend credit on his or her shares
until the check has cleared the banking system. Investors who purchased shares
by check may write checks against those shares only after they have been on a
Fund's book for seven business days. Shareholders who use this service may also
use other redemption procedures. No shareholder may write checks against
certificated shares. The Funds pay the bank charges for this service. However,
each Fund will review the cost of operation periodically and reserve the right
to determine if direct charges to the persons who avail themselves of this
service would be appropriate. Each Fund, Scudder Service Corporation and State
Street Bank and Trust Company reserve the right at any time to suspend or
terminate the "Write-a-Check" procedure.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in each Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
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<PAGE>
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 No-Load Fund
YEARS Pure No-Load(TM) 8.50% Load Fund Load Fund with with 0.25% 12b-1
Fund 0.75% 12b-1 Fee 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.
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.
12
<PAGE>
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." 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.
13
<PAGE>
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 MeTM feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Funds' prospectuses.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current
income. The Fund seeks to maintain a constant net asset value of $1.00
per share, although in certain circumstances this may not be possible,
and declares dividends daily.
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital and, consistent therewith, to maintain the liquidity of
capital and to provide current income. SCIT seeks to maintain a
constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible, and declares dividends daily.
Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices
and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.
Scudder Government Money Market Series seeks to provide investors with
as high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks
to maintain a constant net asset value of $1.00 per share, but there is
no assurance that it will be able to do so. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt
from regular federal income tax and stability of principal through
investments primarily in municipal securities. STFMF seeks to maintain
a constant net asset value of $1.00 per share, although in extreme
circumstances this may not be possible.
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<PAGE>
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.
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.
- --------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
15
<PAGE>
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.
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.
- --------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
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.
U.S. GROWTH
Value
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.
Growth
Scudder Classic Growth Fund seeks to provide long-term growth of
capital with reduced share price volatility compared to other growth
mutual funds.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.
SCUDDER CHOICE SERIES
Scudder Financial Services Fund seeks long-term growth of capital
primarily through investment in equity securities of financial services
companies.
Scudder Health Care Fund seeks long-term growth of capital primarily
through investment in securities of companies that are engaged in the
development, production or distribution of products or services related
to the treatment or prevention of diseases and other medical problems.
Scudder Technology Fund seeks long-term growth of capital primarily
through investment in securities of companies engaged in the
development, production or distribution of technology-related products
or services.
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<PAGE>
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 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 may not be available
for purchase or exchange. For more information, please call 1-800-225-5163.
18
<PAGE>
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Funds' prospectuses.)
The following information regarding Special Plan Accounts applies only
to Premium Shares and each Fund's class of Managed Shares. Special Plan Accounts
do not apply to the Institutional Shares.
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of the Funds may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Funds may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.
Scudder IRA: Individual Retirement Account
Shares of the Funds may be purchased as the underlying investment for
an Individual Retirement Account which meets the requirements of Section 408(a)
of the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
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<PAGE>
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.)
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
---------------------------------------------------------------------------------------------
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.)
<TABLE>
<CAPTION>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
---------------------------------------------------------------------------------------------
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 Fund(s) may be purchased as the underlying investment for
an individual Retirement Account which meets the requirements of Section 408A of
the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions 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.
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<PAGE>
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 Funds' transfer agent ten days prior to the date of the first automatic
withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the
shareholder, the Corporation or its agent on written notice, and will be
terminated when all shares of the Funds under the Plan have been liquidated or
upon receipt by the Corporation of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Corporation and its agents reserve the right to establish a
maintenance charge in the future depending on the services required by the
investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
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<PAGE>
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 was ____% for the Cash Fund, ____%
for the Tax Free Fund and ____% for the Government Fund. Each Fund's yield may
fluctuate daily and does not provide a basis for determining future yields. The
foregoing yields were computed by determining the net change in value, exclusive
of capital changes, of a hypothetical account having a balance of one share at
the beginning of the period, dividing the net change in value by the value of
the account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by 365/7, with the resulting
yield figure carried to the nearest hundredth of one percent. The net change in
value of an account consists of the value of additional shares purchased with
dividends from the original share plus dividends declared on both the original
share and any such additional shares (not including realized gains or losses and
22
<PAGE>
unrealized appreciation or depreciation) less applicable expenses, including the
management fee payable to the Adviser.
Current yield for each Fund will fluctuate from time to time, unlike
bank deposits or other investments that pay a fixed yield for a stated period of
time, and do not provide a basis for determining future yields. Yield is a
function of portfolio quality, composition, maturity and market conditions as
well as expenses allocated to such Funds. Yield information may be useful in
reviewing the performance of the Fund and for providing a basis for comparison
with investment alternatives. The yield of a Fund, however, may not be
comparable to investment alternatives because of differences in the foregoing
variables and differences in the methods used to value portfolio securities and
compute expenses.
Effective Yield
The effective yield for the Funds is calculated in a similar fashion to
yield, except that the seven-day period return is compounded by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)^365/7] - 1
The effective yields (i.e., on a compound basis, assuming the daily reinvestment
of dividends) for each of the following Funds for the seven-day period ended
December 31, 1997 was ____% for the Cash Fund, ____% for the Tax Free Fund and
____% for the Government Fund.
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for periods of one year, five years, and ten years and the life of a
Fund, where applicable, all ended on the last day of a recent calendar quarter.
Average annual total return quotations reflect changes in the price of a Fund's
shares, if any, and assume that all dividends and capital gains distributions
during the respective periods were reinvested in Fund shares. Average annual
total return is calculated by finding the average annual compound rates of
return of a hypothetical investment over such periods, according to the
following formula (average annual total return is then expressed as a
percentage):
T = (ERV/P)^1/n - 1
Where:
P = a hypothetical initial investment of $1,000.
T = Average Annual Total Return
n = number of years.
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Average Annual Total Return for periods ended December 31, 1997
One Year Five Years Ten Years
Cash Fund
Tax Free Fund
Government Fund
* One Year Average Annual 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.
23
<PAGE>
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by finding the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return.
P = a hypothetical initial investment of $1,000.
ERV = ending redeemable value: ERV is the value, at
the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return for periods ended December 31, 1997
One Year Five Years Ten Years
Cash Fund
Tax Free Fund
Government Fund
* 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.
Tax-Equivalent Yield
For the Scudder Tax Free Money Market Series, Tax-Equivalent Yield is
the net annualized taxable yield needed to produce a specified tax-exempt yield
at a given tax rate based on a specified 30 day (or one month) period assuming
semiannual compounding of income. Tax-equivalent yield is calculated by dividing
that portion of the Fund's yield (as computed in the yield description above)
which is tax-exempt by one minus a stated income tax rate and adding the product
to that portion, if any, of the yield of the Fund that is not tax-exempt. Thus,
taxpayers with a federal tax rate of 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
24
<PAGE>
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,
(Trustees)(Directors) and officers of the Funds, the Funds' portfolio manager,
or members of the portfolio management team may be depicted and quoted to give
prospective and current shareholders a better sense of the outlook and approach
of those who manage the Funds. In addition, the amount of assets that the
Adviser has under management in various geographical areas may be quoted in
advertising and marketing materials.
The Funds may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of projected
future college costs based on assumed rates of inflation and examples of
hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Funds. The
description may include a "risk/return spectrum" which compares the Funds to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Funds to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
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.
25
<PAGE>
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Funds, including reprints of, or selections from, editorials or
articles about these Funds. Sources for Fund performance information and
articles about the Funds include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
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.
26
<PAGE>
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
SmartMoney, a national personal finance magazine published monthly by Dow
Jones and Company, Inc. and The Hearst Corporation. Focus is placed on ideas
for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news weekly that periodically reports
mutual fund performance data.
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.
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<PAGE>
THE PROGRAM
Scudder Treasurers Trust(TM) (the "Program") is a corporate and
institutional cash investment program with respect to the Funds. The Program is
designed especially for treasurers and financial officers of small and
middle-sized corporations and financial institutions. The Funds reduce
substantially the costs and inconvenience of direct investment in individual
securities. They help reduce risk by diversifying investments across a broad
range of securities. They also provide flexibility since shares can be redeemed
from or exchanged between any of the Funds at no extra cost with the exception
of the Institutional Shares which are not exchangeable.
The Funds seek to provide busy executives with assistance in the
professional management of their cash reserves. These executives frequently
engage experts (meaning experienced professionals) for services requiring
specialized knowledge and expertise. The investment of liquid assets is one such
service. Each of the Funds has a different objective and offers full-time
professional reserve asset management, which is frequently not available from
traditional cash management providers. The Program can help institutional cash
managers take advantage of today's investment opportunities and techniques to
improve the performance of their liquid assets.
The Funds allow small and middle-sized businesses and other
institutions to take advantage of the investment management services of the
Adviser. The Adviser's investment counsel clients include corporations,
foundations, institutions, insurance companies, endowments, trusts, retirement
plans and individuals.
The Funds also anticipate lower expense ratios than those of money
market mutual funds designed for individual investors because the Funds' average
account balances are normally higher than those of the average money market
fund. The Program also offers special services designed for the convenience of
corporate and institutional treasurers.
Each of the Funds seeks to provide the combination of price stability,
liquidity and current income that treasurers often require for liquid assets
such as operating reserves.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' Prospectuses)
The Corporation was formed on June 18, 1982 under the laws of the State
of Maryland. The authorized capital stock of the Corporation consists of
10,000,000,000 shares having a par value of $.001 per share. The Company's
Articles of Incorporation authorize the Board of Directors to classify or
reclassify any unissued shares of capital stock. Pursuant to that authority, the
Board of Directors has created twenty-eight classes which are not currently
offered but which may be in the future.
Pursuant to authority expressly granted by of the Charter of the
Corporation, the Board of Directors has reclassified six hundred million
(600,000,000) shares of authorized and unissued Capital Stock into Scudder Money
Market Series. Prior to the reclassification, three billion (3,000,000,000)
shares of Capital Stock were classified as shares of Scudder Money Market
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
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Shares; one billion (1,000,000,000) shares of Capital Stock classified as the
Scudder Tax Free Money Market Series, which is further classified into five
hundred million (500,000,000) Managed Shares and five hundred million
(500,000,000) Institutional Shares; and three billion (3,000,000,000) shares of
Capital Stock classified as and the Scudder Government Money Market Series,
which is further classified into one billion five hundred million
(1,500,000,000) Managed Shares and one billion five hundred million
(1,500,000,000) Institutional Shares.
Each share of each class of a Fund shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters that such shares
(or class of shares) shall be entitled to vote. Shareholders of each Fund shall
vote together on any matter, except to the extent otherwise required by the 1940
Act, or when the Board of Directors of the Corporation has determined that the
matter affects only the interest of shareholders of one or more classes of a
Fund, in which case only the shareholders of such class or classes of that Fund
shall be entitled to vote thereon. Any matter shall be deemed to have been
effectively acted upon with respect to a Fund if acted upon as provided in Rule
18f-2 under the 1940 Act, or any successor rule, and in the Corporation's
Articles of Incorporation. As used in the Prospectuses and in this Statement of
Additional Information, the term "majority", when referring to the approvals to
be obtained from shareholders in connection with general matters affecting the
Funds and all additional portfolios (e.g., election of directors), means the
vote of the lesser of (i) 67% of the Corporation's shares represented at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Corporation's outstanding
shares. The term "majority", when referring to the approvals to be obtained from
shareholders in connection with matters affecting a single Fund or any other
single portfolio (e.g., annual approval of investment management contracts),
means the vote of the lesser of (i) 67% of the shares of the portfolio
represented at a meeting if the holders of more than 50% of the outstanding
shares of the portfolio are present in person or by proxy, or (ii) more than 50%
of the outstanding shares of the portfolio. Shareholders are entitled to one
vote for each full share held and fractional votes for fractional shares held.
Each share of a Fund of the Corporation represents an equal
proportionate interest in that Fund with each other share of the same Fund and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared in the discretion of the
Corporation's Board of Directors. In the event of the liquidation or dissolution
of the Corporation, shares of a Fund are entitled to receive the assets
attributable to that Fund that are available for distribution, and a
proportionate distribution, based upon the relative net assets of the Funds, of
any general assets not attributable to a Fund that are available for
distribution.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Corporation.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Funds' Prospectuses)
The Corporation retains Scudder, Stevens & Clark, Inc. as investment
adviser on behalf of each of the Funds pursuant to Investment Advisory
Agreements (the "Agreements"). The Adviser is one of the most experienced
investment counsel firms in the U.S. It was established in 1919 as a partnership
and was restructured as a Delaware corporation in 1985. The principal source of
the Adviser's income is professional fees received from providing continuing
investment advice. The Adviser's subsidiary, the Distributor, acts as principal
underwriter for shares of registered open-end investment companies. The Adviser
provides investment counsel for many individuals and institutions, including
insurance companies, endowments, industrial corporations and financial and
banking organizations. As of December 31, 1996, the Adviser and its affiliates
had in excess of $115 billion under their supervision, approximately two-thirds
of which was invested in fixed-income securities.
The Adviser maintains a research department with more than 50
professionals, which conducts continuous studies of the factors that affect
various industries, companies and individual securities in the U.S. as well as
abroad. In this work the Adviser utilizes reports, statistics and other
investment information from a wide variety of sources, including brokers and
dealers who may execute portfolio transactions for the Funds and for other
clients of the Adviser. Investment decisions, however, are based primarily on
investigations and critical analyses by the Adviser's own research specialists
and portfolio managers.
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<PAGE>
The Adviser may give advice and take action with respect to any of its
other clients, which may differ from advice given or from the time or nature of
action taken with respect to a Fund of the Corporation. If these clients and
such Fund are simultaneously buying or selling a security with a limited market,
the price may be adversely affected. In addition, the Adviser may, on behalf of
other clients, furnish financial advice or be involved in tender offers or
merger proposals relating to companies in which such Fund invests. The best
interests of any Fund may or may not be consistent with the achievement of the
objectives of the other persons for whom the Adviser is providing advice or for
whom they are acting. Where a possible conflict is apparent, the Adviser will
follow whatever course of action is in its judgment in the best interests of the
Fund. The Adviser may consult independent third persons in reaching its
decision.
Subject to policy established by the Corporation's Board of Directors,
which has overall responsibility for the business and affairs of each Fund, the
Adviser manages the operations of the Funds. In addition to providing advisory
services, the Adviser furnishes office space and certain facilities and
personnel required for conducting the business of the Funds and the Adviser pays
the compensation of the Corporation's officers, directors and employees
affiliated with the Adviser or its affiliates. Although the Adviser currently
pays the compensation, as well as certain expenses, of all officers and
employees of the Corporation who are affiliated with the Adviser or its
affiliates, the terms of the Agreements state that the Adviser is not obligated
to pay the compensation and expenses of the Corporation's clerical employees
other than those providing advisory services. The Adviser, however, has
represented to the Corporation's Board of Directors that its current intention
is to continue to pay such compensation and expenses.
