SCUDDER
INVESTMENTS(SM)
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MONEY MARKET
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Scudder
Money Market Series
Premium Money
Market Shares
Fund #402
Prime Reserve Money
Market Shares
Fund #309
Annual Report
May 31, 2000
The fund seeks as high a level of current income as is consistent with
liquidity, preservation of capital, and the fund's investment policies.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Contents
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6 Letter from the Series' Chairperson
8 Portfolio Management Discussion
15 Glossary of Investment Terms
16 Investment Portfolio
20 Financial Statements
24 Financial Highlights
28 Notes to Financial Statements
33 Report of Independent Accountants
34 Tax Information
35 Officers and Directors
36 Investment Products and Services
38 Scudder Solutions
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Scudder Premium Money Market Shares
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ticker symbol SPMXX fund number 402
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Date of Inception: o Short-term interest rates continued to rise over the
7/7/97 12-month period, directly benefiting money market
securities.
o Scudder Premium Money Market Shares reflected the
Total Net Assets as rate increases as its 7-day average yield rose from
of 5/31/00: 4.78% to 6.34% over the 12 months.
$1.7 billion
o An opportunistic strategy and commitment to high
quality money market securities resulted in Premium
Shares ranking among the top 1% of 362 taxable money
market funds for the 12-month period ended May 31,
2000.^1
o Management maintained a shorter average maturity than
its peers over most of the period, which provided
liquidity and the flexibility to reinvest in higher
yielding securities, especially toward the end of the
period.
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and is no guarantee of future results.
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Scudder Prime Reserve Money Market Shares
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ticker symbol SCRXX fund number 309
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Date of Inception: o Short-term interest rates continued to rise over the
10/15/98 12-month period, directly benefiting money market
securities.
o Scudder Prime Reserve Money Market Shares reflected
Total Net Assets the rate increases as its 7-day average yield rose
as of 5/31/00: from 4.75% to 5.74% over the 12 months.
$46 million
o An opportunistic strategy and commitment to high
quality money market securities resulted in Prime
Reserve Shares ranking among the top 15% of 362 taxable
money market funds for the 12-month period ended May
31, 2000.^1
o Management maintained a shorter average maturity than
its peers over most of the period, which provided
liquidity and the flexibility to reinvest in higher
yielding securities, especially toward the end of the
period.
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and is no guarantee of future results.
5
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Letter from the Series' Chairperson
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Dear Shareholders,
Until March 10 the great bull market for "new economy" stocks seemed
unstoppable. However, rising interest rates eventually proved too much, as many
stocks with high valuations and little or no earnings experienced sharp
declines. While we believe the economy is being transformed by a technological
revolution, the now lower valuations have helped reduce the level of market
risk.
This kind of economic revolution combined with wide market swings can be
unnerving for investors. Yet, experience tells us that the best approach during
such periods is to take a step back and review one's long-term investment goals.
It is easy to get caught up in the quickly shifting winds, especially when it
has become only more convenient and economical to move from one investment to
the next. While adjusting your investment portfolio by adding new investments
and harvesting others should be a regular ritual, I encourage you to remain
focused on your original purposes for investing.
If you are investing for retirement in 20 years and are seeking long-term gains,
you should continue to invest in funds that will help you best achieve those
ends, such as domestic and international equity funds. If you are investing for
the short-term (1-2 years) and don't want to risk your principal, you should not
be considering technology or other narrowly focused funds for a substantial
portion of your portfolio. Stick to your plan, stay focused, and avoid the
latest fad. Unless you plan to devote your full-time energies to investing every
day, we think you will be better served by taking a long-term approach that
includes
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exposure to several asset classes. This includes domestic and international
stock, small-cap, fixed-income, and money market funds.
As a shareholder in Scudder Money Market Series you already hold a key element
of a well-diversified portfolio. The series' conservative, high-quality, and
very liquid investments provide relative stability, high current income, and a
short-term parking place for a portion of your investment portfolio. With
short-term interest rates rising and inflation moderate, investors are seeing
some of the best real yields for money market funds in years. For a detailed
discussion of management's investment strategy and portfolio positioning, I
encourage you to read the Portfolio Management Discussion with Frank Rachwalski
and Dean Meddaugh beginning on page 8.
For current information on the series and your account, visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
the most recent performance, the latest news on Scudder products and services,
and the opportunity to perform account transactions. You can also speak with one
of our representatives by calling 1-800-SCUDDER (1-800-728-3337).
Thank you for your continued investment in Scudder Money Market Series.
Sincerely,
/s/Kathryn L. Quirk
Kathryn L. Quirk
President,
Scudder Money Market Series
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Portfolio Management Discussion
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May 31, 2000
In the following interview, portfolio managers Frank J. Rachwalski, Jr. and Dean
Meddaugh discuss the market environment and their approach to managing the
series.
Q: The U.S. stock and bond markets winced with each increase in short-term
interest rates by the Federal Reserve. How did the rate increases affect money
market securities over the 12-month period?
A: Money market securities are directly impacted by changes in short-term rates,
especially the federal funds rate, an important benchmark that is widely watched
by fixed income investors. With the U.S. economy strong, unemployment near an
all time low, and consumer confidence high, concerns over an acceleration of the
inflation rate took center stage. Since the Federal Reserve ("the Fed") has the
responsibility to conduct the nation's monetary policy and maintain stability of
the financial system, it continued to raise the federal funds rate in response
to these trends (see Changes in the Federal Funds Rate below).
