SCUDDER
INVESTMENTS(SM)
[LOGO]
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MONEY MARKET
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Scudder Money Market Series
Institutional Shares
Fund #403
Prospectus
August 14, 2000
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
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Scudder Money Market Series
How the fund works
2 Investment Approach
3 Main Risks to Investors
4 The Fund's Track Record
5 How Much Investors Pay
6 Other Policies and Risks
7 Who Manages and Oversees the Fund
9 Financial Highlights
How to invest in the fund
11 How to Buy Shares
12 How to Sell Shares
13 Policies You Should Know About
16 Understanding Distributions and Taxes
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How the fund works
On the next few pages, you'll find information about this fund's investment
goal, the main strategies it uses to pursue that goal, and the main risks that
could affect its performance.
Whether you are considering investing in the fund or are already a shareholder,
you'll probably want to look this information over carefully. You may want to
keep it on hand for reference as well.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. This fund's
share price isn't guaranteed, so be aware that you could lose money.
You can access all Scudder fund prospectuses online at:
http://institutionalfunds.scudder.com
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Institutional Shares | ICAXX fund number | 403
Scudder Money Market Series
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Investment Approach
The fund seeks as high a level of current income as is consistent with
liquidity, preservation of capital, and the fund's investment policies. It does
this by investing exclusively in high quality short-term securities as well as
certain repurchase agreements.
The fund may buy securities from many types of issuers, including the U.S.
government, banks (both U.S. banks and U.S. branches of foreign banks),
corporations and municipalities. The fund may invest more than 25% of total
assets in bank obligations. However, everything the fund buys must meet the
rules for money market fund investments (see sidebar). In addition, the fund
currently intends to buy only securities that are in the top credit grade for
short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
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MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than
397 days
o the dollar-weighted average maturity of the fund's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and denominated in U.S. dollars
2
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[ICON] With its higher investment minimums and reduced transaction
features, these shares may be appropriate for institutional cash
managers with liquidity needs.
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Main Risks to Investors
There are several risk factors that could reduce the yield you get from the fund
or make it perform less well than other investments. Although the fund seeks to
preserve the value of your investment at $1.00 per share, you could lose money
by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yield tends to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors. For
example, banks' repayment abilities could be compromised by broad economic
declines or sharp rises in interest rates. Securities from foreign banks may
have greater credit risk than comparable U.S. securities, for reasons ranging
from political and economic uncertainties to less stringent banking regulations.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
3
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[ICON] While a fund's past performance isn't necessarily a sign of how
it will do in the future, it can be valuable for an investor to
know. This page looks at fund performance two different ways:
year by year and over time.
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The Fund's Track Record
The bar chart shows how the fund's Institutional Shares' returns have varied
from year to year, which may give some idea of risk. The table shows how the
class's returns over different periods average out. All figures on this page
assume reinvestment of dividends and distributions.
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Annual Total Returns (%) as of 12/31 each year Institutional Shares
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
'98 5.52
'99 5.26
2000 Total Return as of June 30: 3.05%
Best Quarter: 1.43%, Q4 1999 Worst Quarter: 1.21%, Q2 1999
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Average Annual Total Returns (%) as of 12/31/1999
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1 Year Since Inception*
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5.26 5.42
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* Class inception: 8/4/1997
To find out the current seven-day yield for the fund's Institutional Shares,
call 1-800-537-1988 (available 24 hours) or go to the fund's Web site at
http://institutionalfunds.scudder.com.
In the chart, total returns for 1998 and 1999 would have been lower if operating
expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
4
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How Much Investors Pay
The fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
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Fee Table Institutional Shares
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Shareholder Fees (paid directly from your investment) None
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Annual Operating Expenses (deducted from fund assets)
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Management Fee 0.25%
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Distribution (12b-1) Fee None
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Other Expenses* 0.10%
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Total Annual Operating Expenses 0.35%
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Fee Waiver 0.20%
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Net Annual Operating Expenses** 0.15%
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* Includes a fixed administrative fee of 0.10%.
** By contract, the adviser has reduced its management fee by 0.15% and
has reduced its administrative fee by 0.05% through 09/30/2001. From
time to time, the adviser may voluntarily waive an additional portion
of its management fee.
Information in the table has been restated to reflect a new fixed rate
administrative fee.
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Expense Example
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This example helps you compare the expenses of the fund's Institutional Shares
to those of other mutual funds (including one year of capped expenses). The
example assumes the expenses remain the same, and includes one year of reduced
expenses in each period. It also assumes that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
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$15 $92 $176 $423
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5
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Other Policies and Risks
While the previous pages describe the main points of the fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, the fund's Board could
change the fund's investment goal without seeking shareholder approval.
o The fund's investment adviser establishes a security's credit grade
when it buys securities, using independent ratings or, for unrated
securities, its own credit analysis. If a security's credit quality
falls, the security will be sold unless the adviser believes this would
not be in the shareholders' best interests.
For more information
This prospectus doesn't tell you about every policy or risk of investing in the
fund.
If you want more information on the fund's allowable securities and investment
practices and the characteristics and risks of each one, you may want to request
a copy of the Statement of Additional Information (the back cover has
information on how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
6
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[ICON] Scudder Kemper, the company with overall responsibility for
managing the fund, takes a team approach to asset management.
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Who Manages and Oversees the Fund
The investment adviser
The fund's investment adviser is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds, and currently has more than $290 billion in assets under
management.
The fund is managed by a team of investment professionals, who individually
represent different areas of expertise and who together develop investment
strategies and make buy and sell decisions. Supporting the fund managers are
Scudder Kemper's many economists, research analysts, traders and other
investment specialists, located in offices across the United States and around
the world.
As payment for serving as investment adviser, Scudder Kemper receives a
management fee from the fund. For the most recently completed fiscal year, the
actual amount the fund paid in management fees was 0.10% of average daily net
assets.
The portfolio managers
The following people handle the fund's day-to-day management.
Frank J. Rachwalski, Jr. Jerri I. Cohen
Lead Portfolio Manager o Began investment career in 1981
o Began investment career in 1973 o Joined the adviser in 1981
o Joined the adviser in 1973 o Joined the fund team in 2000
o Joined the fund team in 1998
7
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The Board
A mutual fund's Board is responsible for the general oversight of the fund's
business. The majority of the Board is not affiliated with Scudder Kemper. These
independent trustees have primary responsibility for assuring that the fund is
managed in the best interests of its shareholders. The following people comprise
the fund's Board:
Linda C. Coughlin Joan E. Spero
o Managing Director, Scudder o President, Doris Duke
Kemper Investments, Inc. Charitable Foundation
o President of the fund
Jean Gleason Stromberg
Henry P. Becton, Jr. o Consultant
o President and General Manager,
WGBH Educational Foundation Jean C. Tempel
o Managing Director, First
Dawn-Marie Driscoll Light Capital (venture
o Executive Fellow, Center for capital firm)
Business Ethics, Bentley College
o President, Driscoll Associates Steven Zaleznick
(consulting firm) o President and Chief
Executive Officer, AARP
Edgar Fiedler Services, Inc.
o Senior Fellow and Economic
Counsellor, The Conference
Board, Inc.