For the period January 1, 1997 until July 7, 1997, the Adviser received
a management fee from each Fund at an annual rate of 0.40% for the first $1.5
billion of average daily net assets and 0.35% of such assets in excess of $1.5
billion. Until July 7, 1997, the Adviser has agreed to waive a portion of its
investment management fee for each of the Cash Fund and Government Fund to the
extent necessary so that the total annualized expenses of each Fund do not
exceed 0.55% of average daily net assets. Effective July 7, 1997, the Adviser
receives a management fee at an annual rate of 0.25% of average daily net assets
for each Fund. For the period July 7, 1997 to December 31, 1997 there was a
management fee waiver for the Cash Fund, Tax Free Fund and Government Fund of
0.05%, 0.10% and 0.15%, respectively. Management fees are computed daily and
paid monthly.
For the Corporation's fiscal year ended December 31, 1997, _____.
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.
The Agreement provides that the relevant Fund pay all of its expenses
that are not specifically assumed by the Adviser. (Expenses attributable to a
specific class of each Fund will be charged against the assets of that class of
the Fund, other expenses of the Corporation will be allocated among the Funds in
a manner which may, but need not, be proportionately in relation to the net
assets of each Fund.) Expenses payable by each of the Funds include, but are not
limited to, organizational expenses; clerical salaries; brokerage and other
expenses of executing portfolio transactions; legal, auditing or accounting
expenses; trade association dues; taxes or governmental fees; the fees and
expenses of the transfer agent of the Fund; the cost of preparing share
certificates or any other expenses, including clerical expenses of issue,
redemption or repurchase of shares of the Fund; the expenses and fees for
registering and qualifying securities for sale; the fees of Directors of the
Corporation who are not employees or affiliates of the Adviser or its
affiliates; travel expenses of all officers, directors and employees; insurance
premiums; the cost of preparing and distributing reports and notices to
shareholders; and the fees or disbursements of custodians of the Fund's assets.
The Agreement will continue in effect from year to year provided such
continuance is approved annually (i) by the holders of a majority of the
respective Fund's outstanding voting securities or by the Corporation's Board of
Directors and (ii) by a majority of the Directors of the Corporation who are not
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<PAGE>
parties to the investment management contract or "interested persons" (as
defined in the 1940 Act) of any such party. Each of the Agreements may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
DISTRIBUTOR
(See "Fund organization--Distributor" in the Funds' Prospectuses)
Pursuant to a contract with the Corporation, Scudder Investor Services,
Inc., a subsidiary of the Adviser, serves as the Corporation's principal
underwriter in connection with a continuous offering of shares of the
Corporation. The Distributor receives no remuneration for its services as
principal underwriter and is not obligated to sell any specific amount of Fund
shares. As principal underwriter, it accepts purchase orders for shares of the
Fund. In addition, the Underwriting Agreement obligates the Distributor to pay
certain expenses in connection with the offering of the shares of the Fund.
After the Prospectuses and periodic reports have been prepared, set in type and
mailed to shareholders, the Distributor will pay for the printing and
distribution of copies thereof used in connection with the offering to
prospective investors. The Distributor will also pay for supplemental sales
literature and advertising costs.
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
Position with Underwriter, Scudder
Name (Age) and Address Corporation Principal Occupation** Investor Services, Inc.
- ---------------------- -------------- ---------------------- -----------------------
<S> <C> <C> <C>
Daniel Pierce (64)+*# President Chairman of the Board and Vice President,
Managing Director of Scudder Director and Assistant
Kemper Investments, Inc. 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
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<PAGE>
Position with
Position with Underwriter, Scudder
Name (Age) and Address Corporation Principal Occupation** Investor Services, Inc.
- ---------------------- -------------- ---------------------- -----------------------
Edgar R. Fiedler (69)# Director Senior Fellow and Economic --
50023 Brogden Counselor, The Conference
Chapel Hill, NC 27514 Board, Inc.
Peter B. Freeman (65) Director Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI 02906
Robert W. Lear (80) Director Executive-in-Residence, --
429 Silvermine Road Visiting Professor, Columbia
New Canaan, CT 06840 University Graduate School
of Business
Richard M. Hunt ( ) Director
K. Sue Cote (36)+ Vice President Principal of Scudder Kemper --
Investments, Inc.
Jerard K. Hartman (65)++ Vice President Managing Director of Scudder --
Kemper Investments, Inc.
Thomas W. Joseph (58)+ Vice President and Senior Vice President of Vice President,
Assistant Secretary Scudder Kemper Investments, Director, Treasurer
Inc. and Assistant Clerk
Thomas F. McDonough (51)+ Vice President, Senior Vice President of Assistant Clerk
Treasurer and Scudder Kemper Investments,
Secretary Inc.
John R. Hebble ( )+ Assistant Treasurer
Caroline Pearson (35)+ Assistant Treasurer
David B. Wines ( ) Vice President
Kathryn L. Quirk (45)++ Vice President Managing Director of Scudder Senior Vice President,
Kemper Investments, Inc. Director and Clerk
* Mr. Pierce is considered by the Corporation to be a person who is an "interested person" of the Adviser or
of the Corporation (within the meaning of the 1940 Act).
** All the Directors and Officers have been associated with their
respective companies for more than five years, but not necessarily in
the same capacity.
# Messrs. Pierce, Fiedler and Lee are members of the Executive Committee.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
</TABLE>
Directors of the Corporation not affiliated with the Adviser receive
from the Corporation an annual fee and a fee for each Board of Directors and
Board Committee meeting attended and are reimbursed for all out-of-pocket
expenses relating to attendance at such meetings. Directors who are affiliated
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<PAGE>
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 held of record more than
five percent of such Fund:
Cash Fund. State Street Bank and Trust Co., North Quincy, MA
02171-1753, Chemical Bank, Jericho, NY 10017-2014, Wilmington Trust Company,
Wilmington DE 19801, Citibank, Long Island City, NY 11120, Lucian T. Baldwin III
Trust, Winnetka, IL 60093-4223, Cudd & Co., New York, NY 10036, Hare & Co., New
York, NY 10005, and Scudder Trust Company, Two International Place, Boston, MA
02110-4103 held of record ____%, ____%, ____%, ____%, ____%, ____%, ____% and
____%, respectively, of the outstanding shares of the Cash Fund.
Tax Free Fund. Chemical Bank, Jericho, NY 10017-2014, Cudd & Co., New
York, NY 10036, Hare & Co., New York, NY 10005, and State Street Bank and Trust
Co., North Quincy, MA 02171-1753 held of record ____%, ____%, ____% and ____%,
respectively, of the outstanding shares of the Tax Free Fund.
Government Fund. No shareholder held of record more than 5% of the
outstanding shares of the 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, Stevens & Clark, Inc. These "Independent Directors" have primary
responsibility for assuring that each Fund is managed in the best interests of
its shareholders.
The Board of Directors meets at least quarterly to review the
investment performance of each Fund and other operational matters, including
policies and procedures designated to assure compliance with various regulatory
requirements. At least annually, the Independent Directors review the fees paid
to the Adviser and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, each Funds' investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates, and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by each Fund's independent
public accountants and by independent legal counsel selected by the Independent
Directors.
All of the Independent Directors serve on the Committee of Independent
Directors, which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects each Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
The Independent Directors met _____ times during 1997, including Board
and Committee meetings and meetings to review each Fund's contractual
arrangements as described above. All of the Independent Directors attended 100%
of all such meetings.
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<PAGE>
Compensation of Officers and Directors
The Independent Directors receive compensation of $____ per Fund for
each Directors' meeting and each Board Committee meeting attended, and an annual
Director's fee of $____ for each Fund with average daily net assets less than
$100 million, and $_____ 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.
Name Scudder Fund, Inc.* All Scudder Funds
---- ------------------- -----------------
Edgar R. Fiedler, Director**
Peter B. Freeman, Director
Robert W. Lear, Director
* Scudder Fund, Inc. consists of the Cash Fund, Tax Free Fund and Government
Fund.
** Mr. Fiedler received $________ 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.
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 derive less than 30% of its gross income from gains (without offset for
losses) from the sale or other disposition of securities or certain options
thereon held for less than three months; and (c) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of the Fund's assets is invested in the securities of
any one issuer (other than U.S. government securities or securities of other
regulated investment companies), or of two or more issuers which the taxpayer
controls and which are determined to be engaged in the same or similar trade or
business. As a regulated investment company, each Fund generally will not be
subject to federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
stockholders at least 90% of its net taxable investment income (including net
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<PAGE>
short-term capital gain) and at least 90% of the excess of its tax exempt
interest income over attributable expenses earned in each year. Investment
income of a Fund includes, among other things, accretion of market and original
issue discount, even though the Fund will not receive current payments on
discount obligations.
A 4% nondeductible excise tax will be imposed on a Fund (except the Tax
Free Fund to the extent of its tax-exempt income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year. For
this purpose, any income or gain retained by a Fund that is subject to tax will
be considered to have been distributed by year-end. In addition, dividends
including "exempt-interest dividends," declared in October, November or December
payable to shareholders of record on a specified date in such a month and paid
in the following January will be treated as having been paid by each Fund and
received by shareholders on December 31 of the calendar year in which the
dividend was declared. Each Fund intends that it will timely distribute
substantially all of its net investment income and net capital gains and, thus,
expects not to be subject to the excise tax.
Any gain or loss realized upon a sale or redemption of shares of a Fund
by a shareholder who is not a dealer in securities is generally treated as
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the sale or redemption of shares of a Fund held
for six months or less is treated as long-term capital loss to the extent of any
long-term capital gain distribution received by the shareholder. Any loss
realized by a shareholder upon the sale or redemption of shares of the Tax Free
Fund held for six months or less is disallowed to the extent of any
"exempt-interest" dividends received by the shareholder. Any loss realized on a
sale or exchange of shares of a Fund will be disallowed to the extent shares of
such Fund are re-acquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Dividends paid out of a Fund's investment company taxable income (which
includes, among other items, dividends, interest and net excess of net long-term
capital losses) will be taxable to a shareholder as ordinary income. Because no
portion of a Fund's income is expected to consist of dividends paid by U. S.
corporations, no portion of the dividends paid by a Fund is expected to be
eligible for the corporate dividends-received deduction. Distributions of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Fund on the reinvestment date. Shareholders will
be notified annually as to the U.S. federal tax status of distributions, and
shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.
The Tax Free Fund intends to qualify under the Code to pay
"exempt-interest dividends" to its shareholders. The Fund will be so qualified
if, at the close of each quarter of its taxable year, at least 50% of the value
of its total assets consists of securities on which the interest payments are
exempt from federal income tax. To the extent that dividends distributed by the
Fund to its shareholders are derived from interest income exempt from federal
income tax and are designated as "exempt-interest dividends" by the Fund, they
will be excludable from the gross incomes of the shareholders for federal income
tax purposes. "Exempt-interest dividends," however, must be taken into account
by shareholders in determining whether their total incomes are large enough to
result in taxation of up to one-half of their social security benefits and
certain railroad retirement benefits. It should also be noted that tax-exempt
interest on private activity bonds in which the Portfolio may invest generally
is treated as a tax preference item for purposes of the alternative minimum tax
for corporate and individual shareholders. The Fund will inform shareholders
annually as to the portion of the distributions from the Fund which constituted
"exempt-interest dividends."
Investments by a Fund in zero coupon or other original issue discount
(other than tax-exempt securities) securities will result in income to the Fund
equal to a portion of the excess of the face value of the securities over their
issue price (the "original issue discount") each year that the securities are
held, even though the Fund receives no cash interest payments. This income is
included in determining the amount of income which a Fund must distribute to
maintain its status as a regulated investment company and to avoid the payment
of federal income tax and the 4% excise tax.
Gain derived by a Fund from the disposition of any market discount
bonds (i.e., bonds purchased other than at original issue, where the face value
of the bonds exceeds their purchase price), including tax-exempt market discount
bonds, held by the Fund will be taxed as ordinary income to the extent of the
35
<PAGE>
accrued market discount on the bonds, unless the Fund elects to include the
market discount in income as it accrues.
The taxation of over-the-counter options on debt securities is governed
by Code section 1234. Pursuant to Code section 1234, the premium received by a
Fund for selling a put or call option is not included in income at the time of
receipt. If the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the difference between the
amount paid to close out its position and the premium received is short-term
capital gain or loss. If a call option written by a Fund is exercised, thereby
requiring the Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term
depending upon the holding period of the security. With respect to a put or call
option that is purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term,
depending upon the holding period of the option. If the option expires, the
resulting loss is a capital loss and is long-term or short-term, depending upon
the holding period of the option. If the option is exercised, the cost of the
option, in the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount realized on the
underlying security in determining gain or loss.
Certain options in which a Fund may invest are "section 1256
contracts." Gains or losses on section 1256 contracts generally are considered
60% long-term and 40% short-term capital gains or losses. Also, section 1256
contracts held by a Fund at the end of each taxable year (and, generally, for
purposes of the 4% excise tax, on October 31 of each year) are
"marked-to-market" (that is, treated as sold at fair market value), resulting in
unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Funds of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Funds which is taxed as
ordinary income when distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle positions, the amount which may be distributed to
shareholders, and which will be taxed to them as ordinary income or long-term
capital gain, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
The 30% limitation and the diversification requirements applicable to
each Fund's assets may limit the extent to which each Fund will be able to
engage in options transactions.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
Under the Code, a shareholder may not deduct that portion of interest
on indebtedness incurred or continue to purchase or carry shares of an
investment company paying exempt interest dividends (such as those of the Tax
Free Fund) which bears the same ratio to the total of such interest as the
exempt-interest dividends bear to the total dividends (excluding net capital
gain dividends) received by the shareholder. In addition, under rules issued by
the Internal Revenue Service for determining when borrowed funds are considered
to be used to purchase or carry particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to such purchase.
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 useful to the Adviser in
37
<PAGE>
providing services to clients other than the Funds, and not all such information
is used by the Adviser in connection with the Funds.
NET ASSET VALUE
Net asset value per share for each Fund is determined by Scudder Fund
Accounting Corporation, a subsidiary of the Adviser, on each day the Exchange is
open for trading. The net asset value per share of the Cash Fund and the
Government Fund is determined 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 Martin Luther King,
Jr. Day (the third Monday in January), Columbus Day (the second Monday in
October) and Veterans' Day, no redemptions will be made on these three bank
holidays nor on any of the Holidays.