One thing that investors have witnessed over the past year is the surprising
resiliency of the U.S. economy. Despite raising rates six times and
one-and-three-quarters percentage points over the 12 months in attempts to slow
growth, the U.S. economy continued to expand at a rapid
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Changes in the Federal Funds Rate
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Federal Funds New rate Change
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June 30, 1999 5.00% +0.25%
August 24 5.25% +0.25%
November 16 5.50% +0.25%
February 2, 2000 5.75% +0.25%
March 21 6.00% +0.25%
May 16 6.50% +0.50%
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The federal funds rate is the interest rate charged by banks with excess
reserves at the Federal Reserve district bank to banks needing overnight loans
to meet reserve requirements. The federal funds rate is the most sensitive
indicator of the direction of interest rates, since it is set daily by the
market and represents a very short maturity -- an overnight loan.
8
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clip. In the first quarter of this year gross domestic product grew 5.5%.
Reflecting signs that inflationary pressures have been building, the consumer
price index rose 3.1%, up significantly from the beginning of the 12-month
period.
While we think the Fed is closer to achieving its objectives of slowing the
economy and controlling inflation, we believe another rate hike is likely. With
recent consumer confidence numbers suggesting that consumers are not afraid and
are continuing their buying spree, we think the Fed will have to pursue a policy
of raising interest rates for the near term. However, the Fed may take a
cautious approach to raising rates prior to the November elections.
Q: How did you manage the portfolio in this environment?
A: We pursued two strategies, reflecting the two distinct environments over the
12 months -- the period leading up to the end of 1999 and the year-to-date
period. Toward the end of 1999, we continued to focus on maintaining a
sufficient level of liquidity in the portfolio while taking advantage of what
the market was offering. Generally, this meant maintaining a shorter average
maturity than our peers. This strategy was driven by our cautionary approach to
the Y2K changeover, which some had speculated might result in a shift to
short-term money market instruments at year-end. We maintained a higher than
normal level of liquidity in the portfolio in order to be prepared for
potentially high investor demand for cash. By maintaining a shorter maturity in
the rising rate environment, our existing holdings matured more quickly, which
enabled us to invest in higher yielding securities sooner than if we had
maintained a longer average maturity. A limitation of this strategy is that we
gave up a small amount of current yield by maintaining a shorter maturity.
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As it turned out, the Fed pumped a great deal of money into the financial system
by allowing monetary reserves to grow rapidly in the fourth quarter of 1999.
Some speculated that this super-liquid market helped to fuel the strong stock
market rally. We think that remaining very liquid (by maintaining a relatively
short maturity at year-end) was the right approach. If the fund's portfolio had
been invested in longer-term securities and there had been a high demand for
cash by investors, it could have been costly to raise cash at that time.
Q: How did the environment change at the beginning of 2000?
A: Y2K concerns essentially evaporated at the beginning of this year, as it
became clear that fears were overdone and the Fed would likely begin reducing
the excess market liquidity. We viewed this as an opportunity to pick up some
higher yielding paper by extending the portfolio's average maturity slightly.
However, the portfolio's maturity still remained shorter than its peers, given
our expectations that rates would continue to rise. At the end of the period,
the portfolio had an average maturity of 32 days, which compares to about 50
days for the average first-tier money market fund.
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Portfolio Maturity
(Average number of days)
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5/99 38
6/99 38
7/99 30
8/99 39
9/99 39
10/99 43
11/99 36
12/99 32
1/00 22
2/00 24
3/00 16
4/00 22
5/00 32
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Q: How did the series perform?
A: Reflecting the rising interest rate environment, yields for both share
classes rose. Scudder Premium Money Market Shares' (Premium Shares) 7-day yield
increased from 4.78% to 6.34% over the 12 months, which translated into compound
effective yields of 4.90% and 6.54%, respectively.
Yields also rose for Scudder Prime Reserve Money Market Shares (Prime Reserve
Shares). Over the 12 months, the 7-day yield increased from 4.75% to 5.74%,
which translated into compound effective yields of 4.86% and 5.90%,
respectively.
From a total return standpoint, both share classes exceeded the average one-year
total return for 362 taxable money market funds as ranked by Lipper Analytical
Services, Inc. Premium Shares ranked in the top 1% of 362 taxable money market
funds, while Prime Reserve Shares ranked in the top 15% of 362 funds in the same
category.
Each share class has been able to provide above-average performance primarily
due to a lower expense structure and higher investment minimums: $25,000 for
Premium Shares and $10,000 for Prime Reserve Shares.
Q: What is the quality of the short-term securities that you buy for the
portfolio?
A: We invest in "first-tier" short-term securities in the portfolio. By that we
mean issues that are rated in the top rating categories according to major
credit rating agencies, such as Fitch Investors Service, Moody's Investors
Service, or Standard and Poor's. The top ratings have the lowest risk of default
and, while not insured by the FDIC or guaranteed, these securities are among the
safest available outside of U.S. Treasury bills. Basically, our philosophy is
that it does not pay to take on additional credit risk given the relatively
small yield advantage.
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Q: The series can invest in a variety of short-term securities. How did you
allocate its assets?
A: In managing the portfolio, we focus on maintaining its average life (the
average maturity of the portfolio) within a target range and selecting
floating-rate securities that will benefit the portfolio given current interest
rate trends. As a result, we generally do not make big asset allocation shifts
within the portfolio. We attempt to maintain exposure to a broad selection of
securities, including high quality commercial paper, variable- and floating-rate
securities, U.S. government agency obligations, certificates of deposit, and
repurchase agreements. The majority of the portfolio remained invested in high
quality commercial paper (45%), which we maintained because of its attractive
values and high relative yields.
The next largest area of concentration was floating-rate securities at 39% of
assets. "Floaters," as we call them, are highly correlated to short-term
interest rates because their yields are indexed to current short-term rates,
such as the prime rate -- the key lending rate charged by commercial banks to
its best customers. In the rising rate environment, the yield on these
securities adjusts upward sooner than traditional fixed-rate money market
securities. Since selling lower yielding money market securities to buy higher
yielding ones is impractical due to high transaction costs, floaters allow the
portfolio to participate in the higher yielding environment quickly and without
incurring additional transaction costs. In addition, floaters typically provide
slightly higher yields than fixed-rate money market securities with maturities
greater than 30 days.