Keith R. Fox
o General Partner, The Exeter
Group of Funds
8
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Financial Highlights
This table is designed to help you understand the financial performance of the
fund's Institutional Shares in recent years. The figures in the first part of
the table are for a single share. The total return figures represent the
percentage that an investor in Institutional Shares of the fund would have
earned (or lost), assuming all dividends and distributions were reinvested. This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the fund's financial statements, is included in the annual report (see
"Shareholder reports" on the back cover).
Scudder Money Market Series -- Institutional Shares
<TABLE>
<CAPTION>
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2000(a) 1999(b) 1998(c) 1997(d)
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<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.000 $1.000 $1.000 $1.000
------------------------------------
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Net investment income .056 .020 .054 .022
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Distributions from net investment income (.056) (.020) (.054) (.022)
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Net asset value, end of period $1.000 $1.000 $1.000 $1.000
------------------------------------
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Total Return (%) (e) 5.74 2.03** 5.52 2.25**
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Ratios to Average Net Assets and Supplemental Data
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Net assets, end of period ($ millions) 3,350 1,806 1,066 338
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Ratio of expenses before expense reductions (%) .30(f) .28* .29 .31*
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Ratio of expenses after expense reductions (%) .15(f) .14* .18 .26*
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Ratio of net investment income (%) 5.73 4.87* 5.34 5.39*
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</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
9
<PAGE>
How to invest in the fund
The following pages tell you how to invest in this fund and what to expect as a
shareholder. If you're investing directly with Scudder, all of this information
applies to you.
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How to Buy Shares
Use these instructions to invest directly with Scudder. Make out your check to
"The Scudder Funds."
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<CAPTION>
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<S> <C> <C>
Buying shares First investment Additional investments
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$1,000,000 or more for all No minimum amount
accounts
By wire o Call 1-800-537-3177 to open o Instruct the wiring bank to
an account and get an account transmit the specified amount
number to State Street Bank and
Trust Company with the
o Instruct wiring bank to information stated to the left
transmit the specified amount
to:
State Street Bank and
Trust Company
Boston, Massachusetts
ABA Number 011000028
DDA #9902-810-2
Attention: Money Market
Series Institutional Shares
Account (name(s) in which
registered)
Account Number and amount
invested in each fund
o Complete a purchase
application and send it to us
at the address below
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By mail or o Fill out and sign a purchase o Send a check and a letter
express application with your name, account
(see below) number, the full name of the
o Send it to us at the address fund and class and your
below, along with an investment instructions to us
investment check at the address below
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</TABLE>
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[ICON] Regular, express, registered, or certified mail:
Scudder Service Corporation, c/o Kemper Service Company,
Institutional Funds-- Client Services, 222 South Riverside
Plaza, 33rd Floor, Chicago, IL 60606
Phone number: 1-800-537-3177
Fax number: 1-800-537-9960
E-Mail address: [email protected]
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11
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How to Sell Shares
Use these instructions to sell shares in an account opened directly with
Scudder.
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<CAPTION>
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Selling shares
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<S> <C>
By Expedited If Expedited Redemption Service has been elected on the Purchase
Redemption Service Application on file with the Transfer Agent, redemption of shares
may be requested by:
o telephoning Client Services at 1-800-537-3177
o faxing a request to 1-800-537-9960
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By mail or express Write a letter that includes:
o the fund, class, and account number from which you want to sell
shares
o the dollar amount or number of shares you want to sell
o your name(s), signature(s), and address, as they appear on your
account
o a daytime telephone number
Mail the letter to:
Scudder Service Corporation
c/o Kemper Service Company
Institutional Funds -- Client Services
222 South Riverside Plaza, 33rd Floor
Chicago, IL 60606
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</TABLE>
12
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[ICON] Questions? You can speak to a Scudder Institutional Cash
Specialist between 8:30 a.m. and 6:00 p.m. Eastern time on any
fund business day by calling 1-800-537-3177.
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Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder. Some of this information, such as the section on dividends
and taxes, applies to all investors, including those investing through
investment providers.
If you are investing through a third-party provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that a
third-party provider may charge its own fees.
Policies about transactions
The fund is open for business each day the New York Stock Exchange is open. The
fund calculates its share price every business day at 5:00 p.m. Eastern time,
but sometimes earlier, as in the case of scheduled half-day trading or
unscheduled suspensions of trading. Orders received between 4:00 p.m. and 5:00
p.m. Eastern time may be rejected based on certain guidelines described in the
Statement of Additional Information.
You can place an order to buy or sell shares at any time. Once your order is
received by Scudder Service Corporation or its agent, and they have determined
that it is a "good order," it will be processed at the next share price
calculated.
Wire purchase orders that arrive, are accepted and are funded before 5:00 p.m.
Eastern time will be processed that day. Those that arrive and are accepted by
5:00 p.m., but are not funded by that time, will usually be processed the same
day as long as the wire funds arrive before the close of Federal Reserve Wire
System.
Payments transmitted through the Federal Reserve Wire System are in federal
funds. Checks or wire orders made through other bank wire systems must be
converted into federal funds, which generally may result in a one day delay in
executing that order.
Expedited Redemption Service orders that arrive before 12 noon will be processed
that day, and, if possible, those arriving between noon and 4:00 p.m. will be
processed that day as well. Expedited Redemption Service is not available
between 4:00 p.m. and 5:00 p.m., but redemptions by other available means may be
made until 5:00 p.m. Eastern time.
13
<PAGE>
Because orders placed through third-party investment providers must be forwarded
to Scudder Service Corporation or its agent before they can be processed, you'll
need to allow extra time. A representative of your investment provider should be
able to tell you when your order will be processed.
Wire investments that arrive by 5:00 p.m. Eastern time will receive that day's
dividend. Investments you make by other methods will start to accrue dividends
the next business day after your purchase is processed. When you sell shares
with Expedited Redemption Service and we process your order the same day we
receive it, you won't get that day's dividend. In other cases, you will receive
the dividend for the day on which your shares are sold.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
Expedited Redemption Service allows you to have proceeds from your sales of fund
shares wired directly to a bank account. To use this service, you'll need to
designate the bank account in advance. Follow the instructions on your
application.
When you want to sell more than $100,000 worth of shares, you don't need a
signature guarantee as long as you want the proceeds wired to a bank account
that's already on file with us. Also, you don't need a signature guarantee for
an exchange. Otherwise, you'll usually need to place your order in writing and
include a signature guarantee. We may also require a signature guarantee in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
With same-day redemptions through Expedited Redemption Service, money from
shares you sell is normally sent out the same day we receive your order. Money
from other orders is normally sent out within one business day of when your
order is processed (not when it is received), although it could be delayed for
up to seven days. There are also two circumstances when it could be longer: when
you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the
SEC to allow further delays.