As indicated under "Transaction information--Share price" in the
Prospectuses, each Fund uses the amortized cost method to determine the value of
its portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Fund would receive if the security were sold. During these periods the
yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of a Fund's portfolio on a particular day,
a prospective investor in that Fund would be able to obtain a somewhat higher
yield than would result from investment in a fund using solely market values,
and existing Fund shareholders would receive correspondingly less income. The
converse would apply during periods of rising interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, each Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities (as defined in Rule 2a-7) of no more than 397 calendar days and
invest only in securities determined by the Board of Directors to be of high
quality with minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to Rule 2a-7, the Board is
required to establish procedures designed to stabilize, to the extent reasonably
possible, such Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's portfolio
holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Directors. If
such deviation exceeds 1/2 of 1%, the Board will promptly consider what action,
if any, will be initiated. In the event the Board determines that a deviation
exists that may result in material dilution or other unfair results to investors
or existing shareholders, the Board will take such corrective action as it
regards as appropriate, including the redemption of shares in kind, the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity, withholding dividends or establishing a net
asset value per share by using available market quotations.
ADDITIONAL INFORMATION
Experts
The financial highlights of each Fund included in the Managed Shares
Prospectus and the Financial Statements incorporated by reference in this
Statement of Additional Information have been audited by Price Waterhouse LLP,
1177 Avenue of the Americas, New York, New York 10036, independent accountants,
38
<PAGE>
and are included in the Prospectuses and this Statement of Additional
Information in reliance upon the accompanying report of said firm, which reports
are given upon their authority as experts in accounting and auditing.
Other Information
<TABLE>
<S> <C>
The CUSIP number of the Scudder Premium Money Market Shares is 811149871
The CUSIP number of the Scudder Money Market Managed Shares is 811149202
The CUSIP number of the Scudder Money Market Institutional Shares is 811149863
The CUSIP number of the Scudder Tax Free Money Market Managed Shares is 811149301
The CUSIP number of the Scudder Tax Free Money Market Institutional Shares is 811149855
The CUSIP number of the Scudder Government Money Market Managed Shares is 811149103
The CUSIP number of the Scudder Government Money Market Institutional Shares is 811149848
</TABLE>
Each Fund has a fiscal year end of December 31.
The law firm of Dechert Price & Rhoads is counsel to the Funds.
Information enumerated below is provided at the Fund level since each
Fund consisted of one class of shares (which class was redesignated as the
Managed Shares Class) on December 31, 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 $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, 1997.
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, 1997, 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.
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.
39
<PAGE>
FINANCIAL STATEMENTS
The financial statements, including the investment portfolios of the
Corporation, together with the Report of Independent Accountants, Financial
Highlights and notes to financial statements in the Annual Reports to the
Shareholders of the Corporation dated December 31, 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." The financial statements incorporated herein reflect the
investment performance of each Fund prior to the aforementioned redesignation of
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".
<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 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
To be filed by amendment
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.)
(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.)
<PAGE>
(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.)
(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.)
2
<PAGE>
(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.
Is filed herein.
(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.
Is filed herein.
(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.
Is filed herein
7. Not Applicable.
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.)
3
<PAGE>
(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.)
(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. Inapplicable.
12. Inapplicable.
4
<PAGE>
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 is filed
herein
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 to be filed by amendment.
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.)
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 February .
(1) (2)
Title of Class Number of Record
Shareholders
Scudder Money Market
Series:
Premium Money Market 3,460
Shares 1,521
Managed Money Market 39
Shares
Institutional Money
Market Shares
Scudder Tax Free Money
Market Series:
Tax Free Managed Shares 153
Tax Free Institutional 12
Shares
Scudder Government Money
Market Series:
Government Managed 263
Shares 6
Government Institutional
Shares
5
<PAGE>
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 ByLaws 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.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
Stephen R. Treasurer and Chief Financial Officer, Scudder
Beckwith 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. Director and Vice President, Scudder Kemper
Birdsong Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg)
S.A.#
Laurence W. Director, Scudder Kemper Investments, Inc.**
Cheng
Member, Corporate Executive Board, Zurich
Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Steven Director, Scudder Kemper Investments, Inc.**
Gluckstern
Member, Corporate Executive Board, Zurich
Insurance Company of Switzerland##
Director, Zurich Holding Company of Americao
6
<PAGE>
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 Americao
Director, ZKI Holding Corporation xx
Kathryn L. Director, Chief Legal Officer, Chief Compliance
Quirk 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 Corporationoo
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.+
Markus Director, Scudder Kemper Investments, Inc.**
Rohrbasser
Member Corporate Executive Board, Zurich
Insurance Company of Switzerland##
President, Director, Chairman of the Board, ZKI
Holding Corporation xx
Cornelia M. Vice President, Scudder Kemper Investments,
Small Inc.**
Edmond D. Director, President and Chief Executive Officer,
Villani Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan,
Inc.###
President and Director, Scudder, Stevens & Clark
Overseas Corporationoo
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 # Soci,t, 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
7
<PAGE>
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)
Name and Position and Offices Positions and
Principal with Offices with
Business Scudder Investor Registrant
Address Services, Inc.
William S. Vice President None
Baughman
Two International
Place
Boston, MA 02110
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY
10154
Mary Elizabeth Vice President None
Beams
Two International
Place
Boston, MA 02110
Mark S. Casady Director, President None
Two International and Assistant
Place Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior None
Two International Vice President
Place
Boston, MA 02110
Richard W. Vice President None
Desmond
345 Park Avenue
New York, NY
10154
Paul J. Elmlinger Senior Vice President None
345 Park Avenue and Assistant Clerk
New York, NY
10154
Philip S. Fortuna Vice President None
101 California
Street
San Francisco, CA
94111
8
<PAGE>
William F. Glavin Vice President None
Two International
Place
Boston, MA 02110
Margaret D. Assistant Treasurer None
Hadzima
Two International
Place
Boston, MA 02110
Thomas W. Joseph Director, Vice Vice
Two International President, Treasurer President and
Place and Assistant Clerk Assistant
Boston, MA 02110 Secretary
Thomas F. Clerk Vice
McDonough President,
Two International Secretary and
Place Treasurer
Boston, MA 02110
Daniel Pierce Director, Vice President
Two International President
Place and Assistant
Boston, MA 02110 Treasurer
Kathryn L. Quirk Director, Senior Vice Vice
345 Park Avenue President and President
New York, NY Assistant Clerk
10154
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 Vice President None
Thorndike
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>
9
<PAGE>
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.
10
<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
To be filed by amendment
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.)
(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.)
<PAGE>
(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.)
(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.)
2
<PAGE>
(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.
Is filed herein.
(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.
Is filed herein.
(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.
Is filed herein
7. Not Applicable.
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.)
3
<PAGE>
(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.)
(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. Inapplicable.
12. Inapplicable.
4
<PAGE>
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 is filed
herein
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 to be filed by amendment.
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.)
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 February .
(1) (2)
Title of Class Number of Record
Shareholders
Scudder Money Market
Series:
Premium Money Market 3,460
Shares 1,521
Managed Money Market 39
Shares
Institutional Money
Market Shares
Scudder Tax Free Money
Market Series:
Tax Free Managed Shares 153
Tax Free Institutional 12
Shares
Scudder Government Money
Market Series:
Government Managed 263
Shares 6
Government Institutional
Shares
5
<PAGE>
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 ByLaws 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.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
Stephen R. Treasurer and Chief Financial Officer, Scudder
Beckwith 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. Director and Vice President, Scudder Kemper
Birdsong Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg)
S.A.#
Laurence W. Director, Scudder Kemper Investments, Inc.**
Cheng
Member, Corporate Executive Board, Zurich
Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Steven Director, Scudder Kemper Investments, Inc.**
Gluckstern
Member, Corporate Executive Board, Zurich
Insurance Company of Switzerland##
Director, Zurich Holding Company of Americao
6
<PAGE>
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 Americao
Director, ZKI Holding Corporation xx
Kathryn L. Director, Chief Legal Officer, Chief Compliance
Quirk 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 Corporationoo
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.+
Markus Director, Scudder Kemper Investments, Inc.**
Rohrbasser
Member Corporate Executive Board, Zurich
Insurance Company of Switzerland##
President, Director, Chairman of the Board, ZKI
Holding Corporation xx
Cornelia M. Vice President, Scudder Kemper Investments,
Small Inc.**
Edmond D. Director, President and Chief Executive Officer,
Villani Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan,
Inc.###
President and Director, Scudder, Stevens & Clark
Overseas Corporationoo
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 # Soci,t, 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
7
<PAGE>
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)
Name and Position and Offices Positions and
Principal with Offices with
Business Scudder Investor Registrant
Address Services, Inc.
William S. Vice President None
Baughman
Two International
Place
Boston, MA 02110
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY
10154
Mary Elizabeth Vice President None
Beams
Two International
Place
Boston, MA 02110
Mark S. Casady Director, President None
Two International and Assistant
Place Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior None
Two International Vice President
Place
Boston, MA 02110
Richard W. Vice President None
Desmond
345 Park Avenue
New York, NY
10154
Paul J. Elmlinger Senior Vice President None
345 Park Avenue and Assistant Clerk
New York, NY
10154
Philip S. Fortuna Vice President None
101 California
Street
San Francisco, CA
94111
8
<PAGE>
William F. Glavin Vice President None
Two International
Place
Boston, MA 02110
Margaret D. Assistant Treasurer None
Hadzima
Two International
Place
Boston, MA 02110
Thomas W. Joseph Director, Vice Vice
Two International President, Treasurer President and
Place and Assistant Clerk Assistant
Boston, MA 02110 Secretary
Thomas F. Clerk Vice
McDonough President,
Two International Secretary and
Place Treasurer
Boston, MA 02110
Daniel Pierce Director, Vice President
Two International President
Place and Assistant
Boston, MA 02110 Treasurer
Kathryn L. Quirk Director, Senior Vice Vice
345 Park Avenue President and President
New York, NY Assistant Clerk
10154
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 Vice President None
Thorndike
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>
9
<PAGE>
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.
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(a) 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 11th day of February, 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.
SIGNATURE TITLE DATE
/s/ Dr. Rosita Chang
- --------------------------
Dr. Rosita Chang* Director February 11, 1998
/s/ Dr. J.D. Hammond
- --------------------------
Dr. J.D. Hammond* Director February 11, 1998
/s/ Richard M. Hunt
- --------------------------
Richard M. Hunt* Director February 11, 1998
/s/ Edgar R. Fiedler
- --------------------------
Edgar R. Fiedler* Director February 11, 1998
/s/ Peter B. Freeman
- --------------------------
Peter B. Freeman* Director February 11, 1998
/s/ Daniel Pierce
- --------------------------
Daniel Pierce* President February 11, 1998
(Principal
Executive
Officer)
*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. 26
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 22
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER FUND, INC.
<PAGE>
SCUDDER FUND, INC.
EXHIBIT INDEX
Exhibit 5a (9)
Exhibit 5a (10)
Exhibit 5a (11)
Exhibit 14 (c)
Scudder Fund, Inc.
345 Park Avenue
New York, New York 10154
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Money Market Series
Ladies and Gentlemen:
Scudder Fund, Inc. (the "Corporation") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Corporation's Articles of Incorporation, as amended from time-to-time (the
"Articles"), the Board of Directors has divided the Corporation's shares of
capital stock, par value $0.001 per share, (the "Shares") into separate series,
or funds, including Scudder Money Market Series (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation under the Investment Company
Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933, as
amended. Copies of the documents referred to in the preceding sentence have been
furnished to you by the Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated June 12, 1997, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
<PAGE>
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Corporation a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Corporation's
name (the "Fund Name"), and (ii) the Scudder Marks in connection with the
Corporation's investment products and services, in each case only for so long as
this Agreement, any other investment management agreement between you (or any
organization which shall have succeeded to your business as investment manager
("your Successor")) and the Corporation, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a licensee
of the Scudder Marks, provided however, that you agree to use your best efforts
to maintain your license to use and sublicense the Scudder Marks. The
Corporation agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Corporation's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and licensor
of the Scudder Marks (the "Trademark Owner"), and that the Corporation shall not
challenge the validity of the Scudder Marks or the Trademark Owner's ownership
thereof. The Corporation further agrees that all services and products it offers
in connection with the Scudder Marks shall meet commercially reasonable
standards of quality, as may be determined by you or the Trademark Owner from
time to time, provided that you acknowledge that the services and products the
Corporation rendered during the one-year period preceding the date of this
Agreement are acceptable. At your reasonable request, the Corporation shall
cooperate with you and the Trademark Owner and shall execute and deliver any and
all documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Corporation as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your Successor) and the Corporation, or you no longer are
a licensee of the Scudder Marks, the Corporation shall (to the extent that, and
as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with you (or
your Successor) or the Trademark Owner. In no event shall the Corporation use
the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or your Successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation in complying with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
2
<PAGE>
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open-end investment
company and not provided by persons not parties to this Agreement including, but
not limited to, preparing reports to and meeting materials for the Corporation's
Board of Directors and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of, accounting agents, custodians, depositories,
transfer agents and pricing agents, accountants, attorneys, printers,
underwriters, brokers and dealers, insurers and other persons in any capacity
deemed to be necessary or desirable to Fund operations; preparing and making
filings with the Securities and Exchange Commission (the "SEC") and other
regulatory and self-regulatory organizations, including, but not limited to,
preliminary and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices pursuant
to Rule 24f-2 under the 1940 Act; overseeing the tabulation of proxies by the
Fund's transfer agent; assisting in the preparation and filing of the Fund's
federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
Corporation's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
3
<PAGE>
other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be
paid by the principal underwriter pursuant to the underwriting agreement or are
not permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
4
<PAGE>
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you in United States Dollars on the
last day of each month the unpaid balance of a fee equal to the excess of 1/12
of 0.25 of 1 percent of the average daily net assets as defined below of the
Fund for such month over any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75 percent of the amount of your fee then accrued
on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c- 1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by the Manager
have available funds for investment, investments suitable and appropriate for
each shall be allocated in accordance with procedures believed by the Manager to
be equitable to each entity. Similarly, opportunities to sell securities shall
be allocated in a manner believed by the Manager to be equitable. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.
5
<PAGE>
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until July 31, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. This Agreement shall terminate automatically in the event of its
assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
6
<PAGE>
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Corporation on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER FUND, INC., on behalf of
Scudder Money Market Series
By:
------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------
Managing Director
7
Scudder Fund, Inc.