We also held 1% of assets in repurchase agreements (commonly called "repos").
These very short-term loans (usually seven days or less) are collateralized by
U.S. government notes and provide a private sector yield, or a yield that is
comparable to non-government issued money market securities. These securities
tend to trade more cheaply than comparable Treasury bills and often represent
good value from our standpoint. Because these securities are collateralized by
Treasuries and have relatively short
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maturities, repos tend to react quickly when interest rates change. Our holdings
of repos benefited the portfolio as rates rose over the period.
Q: What is your outlook for interest rates?
A: As we mentioned earlier, we think the Fed will raise rates at least one more
time before the November elections. Since we have recently begun to see signs
that the economy may be slowing in reaction to the higher rate environment, we
think the Fed may eventually be able to ease off its current policy of raising
short-term interest rates. Knowing when to stop raising rates is a tough job for
the Fed since the rate increases take time to work their way through the
economy. Typically it takes six months for the effects to begin showing up, so
the braking effects of this year's rate hikes on growth are still yet to come.
In any case, this is a great environment for money market fund investors because
interest rates are rising and real yields (after subtracting inflation) are
still providing investors with very attractive returns.
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Scudder Premium Money Market Shares
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7-day 7-day
average compounded
yield effective yield
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May 31, 1999 4.78% 4.90%
May 31, 2000 6.34% 6.54%
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Scudder Prime Reserve Money Market Shares
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7-day 7-day
average compounded
yield effective yield
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May 31, 1999 4.75% 4.86%
May 31, 2000 5.74% 5.90%
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Scudder Money Market Series:
A Team Approach to Investing
Scudder Money Market Series is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals, each of whom plays an important role in the
fund's management process. Team members work together to develop investment
strategies and select securities for the fund's portfolio. They are supported by
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 that a team approach benefits fund investors by bringing
together many disciplines and leveraging the firm's extensive resources.
Lead portfolio manager Frank J. Rachwalski, Jr. assumed responsibility for
setting the Fund's investment strategy and for overseeing the fund's day-to-day
management in January 1998. Mr. Rachwalski has been responsible for the trading
and portfolio management of money market funds since joining the Adviser in
1973.
Portfolio manager Dean Meddaugh joined the Adviser in 1996 as a money market
manager. Mr. Meddaugh joined the team in 1999 and has six years of investment
industry experience.
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Glossary of Investment Terms
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Commercial Paper Short-term debt obligations with maturities ranging from 2
to 270 days, and issued by banks, corporations, and other
borrowers to investors with temporarily idle cash. These
instruments are unsecured and usually discounted from the
face value of the security, although some are
interest-bearing and offer a high level of safety and
liquidity.
Federal Open Market The committee that sets interest rate and credit policies
Committee (FOMC) for the Federal Reserve System. The committee decides
whether to increase or decrease interest rates through
open-market operations. The committee's actions are closely
watched and interpreted by economists and stock and bond
market analysts, who try to predict whether the Fed is
seeking to tighten credit to reduce inflation, or to loosen
credit to stimulate the economy.
Gross Domestic Gross domestic product is a commonly referenced measure of
Product (GDP) the health of the U.S. economy and refers to the market
value of the goods and services produced by labor and
property in the United States. Economic growth that is
overly strong can lead to accelerating inflation; weakening
growth can lead to a recession.
Liquidity A characteristic of an investment or an asset referring to
the ease of convertibility into cash within a reasonably
short period of time.
Maturity The date a debt instrument is due and payable. For money
market securities, a short maturity provides better
investment flexibility, but tends to provide a lower yield;
a long maturity provides a higher yield, but requires the
investor to tie up money for a longer period (less
flexibility).
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
Additional glossary terms are available at our Internet Web site --
www.scudder.com.
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Investment Portfolio as of May 31, 2000
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Principal
Amount ($) Value ($)
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Repurchase Agreements 1.3%
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State Street Bank and Trust Company, 6.37%, to be
repurchased at $61,940,958 on 6/1/2000** ------------
(Cost $61,930,000) ........................... 61,930,000 61,930,000
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Short-Term Investments 15%
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Firstar NA, 6.81%, 6/1/2000 ..................... 225,000,000 225,000,000
Norwest Bank, 6.81%, 6/1/2000 ................... 160,000,000 160,000,000
Suntrust Bank, 6.78%, 6/1/2000 .................. 120,000,000 120,000,000
Wachovia Bank, 6.81%, 6/1/2000 .................. 225,000,000 225,000,000
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Total Short-Term Investments (Cost $730,000,000) 730,000,000
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Commercial Paper 45.3%
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Alpine Securitization Corp., 6.1%, 6/13/2000 .... 84,000,000 83,829,200
American Home Products, 6.46%, 6/8/2000 ......... 100,000,000 100,000,000
Amsterdam Funding Corp., 6.1%, 6/12/2000 ........ 25,000,000 24,953,403
Amsterdam Funding Corp., 6.53%, 6/19/2000 ....... 50,000,000 49,836,750
Asset Portfolio Funding, 6.53%, 6/16/2000 ....... 35,187,000 35,091,262
Barton Capital Corp., 6.8%, 6/8/2000 ............ 31,000,000 30,963,351
Bavaria University Funding Corp., 6.5%, 6/12/2000 99,000,000 98,802,165
Capital One Fund (99-F), 6.7%, 6/1/2000 ......... 10,657,000 10,657,000
CIT Group Holdings Inc., 6.61%, 6/1/2000 ........ 40,000,000 39,977,371
Clipper Receivables Corp., 6.52%, 6/19/2000 ..... 80,087,000 79,825,916
Corporate Asset Funding Corp., 6.12%, 6/9/2000 .. 50,000,000 49,932,000
Corporate Receivables Corp., 6.09%, 6/7/2000 .... 70,000,000 69,928,950
CXC Incorporated, 6.11%, 6/19/2000 .............. 50,000,000 49,847,250
CXC Incorporated, 6.11%, 6/21/2000 .............. 50,000,000 49,830,278
Enterprise Funding Corp., 6.11%, 6/20/2000 ...... 71,805,000 71,573,449
FCC National Bank, 6.77%, 6/1/2000 .............. 20,000,000 20,013,036
Forrestal Funding Master TR, 6.13%, 6/12/2000 ... 79,000,000 78,852,029
Four Winds Funding Corp., 6.54%, 6/19/2000 ...... 61,000,000 60,800,530
Galaxy Funding, 6.1%, 6/5/2000 .................. 40,000,000 39,972,889
Galaxy Funding, 6.55%, 6/26/2000 ................ 73,800,000 73,464,313
Giro Funding US Corp., 6.09%, 6/15/2000 ......... 50,000,000 49,881,583
Giro Funding US Corp., 6.31%, 6/21/2000 ......... 25,995,000 25,903,873
Goldman Sachs Promissory Note, 6.63%, 6/28/2000 . 50,000,000 50,000,000
Goldman Sachs Promissory Note, 6.75%, 8/7/2000 .. 40,000,000 40,026,252
The accompanying notes are an integral part of the financial statements.