14
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How the fund calculates share price
The share price for the fund's Institutional Shares is the net asset value per
share, or NAV. To calculate the NAV for this share class, the fund uses the
following equation:
TOTAL ASSETS - TOTAL LIABILITIES
------------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if we have
been notified by the IRS that you are subject to backup withholding, or
if you fail to provide us with a correct taxpayer ID number or
certification that you are exempt from backup withholding
o close your account and send you the proceeds if your balance falls
below $1,000,000 for at least 30 days; we will give you 60 days' notice
so you can either increase your balance or close your account (these
policies don't apply to retirement accounts)
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been
opened, we may give you 30 days' notice to provide the correct number
o change, add, or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason
o pay you for shares you sell by "redeeming in kind," that is, by giving
you marketable securities (which typically will involve brokerage costs
for you to liquidate) rather than cash; in most cases, a fund won't
make a redemption-in-kind unless your requests over a 90-day period
total more than $250,000 or 1% of the fund's net assets, whichever is
less.
15
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[ICON] Because each shareholder's tax situation is unique, it's always
a good idea to ask your tax professional about the tax
consequences of your investments, including any state and local
tax consequences.
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Understanding Distributions and Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchases and sales of shares.) A
fund may not always pay a distribution for a given period.
The fund intends to declare income dividends daily, and pay them monthly. The
fund may take into account capital gains and losses (other than net long-term
capital gains) in its daily dividend declarations. The fund may make additional
distributions for tax purposes, if necessary.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares, sent to you by check or wired
to your bank account of record. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested. For retirement plans, reinvestment is the only option.
16
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on which type of transaction is involved. The following tables
show the usual tax status of transactions in fund shares as well as that of any
taxable distributions from the fund:
Generally taxed at ordinary income rates
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o short-term capital gains from selling fund shares
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o taxable income dividends you receive from the fund
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o short-term capital gains distributions you receive from the fund
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Generally taxed at capital gains rates
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o long-term capital gains from selling fund shares
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o long-term capital gains distributions you receive from the fund
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Because the fund seeks to maintain a stable share price, you are unlikely to
have a capital gain or loss when you sell fund shares. For tax purposes, an
exchange is the same as a sale.
The fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
17
<PAGE>
Notes
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<PAGE>
Notes
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<PAGE>
Notes
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<PAGE>
Notes
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<PAGE>
To Get More Information
Shareholder reports -- These include detailed performance figures, a list of
everything the fund owns and the fund's financial statements. Shareholders get
these reports automatically. To reduce costs, we mail one copy per customer. For
more copies, call 1-800-537-3177.
Statement of Additional Information (SAI) -- This tells you more about the
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, please contact Scudder or
the SEC (see below). If you're a shareholder and have questions, please contact
Scudder. Materials you get from Scudder are free; those from the SEC involve a
copying fee. If you like, you can look over these materials in person at the
SEC's Public Reference Room in Washington, DC or request them electronically at
[email protected].
Scudder Kemper Investments, Inc. SEC
222 S. Riverside Plaza, 33rd Floor 450 Fifth Street, N.W.
Institutional Funds-- Client Washington, DC 20549-6009
Services Chicago, IL 60606
1-800-537-3177 1-202-942-8090
http://institutionalfunds.scudder.com www.sec.gov
e-mail: [email protected]
SEC File Number 811-3495
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
--------------------------------------------------------------------------------
MONEY MARKET
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Scudder Money Market Series
Managed Shares
Prospectus
August 14, 2000
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
Scudder Money Market Series
How the fund works
2 Investment Approach
3 Main Risks to Investors
4 The Fund's Track Record
5 How Much Investors Pay
6 Other Policies and Risks
7 Who Manages and Oversees the Fund
9 Financial Highlights
How to invest in the fund
11 How to Buy Shares
12 How to Exchange or Sell Shares
13 Policies You Should Know About
17 Understanding Distributions and Taxes
<PAGE>
How the fund works
On the next few pages, you'll find information about this fund's
investment goal, the main strategies it uses to pursue that goal, and
the main risks that could affect its performance.
Whether you are considering investing in the fund or are already a
shareholder, you'll probably want to look this information over
carefully. You may want to keep it on hand for reference as well.
Remember that mutual funds are investments, not bank deposits. They're
not insured or guaranteed by the FDIC or any other government agency.
This fund's share price isn't guaranteed, so be aware that you could
lose money.
You can access all Scudder fund prospectuses online at www.scudder.com
<PAGE>
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ticker symbol | MCAXX fund number | 023
Scudder Money Market Series
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Investment Approach
The fund seeks as high a level of current income as is consistent with
liquidity, preservation of capital, and the fund's investment policies.
It does this by investing exclusively in high quality short-term
securities as well as certain repurchase agreements.
The fund may buy securities from many types of issuers, including the
U.S. government, banks (both U.S. banks and U.S. branches of foreign
banks), corporations and municipalities. The fund may invest more than
25% of total assets in bank obligations. However, everything the fund
buys must meet the rules for money market fund investments (see
sidebar). In addition, the fund currently intends to buy only
securities that are in the top credit grade for short-term debt
securities.
Working in conjunction with credit analysts, the portfolio managers
screen potential securities and develop a list of those that the fund
may buy. The managers then decide which securities on this list to buy,
looking for attractive yield and weighing considerations such as credit
quality, economic outlooks and possible interest rate movements. The
managers may adjust the fund's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates
and to preserve yield when interest rates appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term debt
securities and denominated in U.S. dollars
2 | Scudder Money Market Series
<PAGE>
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[ICON] This fund may make sense for investors who are in a moderate to high
tax bracket and who are looking for the income, liquidity and
stability that a money fund is designed to offer.
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Main Risks to Investors
There are several risk factors that could reduce the yield you get
from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at
$1.00 per share, you could lose money by investing in the fund.
As with most money market funds, the most important factor is market
interest rates. The fund's yield tends to reflect current interest
rates, which means that when these rates fall, the fund's yield
generally falls as well.
A second factor is credit quality. If a portfolio security declines in
credit quality or goes into default, it could hurt the fund's
performance. To the extent that the fund emphasizes certain sectors of
the short-term securities market, the fund increases its exposure to
factors affecting these sectors. For example, banks' repayment
abilities could be compromised by broad economic declines or sharp
rises in interest rates. Securities from foreign banks may have
greater credit risk than comparable U.S. securities, for reasons
ranging from political and economic uncertainties to less stringent
banking regulations.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate
trends, credit quality or other matters
o the counterparty to a repurchase agreement or other transaction
could default on its obligations
Scudder Money Market Series | 3
<PAGE>
--------------------------------------------------------------------------------
[ICON] While a fund's past performance isn't necessarily a sign of how it
will do in the future, it can be valuable for an investor to know.