345 Park Avenue
New York, New York 10154
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Tax Free Money Market Series
Ladies and Gentlemen:
Scudder Fund, Inc. (the "Corporation") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Corporation's Articles of Incorporation, as amended from time-to-time (the
"Articles"), the Board of Directors has divided the Corporation's shares of
capital stock, par value $0.001 per share, (the "Shares") into separate series,
or funds, including Scudder Tax Free Money Market Series (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation under the Investment Company
Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933, as
amended. Copies of the documents referred to in the preceding sentence have been
furnished to you by the Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated June 12, 1997, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
<PAGE>
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Corporation a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Corporation's
name (the "Fund Name"), and (ii) the Scudder Marks in connection with the
Corporation's investment products and services, in each case only for so long as
this Agreement, any other investment management agreement between you (or any
organization which shall have succeeded to your business as investment manager
("your Successor")) and the Corporation, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a licensee
of the Scudder Marks, provided however, that you agree to use your best efforts
to maintain your license to use and sublicense the Scudder Marks. The
Corporation agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Corporation's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and licensor
of the Scudder Marks (the "Trademark Owner"), and that the Corporation shall not
challenge the validity of the Scudder Marks or the Trademark Owner's ownership
thereof. The Corporation further agrees that all services and products it offers
in connection with the Scudder Marks shall meet commercially reasonable
standards of quality, as may be determined by you or the Trademark Owner from
time to time, provided that you acknowledge that the services and products the
Corporation rendered during the one-year period preceding the date of this
Agreement are acceptable. At your reasonable request, the Corporation shall
cooperate with you and the Trademark Owner and shall execute and deliver any and
all documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Corporation as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your Successor) and the Corporation, or you no longer are
a licensee of the Scudder Marks, the Corporation shall (to the extent that, and
as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with you (or
your Successor) or the Trademark Owner. In no event shall the Corporation use
the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or your Successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation in complying with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
2
<PAGE>
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open-end investment
company and not provided by persons not parties to this Agreement including, but
not limited to, preparing reports to and meeting materials for the Corporation's
Board of Directors and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of, accounting agents, custodians, depositories,
transfer agents and pricing agents, accountants, attorneys, printers,
underwriters, brokers and dealers, insurers and other persons in any capacity
deemed to be necessary or desirable to Fund operations; preparing and making
filings with the Securities and Exchange Commission (the "SEC") and other
regulatory and self-regulatory organizations, including, but not limited to,
preliminary and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices pursuant
to Rule 24f-2 under the 1940 Act; overseeing the tabulation of proxies by the
Fund's transfer agent; assisting in the preparation and filing of the Fund's
federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
Corporation's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
3
<PAGE>
other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be
paid by the principal underwriter pursuant to the underwriting agreement or are
not permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
4
<PAGE>
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you in United States Dollars on the
last day of each month the unpaid balance of a fee equal to the excess of 1/12
of 0.25 of 1 percent of the average daily net assets as defined below of the
Fund for such month over any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75 percent of the amount of your fee then accrued
on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c- 1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by the Manager
have available funds for investment, investments suitable and appropriate for
each shall be allocated in accordance with procedures believed by the Manager to
be equitable to each entity. Similarly, opportunities to sell securities shall
be allocated in a manner believed by the Manager to be equitable. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.
5
<PAGE>
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until July 31, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. This Agreement shall terminate automatically in the event of its
assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
6
<PAGE>
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Corporation on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER FUND, INC., on behalf
of
Scudder Tax Free Money Market
Series
By:
------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS,
INC.
By:
------------------------------
Managing Director
7
Scudder Fund, Inc.
345 Park Avenue
New York, New York 10154
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Government Money Market Series
Ladies and Gentlemen:
Scudder Fund, Inc. (the "Corporation") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Corporation's Articles of Incorporation, as amended from time-to-time (the
"Articles"), the Board of Directors has divided the Corporation's shares of
capital stock, par value $0.001 per share, (the "Shares") into separate series,
or funds, including Scudder Government Money Market Series (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation under the Investment Company
Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933, as
amended. Copies of the documents referred to in the preceding sentence have been
furnished to you by the Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated June 12, 1996, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
<PAGE>
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Corporation a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Corporation's
name (the "Fund Name"), and (ii) the Scudder Marks in connection with the
Corporation's investment products and services, in each case only for so long as
this Agreement, any other investment management agreement between you (or any
organization which shall have succeeded to your business as investment manager
("your Successor")) and the Corporation, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a licensee
of the Scudder Marks, provided however, that you agree to use your best efforts
to maintain your license to use and sublicense the Scudder Marks. The
Corporation agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Corporation's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and licensor
of the Scudder Marks (the "Trademark Owner"), and that the Corporation shall not
challenge the validity of the Scudder Marks or the Trademark Owner's ownership
thereof. The Corporation further agrees that all services and products it offers
in connection with the Scudder Marks shall meet commercially reasonable
standards of quality, as may be determined by you or the Trademark Owner from
time to time, provided that you acknowledge that the services and products the
Corporation rendered during the one-year period preceding the date of this
Agreement are acceptable. At your reasonable request, the Corporation shall
cooperate with you and the Trademark Owner and shall execute and deliver any and
all documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Corporation as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your Successor) and the Corporation, or you no longer are
a licensee of the Scudder Marks, the Corporation shall (to the extent that, and
as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with you (or
your Successor) or the Trademark Owner. In no event shall the Corporation use
the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or your Successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation in complying with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
2
<PAGE>
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open-end investment
company and not provided by persons not parties to this Agreement including, but
not limited to, preparing reports to and meeting materials for the Corporation's
Board of Directors and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of, accounting agents, custodians, depositories,
transfer agents and pricing agents, accountants, attorneys, printers,
underwriters, brokers and dealers, insurers and other persons in any capacity
deemed to be necessary or desirable to Fund operations; preparing and making
filings with the Securities and Exchange Commission (the "SEC") and other
regulatory and self-regulatory organizations, including, but not limited to,
preliminary and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices pursuant
to Rule 24f-2 under the 1940 Act; overseeing the tabulation of proxies by the
Fund's transfer agent; assisting in the preparation and filing of the Fund's
federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
Corporation's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
3
<PAGE>
other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be
paid by the principal underwriter pursuant to the underwriting agreement or are
not permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
4
<PAGE>
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you in United States Dollars on the
last day of each month the unpaid balance of a fee equal to the excess of 1/12
of 0.25 of 1 percent of the average daily net assets as defined below of the
Fund for such month over any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75 percent of the amount of your fee then accrued
on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c- 1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by the Manager
have available funds for investment, investments suitable and appropriate for
each shall be allocated in accordance with procedures believed by the Manager to
be equitable to each entity. Similarly, opportunities to sell securities shall
be allocated in a manner believed by the Manager to be equitable. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.
5
<PAGE>
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until July 31, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. This Agreement shall terminate automatically in the event of its
assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
6
<PAGE>
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Corporation on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER FUND, INC., on behalf of
Scudder Government Money
Market Series
By:
------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------
Managing Director
7
IRA Custodian Disclosure Statement and Plan Agreement
<PAGE>
CUSTODIAN DISCLOSURE
STATEMENT
The following information is provided to you by the Custodian (as specified
on the Scudder IRA application or Scudder Brokerage IRA application) of the
Scudder Individual Retirement Account, as required by the Internal Revenue Code.
You should read this information along with the Individual Retirement Account
Custodial Agreement and the prospectus(es) and/or other information for the
investments you have selected for your IRA contributions. If there is any
inconsistency between the provisions of your plan or a prospectus and this
Statement, the plan and the prospectus provisions will control.
REVOCATION OF YOUR IRA
If you have not received this Disclosure Statement at least seven calendar
days before your IRA has been established, you have the right to revoke your IRA
during the seven calendar days after your IRA was established. To revoke your
IRA, you must request the revocation in writing and send or deliver it to:
Scudder Trust Company Trust Department Two International Place Boston, MA 02110
If you mail your revocation, the postmark must be within the seven-day
period during which you are permitted to revoke your IRA. If you revoke your IRA
within the proper time, the entire amount that you contributed, without any
adjustments for administrative fees, expenses, price fluctuation, or earnings,
will be returned to you. You may obtain further IRA information from any
district office of the Internal Revenue Service.
IRA TYPES
Within this Disclosure Statement, the IRA types which are addressed are as
follows:
Traditional IRA
A Traditional IRA is an IRA to which you make regular deductible or
non-deductible contributions or your employer makes Simplified Employee Pension
Plan (SEP) IRA contributions.
Roth IRA
A Roth IRA is an IRA to which you make regular non-deductible contributions
and from which distributions are tax and penalty free if certain conditions are
met.
Conversion Roth IRA
A Conversion Roth IRA is a Roth IRA to which you convert a Traditional IRA.
<PAGE>
CONTRIBUTIONS
Eligibility to Make Contributions
Traditional IRA Contributions
You are eligible to make a regular Traditional IRA contribution for any tax
year in which you have earned income. However, you cannot make a Traditional IRA
contribution for the calendar year you reach age 701/2 or for any later year.
You must make your regular Traditional IRA contributions for any tax year
during that tax year or by April 15th of the next year. You may make rollover
contributions or transfers to your Traditional IRA at any time even if you have
reached the age of 701/2 (see "Rollovers, Transfers and Conversions" below).
If you are an employee, "earned income" means the amount shown as wages on
the Form W-2 that you receive from your employer. If you are self-employed, your
"earned income" is your net profits, if any, as shown on the "Net profits or
loss" line on the Schedule C or C-EZ of your IRS Form 1040 less your
self-employment tax deduction and contributions to a qualified retirement plan
on your own behalf. If you are performing income-producing services as a partner
in a partnership, your "earned income" is your share of the net partnership
profits as shown on the Schedule K-1 of your partnership return (IRS Form 1065)
less your self-employment tax deduction and contributions to a qualified
retirement plan on your own behalf. In most cases, earned income will not
include passive income, such as investment income or rental income.
Roth IRA Contributions
You are eligible to make a regular Roth IRA contribution for any tax year
in which you have earned income (described above), and if your Adjusted Gross
Income (AGI) does not exceed the applicable tax year's maximum allowable AGI.
Your AGI for this purpose is, in general, your income from all sources before
any deductions. The instructions to your federal income tax return (i.e., Form
1040) will provide you with specific guidance on calculating your AGI for this
purpose.
For 1998, if you are single and your AGI is below $95,050, you may make a
full $2,000 (or 100% of your earned income, if less) Roth IRA contribution. If
your AGI is $110,000 or more, you cannot make any Roth IRA contribution. If your
AGI is more than $95,050 and less than $110,000, and you have earned income of
at least the amount of your Roth IRA contribution, your maximum Roth IRA
contribution will be an amount between $200 and $1,990. If your AGI falls in
this zone, you can calculate your maximum Roth IRA contribution with this
formula:
Maximum Maximum
$15,000 - (AGI - $95,000) X Allowable = Roth IRA
- ------------------------- Contribution Contribution
$15,000
(Your "Maximum Allowable Contribution" is the lesser of $2,000 or 100% of
your earned income.)
<PAGE>
You must round up your result to the next highest $10 level (the next
highest number which ends in zero). For example, if your result was $1,521, you
would round it up to $1,530. In addition, if your rounded result is greater than
$0, but less than $200, your maximum Roth IRA contribution would automatically
be $200.*
For 1998, if you are married and file a joint return and you and your
spouse's combined AGI is below $150,050, you may make a full $2,000 Roth IRA
contribution (or 100% of your combined earned income, if less). If your combined
AGI is $160,000 or more, you cannot make any Roth IRA contribution. If your
combined AGI is more than $150,050 and less than $160,000, and you have earned
income of at least the amount of your Roth IRA contribution, your maximum Roth
IRA contribution will be an amount between $200 and $1,990. If your combined AGI
falls in this zone, you can calculate your maximum Roth IRA contribution with
this formula:
$10,000 - Maximum Maximum
(combined AGI - $150,000) X Allowable = Roth IRA
- -------------------------- Contribution Contribution
$10,000
(Your "Maximum Allowable Contribution" is the lesser of $2,000 or 100% of
your earned income.)
You must round up your result to the next highest $10 level (the next
highest number which ends in zero). For example, if your result was $1,521, you
would round it up to $1,530. In addition, if your rounded result is greater than
$0, but less than $200, your maximum Roth IRA contribution would automatically
be $200.*
* This assumes that you have at least $200 in earned income. If you have
less, the maximum would be equal to the amount of the earned income.
Maximum Combined Traditional and Roth IRA Contributions
Your maximum combined regular Traditional and Roth IRA contributions for
each tax year is the lesser of $2,000 or 100% of your earned income. However, if
your earned income is less than your spouse's earned income and you and your
spouse file a joint federal income tax return for the year, you may contribute
up to the lesser of (a) $2,000 or (b) your combined earned income reduced by the
amount your spouse contributes to his or her IRA for the year. Thus, married
persons may often make total IRA contributions of up to $4,000, even if one
spouse does not work. You can split the contribution amount in any manner among
IRAs for you and your spouse as long as you do not contribute more than $2,000
to all IRAs belonging to one spouse. (Your ability to make a Roth IRA
contribution is subject to your AGI, as described above in this section. Also,
under certain circumstances to gain the maximum possible federal income tax
deduction for Traditional IRA contributions, you may be required to carefully
allocate your contributions among IRAs. See "Deductibility of Your Traditional
IRA Contributions" below.)
<PAGE>
Excess IRA Contributions
If you make contributions to one or more IRAs which exceed the amount you
are allowed to contribute for any tax year, the excess over the allowable amount
will be subject to a 6% IRS excess contribution tax unless you remove it (and
any attributable earnings) by the due date, including any extensions, for your
federal income tax return for the year for which you made the contributions.
If you make a contribution to a Roth IRA or a conversion of a Traditional
IRA (see "Conversion from a Traditional IRA to a Conversion Roth IRA" below) and
later determine that you do not qualify to make such contribution or conversion,
legislation is currently pending which may allow you to transfer the excess
amount (and earnings) to a Traditional IRA by the due date of your tax return
for the year of the contribution or conversion. This transfer will be included
as a part of your Maximum Allowable Contribution (see "Eligibility to Make
Contributions" above) for the year. If this legislation is not enacted, the 6%
penalty described above may apply for contributions or conversions which you are
not qualified to make.
Deductibility of Your Traditional IRA Contributions
Active Participant Status
If either you or your spouse is an "active participant" in an
employer-maintained retirement plan, your Traditional IRA contributions may be
fully or partially deductible or may be nondeductible. You are an "active
participant" if you make contributions to, or receive credit for an employer
contribution in, certain employer-maintained retirement plans. These plans
include pension plans, profit-sharing plans, 401(k) plans, 403(b) plans
(tax-sheltered annuities), Keogh plans, ESOPs (stock bonus plans), simplified
employee pension plans (SEP-IRAs), simple retirement accounts (simple IRAs) and
certain governmental plans.
You will be considered to be an active participant for the year even if you
are not yet vested in any contributions made on your behalf to an
employer-maintained retirement plan. Also, if you make required contributions or
voluntary employee contributions to an employer-maintained retirement plan, you
will be considered to be an active participant even if you only worked for the
employer for part of the year.
You will not be considered to be an active participant if you are covered
in a plan only because of your service as (1) an Armed Force Reservist, for less
than 90 days active service, or (2) a volunteer firefighter covered for
firefighting service by a governmental plan.
If you are an employee, the Form W-2 that you receive from your employer
should indicate whether you were an active participant for the year that the
Form W-2 covers. If you have any questions about your participation in your
employer's plan, you should check with your employer.
(NOTE: If a husband and wife live apart for an entire tax year, and file
separate federal income tax returns, they will not be treated as married for the
purposes of these IRA deduction limits.)