16
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Principal
Amount ($) Value ($)
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Goldman Sachs Promissory Note, 6.29%, 10/2/2000 30,000,000 30,000,000
Intrepid Funding, 6.17%, 7/10/2000 ............ 79,726,000 79,193,098
Kitty Hawk Funding Corp., 6.11%, 6/9/2000 ..... 50,000,000 49,932,111
Merrill Lynch & Co. Inc., 6.59%, 4/20/2001 .... 70,000,000 69,993,936
Moat Funding LLC, 6.53%, 6/20/2000 ............ 65,000,000 64,775,985
Moat Funding LLC, 6.15%, 7/6/2000 ............. 24,377,000 24,231,246
Monte Rosa Capital Corp., 6.08%, 6/7/2000 ..... 30,000,000 29,969,600
Morgan Stanley Dean Witter Discover Co.,
6.55%, 6/26/2000 ........................... 14,200,000 14,135,410
Norwest Financial Inc., 6.45%, 9/7/2000 ....... 50,000,000 49,992,098
PNC NA, 6.37%, 6/7/2000 ....................... 25,000,000 24,999,799
Receivables Capital Corp., 6.25%, 6/5/2000 .... 15,000,000 14,989,583
Receivables Capital Corp., 6.11%, 6/15/2000 ... 50,000,000 49,881,194
Sallie Mae, 6.54%, 8/1/2000 ................... 30,000,000 29,997,658
Scaldis Capital LLC, 6.16%, 7/10/2000 ......... 40,000,000 39,733,067
Sheffield Receivables Corp., 6.53%, 6/20/2000 . 46,510,000 46,349,708
Sigma Finance, 5.92%, 6/1/2000 ................ 50,000,000 50,000,000
Surrey Funding Corp., 6.53%, 3/1/2001 ......... 100,000,000 100,000,000
WCP Funding Inc., 6.27%, 6/19/2000 ............ 45,000,000 44,858,925
Windmill Funding Corp., 6.09%, 6/21/2000 ...... 25,000,000 24,915,417
Xerox Credit Corp., 6.63%, 12/8/2000 .......... 75,000,000 74,985,665
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Total Commercial Paper (Cost $2,196,897,350) 2,196,897,350
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Certificates Of Deposit 17.1%
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Amsouth Bank NA, 6.21%, 9/11/2000* ............ 40,000,000 40,000,000
Bank of America Corp., 6.65%, 4/27/2001* ...... 83,000,000 83,000,000
Bank Of Montreal, 6.8%, 9/11/2000* ............ 50,000,000 49,993,252
Banc One Corp. 7.17%, 5/8/2001* ............... 50,000,000 50,000,000
Canadian IMP Bank of Comm., 7.18%, 5/10/2001* . 75,000,000 74,993,339
Comerica Bank, 6.41%, 6/12/2000* .............. 25,000,000 24,999,596
Credit Suisse Federal Bank of New York, 6.72%,
6/9/2000* .................................. 50,000,000 50,000,000
Den Danske Bank NY, 6.55%,
6/23/2000* ................................. 30,000,000 29,999,289
Dresdner Bank NY, 6.58%, 7/24/2000* ........... 50,000,000 49,997,178
First Union National Bank, 6.63%, 7/26/2000* .. 15,000,000 15,000,000
First Union National Bank, 6.67%, 5/8/2001* ... 25,000,000 25,000,000
National Bank Kentucky, 6.35%, 7/7/2000* ...... 50,000,000 50,005,176
Old Kent Bank, 6.69%, 6/16/2000* .............. 10,000,000 9,999,838
The accompanying notes are an integral part of the financial statements.