This page looks at fund performance two different ways: year by year
and over time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the total returns for the fund's Managed
Shares have varied from year to year, which may give some idea of
risk. The table shows how the class's returns over different periods
average out. All figures on this page assume reinvestment of dividends
and distributions.
----------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Managed Shares
----------------------------------------------------------------------
7.92 6.07 3.74 2.81 3.86 5.57 4.97 5.21 5.33 5.16
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
2000 Total Return as of June 30: 2.95%
Best Quarter: 1.94%, Q2 1990 Worst Quarter: 0.69%, Q2 1993
----------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
----------------------------------------------------------------------
1 Year 5 Years 10 Years
----------------------------------------------------------------------
5.16 5.25 5.06
----------------------------------------------------------------------
To find out the current seven-day yield for the fund's Managed Shares,
call 1-800-SCUDDER.
Total returns for 1990 through 1999 would have been lower if operating
expenses hadn't been reduced.
4 | Scudder Money Market Series
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund
does have annual operating expenses, and as a shareholder you pay them
indirectly.
----------------------------------------------------------------------
Fee Table Managed Shares
----------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
----------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
----------------------------------------------------------------------
Management Fee 0.25%
----------------------------------------------------------------------
Distribution (12b-1) Fee None
----------------------------------------------------------------------
Other Expenses* 0.25%
--------------
----------------------------------------------------------------------
Total Annual Operating Expenses 0.50%
----------------------------------------------------------------------
Fee Waiver 0.20%
---------------
----------------------------------------------------------------------
Net Annual Operating Expenses** 0.30%
----------------------------------------------------------------------
* Includes a fixed administrative fee of 0.25%.
** By contract the adviser has reduced its management fee by 0.15%
and has reduced its administrative fee by 0.05% through
9/30/2001. From time to time, the adviser may voluntarily waive
an additional portion of its management fee.
Information in the table has been restated to reflect a new fixed rate
administrative fee.
----------------------------------------------------------------------
Expense Example
----------------------------------------------------------------------
This example is designed to help you compare the expenses of the
fund's Managed Shares to those of other mutual funds (including one
year of capped expenses). The example assumes the expenses remain
the same, and includes one year of reduced expenses in each period.
It also assumes that you invested $10,000, earned 5% annual returns
and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------------
$31 $140 $260 $609
----------------------------------------------------------------------
Scudder Money Market Series | 5
<PAGE>
Other Policies and Risks
While the previous pages describe the main points of the fund's
strategy and risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, the fund's Board
could change the fund's investment goal without seeking
shareholder approval.
o The fund's investment adviser establishes a security's credit
grade when it buys securities, using independent ratings or, for
unrated securities, its own credit analysis. If a security's
credit quality falls, the security will be sold unless the
adviser believes this would not be in the shareholders' best
interests.
For more information
This prospectus doesn't tell you about every policy or risk of
investing in the fund.
If you want more information on the fund's allowable securities and
investment practices and the characteristics and risks of each one,
you may want to request a copy of the Statement of Additional
Information (the back cover has information on how to do this).
Keep in mind that there is no assurance that any mutual fund will
achieve its goal.
6 | Other Policies and Risks
<PAGE>
--------------------------------------------------------------------------------
[ICON] Scudder Kemper, the company with overall responsibility for managing
the fund, takes a team approach to asset management.
--------------------------------------------------------------------------------
Who Manages and Oversees the Fund
The investment adviser
The fund's investment adviser is Scudder Kemper Investments, Inc., 345
Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds, and currently has more than $290
billion in assets under management.
The fund is managed by a team of investment professionals, who
individually represent different areas of expertise and who together
develop investment strategies and make buy and sell decisions.
Supporting the fund managers are Scudder Kemper's many economists,
research analysts, traders and other investment specialists, located
in offices across the United States and around the world.
As payment for serving as investment adviser, Scudder Kemper receives
a management fee from the fund. For the most recently completed fiscal
year, the actual amount the fund paid in management fees was 0.10% of
average daily net assets.
The portfolio managers
The following people handle the fund's day-to-day management.
Frank J. Rachwalski, Jr. Jerri I. Cohen
Lead Portfolio Manager o Began investment career in
o Began investment career in 1973 1981
o Joined the adviser in 1973 o Joined the adviser in 1981
o Joined the fund team in 1998 o Joined the fund team in 2000
Who Manages and Oversees the Fund | 7
<PAGE>
The Board
A mutual fund's Board is responsible for the general oversight of the
fund's business. The majority of the Board is not affiliated with
Scudder Kemper. These independent trustees have primary responsibility
for assuring that the fund is managed in the best interests of its
shareholders. The following people comprise the fund's Board:
Linda C. Coughlin Joan E. Spero
o Managing Director, Scudder o President, Doris Duke
Kemper Investments, Inc. Charitable Foundation
o President of the fund
Jean Gleason Stromberg
Henry P. Becton, Jr. o Consultant
o President and General Manager,
WGBH Educational Foundation Jean C. Tempel
o Managing Director, First
Dawn-Marie Driscoll Light Capital (venture
o Executive Fellow, Center for capital firm)
Business Ethics, Bentley College
o President, Driscoll Associates Steven Zaleznick
(consulting firm) o President and Chief
Executive Officer, AARP
Edgar Fiedler Services, Inc.
o Senior Fellow and Economic
Counsellor, The Conference
Board, Inc.
Keith R. Fox
o General Partner, The Exeter
Group of Funds
8 | Who Manages and Oversees the Fund
<PAGE>
Financial Highlights
This table is designed to help you understand the financial performance of the
fund's Managed Shares in recent years. The figures in the first part of the
table are for a single share. The total return figures represent the percentage
that an investor in Managed Shares of the fund would have earned (or lost),
assuming all dividends and distributions were reinvested. This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, is included in the annual report (see "Shareholder
reports" on the back cover).
Scudder Money Market Series -- 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
Financial Highlights | 9
<PAGE>
How to invest in the fund
The following pages tell you how to invest in this fund and what to expect
as a shareholder. If you're investing directly with Scudder, all of this
information applies to you.
If you're investing through a "third party provider" -- for example, a
brokerage firm or bank -- your provider may have its own policies or
instructions, and you should follow those.
<PAGE>
How to Buy Shares
Use these instructions to invest directly with Scudder. Make out your check to
"The Scudder Funds."