<PAGE>
Deductibility if Neither You nor Your Spouse Is an Active Participant
If neither you nor your spouse is an active participant in an
employer-maintained retirement plan, you can deduct 100% of your Traditional IRA
contributions up to the maximum amount: in general, the lesser of $2,000 or 100%
of earned income. (See "Eligibility to Make Contributions" above.)
Deductibility if You or Your Spouse Is an Active Participant
If you are an active participant in an employer-maintained retirement plan,
the amount of your Traditional IRA contributions that you can deduct will depend
on what your modified adjusted gross income ("AGI") is for the year for which
you want to make an IRA contribution. Your AGI for this purpose is, in general,
your income from all sources before any deductions. The instructions to your
federal income tax return (i.e., Form 1040) will provide you with specific
guidance on calculating your AGI for this purpose.
Remember, even if you can deduct only a portion of your maximum allowable
Traditional IRA contribution, you can still contribute the difference between
the maximum deductible portion of your contribution and your maximum IRA
contribution (see "Eligibility to Make Contributions" above) as a nondeductible
contribution to a Traditional IRA or a Roth IRA (if you meet the Roth IRA income
qualifications, as described above in "Eligibility to Make Contributions"). You
may also choose to treat as nondeductible a contribution which could be
deductible. Any contributions you make to an IRA, whether deductible or
nondeductible, will accumulate earnings tax deferred until you withdraw the
contributions at a later date. (Withdrawals of Roth IRA earnings may be
tax-free, as described below in "Taxability of IRA Distributions.")
Single Individuals
If you are single and your AGI is below $30,050, you can deduct 100% of
your Traditional IRA contribution up to your maximum allowable contribution (see
"Eligibility to Make Contributions" above). If your AGI is $40,000 or more, you
cannot deduct any of your Traditional IRA contribution. If your AGI is more than
$30,050 and less than $40,000, and you have earned income of at least the amount
of your Traditional IRA contribution, your maximum tax-deductible Traditional
IRA contribution will be an amount between $200 and $1,990. If your AGI falls in
this zone, you can calculate the maximum deductible portion of your Traditional
IRA contribution with this formula:
Maximum
$10,000 - Maximum Deductible
(combined AGI - $30,000) X Allowable = Portion of
- --------------------------- Contribution Traditional IRA
$10,000 Contribution
<PAGE>
(Your "Maximum Allowable Contribution" is the
lesser of $2,000 or 100% of your earned income.)
You must round up your result to the next highest $10 level (the next
highest number which ends in zero). For example, if your result was $1,521, you
would round it up to $1,530. In addition, if your rounded result is greater than
$0, but less than $200, the maximum deductible portion of your Traditional IRA
contribution would automatically be $200.*
Married Individuals
If you are married and file a joint return and you and your spouse's
combined AGI is below $50,050, you can deduct 100% of your Traditional IRA
contribution up to your Maximum Allowable Contribution (see "Eligibility to Make
Contributions" above). If your combined AGI is $60,000 or more, you cannot
deduct any of your Traditional IRA contribution. If your combined AGI is more
than $50,050 and less than $60,000, and you have earned income of at least the
amount of your IRA contribution, your maximum tax-deductible IRA contribution
will be an amount between $200 and $1,990. If your combined AGI falls in this
zone, you can calculate the maximum deductible portion of your Traditional IRA
contribution with this formula:
Maximum
$10,000 - Maximum Deductible
(combined AGI - $150,000) X Allowable = Portion of
- -------------------------- Contribution Traditional IRA
$10,000 Contribution
(Your "Maximum Allowable Contribution" is the lesser of $2,000 or 100% of
your earned income.)
You must round up your result to the next highest $10 level (the next
highest number which ends in zero). For example, if your result was $1,521, you
would round it up to $1,530. In addition, if your rounded result is greater than
$0, but less than $200, the maximum deductible portion of your Traditional IRA
contribution would automatically be $200.*
* This assumes that you have at least $200 in earned income. If you have
less, the deductible portion would be equal to the amount of the earned
income.
Deductibility if Your Spouse Is an Active Participant, and You Are Not
If you are married and file a joint return and your spouse is an active
participant in an employer-maintained retirement plan, but you are not, then you
can deduct 100% of your Traditional IRA contribution up to your Maximum
Allowable Contribution (see "Eligibility to Make Contributions" above) if your
combined AGI is below $150,050. If your combined AGI is $160,000 or more, you
cannot deduct any of your Traditional IRA contribution. If your combined AGI is
more than $150,050 and less than $160,000, and you and your spouse have earned
income of at least the amount of your IRA contribution, your maximum
tax-deductible Traditional IRA contribution will be
<PAGE>
an amount between $200 and $1,990. If your combined AGI falls in this zone, you
can calculate the maximum deductible portion of your Traditional IRA
contribution with this formula:
Maximum
$10,000 Maximum Deductible
(combined AGI - $150,000) X Allowable = Portion of
- ---------------------------- Contribution Traditional IRA
$10,000 Contribution
(Your "Maximum Allowable Contribution" is the lesser of $2,000 or 100% of
your earned income.)
You must round up your result to the next highest $10 level (the next
highest number which ends in zero). For example, if your result was $1,521, you
would round up to $1,530. In addition, if your rounded result is greater than
$0, but less than $200, the maximum deductible portion of your Traditional IRA
contribution would automatically be $200.*
* This assumes that you and your spouse have at least $200 in earned income.
If you and your spouse have less, the deductible portion would be equal to
the amount of earned income.
Nondeductibility of your Roth IRA Contributions
Contributions to a Roth IRA are not deductible, regardless of your earned
income.
Other Eligibility, Contribution and Deductibility Provisions
Reporting of Nondeductible Contributions to IRAs
If you make a nondeductible contribution to a Traditional IRA, you must
report the amount of the nondeductible contribution to the IRS on Form 8606 as a
part of your annual federal income tax return. It has not yet been established
whether your nondeductible Roth IRA contributions must be reported on Form 8606.
You may make contributions to your Traditional IRA at any time during the
year until the total of your contributions to your Traditional IRA equals your
maximum (see "Eligibility to Make Contributions" above), without having to know
how much will be a Traditional IRA deductible contribution. When you fill out
your tax return, you may then figure out how much of your Traditional IRA
contribution is deductible. You should be aware that there is a $100 IRS penalty
tax for overstating on your federal income tax return the amount you can deduct.
Form of Contribution
Unless you are making a rollover contribution, your contribution must be
made in cash. Rollover contributions may be made in a form other than cash if
permitted by Scudder Investor Services, Inc. You cannot make any contributions
to this IRA for investment in life insurance contracts.
All contributions you make to this IRA are nonforfeitable (100% vested).
<PAGE>
SEP Contributions
If your employer makes contributions to your Traditional IRA as part of a
Simplified Employee Pension Plan (SEP-IRA), those employer contributions are not
subject to the eligibility and deduction limits discussed above. Your employer
may contribute up to the lesser of $24,000 (for 1997 and 1998) or 15% of your
compensation to your IRA and deduct that amount on the employer's federal income
tax return. The employer contribution amount is excluded from your income for
federal income tax purposes. You may also make your own contributions, subject
to the eligibility and deduction limits above, to the same Traditional IRA to
which your employer makes contributions.
ROLLOVERS, TRANSFERS, and CONVERSIONS
Rollovers and Transfers to Traditional IRAs
You are allowed to transfer or roll over all or a part of your Traditional
IRA investment to another Traditional IRA without any tax liability. However,
you are only allowed to make one rollover from a particular Traditional IRA
during any 12-month period. In addition, if you are to receive a distribution of
all or any part of your interest in an employer-maintained retirement plan, then
you may roll over all or a portion of the distribution into a Traditional IRA
either directly from the employer-maintained plan or within 60 days of the day
you receive it, unless the distribution is a required minimum distribution or
part of a series of substantially equal payments made over a period of 10 years
or more or over your life expectancy or the joint life expectancy of you and
your beneficiary. Please note that distributions paid to you directly will be
subject to a 20% withholding requirement unless they are required minimum
distributions, or payments made over a period longer than 10 years of your life
expectancy or the joint life expectancy of you and your beneficiary.
Distributions directly rolled over to a Traditional IRA are not subject to 20%
withholding.
Rollovers and Transfers to Roth IRAs
You are allowed to transfer or roll over all or part of your Roth IRA
investment to another Roth IRA without any tax liability. However, you are only
allowed to make one rollover from a particular Roth IRA during any 12-month
rollover period. In addition, if you are to receive a distribution of all or any
part of your interest in an employer-maintained retirement plan, you may not
directly roll over such amount to a Roth IRA. You must roll it over into a
Traditional IRA first, and you may then be able to convert all or part of your
Traditional IRA to a Conversion Roth IRA, depending on your AGI, or you and your
spouse's combined AGI (see "Conversion from a Traditional IRA to a Conversion
Roth IRA" below).
Conversion from a Traditional IRA to a Conversion Roth IRA
If you are single and your AGI does not exceed $100,000, or if you are
married and you and your spouse's combined AGI does not exceed $100,000 (and you
are not married filing a separate return), you may convert all or part of your
Traditional IRA to a Conversion Roth IRA. (Note, a conversion from a Traditional
IRA to a Conversion Roth IRA must be made as a rollover and not a transfer.) If
you are married and file a separate return, you may not make a conversion.The
entire amount of the taxable portion of the conversion (i.e., all amounts other
than nondeductible contributions) is taxable to you for the tax year during
which the conversion is made. However, if you make the conversion before January
1, 1999, the tax will be spread over four years. If you die during the four year
period, it has not been determined whether any remaining taxable amounts must be
included on your final tax return, or if you are married and your spouse is your
beneficiary, if your spouse can continue to include the appropriate amounts in
his or her income for the remainder of the four year period.
TAXABILITY OF IRA DISTRIBUTIONS
Traditional IRAs
If you have made only deductible contributions to your Traditional IRA, all of
your distributions will be taxed as ordinary income for the year you receive the
distributions. If, however, you made any nondeductible contributions, the
portion of the IRA distributions consisting of nondeductible contributions will
not be taxed again when you receive it. If you made any nondeductible
Traditional IRA contributions, each distribution from your Traditional IRA (or
IRAs) will consist of a nontaxable portion (return of nondeductible
contributions) and a taxable portion (return of deductible contributions, if
any, and account earnings). You may use the following formula to determine the
nontaxable portion of your distributions for a tax year:
Nondeductible
Contributions Total Non-taxable
Not Yet Distributed x Distribution = Distribution
------------------- (for the year) (for the year)
Year-End Total Traditional
IRA Account Balances Plus
Distributions Taken During
Year (Currently, there is
no clarification as to whether
you must also include your Roth
and Conversion Roth IRA
account balances in this amount.)
To figure the year-end total Traditional IRA account balances, you treat
all of your Traditional IRAs as a single IRA. This includes all regular
Traditional IRAs, as well as SEP-IRAs, and Traditional IRAs to which you have
made rollover contributions.
If you take a distribution from a Traditional IRA to which you have made
nondeductible contributions, you must file Form 8606 as part of your annual
federal income tax return for the year of the distribution.
Roth IRAs
Distributions of earnings from your Roth IRA (or Conversion Roth IRA) will
be taxed as ordinary income for the year you receive the distribution, unless 1)
the distribution is made after five taxable years from your first Roth IRA
contribution (or after five taxable years from each conversion of a Traditional
IRA to a Conversion Roth IRA) and if 2) the distribution is made for one of the
following reasons:
1) It is paid to you after you attain age 59 1/2.
2) It is paid to you because you are disabled.
3) It is paid to your beneficiary or estate because of your death.
4) It is paid for the first-time home purchase for you, your spouse, or any
child, grandchild or ancestor of you or your spouse. (Please see your tax
advisor to determine if your distribution qualifies as made for the
first-time purchase of a home.) A maximum lifetime amount of $10,000 from
all IRAs can qualify for this tax exception.
The five-taxable-year period indicated above begins on the January 1
of the calendar year during which you make a contribution or conversion.
Distributions from a Roth IRA are made first from non-taxable principal and
then from earnings. Roth IRAs to which you make regular contributions are
aggregated for purposes of determining non-taxable principal and earnings for
distributions from Roth IRAs. Conversion Roth IRAs with the same five year
holding period are aggregated for purposes of determining non-taxable principal
and earnings for distributions from Conversion Roth IRAs. The five year holding
period for a Conversion Roth IRA begins with the tax year of the most recent
conversion to the Conversion Roth IRA. Because of this rule, you may wish to
establish a separate Conversion Roth IRA account for each conversion you make.
Special rules may apply if a distribution is made from a Conversion Roth
IRA within the five-taxable-year period beginning with the January 1 of the year
in which the most recent conversion was made to that particular Conversion Roth
IRA. In this case, certain penalties may apply on the amounts which were
previously subject to tax at the time of the conversion (see "Special Penalty
for Certain Conversion Roth IRA Distributions" below).
It is currently not yet established whether you must file Form 8606 as part
of your annual federal income tax return for the year of the distribution of
Roth IRA contributions and/or earnings.
<PAGE>
PENALTIES ON IRA DISTRIBUTIONS
Traditional IRAs
Since the purpose of your IRA is to accumulate funds for your retirement, if you
take a distribution from your Traditional IRA before you reach the age of 591/2,
the taxable portion of the distribution will be subject to a 10% IRS early
withdrawal penalty tax unless the distribution meets one of these exceptions:
1) It is made to your beneficiary or your estate because of your death.
2) It is part of a series of installment payments paid over your life
expectancy or the joint life and last survivor expectancy of you and your
beneficiary, and the payments continue until the later of five years or
your reaching age 59 1/2.
3) It is rolled over into another IRA or a qualified plan (if allowed) within
60 days of the day you receive the distribution.
4) It is paid to you because you are disabled.
5) It is paid to you to pay medical expenses in excess of 7 1/2% of your
adjusted gross income.
6) It is paid to you to pay for medical insurance premiums if you are
unemployed (or within 60 days after your re-employment) and you have
received unemployment compensation for at least 12 consecutive weeks during
the current or preceding taxable year. (Self-employed individuals may only
be eligible for this exception in certain circumstances.)
7) It is paid to you, your spouse, or any child or grandchild of you or your
spouse for qualified higher education expenses. (Please see your tax
advisor to determine if your distribution qualifies as made for qualified
higher education expenses.)
8) It is paid for the first-time purchase of a home for you, your spouse, or
any child, grandchild or ancestor of you or your spouse. (See your tax
advisor to determine if your distribution qualifies as made for the
first-time purchase of a home.) A maximum lifetime amount of $10,000 from
all IRAs can qualify for this penalty exception.
Roth IRAs
The taxable portion (the earnings portion) of distributions from Roth IRAs
or Conversion Roth IRAs will be subject to a 10% penalty tax, unless one of the
exceptions listed in items 1-8 above applies. (A special penalty may apply for
distribution from a Conversion Roth IRA within five taxable years of a
conversion. See "Special Penalty for Certain Conversion Roth IRA Distributions"
below).