17
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<TABLE>
<CAPTION>
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Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------------------
<S> <C> <C>
Rabobank Nederland AV, 7.17%, 5/10/2001* .................... 50,000,000 49,995,559
Royal Bank Scotland, 6.45%, 3/6/2001* ....................... 100,000,000 100,000,000
Skandinav Enskilda Banken NY, 6.59%, 7/24/2000* ............. 50,000,000 49,997,855
Skandinav Enskilda Banken NY, 6.62%, 8/29/2000* ............. 25,000,000 24,997,607
Union Bank Switzerland, 7.22%, 5/8/2001* .................... 50,000,000 49,991,176
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Total Certificates Of Deposit (Cost $827,969,865) 827,969,865
--------------------------------------------------------------------------------------------
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Short-Term and Medium-Term Notes 21.3%
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Allfirst Bank, 6.51%, 1/16/2001* ............................ 50,000,000 49,990,793
Allfirst Bank, 6.18%, 9/5/2000* ............................. 50,000,000 49,996,087
Amsouth Bank NA, 6.72%, 1/19/2001* .......................... 30,000,000 29,992,660
American Express Centurian Bank, 6.58%, 6/19/2001* .......... 50,000,000 49,994,875
Bank One Corp., 6.32%, 10/5/2000* ........................... 25,000,000 24,995,791
Bank One Corp., 6.65%, 11/6/2000* ........................... 20,000,000 19,999,442
Capital One Fund 96-F, 6.7%, 9/1/2011* ...................... 22,259,000 22,259,000
Capital One Fund 96-H, 6.7%, 10/1/2021* ..................... 15,159,000 15,159,000
Capital One Fund 97-E, 6.7%, 8/1/2012* ...................... 28,714,000 28,714,000
CIT Group Inc., 6.64%, 5/9/2001* ............................ 40,000,000 39,981,673
CIT Group Inc. MTM, 6.65%, 5/24/2001* ....................... 60,000,000 59,971,397
Comerica Bank, 6.45%, 1/12/2001* ............................ 40,000,000 39,990,316
First Union National Bank, 6.68%, 3/2/2001* ................. 50,000,000 50,000,000
First Union National Bank, 6.4%, 6/8/2000* .................. 20,000,000 20,000,000
Key Bank N.A., 6.42%, 11/8/2000* ............................ 35,000,000 34,990,820
Key Bank N.A., 6.76%, 5/25/2001* ............................ 50,000,000 49,982,326
Merita Bank Ltd. NY, 6.14%, 3/1/2001* ....................... 50,000,000 49,985,411
Merrill Lynch & Co., 6.59%, 4/27/2001* ...................... 30,000,000 29,997,233
MMR Funding One, 6.7%, 9/1/2010* ............................ 5,500,000 5,500,000
National Rural Utility CFC, 6.45%, 9/8/2000* ................ 50,000,000 49,997,295
Old Kent Bank, 6.66%, 5/8/2001* ............................. 25,000,000 24,997,716
Old Kent Bank, 6.67%, 5/30/2001* ............................ 55,000,000 55,000,000
Old Kent Bank, 6.67%, 6/11/2001* ............................ 30,000,000 30,000,000
Sigma Finance Inc., 6.74%, 6/30/2000* ....................... 65,000,000 65,000,000
SMM Trust 1999-A, 6.4%, 9/13/2000* .......................... 50,000,000 50,000,000
Southern California Edison, 6.71%, 10/25/2000* .............. 20,000,000 20,000,000
Transamerica Finance Corp., 6.2%, 12/1/2000* ................ 50,000,000 50,000,000
US Bank N.A., 6.79%, 11/15/2000* ............................ 15,000,000 15,018,182
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Total Short-Term and Medium-Term Notes (Cost $1,031,514,017) 1,031,514,017
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Total Investment Portfolio -- 100.0% (Cost $4,848,311,232) (a) 4,848,311,232
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(a) Cost for federal income tax purposes is $4,848,311,232.
* Floating rate notes are securities whose yields vary with a designated
market index or market rate, such as the coupon-equivalent of the
Treasury bill rate. These securities are shown at their rate as of May
31, 2000.
** Repurchase agreements are fully collateralized by U.S. Treasury and
Government agency securities.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Statements
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of May 31, 2000
-------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $4,848,311,232) .......... $4,848,311,232
Cash ............................................................... 2,154,605
Receivable for investments sold .................................... 96,000
Interest receivable ................................................ 13,441,340
Receivable for Fund shares sold .................................... 51,854,521
Due from Adviser ................................................... 39,599
Other assets ....................................................... 39,912
---------------
Total assets ....................................................... 4,915,937,209
Liabilities
-------------------------------------------------------------------------------------
Dividends payable .................................................. 27,246,893
Payable for Fund shares redeemed ................................... 7,356,898
Accrued management fee ............................................. 1,109,507
Accrued reorganization costs ....................................... 10,266
Accrued Directors' fees and expenses ............................... 119,687
Other accrued expenses and payables ................................ 1,284,693
---------------
Total liabilities .................................................. 37,127,944
-------------------------------------------------------------------------------------
Net assets, at value $4,878,809,265
-------------------------------------------------------------------------------------
Net Asset Value
-------------------------------------------------------------------------------------
Managed Shares:
Net assets applicable to shares outstanding ........................ $ 415,698,726
Shares outstanding of capital stock, $.001 par value, 800,000,000
shares authorized ............................................... 415,893,881
Net Asset Value, offering and redemption price per share (net assets --------------
/ shares outstanding) ........................................... $ 1.00
Institutional Shares: --------------
Net assets applicable to shares outstanding ........................ $3,349,739,373
Shares outstanding of capital stock, $.001 par value, 3,615,000,000
shares authorized ............................................... 3,349,868,723
Net Asset Value, offering and redemption price per share (net assets --------------
/ shares outstanding) ........................................... $ 1.00
Premium Money Market Shares: --------------
Net assets applicable to shares outstanding ........................ $1,067,174,369
Shares outstanding of capital stock, $.001 par value, 2,180,000,000
shares authorized ............................................... 1,067,242,867
Net Asset Value, offering and redemption price per share (net assets --------------
/ shares outstanding) ........................................... $ 1.00
Prime Reserve Money Market Shares: --------------
Net assets applicable to shares outstanding ........................ $ 46,196,797
Shares outstanding of capital stock, $.001 par value, 1,180,000,000
shares authorized ............................................... 46,201,590
Net Asset Value, offering and redemption price per share (net assets --------------
/ shares outstanding) ........................................... $ 1.00
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
-------------------------------------------------------------------------------
Statement of Operations for the year ended May 31, 2000
-------------------------------------------------------------------------------
Investment Income
-------------------------------------------------------------------------------
Income:
Interest ...................................................... $ 304,339,172
---------------
Expenses:
Management fee ................................................ 13,019,076
Services to shareholders ...................................... 1,381,424
Custodian and accounting fees ................................. 657,717
Auditing ...................................................... 30,907
Legal ......................................................... 62,677
Directors' fees and expenses .................................. 101,644
Reports to shareholders ....................................... 188,257
Registration fees ............................................. 1,011,149
Reorganization ................................................ 10,266
Other ......................................................... 257,497
---------------
Total expenses, before expense reductions ..................... 16,720,614
Expense reductions ............................................ (7,666,166)
---------------
Total expenses, after expense reductions ...................... 9,054,448
-------------------------------------------------------------------------------
Net investment income 295,284,724
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 295,284,724
-------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
--------------------------------------------------------------------------------
Operations:
Net investment income ..........................................................