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
First investment Additional investments
------------------------------------------------------------------------------------
<S> <C> <C>
$100,000 or more for all $1,000 or more for regular
accounts accounts
$100 or more for IRAs
$50 or more with an Automatic
Investment Plan
------------------------------------------------------------------------------------
By mail or o Fill out and sign an o Send a check and a Scudder
express application investment slip to us at the
(see below) appropriate address below
o Send it to us at the
appropriate address, along o If you don't have an
with an investment check investment slip, simply
include a letter with your
name, account number, the
full name of the fund and
class, and your investment
instructions
------------------------------------------------------------------------------------
By wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
------------------------------------------------------------------------------------
By phone -- o Call 1-800-SCUDDER for
instructions
------------------------------------------------------------------------------------
With an -- o To set up regular investments
automatic from a bank investment
plan checking account, call
1-800-SCUDDER
------------------------------------------------------------------------------------
Using QuickBuy -- o Call 1-800-SCUDDER
------------------------------------------------------------------------------------
On the Internet o Go to the "funds and prices" o Call 1-800-SCUDDER to ensure
section at www.scudder.com you have enabled electronic
services
o Access and print out an
on-line prospectus and a new o Go to www.scudder.com and
account application register
o Complete and return the o Follow instructions for
application with your check buying shares with money from
your bank account
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
[ICON] Regular mail:
The Scudder Funds, PO Box 2291, Boston, MA 02107-2291
Express, registered or certified mail:
The Scudder Funds, 66 Brooks Drive, Braintree, MA 02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
--------------------------------------------------------------------------------
How to Buy Shares | 11
<PAGE>
How to Exchange or Sell Shares
Use these instructions to exchange or sell shares in an account opened directly
with Scudder.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Exchanging into another fund Selling shares
------------------------------------------------------------------------------------
<S> <C> <C>
To open a new account: same Some transactions, including
minimum as for a new investment most for over $100,000, can
only be ordered in writing; if
For exchanges between existing you're in doubt, see page 15.
accounts: $1,000 or more
------------------------------------------------------------------------------------
By phone or wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
------------------------------------------------------------------------------------
Using SAIL(TM) o Call 1-800-343-2890 and o Call 1-800-343-2890 and
follow the instructions follow the instructions
------------------------------------------------------------------------------------
By mail, express, Write a letter that includes: Write a letter that includes:
or fax (see
previous page) o the fund, class, and account o the fund, class, and account
number you're exchanging out number from which you want to
of sell shares
o the dollar amount or number o the dollar amount or number
of shares you want to exchange of shares you want to sell
o the name and class of the o your name(s), signature(s),
fund you want to exchange into and address, as they appear
on your account
o your name(s), signature(s),
and address, as they appear o a daytime telephone number
on your account
o a daytime telephone number
------------------------------------------------------------------------------------
With an -- o To set up regular cash payments
automatic from a Scudder fund account,
withdrawal call 1-800-SCUDDER
plan
------------------------------------------------------------------------------------
Using QuickSell -- o Call 1-800-SCUDDER
------------------------------------------------------------------------------------
Using -- o Call 1-800-SCUDDER
Checkwriting
------------------------------------------------------------------------------------
On the Internet o Go to www.scudder.com and --
register
o Follow instructions for
making on-line changes
------------------------------------------------------------------------------------
</TABLE>
12 | How to Exchange or Sell Shares
<PAGE>
--------------------------------------------------------------------------------
[ICON] Questions? You can speak to a Scudder representative between 8:00
a.m. and 8:00 p.m. Eastern time on any fund business day by calling
1-800-SCUDDER.
--------------------------------------------------------------------------------
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may
affect you as a shareholder. Some of this information, such as the section
on dividends and taxes, applies to all investors, including those investing
through investment providers.
If you are investing through an investment provider, check the materials
you got from them. As a general rule, you should follow the information in
those materials wherever it contradicts the information given here. Please
note that an investment provider may charge its own fees.
Policies about transactions
The fund is open for business each day the New York Stock Exchange is open.
The fund calculates its share price every business day at 5:00 p.m. Eastern
time, but sometimes earlier, as in the case of scheduled half-day trading
or unscheduled suspensions of trading. Orders received between 4:00 p.m.
and 5:00 p.m. Eastern time may be rejected based on certain guidelines
described in the Statement of Additional Information
You can place an order to buy or sell shares at any time. Once your order
is received by Scudder Service Corporation, and they have determined that
it is a "good order," it will be processed at the next share price
calculated.
Because orders placed through investment providers must be forwarded to
Scudder Service Corporation before they can be processed, you'll need to
allow extra time. A representative of your investment provider should be
able to tell you when your order will be processed.
Payments transmitted through the Federal Reserve Wire System are in federal
funds. Checks or wire orders made through other bank wire systems must be
converted into federal funds, which generally may result in a one day delay
in executing the order.
Policies You Should Know About | 13
<PAGE>
--------------------------------------------------------------------------------
[ICON] The Scudder Web site can be a valuable resource for shareholders
with Internet access. Go to www.scudder.com to get up-to-date
information, review balances or even place orders for exchanges.
--------------------------------------------------------------------------------
Wire investments that arrive by 5:00 p.m. Eastern time will receive that
day's dividend. Investments you make by other methods will start to accrue
dividends the next business day after your purchase is processed. However,
redemption by wire is not available after 4:00 p.m. Eastern time, but
redemptions by other available means may be made until 5:00 p.m. Eastern
time.
SAIL(TM), the Scudder Automated Information Line, is available 24 hours a
day by calling 1-800-343-2890. You can use SAIL to get information on
Scudder funds generally and on accounts held directly at Scudder. You can
also use it to make exchanges and sell shares.
QuickBuy and QuickSell let you set up a link between a Scudder account and
a bank account. Once this link is in place, you can move money between the
two with a phone call. You'll need to make sure your bank has Automated
Clearing House (ACH) services. To set up QuickBuy or QuickSell on a new
account, see the account application; to add it to an existing account,
call 1-800-SCUDDER.
Checkwriting lets you sell fund shares by writing a check. Your investment
keeps earning dividends until your check clears. Please note that with this
fund, you should not write checks for less than $1,000. Note as well that
we can't honor any check larger than your balance at the time the check is
presented to us, or any check for more than $5,000,000. It's not a good
idea to close out an account using a check because the account balance
could change between the time you write the check and the time it is
processed.
When you call us to sell shares, we may record the call, ask you for
certain information or take other steps designed to prevent fraudulent
orders. It's important to understand that as long as we take reasonable
steps to ensure that an order appears genuine, we are not responsible for
any losses that may occur.
14 | Policies You Should Know About
<PAGE>
When you ask us to send or receive a wire, please note that while we don't
charge a fee to receive wires, we will deduct a $5 fee from all wires sent
from us to your bank. Your bank may charge its own fees for handling wires.
The fund can only accept wires of $100 or more.
Exchanges among Scudder funds are an option for shareholders who bought
their shares directly from Scudder and for many other investors as well.
Exchanges are a shareholder privilege, not a right: we may reject or limit
any exchange order, particularly when there appears to be a pattern of
"market timing" or other frequent purchases and sales. We may also reject
or limit purchase orders, for these or other reasons.