<PAGE>
SPECIAL PENALTY
FOR CERTAIN CONVERSION
ROTH IRA DISTRIBUTIONS
Legislation is currently pending which will provide that amounts which are
distributed from a Conversion Roth IRA within five taxable years of a conversion
would be subject to i) a 10% penalty and ii) for conversions made in 1998, an
additional 10% penalty. These penalties would be based on the amount that was
taxable at the time of conversion. Any such withdrawal from a Conversion Roth
IRA may also be deemed to come first from amounts which were taxable at the time
of the conversion.
In addition, separate Roth IRAs and Conversion Roth IRAs must be
maintained. The proposed legislation would provide that the five year holding
period described above may be deemed to begin with the most recent taxable year
for which a conversion is made. All Roth IRAs with the same five year holding
period would be aggregated to determine the amount of the withdrawal which is
considered attributable to the taxable amounts at the time of the conversion.
You must establish a separate Conversion Roth IRA for conversions of Traditional
IRAs that you make in different calendar years. One Conversion Roth IRA can be
established for all conversions made within the same calendar year.
REQUIRED DISTRIBUTIONS
Traditional IRAs
You must begin taking distributions from your Traditional IRA by the April
1 following the year in which you reach age 701/2. The minimum amount that you
are required to take for the year you reach 701/2 and each following year is the
amount that you would take as a distribution if you were taking distributions
over the joint life and last survivor expectancy of you and your beneficiary.
For more information on the minimum distribution requirements of your IRA, see
Articles IV and VIII of the Form 5305-A (1-98) Individual Retirement Custodial
Account Agreement.
Roth IRAs
You are not required to begin taking distributions from a Roth IRA (or
Conversion Roth IRA) at any time. If you die prior to a distribution of all
amounts held in a Roth IRA (or Conversion Roth IRA), certain distribution rules
apply to your beneficiary. For more information on the distribution requirements
of your Roth IRA (or Conversion Roth IRA) after your death, see Articles V and
IX of the Form 5303-RA(1-98) Individual Retirement Custodial Account Agreement.
EXCESS ACCUMULATION
PENALTY TAX
If you do not meet the minimum distribution requirements as discussed in
Articles IV and VIII of the Form 5305-A (1-98) Individual Retirement Custodial
<PAGE>
Account Agreement for any year, you will be subject to an IRS penalty tax of 50%
of the amount that you were required to take as a distribution but did not take
as a distribution.
ESTATE TAX
After your death, the balance in your IRA may be subject to an estate tax.
You should contact your attorney or accountant for more details.
PROHIBITED TRANSACTIONS
If you or your Beneficiary engage in any prohibited transactions, including
selling, exchanging, or leasing any property between you and the custodial
account, the account would lose its tax-exempt status and all assets of the
account will be treated as if they were distributed to you. You would then be
required to pay taxes on the appropriate portion of your IRA assets. (See
"Taxability of IRA Distributions" above.) In addition, if you are under age 59
1/2 and are not disabled, the distribution will also be subject to the 10% IRS
early withdrawal penalty tax unless it meets any of the exceptions listed above
under "Penalties on IRA Distributions" and is not subject to the penalty
described in "Special Penalty for Certain Conversion Roth IRA Distributions"
described above.
You also cannot use your IRA assets as collateral for a loan. If you do
this, the amount used as collateral will be treated as if it were distributed to
you and will be subject to tax and penalty tax as provided in the paragraph
above for prohibited transactions.
SCUDDER MUTUAL FUND
INFORMATION
Information about the Scudder mutual funds available for investment in this
IRA is available from Scudder Investor Services, Inc. You are required to
receive this information (given in the form of a prospectus governed by the
rules of the Securities and Exchange Commission) before you invest in the Funds.
Growth in the value of your custodial account cannot be guaranteed or
projected. The Funds' prospectuses and reports provide information regarding
current income and expenses.
BROKERAGE INFORMATION
Information about the brokerage services available for this IRA is available
from Scudder Brokerage Services, Inc. Growth in the value of your custodial
account cannot be guaranteed or projected.
CUSTODIAL PROVISIONS
These provisions supplement paragraphs 5-7 of Article IX of the Form 5305-RA
(1-98), Individual Retirement Custodial Account Agreement and paragraphs 5-7 of
Article VIII of the Form 5305-A (1-98), Individual Retirement Custodial Account
Agreement and should be read in conjunction with them.
<PAGE>
1. Your contributions must be made to a trust or custodial account for which
the trustee or custodian is either a bank or a person who has been approved
by the Secretary of the Treasury.
2. The Custodian may charge your custodial account for any fees or other
expenses of maintaining your account. The Custodian's fee schedule is also
referred to in Article IX of the Form 5305-RA (1-98), IRA Custodial Account
Agreement and Article VIII of the Form 5305-A (1-98) IRA Custodial Account
Agreement and notice of such fee schedule will be provided to you in an
appropriate manner.
REPORTING EXCESS
CONTRIBUTIONS,
EXCESS ACCUMULATIONS,
and EARLY WITHDRAWALS
TO THE IRS
For any year for which you have an excess contribution, an excess
accumulation, or an early withdrawal (unless the 1099-R you receive correctly
reflects that the distributions meet an exception to the penalty tax), you are
required to report it on Form 5329 with your annual federal income tax return to
the Internal Revenue Service.
The form of this Individual Retirement Account Plan has been approved by
the Internal Revenue Service. The approval, however, is only for the form of the
Plan and does not represent an approval of the merits of the Plan.
For Traditional IRAs:
IRA Form 5305-A (1-98)
SCUDDER INDIVIDUAL RETIREMENT CUSTODIAL
ACCOUNT AGREEMENT
(Under Section 408(a) of the Internal Revenue Code)
The Depositor whose name appears on the Scudder IRA Application is
establishing an individual retirement account under section 408(a) to provide
for his or her retirement and for the support of his or her beneficiaries after
death.
The Custodian named on the Application has given the Depositor the
disclosure statement required under Regulations section 1.408-6.
The Depositor has deposited with the Custodian the amount indicated on the
Application in cash. The Depositor and the Custodian make the following
agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
<PAGE>
contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5).
2. No part of the custodial funds may be invested in collectables (within
the meaning of section 408(m)), except as otherwise permitted by section
408(m)(3), which provides an exception for certain gold, silver, and platinum
coins issued under the laws of any state, and certain bullion.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and to the surviving spouse and shall apply to all subsequent years. The life
expectancy of a non-spouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date April 1
following the calendar year end in which the Depositor reaches age 70 1/2. By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
<PAGE>
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have reached age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"Alternative Method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
ARTICLE VIII
1. Please refer to the Scudder IRA Application or Scudder Brokerage IRA
Application which is incorporated into this Agreement as this paragraph of
Article VIII.
2. Depositor's Selection of Investments.
Investment Options
The Depositor may only direct the Custodian to invest custodial funds in
investment shares of the Mutual Funds (regulated investment companies for which
Scudder, Stevens & Clark, Inc., its successor or any affiliates, acts as the
investment adviser and which Scudder Investor Services, Inc., (the
"Distributor") has designated as appropriate for investments in the custodial
account), or in other investments which the Distributor or its successors has
designated as eligible investments for the custodial account.
Investments
As soon as practicable after the Custodian receives the Application, the
Custodian will invest the initial contribution or transfer as the Depositor
directed on the Application in shares of the Mutual Fund(s) or other investments
designated by the Distributor as eligible investments for the custodial account.
With regard to the Mutual Funds listed on the Application and any other Mutual
<PAGE>
Fund, the Depositor understands that neither the Custodian nor the Distributor
endorses the Mutual Funds as suitable investments for the custodial account. In
addition, neither the Custodian nor the Distributor will provide investment
advice to the Depositor. The Depositor assumes all responsibility for the choice
of his or her investments in the custodial account.
The Custodian will invest each subsequent contribution or transfer to the
custodial account as soon as practicable after the Custodian receives the
contribution or transfer, according to the Depositor's instructions for that
subsequent contribution or transfer, in the Mutual Funds or other investment
designated by the Distributor as eligible investments for the custodial account.
If the Depositor's custodial account assets are invested in any Mutual Fund
which terminates or is eliminated, the Custodian will transfer the custodial
account assets in that Mutual Fund to another Mutual Fund designated by the
Distributor unless the Depositor instructs the Custodian otherwise in the manner
required by the Custodian.
If the Custodian receives any investment instructions from the Depositor
which in the opinion of the Custodian are not in good order or are unclear, or
if the Custodian receives any monies from the Depositor which would exceed the
amount that the Depositor may contribute to the custodial account, the Custodian
may hold all or a portion of the monies uninvested pending receipt of written
(or in any other manner permitted by the Distributor) instructions or
clarification. During any such delay the Custodian will not be liable for any
loss of income or appreciation, loss of interest, or for any other loss. The
Custodian may also return all or a portion of the monies to the Depositor.
Again, in such situations, the Custodian will not be liable for any loss.
Unless the Custodian permits otherwise, all dividend and capital gains
distributions received on shares of a Mutual Fund in the custodial account
(unless made in the form of additional shares) will be reinvested in shares of
the same Mutual Fund which paid the distribution, and credited to the custodial
account. All accumulations from other investments will be reinvested in the
Depositor's custodial account according to the Depositor's instructions to the
Custodian which must be in a form acceptable to the Custodian.
The Depositor may change any portion of his or her investment in an
eligible investment to another eligible investment by requesting the change in
the manner the Custodian requires. However, the Distributor reserves the right
to refuse to sell shares of any Mutual Fund when it determines in its own
judgment that the Depositor has made frequent trading in the custodial account.
3. Contributions
All contributions by the Depositor to the custodial account must be in
cash, except for initial contributions of rollovers which may be made in a form
other than cash if permitted by the Distributor.
<PAGE>
The Custodian will designate contributions (other than rollover
contributions) as being made for particular years as requested by the Depositor.
If the Depositor does not designate a year for any contribution, the Custodian
will designate the contribution as being made for a particular year according to
a policy established by the Distributor.
If permitted by the Distributor, the Depositor may make rollover
contributions to the custodial account of deductible employee contributions
which were made to qualified employer or government retirement plans as provided
in Internal Revenue Code Section 72(o).
The Depositor warrants that all contributions to the custodial account,
including any rollover contributions, will be made in accordance with the
provisions of the Internal Revenue Code.
Excess Contributions
If the Depositor exceeds the amount that may be contributed to his or her
custodial account for any year, the Custodian will, upon a proper written
request from the Depositor, either 1) return the excess and any attributable
earnings to the Depositor, or 2) treat the contribution as if it were made for a
later year.
4. Transfers
The Custodian will accept transfers of a cash amount to the custodial
account from another custodian or a trustee of an individual retirement account
or individual retirement annuity upon the Depositor's written direction. The
Custodian will also transfer a cash amount in the custodial account upon the
written request of the Depositor to another custodian or trustee of an
individual retirement account or individual retirement annuity. For such a
transfer, the Custodian may require the written acceptance of the successor
custodian. The Depositor warrants that all transfers to and from the custodial
account will be made in accordance with the rules and regulations issued by the
Internal Revenue Service.
5. Custodian's Fees
The Custodian is entitled to receive reasonable fees for establishing and
maintaining the custodial account. These fees will be set by the Custodian from
time to time.
The Custodian may change its fee schedule upon thirty (30) days' written
notice to the Distributor.
The Custodian has the right to charge the custodial account, including the
right to liquidate Mutual Fund shares or other investments, or to charge the
Depositor for the Custodian's fees, as well as for any income, gift, estate and
inheritances taxes (including any transfer taxes incurred in connection with the
investment or reinvestment of the assets of the custodial account), which are
levied or assessed against the custodial account assets, and for all other
administrative expenses of the Custodian for performing its duties, including
any fees for legal services provided to the Custodian.
<PAGE>
6. Custodial Account
Once the Custodian mails an acknowledgement of its receipt of the
Application to the Depositor, this Agreement will be effective as of the date
the Depositor signed the Application. As soon as practicable after the Custodian
receives the Application, the Custodian will open and maintain a separate
custodial account for the Depositor.
All Mutual Fund shares or other investments in the custodial account will
be registered in the name of the Custodian (with or without identifying the
Depositor) or in the name of the Custodian's nominee. The Custodian will
deliver, or cause to be executed and delivered, to the Depositor all notices,
prospectuses, financial statements, proxies and proxy solicitating materials
relating to the Mutual Funds or other investments in the custodial account.
The Custodian will vote shares only according to the Depositor's
instructions on an executed proxy; provided that the Custodian may without
written direction from the Depositor vote shares "present" solely for the
purposes of establishing a quorum.
7. Additional Provisions Regarding the Custodian
According to this Agreement, the Custodian will be an agent for the
Depositor for the custodial account to receive and to invest contributions, and
to hold and to distribute these investments as authorized by the Depositor, and
to keep adequate records and provide reports as required by the Agreement. None
of the parties to this Agreement intend to confer any fiduciary duties on the
Custodian, and no such duties shall be implied.
The Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time. However, the custodial
account must be registered in the name of the Custodian or its nominee as
provided in paragraph 6 above.
The Custodian assumes no responsibility or liability for collecting
contributions, for the deductibility or propriety of any contribution made to
the custodial account, or for the purpose or propriety of any distributions made
from the custodial account. Those matters are the sole responsibility of the
Depositor.
The Custodian will keep adequate records of transactions it is required to
perform for the custodial account. The Custodian will provide to the Depositor a
written report or reports reflecting the transactions in the custodial account
over each calendar year and the assets in the custodial account as of the end of
the calendar year.
If the Custodian resigns or is removed, as provided in paragraph 10 below,
the Custodian must provide a written report or reports reflecting the
transactions in the custodial account from the last report through the date of
the Custodian's resignation or removal, and the assets in the custodial account
as of the date of the Custodian's resignation or removal.
After providing the end-of-the-year report or the reports from the
Custodian's resignation or removal, the Custodian will be forever released from
all liability and accountability to anyone for its acts or transactions
reflected in the report(s), except those acts or transactions to which the
Depositor (or recipient, if different) has filed a written objection with the
Custodian within 60 days of the date the report was provided to the Depositor or
other recipient.
The Depositor always fully indemnifies the Custodian and will hold it
harmless from any and all liability which may arise from this Agreement, except
that which arises from the Custodian's negligence or willful misconduct. The
Custodian will not be obligated or expected to commence or defend any legal
action or proceeding about this Agreement unless both the Custodian and
Depositor agree and the Custodian will be fully indemnified to its satisfaction.
The Custodian may conclusively rely upon and will be protected from acting
on any written order from or authorized by the Depositor, or any other notice,
request, consent, certificate or other instrument, paper, or other communication
which the Custodian believes to be genuine and issued in proper form with proper
authority, as long as the Custodian acts in good faith in taking or omitting to
take any action in reliance upon the communication.