Distributions to shareholders from:
Net investment income (Managed Shares) .........................................
Net investment income (Institutional Shares) ...................................
Net investment income (Premium Money Market Shares) ............................
Net investment income (Prime Reserve Money Market Shares) ......................
Fund share transactions:
Managed Shares:
Proceeds from shares sold ......................................................
Reinvestment of distributions ..................................................
Cost of shares redeemed ........................................................
Net increase (decrease) in net assets from Fund share transactions .............
Institutional Shares
Proceeds from shares sold ......................................................
Reinvestment of distributions ..................................................
Cost of shares redeemed ........................................................
Net increase (decrease) in net assets from Fund share transactions .............
Premium Money Market Shares
Proceeds from shares sold ......................................................
Reinvestment of distributions ..................................................
Cost of shares redeemed ........................................................
Net increase (decrease) in net assets from Fund share transactions .............
Prime Reserve Money Market Shares
Proceeds from shares sold ......................................................
Reinvestment of distributions ..................................................
Cost of shares redeemed ........................................................
Net increase (decrease) in net assets from Fund share transactions .............
Increase (decrease) in net assets ..............................................
Net assets at beginning of period ..............................................
Net assets at end of period ....................................................
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Five Months Year Ended
Year Ended May Ended May 31, December 31,
31, 2000 1999 1998
--------------------------------------------------
$ 295,284,724 $ 59,023,051 $ 88,278,881
----------------- ---------------- ---------------
(21,023,946) (7,380,665) (18,908,573)
----------------- ---------------- ---------------
(215,221,172) (33,615,524) (38,347,244)
----------------- ---------------- ---------------
(56,686,377) (17,567,663) (30,962,225)
----------------- ---------------- ---------------
(2,353,229) (459,199) (60,839)
----------------- ---------------- ---------------
1,171,602,032 673,318,688 1,521,267,560
4,231,558 1,551,477 5,506,361
(1,155,348,705) (607,192,461) (1,568,154,523)
----------------- ---------------- ---------------
20,484,885 67,677,704 (41,380,602)
----------------- ---------------- ---------------
90,572,901,002 11,712,781,921 5,884,096,724
72,983,474 11,965,433 14,372,769
(89,101,937,654) (10,985,348,196) (5,169,903,810)
----------------- ---------------- ---------------
1,543,946,822 739,399,158 728,565,683
----------------- ---------------- ---------------
2,847,283,440 1,070,305,354 2,381,877,957
54,096,252 15,125,932 24,053,642
(2,770,287,933) (956,923,660) (1,933,144,105)
----------------- ---------------- ---------------
131,091,759 128,507,626 472,787,494
----------------- ---------------- ---------------
111,134,122 41,129,865 15,004,074
2,286,836 341,450 17,985
(101,036,164) (19,992,513) (2,685,634)
----------------- ---------------- ---------------
12,384,794 21,478,802 12,336,425
----------------- ---------------- ---------------
1,707,908,260 957,063,290 1,172,309,000
3,170,901,005 2,213,837,715 1,041,528,715
----------------- ---------------- ---------------
$4,878,809,265 $3,170,901,005 $2,213,837,715
----------------- ---------------- ---------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Money Market Series
The following table includes selected data for a share of the Managed Shares
class outstanding throughout each period and other performance information
derived from the financial statements.
Managed Shares (a)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(b) 1999(c) 1998(d) 1997(d) 1996(d) 1995(d) 1994(d)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
--------------------------------------------------------
------------------------------------------------------------------------------------
Net investment income .055 .020 .052 .051 .049 .054 .038
------------------------------------------------------------------------------------
Distributions from net
investment income (.055) (.020) (.052) (.051) (.049) (.054) (.038)
------------------------------------------------------------------------------------
Net asset value, end
of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
--------------------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (e) 5.60 1.99** 5.33 5.21 4.97 5.57 3.86
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 416 395 328 369 431 372 367
------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) .43(f) .37* .48 .59 .62 .68 .68
------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .28(f) .23* .38 .49 .55 .55 .55
------------------------------------------------------------------------------------
Ratio of net investment
income (%) 5.46 4.78* 5.20 5.00 4.86 5.45 3.84
------------------------------------------------------------------------------------
</TABLE>
(a) Effective July 7, 1997, Scudder Money Market Series (formerly known as
the Managed Cash Fund) was divided into four classes, of which Managed
Shares is one. Shares of the Fund outstanding on such date were
redesignated as the Managed Shares of the Fund. The data set forth
above for the periods prior to July 17, 1997, reflects the investment
performance of the Fund prior to such redesignation.