When you want to sell more than $100,000 worth of shares, you'll usually
need to place your order in writing and include a signature guarantee. The
only exception is if you want money wired to a bank account that is already
on file with us; in that case, you don't need a signature guarantee. Also,
you don't need a signature guarantee for an exchange, although we may
require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a
valuable safeguard against fraud. You can get a signature guarantee from
most brokers, banks, savings institutions and credit unions. Note that you
can't get a signature guarantee from a notary public.
Money from shares you sell is normally sent out within one business day of
when your order is processed (not when it is received), although it could
be delayed for up to seven days. There are also two circumstances when it
could be longer: when you are selling shares you bought recently by check
and that check hasn't cleared yet (maximum delay: 15 days) or when unusual
circumstances prompt the SEC to allow further delays.
Policies You Should Know About | 15
<PAGE>
--------------------------------------------------------------------------------
[ICON] If you ever have difficulty placing an order by phone or fax, you can
always send us your order in writing.
--------------------------------------------------------------------------------
How the fund calculates share price
The share price for the fund's Managed Shares is the net asset value
per share, or NAV. To calculate NAV for this share class, the fund
uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the
method used by most money market funds).
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if we
have been notified by the IRS that you are subject to backup
withholding, or if you fail to provide us with a correct taxpayer
ID number or certification that you are exempt from backup
withholding
o close your account and send you the proceeds if your balance
falls below $100,000 for at least 30 days; we will give you 60
days' notice so you can either increase your balance or close
your account (these policies don't apply to retirement accounts)
o reject a new account application if you don't provide a correct
Social Security or other tax ID number; if the account has
already been opened, we may give you 30 days' notice to provide
the correct number
o change, add, or withdraw various services, fees and account
policies (for example, we may change or terminate the exchange
privilege at any time)
o pay you for shares you sell by "redeeming in kind," that is, by
giving you marketable securities (which typically will involve
brokerage costs for you to liquidate) rather than cash; in most
cases, a fund won't make a redemption-in-kind unless your
requests over a 90-day period total more than $250,000 or 1% of
the fund's net assets, whichever is less
16 | Policies You Should Know About
<PAGE>
--------------------------------------------------------------------------------
[ICON] Because each shareholder's tax situation is unique, it's always a good
idea to ask your tax professional about the tax consequences of your
investments, including any state and local tax consequences.
--------------------------------------------------------------------------------
Understanding Distributions and Taxes
By law, a mutual fund is required to pass through to its shareholders
virtually all of its net earnings. A fund can earn money in two ways:
by receiving interest, dividends or other income from securities it
holds, and by selling securities for more than it paid for them. (A
fund's earnings are separate from any gains or losses stemming from
your own purchases and sales of shares.) A fund may not always pay a
distribution for a given period.
The fund intends to declare income dividends daily, and pay them
monthly. The fund may take into account capital gains and losses
(other than net long-term capital gains) in its daily dividend
declarations. The fund may make additional distributions for tax
purposes, if necessary.
You can choose how to receive your dividends and distributions. You
can have them all automatically reinvested in fund shares or all sent
to you by check. Tell us your preference on your application. If you
don't indicate a preference, your dividends and distributions will all
be reinvested. For retirement plans, reinvestment is the only option.
Understanding Distributions and Taxes | 17
<PAGE>
The tax status of the fund earnings you receive, and your own fund
transactions, generally depends on which type of transaction is
involved. The following tables show the usual tax status of
transactions in fund shares as well as that of any taxable
distributions from the fund:
Generally taxed at ordinary income rates
----------------------------------------------------------------------
o short-term capital gains from selling fund shares
----------------------------------------------------------------------
o taxable income dividends you receive from the fund
----------------------------------------------------------------------
o short-term capital gains distributions you receive from the fund
----------------------------------------------------------------------
Generally taxed at capital gains rates
----------------------------------------------------------------------
o long-term capital gains from selling fund shares
----------------------------------------------------------------------
o long-term capital gains distributions you receive from the fund
----------------------------------------------------------------------
Because the fund seeks to maintain a stable share price, you are
unlikely to have a capital gain or loss when you sell fund shares. For
tax purposes, an exchange is the same as a sale.
The fund will send you detailed tax information every January. These
statements tell you the amount and the tax category of any dividends
or distributions you received. They also have certain details on your
purchases and sales of shares. The tax status of dividends and
distributions is the same whether you reinvest them or not. Dividends
or distributions declared in the last quarter of a given year are
taxed in that year, even though you may not receive the money until
the following January.
18 | Understanding Distributions and Taxes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
To Get More Information
Shareholder reports -- These include commentary from the fund's
management team about recent market conditions and the effects of the
fund's strategies on its performance. They also have detailed
performance figures, a list of everything the fund owns and the fund's
financial statements. Shareholders get these reports automatically. To
reduce costs, we mail one copy per household. For more copies, call
1-800-SCUDDER.
Statement of Additional Information (SAI) -- This tells you more about
the fund's features and policies, including additional risk
information. The SAI is incorporated by reference into this document
(meaning that it's legally part of this prospectus).
If you'd like to ask for copies of these documents, please contact
Scudder or the SEC (see below). If you're a shareholder and have
questions, please contact Scudder. Materials you get from Scudder are
free; those from the SEC involve a copying fee. If you like, you can
look over these materials in person at the SEC's Public Reference Room
in Washington, DC or request them electronically at
[email protected].
Scudder Funds SEC
PO Box 2291 450 Fifth Street, N.W.
Boston, MA 02107-2291 Washington, DC 20549-6009
1-800-SCUDDER 1-202-942-8090
www.scudder.com www.sec.gov
SEC File Number 811-3495
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
Scudder Tax Free Money Fund
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series
Supplement to Prospectus Dated August 14, 2000
On or about the following dates, this prospectus will offer additional classes
of shares of each fund to provide investors with different purchase options.
Each class has its own important features and policies.
Fund Class Date
--------------------------------------------------------------------------------
Scudder Tax Free Money Fund Class AARP September 11, 2000
--------------------------------------------------------------------------------
Scudder Cash Investment Trust Class AARP September 11, 2000
--------------------------------------------------------------------------------
Scudder U.S. Treasury Money Class AARP October 2, 2000
Fund
--------------------------------------------------------------------------------
Scudder Money Market Series Prime Reserve Class AARP August 14, 2000
Premium Class AARP October 2, 2000
--------------------------------------------------------------------------------
In addition, as of the dates noted above for Scudder Tax Free Money Fund,
Scudder Cash Investment Trust and Scudder U.S. Treasury Money Fund, all existing
shares of each fund will be redesignated as Class S shares of the respective
fund. As of August 14, 2000 all existing shares of Premium Shares and Prime
Reserve Shares of Scudder Money Market Series were redesignated Premium Class S
and Prime Reserve Class S, respectively.