Before the Beneficiary has notified the Custodian (in the manner required
by the Custodian) of the Depositor's death, the Custodian will not be
responsible for treating the Beneficiary as if he or she has rights and
obligations under this Agreement.
8. Distributions
This paragraph supplements the information found in Article IV above, and
must be read in conjunction with it.
The Depositor has the responsibility to ensure that he or she will begin to
receive distributions from the custodial account on or before the Required
Beginning Date (i.e., the April 1 following the year in which the Depositor
reaches age 70 1/2). The Depositor also has sole responsibility to initiate
distributions from the custodial account and sole responsibility to ensure that
all distributions are made in accordance with the applicable provisions of the
Internal Revenue Code.
Distribution Requests
The Depositor is responsible for making the distribution requests to the
Custodian sufficiently in advance of any requested or required distribution time
to ensure that the distribution will be made before that requested or required
distribution time.
The Custodian will make distributions from the custodial account only after
receiving a written request from the Depositor (or any other party entitled to
receive the assets of the custodial account) or any other party entitled to
receive the assets of the custodial account. The Custodian will make the
distribution as soon as practicable after it receives the written request.
The Depositor must make the distribution request in the form required by
the Custodian. The distribution
<PAGE>
request must include the form of distribution requested (e.g., lump-sum
distribution or installment payments). The Depositor must provide to the
Custodian any applications, certificates, tax waivers, signature guarantees, and
any other documents (including proof of legal representative's authority) that
the Custodian requires. The Custodian will not be liable for complying with a
distribution request that appears on its face to be genuine, nor will the
Custodian be liable for refusing to comply with a distribution request which the
Custodian is not satisfied is genuine.
If the distribution request is not made in the correct form, the Custodian
is not responsible and will not be liable to the Depositor for any losses while
the Custodian waits for the distribution request to be made in the proper form.
The Depositor also agrees to fully indemnify the Custodian for any losses which
may result from the Custodian's failing to act upon an improperly made
distribution request.
The Depositor may request a distribution of any portion of the custodial
account at any time. However, the Depositor must meet the minimum distribution
requirements of the Internal Revenue Code at all times.
The Custodian does not assume any responsibility for the tax treatment of
any distributions from the custodial account.
Notwithstanding anything to the contrary in 3.(b.) and (c.) of Article IV
above, the Depositor may not receive distributions from the custodial account in
the form of an annuity.
Designation of Beneficiary
The Depositor may designate a beneficiary or beneficiaries (the
"Beneficiary") to receive the assets of the custodial account upon the
Depositor's death. The Depositor must designate his or her Beneficiary to the
Custodian in the manner required by the Custodian.
If the Depositor's Beneficiary is not living at the Depositor's death, the
Depositor's estate is entitled to receive the assets of the custodial account.
In addition, to the extent the Depositor has not effectively disposed of the
assets in the custodial account by his or her designation of Beneficiary, the
Depositor's estate will be entitled to receive the assets of the custodial
account.
If the Depositor's Beneficiary dies after the Depositor, the Beneficiary's
estate will be entitled to receive the assets of the custodial account.
The Depositor may change his or her choice of a Beneficiary at any time by
notifying the Custodian in the manner required by the Custodian. However, if the
Depositor changes his or her Beneficiary after the Required Beginning Date, that
new Beneficiary may decrease the joint life and last survivor expectancy of the
Depositor and his or her Beneficiary for purposes of installment payments paid
over the joint life and last survivor expectancy of the Depositor and his or her
Beneficiary.
Before the Depositor's death, the Depositor's Beneficiary has no right or
power to anticipate any part of the custodial account, or to sell, assign,
<PAGE>
transfer, pledge, or hypothecate any part of the account. In addition, the
Custodial account will not be liable for any debts of the Depositor's
Beneficiary or, except as required by law, subject to attachment, execution, or
any other legal process.
Election to Have Life Expectancy Recalculated
For installment payments to be made over the Depositor's life expectancy,
the Depositor may make an election to have the Custodian annually recalculate
his or her life expectancy, and the life expectancy of the Depositor's spouse,
if applicable.
The Depositor must make the election to have the Custodian recalculate no
later than his or her Required Beginning Date. The Depositor must make this
election in the manner required by the Custodian.
If the depositor does not elect to have the Custodian recalculate life
expectancy, the Custodian will not recalculate the life expectancy.
9. Amendment
This paragraph supplements the information found in Article VII above, and
must be read in conjunction with it.
If the Distributor amends this Agreement, it must provide a written notice
of the amendment to both the Depositor and the Custodian. The Depositor will be
considered to have consented to the Distributor's amendment 30 days after the
Distributor has mailed the notice to the Depositor unless within that 30-day
period the Depositor gives the Custodian a proper written order for a lump-sum
distribution. The Custodian will be considered to have consented to the
Distributor's amendment unless it notifies the Distributor otherwise within 30
days after the Distributor has mailed (or otherwise delivered) the notice to the
Custodian.
The Custodian may change its fee schedule, as provided in paragraph 5
above, without having to amend this Agreement.
10. Resignation or Removal of Custodian
The Custodian may resign at any time by giving at least 30 days' written
notice to the Distributor. The Distributor may remove the Custodian at any time
by giving at least 30 days' written notice to the Custodian.
If the Custodian resigns or is removed, the Distributor must either appoint
a successor custodian to serve under this Agreement or notify the Depositor that
he or she must appoint a successor custodian. The successor custodian must
provide a written acceptance of its appointment as successor custodian to the
Custodian. Upon receiving this written acceptance, the Custodian must transfer
to the successor custodian all of the assets and records of the custodial
account.
The Custodian may reserve a portion of the custodial account assets to pay
for any fees, compensation, costs, expenses, or for any liabilities constituting
a charge on or against the Custodian. If any assets remain after paying these
<PAGE>
items, the Custodian will pay the remainder to the successor custodian.
If the Custodian resigns or is removed, and the Distributor or the
Depositor has not appointed a successor custodian within 30 days after the
Custodian's resignation or removal (or a longer period, if the Custodian
agrees), the Custodian will terminate this Agreement as provided in paragraph
11, below.
After the Custodian has transferred the custodial account assets to the
successor custodian, the Custodian is relieved of any further liability for this
Agreement, the custodial account, and the custodial account assets.
The Custodian or any successor custodian appointed to serve under this
Agreement, must be either 1) a bank as defined in Internal Revenue Code Section
408(n), or 2) such other person who qualifies to serve as prescribed by Internal
Revenue Code Section 408(a)(2) and satisfies the Distributor and the Custodian
that he or she qualifies.
11. Termination of Agreement
As provided in paragraph 10, above, the Custodian will terminate the
Agreement if the Distributor or the Depositor has not appointed a successor
custodian within the specified time after the Custodian resigns or is removed.
If this Agreement is terminated, the Custodian will distribute the custodial
account assets in kind or cash to the Depositor. The Custodian may reserve a
portion of the assets as provided in paragraph 10.
The Depositor may terminate this Agreement at any time by taking a lump-sum
distribution of his or her investment in the custodial account.
After this Agreement has been terminated, it will have no further force and
effect, and the Custodian is relieved of any further liability for this
Agreement, the custodial account, and the custodial account assets.
12. Liquidation of Custodial Account
The Distributor has the right to direct the Custodian by a written order to
liquidate the custodial account if the value of the account is below a minimum
level established from time to time by the Distributor on a nondiscriminatory
basis. Once the Custodian receives a written liquidation order from the
Distributor, the Custodian will liquidate the assets in the custodial account as
soon as practicable and distribute the proceeds to the Depositor in a lump sum
in cash or in kind. The Custodian may reserve a portion of the account to pay
for any fees, compensation, costs or expenses, or for any liabilities
constituting a charge on or against the Custodian. If any assets remain after
paying these items, the Custodian will pay the remainder to the Depositor.
If the custodial account is liquidated as provided above, neither the
Distributor nor the Custodian will be responsible or liable for any penalty or
loss incurred by anyone because of the liquidation. In addition, after the
account is liquidated, both the Distributor and the Custodian will be relieved
from any further liability for this Agreement, the custodial account, and the
custodial account assets.
13. Miscellaneous
Any reference in this Agreement to Internal Revenue Code means the Internal
Revenue Code of 1986, as amended, and any future successors.
Except as provided in the next sentence, any references to "Depositor" in
this Agreement will apply to the Depositor's Beneficiary if the Depositor is
deceased. The references to the "Depositor" in paragraphs 3, 4, and 8 of this
Article VIII will apply to the Depositor's Beneficiary only if the Depositor is
deceased, the Depositor's Beneficiary is the Depositor's surviving spouse, and
the surviving spouse elects to treat the custodial account as his or her own. If
the spouse does elect to treat the custodial account as his or her own, as
discussed in the preceding sentence, references to "Depositor" in Articles I
through VII will apply to the spouse as the Depositor's Beneficiary.
Unless specifically designated otherwise in this Agreement, any notice or
report that the Custodian must provide to any person by reason of this Agreement
will be considered to have been provided by the Custodian as of the date it is
sent by first-class mail to the person at his or her most recent address on the
Custodian's records.
To the extent permitted by law, the Custodian may, at its election and upon
the written instructions of the Depositor, pay investment adviser fees from the
Depositor's custodial accounts.
This Agreement is accepted by the Custodian in the Commonwealth of
Massachusetts and will be constructed and administered in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement is intended to qualify under Section 408 of the Internal
Revenue Code as an Individual Retirement Account, and under Section 219 of the
Internal Revenue Code for any tax-deductibility and limitations of contributions
made to the IRA. If any language or provision of this Agreement can be
interpreted in more than one way, the interpretation of the language or
provision that is consistent with the intention of this Agreement will control.
However, the Custodian and the Mutual Funds (or any company associated with
them) will not be responsible for guaranteeing that the intentions of this
Agreement are met through the use of this Agreement. The Depositor should
consult his or her own attorney for any assurances that the intentions of the
Agreement will be met through the use of this Agreement.
For Roth IRAs: Form 5305-RA (1-98)
SCUDDER ROTH INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT AGREEMENT
(Under section 408A of the Internal Revenue Code)
The Depositor whose name appears on the Scudder IRA application or Scudder
Brokerage IRA application is establishing a Roth individual retirement account
(Roth IRA) under Section 408A to provide for his or her retirement and for the
<PAGE>
support of his or her beneficiaries after death. The Custodian named on the
Application has given the Depositor the disclosure statement required under
Regulations Section 1.408-6. The Depositor has deposited with the Custodian the
amount indicated on the Application in cash. The Depositor and the Custodian
make the following agreement:
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in Section 408A(e), the
custodian will accept only cash contributions and only up to a maximum amount of
$2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same tax
year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married depositor who files jointly, between AGI $150,000 and $160,000;
and for a married depositor who files separately, between $0 and $10,000. In the
case of a conversion, the custodian will not accept IRA Conversion Contributions
in a tax year if the depositor's AGI for that tax year exceeds $100,000 or if
the depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)), except as otherwise permitted by section
408(m)(3), which provides an exception for certain gold, silver and platinum
coins, coins issued under the laws of any state, and certain bullion.
ARTICLE V
1. If the depositor dies before his or her entire interest is distributed
to him or her and the grantor's surviving spouse is not the sole beneficiary,
the entire remaining interest will, at the election of the depositor or, if the
depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of
the depositor's death. If distributions do not begin by the date
described in (b), distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the minimum
annual payment for each year, divide the grantor's entire interest in the trust
as of the close of business on December 31 of the preceding year by the life
expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the depositor's
date of death, such spouse will then be treated as the depositor.
ARTICLE VI
1.The depositor agrees to provide the custodian with information necessary
for the custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E), Regulations sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2.The Custodian agrees to submit reports to the Internal Revenue Service
and the depositor prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with Section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VIII
This agreement will be amended from time to time to comply with the
provisions of the code, related regulations, and other published guidance. Other
Amendments may be made with the consent of the persons whose signatures appear
on the application.
ARTICLE IX
1. Please refer to the Scudder IRA Application or Scudder Brokerage IRA
Application, which is incorporated into this Agreement as this paragraph of
Article IX.
2. Depositor's Selection of Investments
<PAGE>
Investment Options
The Depositor may only direct the Custodian to invest custodial funds in
investment shares of the Mutual Funds (regulated investment companies for which
Scudder, Stevens & Clark, Inc., its successor or any affiliates, acts as the
investment adviser and which Scudder Investor Services, Inc., (the
"Distributor") has designated as appropriate for investments in the custodial
account), or in other investments which the Distributor or its successors has
designated as eligible investments for the custodial account.
Investments
As soon as practicable after the Custodian receives the Application, the
Custodian will invest the initial contribution or transfer as the Depositor
directed on the Application in shares of the Mutual Fund(s) or other investments
designated by the Distributor as eligible investments for the custodial account.
With regard to the Mutual Funds listed on the Application and any other Mutual
Fund, the Depositor understands that neither the Custodian nor the Distributor
endorses the Mutual Funds as suitable investments for the custodial account. In
addition, the Custodian (and the Distributor, unless the Distributor otherwise
agrees) will not provide investment advice to the Depositor. The Depositor
assumes all responsibility for the choice of his or her investments in the
custodial account.
The Custodian will invest each subsequent contribution or transfer to the
custodial account as soon as practicable after the Custodian receives the
contribution or transfer, according to the Depositor's instructions for that
subsequent contribution or transfer, in the Mutual Funds or other investment
designated by the Distributor as eligible investments for the custodial account.
If the Depositor's custodial account assets are invested in any Mutual Fund
which terminates or is eliminated, the Custodian will transfer the custodial
account assets in that Mutual Fund to another Mutual Fund designated by the
Distributor unless the Depositor instructs the Custodian otherwise in the manner
required by the Custodian.
If the Custodian receives any investment instructions from the Depositor
which in the opinion of the Custodian are not in good order or are unclear, or
if the Custodian receives any monies from the Depositor which would exceed the
amount that the Depositor may contribute to the custodial account, the Custodian
may hold all or a portion of the monies uninvested pending receipt of written
(or in any other manner permitted by the Distributor) instructions or
clarification. During any such delay the Custodian will not be liable for any
loss of income or appreciation, loss of interest, or for any other loss. The
Custodian may also return all or a portion of the monies to the Depositor.
Again, in such situations, the Custodian will not be liable for any loss.
Unless the Custodian permits otherwise, all dividend and capital gains
distributions received on shares of a Mutual Fund in the custodial account
(unless made in the form of additional shares) will be reinvested in shares of
the same Mutual Fund which paid the distribution, and credited to the custodial
account. All accumulations from other investments will be reinvested in the
Depositor's custodial account according to the Depositor's instructions to the
Custodian which must be in a form acceptable to the Custodian.