(b) For the year ended May 31, 2000.
(c) For the five months ended May 31, 1999. On November 13, 1998, the Board
of Directors of the Corporation changed the fiscal year end of the Fund
from December 31 to May 31.
(d) For the years ended December 31.
(e) Total returns would have been lower had certain expenses not been
reduced.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .43%
and .28%, respectively.
* Annualized
** Not annualized
24
<PAGE>
The following table includes selected data for a share of the Institutional
Shares class outstanding throughout each period and other performance
information derived from the financial statements.
Institutional Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(d)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.000 $1.000 $1.000 $1.000
-----------------------------------
------------------------------------------------------------------------------------
Net investment income .056 .020 .054 .022
------------------------------------------------------------------------------------
Distributions from net investment income (.056) (.020) (.054) (.022)
------------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000 $1.000
-----------------------------------
------------------------------------------------------------------------------------
Total Return (%) (e) 5.74 2.03** 5.52 2.25**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 3,350 1,806 1,066 338
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .30(f) .28* .29 .31*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .15(f) .14* .18 .26*
------------------------------------------------------------------------------------
Ratio of net investment income (%) 5.73 4.87* 5.34 5.39*
------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the five months ended May 31, 1999. On November 13, 1998, the Board
of Directors of the Corporation changed the fiscal year end of the Fund
from December 31 to May 31.
(c) For the year ended December 31, 1998.
(d) For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
(e) Total returns would have been lower had certain expenses not been
reduced.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .30%
and .15%, respectively.
* Annualized
** Not annualized
25
<PAGE>
The following table includes selected data for a share of the Premium Money
Market Shares class outstanding throughout each period and other performance
information derived from the financial statements.
Premium Money Market Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(d)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.000 $1.000 $1.000 $1.000
-----------------------------------
------------------------------------------------------------------------------------
Net investment income .055 .020 .053 .026
------------------------------------------------------------------------------------
Distributions from net investment income (.055) (.020) (.053) (.026)
------------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000 $1.000
-----------------------------------
------------------------------------------------------------------------------------
Total Return (%) (e) 5.68 2.00** 5.46 2.62**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1,067 936 808 335
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .35(f) .34* .35 .43*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .20(f) .20* .24 .38*
------------------------------------------------------------------------------------
Ratio of net investment income (%) 5.56 4.81* 5.31 5.50*
------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the five months ended May 31, 1999. On November 13, 1998, the Board
of Directors of the Corporation changed the fiscal year end of the Fund
from December 31 to May 31.
(c) For the year ended December 31, 1998.
(d) For the period August 4, 1997 (commencement of sale of Premium Money
Market Shares) to December 31, 1997.
(e) Total returns would have been lower had certain expenses not been
reduced.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .35%
and .20%, respectively.
* Annualized
** Not annualized
26
<PAGE>
The following table includes selected data for a share of the Prime Reserve
Money Market Shares class outstanding throughout each period and other
performance information derived from the financial statements.
Prime Reserve Money Market Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $1.000 $1.000 $1.000
--------------------------
------------------------------------------------------------------------------------
Net investment income .052 .020 .011
------------------------------------------------------------------------------------
Distributions from net investment income (.052) (.020) (.011)
------------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000
--------------------------
------------------------------------------------------------------------------------
Total Return (%) (d) 5.30 1.98** 1.06**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 46 34 12
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .74(e) .40* .45*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .59(e) .26* .31*
------------------------------------------------------------------------------------
Ratio of net investment income (%) 5.18 4.73* 4.95*
------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the five months ended May 31, 1999. On November 13, 1998, the Board
of Directors of the Corporation changed the fiscal year end of the Fund
from December 31 to May 31.
(c) For the period October 15, 1998 (commencement of sale of Prime Reserve
Money Market Shares) to December 31, 1998.
(d) Total returns would have been lower had certain expenses not been
reduced.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .74%
and .59%, respectively.
* Annualized
** Not annualized
27
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Money Market Series (the "Fund") is the diversified investment portfolio
comprising Scudder Fund, Inc. (the "Corporation"), which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Fund offers four classes of shares: Premium
Money Market Shares, Prime Reserve Money Market Shares, Managed Shares and
Institutional Shares.
On November 13, 1998 the Board of Directors changed the fiscal year end of the
Fund from December 31 to May 31.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class such as shareholder
services, administrative services and certain other class specific expenses.
Differences in class expenses may result in payment of different per share
dividends by class. All shares of the Fund have equal rights with respect to
voting subject to class specific arrangements.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the use of
management estimates. The policies described below are followed consistently by
the Fund in the preparation of its financial statements.
Security Valuation. The Fund values portfolio securities utilizing the amortized
cost method permitted in accordance with Rule 2a-7 under the 1940 Act and
pursuant to which the Fund must adhere to certain conditions. Under this method,
which does not take into account unrealized gains or losses on securities, an
instrument is initially valued at its cost and thereafter assumes a constant
amortization to maturity of any discount or premium.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
28
<PAGE>
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At May 31, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $91,000 which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until May 31, 2007
($1,000) and May 31, 2008 ($90,000), the respective expiration dates, whichever
occurs first.
In addition, from November 1, 1999 through May 31, 2000, the Fund incurred
approximately $7,400 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
occurring in the fiscal year ended May 31, 2001.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. Net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed, and, therefore,
will be distributed to shareholders at least annually.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Original issue discounts are accreted for both tax and financial
reporting purposes.
B. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies
and restrictions. The Adviser determines the securities, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.25% of average daily
net assets for the Fund, computed and accrued daily and payable monthly. The
Adviser has agreed to waive a portion of its investment management fee for the
Fund by 0.05% through
29
<PAGE>
September 30, 2000. From time to time the Adviser may voluntarily waive an
additional portion of its management fee.
For the year ended May 31, 2000, the Adviser did not impose fees of $7,384,398
and did impose fees of $5,634,678 which amounted to an annual effective rate of
0.10%.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. Each class
of the Fund has entered into a Transfer Agency and Service Agreement with SSC.
SSC receives account fees that vary according to the account size and type of
account of the shareholders of the respective classes. For the year ended May
31, 2000, the following amounts were charged to the classes of the Fund:
Managed Shares .................................................... $102,310
Institutional Shares .............................................. 48,176
Premium Shares .................................................... 461,604
Prime Reserve Shares .............................................. 132,243
--------
$744,333
--------
Amount unpaid at May 31, 2000 ..................................... $ 99,963
The Managed Shares of the Fund has arrangements with certain banks, institutions
and other persons under which they receive compensation from the Fund and the
Adviser for performing shareholder servicing functions for their customers who
own shares in the Fund. In connection with these arrangements for the year ended
May 31, 2000, the total expense charged to the Managed Shares of the Fund
amounted to $337,281 and the receivable for the Adviser's portion aggregated
$161,692.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Fund. For the year ended
May 31, 2000, the amount charged to the Fund by SFAC aggregated $478,549, of
which $125,067 remains unpaid at May 31, 2000.
The Fund pays each of its Directors not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the year ended May 31, 2000, Directors' fees and expenses aggregated $22,446. In
addition, a one-time fee of $79,198 was accrued for payment to those Directors
not affiliated with the Adviser who are not standing for re-election, under the
reorganization discussed in Note E. Inasmuch as the
30
<PAGE>
Adviser will also benefit from administrative efficiencies of a consolidated
Board, the Adviser has agreed to bear $39,599 of such costs.
The Fund has a compensation arrangement under which payment of Directors' fees
may be deferred. Interest is accrued (based on the rate of return earned on the
90 day Treasury Bill as determined at the beginning of each calendar quarter) on
the deferred balances and is included in "Directors' fees and expenses." The
accumulated balance of deferred Directors' fees and interest thereon relating to
the Fund aggregated $101,929 as of May 31, 2000, which is included in accrued
expenses of the Fund.
Other. Printing and postage expenses related to preparing and distributing
material such as shareholder reports, prospectuses and proxy materials to
current shareholders are charged to each class pro rata based on relative net
assets. For the year ended May 31, 2000, the following amounts were expensed by
the Fund:
Managed Shares .................................................... $ 50,462
Institutional Shares .............................................. 81,955
Premium Shares .................................................... 43,824
Prime Reserve Shares .............................................. 12,016
--------
$188,257
--------
Amount unpaid at May 31, 2000 ..................................... $115,262
C. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the year ended May 31, 2000, the
custodian and transfer agent fees were reduced as follows:
Custodian ......................................................... $ 66,320
Transfer Agent .................................................... 175,849
--------
$242,169
--------
D. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated, pro rata based on net assets, among each of the
Participants. Interest is calculated based on the market rates at the time
31
<PAGE>
of the borrowing. The Fund may borrow up to a maximum of 33 percent of its net
assets under the agreement.
E. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
32
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder Fund, Inc. and Shareholders of Scudder
Money Market Series:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Money Market Series (the
"Fund") at May 31, 2000, the results of its operations, the changes in its net
assets, and the financial highlights for each of the periods indicated therein,
in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 2000 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 21, 2000
33
<PAGE>
Tax Information
--------------------------------------------------------------------------------
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Kathryn L. Quirk* Ann M. McCreary*
o President and Assistant Secretary o Vice President
Dr. Rosita P. Chang Frank J. Rachwalski, Jr.*
o Director; Professor of Finance, o Vice President
University of Hawaii
John Millette*
Edgar R. Fiedler o Vice President and Secretary
o Director; Senior Fellow and
Economic Counsellor, The John R. Hebble*
Conference Board, Inc. o Treasurer
Peter B. Freeman Caroline Pearson*
o Director; Corporate Director and o Assistant Secretary
Trustee
*Scudder Kemper Investments, Inc.
Dr. J. D. Hammond
o Director; Dean, Smeal College of
Business Administration
Richard M. Hunt
o Director; University Marshal and
Senior Lecturer, Harvard University
35
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
The Scudder Family of Funds+++
--------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Scudder Tax Free Money Fund+ Growth
Scudder Classic Growth Fund***
Tax Free+ Scudder Large Company Growth Fund***
Scudder Limited Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Medium Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder 21st Century Growth Fund***
Scudder High Yield Tax Free Fund***
Scudder California Tax Free Fund** Global Equity
Scudder Massachusetts Limited Term Worldwide
Tax Free Fund** Scudder Global Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder Global Discovery Fund***
U.S. Income Scudder Emerging Markets Growth Fund
Scudder Short Term Bond Fund Scudder Gold Fund
Scudder GNMA Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.***
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Health Care Fund
Asset Allocation Scudder Technology Fund
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio Preferred Series
Scudder Pathway Growth Portfolio Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund***
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
</TABLE>
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1-800-SCUDDER www.scudder.com
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Retirement Programs and Education Accounts
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Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
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Closed-End Funds#
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<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Class S Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder
Kemper Investment's insurance agencies, 1-800-225-2470.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold by Scudder Kemper Investment's insurance agencies,
1-800-225-2470.
# These funds, advised by Scudder Kemper Investments, Inc., are
traded on the New York Stock Exchange and, in some cases, on
various other stock exchanges.
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Scudder Solutions
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1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
38
<PAGE>
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1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
39
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