Class AARP shares have been especially designed for members of AARP. Therefore,
the disclosure in the prospectus regarding Class AARP is not applicable until a
fund offers Class AARP.
<PAGE>
From August 14, 2000 to September 11, 2000, the following information replaces
the information in the "How Much Investors Pay" section on page 5 of the
prospectus:
Scudder Tax Free Money Fund
This fund has no sales charge or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.23%
-----------
--------------------------------------------------------------------------------
Total Annual Operating Expenses** 0.73%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
** By contract expenses are capped at 0.65% through 9/30/2000.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
Based on the costs above, this example helps you compare this fund's expenses to
those of other mutual funds. The example assumes the expenses above remain the
same. It also assumes that you invested $10,000, earned 5% annual returns,
reinvested all dividends and distributions and sold your shares at the end of
each period. This is only an example; your actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$75 $233 $406 $906
--------------------------------------------------------------------------------
2
<PAGE>
From August 14, 2000 to October 2, 2000, the following information replaces the
information in the "How Much Investors Pay" section on page 9 of the prospectus:
Scudder U.S. Treasury Money Fund
This fund has no sales charge or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.54%
-----------
--------------------------------------------------------------------------------
Total Annual Operating Expenses** 1.04%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
** By contract expenses are capped at 0.65% through 9/30/2000.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
Based on the costs above, this example helps you compare this fund's expenses to
those of other mutual funds. The example assumes the expenses above remain the
same. It also assumes that you invested $10,000, earned 5% annual returns,
reinvested all dividends and distributions and sold your shares at the end of
each period. This is only an example; your actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$106 $331 $574 $1,271
--------------------------------------------------------------------------------
3
<PAGE>
From August 14, 2000 to September 11, 2000, the following information replaces
the information in the "How Much Investors Pay" section on page 13 of the
prospectus:
Scudder Cash Investment Trust
This fund has no sales charge or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.43%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.56%
-----------
--------------------------------------------------------------------------------
Total Annual Operating Expenses** 0.99%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
** By contract expenses are capped at 0.85% through 9/30/2000.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
Based on the costs above, this example helps you compare this fund's expenses to
those of other mutual funds. The example assumes the expenses above remain the
same. It also assumes that you invested $10,000, earned 5% annual returns,
reinvested all dividends and distributions and sold your shares at the end of
each period. This is only an example; your actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$101 $315 $547 $1,213
--------------------------------------------------------------------------------
August 14, 2000
<PAGE>
SCUDDER
INVESTMENTS (SM)
[LOGO]
--------------------------------------------------------------------------------
MONEY MARKET
--------------------------------------------------------------------------------
Money Market Funds
Scudder Tax Free
Money Fund
Class AARP and Class S Shares
Scudder U.S. Treasury
Money Fund
Class AARP and Class S Shares
Scudder Cash Investment
Trust
Class AARP and Class S Shares
Scudder Money Market
Series
Premium Class AARP
Premium Class S
Prime Reserve Class AARP
Prime Reserve Class S
Prospectus
August 14, 2000
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
Scudder Money Funds
How the funds work
2 Tax Free Money Fund
6 U.S. Treasury Money Fund
10 Cash Investment Trust
14 Money Market Series
18 Other Policies and Risks
19 Who Manages and Oversees the Funds
23 Financial Highlights
How to invest in the funds
29 How to Buy, Sell and Exchange
Class AARP Shares
31 How to Buy, Sell and Exchange
Class S Shares
33 Policies You Should Know About
38 Understanding Distributions and Taxes
<PAGE>
How the funds work
These funds are money funds, meaning that they seek to maintain a stable $1.00
share price to preserve the value of your investment.
Taken as a group, they represent a spectrum of approaches to money fund
investing. One fund invests for income that is free from regular federal income
taxes. Each fund follows its own goal.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices aren't guaranteed, so be aware that you could lose money.
This prospectus offers classes of shares for each of the funds described. Class
AARP shares have been created especially for AARP members. Class S shares are
available to all investors. Unless otherwise noted, all information in this
prospectus applies to both classes.
You can find Scudder prospectuses on the Internet for Class AARP shares at
aarp.scudder.com and for Class S shares at www.scudder.com.
<PAGE>
--------------------------------------------------------------------------------
ticker symbol | Class S STFXX fund numbers | Class AARP 171
| Class S 071
Scudder Tax Free Money Fund
--------------------------------------------------------------------------------
Investment Approach
The fund seeks to provide income exempt from regular federal income tax and
stability of principal through investments in municipal securities. The fund
invests at least 80% of net assets in high quality short-term municipal
securities, the income from which is free from regular federal income tax and
from alternative minimum tax (AMT).
The fund may buy many types of municipal securities, including industrial
development bonds, but all must meet the rules for money market fund investments
(see sidebar). The fund may invest all or any part of its assets in municipal
securities that are industrial development bonds. In addition, the fund
currently intends to only buy securities that are in the top credit grade for
short-term debt securities.
Working in conjunction with a credit analyst, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities and strategies. Some of the
rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term debt
securities and denominated in U.S. dollars
--------------------------------------------------------------------------------
2 | Scudder Tax Free Money Fund
<PAGE>
--------------------------------------------------------------------------------
[ICON] This fund may make sense for investors who are in a moderate to high
tax bracket and who are looking for the income, liquidity and
stability that a money fund is designed to offer.
--------------------------------------------------------------------------------
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the fund
or make it perform less well than other investments. Although the fund seeks to
preserve the value of your investment at $1.00 per share, you could lose money
by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yield tends to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain geographic regions or sectors of the
municipal market, the fund increases its exposure to any factors affecting these
regions or sectors. For example, industrial development bonds are typically
backed by revenues from a given facility and by the credit of a private company,
but are not backed by the taxing power of a municipality.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends or
credit quality
o political or legal actions could change the way the fund's dividends are
taxed
3 | Scudder Tax Free Money Fund
<PAGE>
--------------------------------------------------------------------------------
[ICON] While a fund's past performance isn't necessarily a sign of how it
will do in the future, it can be valuable for an investor to know.
This page looks at fund performance two different ways: year by year
and over time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the returns of the fund's Class S shares have varied
from year to year, which may give some idea of risk. On or about September 11,
2000, the outstanding shares of Scudder Tax Free Money Fund will be redesignated
as Class S. The performance of Class S in the bar chart and the performance
table reflects the performance of Scudder Tax Free Money Fund prior to the
redesignation. The table shows how the class's returns over different periods
average out. All figures on this page assume reinvestment of dividends and
distributions.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class S
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.44 4.20 2.54 1.86 2.26 3.27 2.91 3.10 2.92 2.71
--------------------------------------------------------------------------------
`90 `91 `92 `93 `94 `95 `96 `97 `98 `99
--------------------------------------------------------------------------------
2000 Total Return as of June 30: 1.70%
Best Quarter: 1.37%, Q4 1990 Worst Quarter: 0.43%, Q1 1994
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Fund -- Class S* 2.71 2.98 3.12
--------------------------------------------------------------------------------
To find out the fund's current seven-day yield, call 1-800-SCUDDER.