The Depositor may change any portion of his or her investment in an
eligible investment to another eligible investment by requesting the change in
the manner the Custodian requires. However, the Distributor reserves the right
to refuse to sell shares of any Mutual Fund when it determines in its own
judgment that the Depositor has made frequent trading in the custodial account.
3. Contributions
All contributions by the Depositor to the custodial account must be in
cash, except for initial contributions of rollovers which may be made in a form
other than cash if permitted by the Distributor.
The Custodian will designate contributions (other than rollover
contributions) as being made for particular years as requested by the Depositor.
If the Depositor does not designate a year for any contribution, the Custodian
will designate the contribution as being made for a particular year according to
a policy established by the Distributor.
If permitted by the Distributor, the Depositor may make rollover
contributions to the custodial account of deductible employee contributions
which were made to qualified employer or government retirement plans as provided
in Internal Revenue Code Section 72(o).
The Depositor warrants that all contributions to the custodial account,
including any rollover contributions, will be made in accordance with the
provisions of the Internal Revenue Code.
Excess Contributions
If the Depositor exceeds the amount that may be contributed to his or her
custodial account for any year, the Custodian will apply such amount as is
allowed by law.
4. Transfers
The Custodian will accept transfers to the custodial account of investments
which the Distributor or its successors have designated as eligible investments
for the custodial account from another custodian or trustee of an individual
retirement account or individual retirement annuity upon the Depositor's
direction. The Custodian will also transfer amounts in the custodial account
upon the request in writing, or in such other manner as agreed upon by the
Custodian, of the Depositor to another custodian or trustee of an individual
retirement account or individual retirement annuity. For such a transfer, the
Custodian may require the written acceptance of the successor custodian. The
Depositor warrants that all transfers to and from the custodial account will be
<PAGE>
made in accordance with the rules and regulations issued by the Internal Revenue
Service.
5. Custodian's Fees
The Custodian is entitled to receive reasonable fees for establishing and
maintaining the custodial account. These fees will be set by the Custodian from
time to time.
The Custodian may change its fee schedule upon thirty (30) days' written
notice to the Distributor.
The Custodian has the right to charge the custodial account, including the
right to liquidate Mutual Fund shares or other investments, or to charge the
Depositor for the Custodian's fees, as well as for any income, gift, estate, and
inheritance taxes (including any transfer taxes incurred in connection with the
investment or reinvestment of the assets of the custodial account), which are
levied or assessed against the custodial account assets, and for all other
administrative expenses of the Custodian for performing its duties, including
any fees for legal services provided to the Custodian.
6. Custodial Account
Once the Custodian mails an acknowledgment of its receipt of the
Application to the Depositor, this Agreement will be effective as of the date
the Depositor signed the Application. As soon as practicable after the Custodian
receives the Application, the Custodian will open and maintain a separate
custodial account for the Depositor.
All Mutual Fund shares or other investments in the custodial account will
be registered in the name of the Custodian (with or without identifying the
Depositor) or in the name of the Custodian's nominee. The Custodian or its agent
will deliver, or cause to be executed and delivered, to the Depositor all
notices, prospectuses, financial statements, proxies, and proxy soliciting
materials which the Custodian or its agent receives which relate to the Mutual
Funds or other investments in the custodial account. The Custodian or its agent
will vote shares only according to the Depositor's instructions on an executed
proxy, provided that the Custodian may without written direction from the
Depositor vote shares "present" solely for purposes of establishing a quorum.
7. Additional Provisions Regarding the Custodian
According to this Agreement, the Custodian will be an agent for the
Depositor for the custodial account to receive and to invest contributions, and
to hold and to distribute these investments as authorized by the Depositor, and
to keep adequate records and provide reports as required by the Agreement. None
of the parties to this Agreement intend to confer any fiduciary duties on the
Custodian, and no such duties shall be implied.
The Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time. However, the custodial
account must be registered in the name of the Custodian or its nominee as
provided in paragraph 6 above.
The Custodian assumes no responsibility or liability for collecting
contributions, for the deductibility or propriety of any contribution made to
the custodial account, or for the purpose or propriety of any distributions made
from the custodial account. Those matters are the sole responsibility of the
Depositor.
The Custodian will keep adequate records of transactions it is required to
perform for the custodial account. The Custodian will provide to the Depositor a
written report or reports reflecting the transactions in the custodial account
over each calendar year and the assets in the custodial account as of the end of
the calendar year.
If the Custodian resigns or is removed, as provided in paragraph 10 below,
the Custodian must provide a written report or reports reflecting the
transactions in the custodial account from the last report through the date of
the Custodian's resignation or removal, and the assets in the custodial account
as of the date of the Custodian's resignation or removal.
After providing the end-of-the-year report or the reports from the
Custodian's resignation or removal, the Custodian will be forever released from
all liability and accountability to anyone for its acts or transactions
reflected in the report(s), except those acts or transactions to which the
Depositor (or recipient, if different) has filed a written objection with the
Custodian within 60 days of the date the report was provided to the Depositor or
other recipient.
The Depositor always fully indemnifies the Custodian and will hold it
harmless from any and all liability which may arise from this Agreement, except
that which arises from the Custodian's negligence or willful misconduct. The
Custodian will not be obligated or expected to commence or defend any legal
action or proceeding about this Agreement unless both the Custodian and
Depositor agree and the Custodian will be fully indemnified to its satisfaction.
The Custodian may conclusively rely upon and will be protected from acting
on any written order from or authorized by the Depositor, or any other notice,
request, consent, certificate or other instrument, paper, or other communication
which the Custodian believes to be genuine and issued in proper form with proper
authority, as long as the Custodian acts in good faith in taking or omitting to
take any action in reliance upon the communication.
Before the Beneficiary has notified the Custodian (in the manner required
by the Custodian) of the Depositor's death, the Custodian will not be
responsible for treating the Beneficiary as if he or she has rights and
obligations under this Agreement.
8. Distributions
This paragraph supplements the information found in Article V above, and
must be read in conjunction with it.
The Depositor has sole responsibility to initiate distributions from the
custodial account and sole responsibility to ensure that all distributions are
made in accordance with the applicable provisions of the Internal Revenue Code.
<PAGE>
Distribution Requests
The Depositor* is responsible for making the distribution requests to the
Custodian sufficiently in advance of any requested or required distribution time
to ensure that the distribution will be made before that requested or required
distribution time.
The Custodian will make distributions from the custodial account only after
receiving a request in writing, or in such other manner as agreed upon by the
Custodian, from the Depositor*. The Custodian will make the distribution as soon
as practicable after it receives the request in writing, or in such other manner
as agreed upon by the Custodian.
The Depositor* must make the distribution request in the form required by
the Custodian. The distribution request must include the form of distribution
requested (e.g., lump-sum distribution or installment payments). The Depositor*
must provide to the Custodian any applications, certificates, tax waivers,
signature guarantees and any other documents (including proof of legal
representative's authority) that the Custodian requires. The Custodian will not
be liable for complying with a distribution request that appears on its face to
be genuine, nor will the Custodian be liable for refusing to comply with a
distribution request which the Custodian is not satisfied is genuine.
If the distribution request is not made in the correct form, the Custodian
is not responsible and will not be liable to the Depositor* for any losses while
the Custodian waits for the distribution request to be made in the proper form.
The Depositor* also agrees to fully indemnify the Custodian for any losses which
may result from the Custodian's failing to act upon an improperly made
distribution request.
The Depositor* may request a distribution of any portion of the custodial
account at any time.
The Custodian does not assume any responsibility for the tax treatment of
any distributions from the custodial account.
* or any other party entitled to receive the assets of the custodial
account
Designation of Beneficiary
The Depositor may designate a beneficiary or beneficiaries (the
"Beneficiary") to receive the assets of the custodial account upon the
Depositor's death. The Depositor must designate his or her Beneficiary to the
Custodian in the manner required by the Custodian.
If the Depositor's Beneficiary is not living at the Depositor's death, the
Depositor's estate is entitled to receive the assets of the custodial account.
In addition, to the extent the Depositor has not effectively disposed of the
assets in the custodial account by his or her designation of beneficiary, the
Depositor's estate will be entitled to receive the assets of the custodial
account.
If the Depositor's Beneficiary dies after the Depositor, the Beneficiary's
estate will be entitled to receive the assets of the custodial account.
The Depositor may change his or her choice of a Beneficiary at any time by
notifying the Custodian in the manner required by the Custodian.
Before the Depositor's death, the Depositor's Beneficiary has no right or
power to anticipate any part of the custodial account, or to sell, assign,
transfer, pledge, or hypothecate any part of the account. In addition, the
Custodial account will not be liable for any debts of the Depositor's
Beneficiary or, except as required by law, subject to attachment, execution, or
any other legal process.
Election to Have Life Expectancy Recalculated
For installment payments to be made over the Depositor's life expectancy,
the Depositor may make an election to have the Custodian annually recalculate
his or her life expectancy, and the life expectancy of the Depositor's spouse,
if applicable. The Depositor must make this election in the manner required by
the Custodian.
If the Depositor does not elect to have the Custodian recalculate life
expectancy, the Custodian will not recalculate the life expectancy of any other
party entitled to receive the assets of the custodial account.
9. Amendment
This paragraph supplements the information found in Article VIII above, and
must be read in conjunction with it.
If the Distributor amends this Agreement, it must provide a written notice
of the amendment to both the Depositor and the Custodian. The Depositor will be
considered to have consented to the Distributor's amendment 30 days after the
Distributor has mailed the notice to the Depositor unless within that 30-day
period the Depositor gives the Custodian a proper request in writing, or in such
other manner as agreed upon by the Custodian, for a lump-sum distribution. The
Custodian will be considered to have consented to the Distributor's amendment
unless it notifies the Distributor otherwise within 30 days after the
Distributor has mailed (or otherwise delivered) the notice to the Custodian.
The Custodian may change its fee schedule, as provided in paragraph 5
above, without having to amend this Agreement.
10. Resignation or Removal of Custodian
The Custodian may resign at any time by giving at least 30 days' written
notice to the Distributor. The Distributor may remove the Custodian at any time
by giving at least 30 days' written notice to the Custodian.
If the Custodian resigns or is removed, the Distributor must either appoint
a successor custodian to serve under this Agreement or notify the Depositor that
he or she must appoint a successor custodian. The successor custodian must
provide a written acceptance of its appointment as successor custodian to the
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Custodian. Upon receiving this written acceptance, the Custodian must transfer
to the successor custodian all of the assets and records of the custodial
account.
The Custodian may reserve a portion of the custodial account assets to pay
for any fees, compensation, costs, expenses, or for any liabilities constituting
a charge on or against the Custodian. If any assets remain after paying these
items, the Custodian will pay the remainder to the successor custodian.
If the Custodian resigns or is removed, and the Distributor or the
Depositor has not appointed a successor custodian within 30 days after the
Custodian's resignation or removal (or a longer period, if the Custodian
agrees), the Custodian will terminate this Agreement as provided in paragraph
11, below.
After the Custodian has transferred the custodial account assets to the
successor custodian, the Custodian is relieved of any further liability for this
Agreement, the custodial account, and the custodial account assets.
The Custodian or any successor custodian appointed to serve under this
Agreement must be either 1) a bank as defined in Internal Revenue Code Section
408(n), or 2) such other person who qualifies to serve as prescribed by Internal
Revenue Code Section 408(a)(2) and satisfies the Distributor and the Custodian
that he or she qualifies.
11. Termination of Agreement
As provided in paragraph 10, above, the Custodian will terminate the
Agreement if the Distributor or the Depositor has not appointed a successor
custodian within the specified time after the Custodian resigns or is removed.
If this Agreement is terminated, the Custodian will distribute the custodial
account assets in kind or cash to the Depositor. The Custodian may reserve a
portion of the assets as provided in paragraph 10.
The Depositor may terminate this Agreement at any time by taking a lump-sum
distribution of his or her investment in the custodial account.
After this Agreement has been terminated, it will have no further force and
effect, and the Custodian is relieved of any further liability for this
Agreement, the custodial account, and the custodial account assets.
12. Liquidation of Custodial Account
The Distributor has the right to direct the Custodian by a request in
writing, or in such other manner as agreed upon by the Custodian, to liquidate
the custodial account if the value of the account is below a minimum level
established from time to time by the Distributor on a nondiscriminatory basis.
Once the Custodian receives a request in writing, or in such other manner as
agreed upon by the Custodian, from the Distributor, the Custodian will liquidate
the assets in the custodial account as soon as practicable and distribute the
proceeds to the Depositor in a lump sum in cash or in kind. The Custodian may
reserve a portion of the account to pay for any fees, compensation, costs or
expenses, or for any liabilities constituting a charge on or against the
Custodian. If any assets remain after paying these items, the Custodian will pay
the remainder to the Depositor.
If the custodial account is liquidated as provided above, neither the
Distributor nor the Custodian will be responsible or liable for any penalty or
loss incurred by anyone because of the liquidation. In addition, after the
account is liquidated, both the Distributor and the Custodian will be relieved
from any further liability for this Agreement, the custodial account, and the
custodial account assets.
13. Miscellaneous
Any references in this Agreement to Internal Revenue Code mean the Internal
Revenue Code of 1986, as amended, and any future successors.
Except as provided in the next sentence, any references to "Depositor" in
this Agreement will apply to the Depositor's Beneficiary if the Depositor is
deceased. The references to the "Depositor" in paragraphs 3, 4, and 8 of this
Article IX will apply to the Depositor's Beneficiary only if the Depositor is
deceased, the Depositor's Beneficiary is the Depositor's surviving spouse, and
the surviving spouse elects to treat the custodial account as his or her own. If
the spouse does elect to treat the custodial account as his or her own, as
discussed in the preceding sentence, references to "Depositor" in Articles I
through VIII will apply to the spouse as the Depositor's Beneficiary. (Note,
this highlighted information overrides otherwise conflicting information found
in Article V.3 of this Agreement.)
Unless specifically designated otherwise in this Agreement, any notice or
report that the Custodian must provide to any person by reason of this Agreement
will be considered to have been provided by the Custodian as of the date it is
sent by first-class mail to the person at his or her most recent address on the
Custodian's records.
To the extent permitted by law, the Custodian may, at its election and upon
the written instructions of the Depositor, pay investment adviser fees from the
Depositor's custodial accounts.
This Agreement is accepted by the Custodian in the Commonwealth of
Massachusetts and will be constructed and administered in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement is intended to qualify under Section 408 of the Internal
Revenue Code as an Individual Retirement Account, and under Section 219 of the
Internal Revenue Code for any tax-deductibility and limitations of contributions
made to the IRA. If any language or provision of this Agreement can be
interpreted in more than one way, the interpretation of the language or
provision that is consistent with the intention of this Agreement will control.
However, the Custodian and the Mutual Funds (or any company associated with
them) will not be responsible for guaranteeing that the intentions of this
Agreement are met through the use of this Agreement. The Depositor should
consult his or her own attorney for any assurances that the intentions of the
Agreement will be met through the use of this Agreement.