Total returns for 1996 through 1999 would have been lower if operating expenses
hadn't been reduced.
* Performance for Class AARP shares is not provided because this class does
not have a full calendar year of performance.
4 | Scudder Tax Free Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder of either Class AARP or Class S
you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.15%
----------
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.65%
--------------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.15%.
Information in the table has been restated to reflect a new fixed rate
administrative fee.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
This example helps you compare this fund's expenses to those of other mutual
funds. This example assumes the expenses remain the same. It also you assumes
that you invested $10,000, earned 5% annual returns, and reinvested all
dividends and distributions. This is only an example; your actual expenses will
be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$66 $208 $362 $810
5 | Scudder Tax Free Money Fund
<PAGE>
--------------------------------------------------------------------------------
ticker symbol | Class S SCBXX fund numbers | Class AARP 159
| Class S 059
Scudder U.S. Treasury Money Fund
--------------------------------------------------------------------------------
Investment Approach
The fund seeks current income consistent with safety, liquidity, and stability
of capital. It does this by investing at least 80% of total assets in short-term
U.S. Treasury securities or in repurchase agreements backed by these securities.
While the fund may place up to 20% of total assets in other types of
investments, it can only invest in high quality short-term securities that are
guaranteed by the full faith and credit of the U.S. government as to the timely
payment of interest and principal.
Income paid by Treasuries is usually free from state and local income taxes, and
for most fund shareholders the bulk of fund distributions will be free from
these taxes as well (although not from federal income tax).
Working in conjunction with a credit analyst, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlooks and
possible interest rate movements. The managers may adjust the fund's exposure to
interest rate risk, typically seeking to take advantage of possible rises in
interest rates and to preserve yield when interest rates appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities and strategies. Some of the
rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term debt
securities and denominated in U.S. dollars
--------------------------------------------------------------------------------
6 | Scudder U.S. Treasury Money Fund
<PAGE>
--------------------------------------------------------------------------------
[ICON] Investors whose primary concerns are quality and liquidity may want to
consider this fund.
--------------------------------------------------------------------------------
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the fund
or make it perform less well than other investments. Although the fund seeks to
preserve the value of your investment at $1.00 per share, you could lose money
by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yield tends to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
Because of the fund's high credit standards, its yield may be lower than the
yields of money funds that don't limit their investments to
government-guaranteed securities.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o political or legal actions could change the way the fund's dividends are
taxed, particularly in certain states or localities
7 | Scudder U.S. Treasury Money Fund
<PAGE>
--------------------------------------------------------------------------------
[ICON] While a fund's past performance isn't necessarily a sign of how it
will do in the future, it can be valuable for an investor to know.
This page looks at fund performance two different ways: year by year
and over time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the returns of the fund's Class S shares have varied
from year to year, which may give some idea of risk. On or about October 2,
2000, the outstanding shares of Scudder U.S. Treasury Money Fund will be
redesignated as Class S shares. The performance of Class S in the bar chart and
the performance table reflects the performance of Scudder U.S. Treasury Money
Fund prior to the redesignation. The table shows how the class's returns over
different periods average out. All figures on this page assume reinvestment of
dividends and distributions.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class S
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
7.34 5.66 3.36 2.56 3.52 5.22 4.62 4.67 4.78 4.41
--------------------------------------------------------------------------------
`90 `91 `92 `93 `94 `95 `96 `97 `98 `99
--------------------------------------------------------------------------------
2000 Total Return as of June 30: 2.61%
Best Quarter: 1.81%, Q3 1990 Worst Quarter: 0.63%, Q1 1993
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Fund -- Class S* 4.41 4.74 4.61
--------------------------------------------------------------------------------
To find out the fund's current seven-day yield, call 1-800-SCUDDER.
Total returns for 1991 through 1999 would have been lower if operating expenses
hadn't been reduced.
* Performance for Class AARP shares is not provided because this class does
not have a full calendar year of performance.
8 | Scudder U.S. Treasury Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder of either Class AARP or Class S
you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.40%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.40%
---------
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.80%
--------------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.40%.
Information in the table above has been restated to reflect a new fixed
administrative fee and a new investment management agreement.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
This example helps you compare this fund's expenses to those of other mutual
funds. This example assumes the expenses remain the same. It also you assumes
that you invested $10,000, earned 5% annual returns, and reinvested all
dividends and distributions. This is only an example; your actual expenses will
be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$82 $255 $444 $990
--------------------------------------------------------------------------------
9 | Scudder U.S. Treasury Money Fund
<PAGE>
--------------------------------------------------------------------------------
ticker symbol | Class S SCTXX fund numbers | Class AARP 165
| Class S 065
Scudder Cash Investment Trust
--------------------------------------------------------------------------------
Investment Approach
The fund seeks to maintain stability of capital and, consistent with that, to
maintain liquidity of capital and to provide current income. It does this by
investing exclusively in high quality short-term securities.
The fund may buy securities from many types of issuers, including the U.S.
government, banks, corporations, and municipalities. However, everything the
fund buys must meet the rules for money market fund investments (see sidebar).
In addition, the fund currently intends to only buy securities that are in the
top credit grade for short-term debt securities.
Working in conjunction with a credit analyst, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities and strategies. Some of the
rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term debt
securities and denominated in U.S. dollars
--------------------------------------------------------------------------------
10 | Scudder Cash Investment Trust
<PAGE>
--------------------------------------------------------------------------------
[ICON] This fund, a broadly diversified money fund with an emphasis on credit
quality, could serve investors who want a money fund that's designed
to offer a high level of stability.
--------------------------------------------------------------------------------
Main Risk to Investors
There are several risk factors that could reduce the yield you get from the fund
or make it perform less well than other investments. Although the fund seeks to
preserve the value of your investment at $1.00 per share, you could lose money
by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yield tends to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund invests in certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors.
The managers could be wrong in their analysis of interest rate trends or credit
quality, and this could affect performance.
11 | Scudder Cash Investment Trust
<PAGE>
--------------------------------------------------------------------------------
[ICON] While a fund's past performance isn't necessarily a sign of how it
will do in the future, it can be valuable for an investor to know.
This page looks at fund performance two different ways: year by year
and over time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the returns of the fund's Class S shares have varied
from year to year, which may give some idea of risk. On or about September 11,
2000, the outstanding shares of Scudder Cash Investment Trust will be
redesignated as Class S shares. The performance of Class S in the bar chart and
the performance table reflects the performance of Scudder Cash Investment Trust
prior to the redesignation. The table shows how the class's returns over
different periods average out. All figures on this page assume reinvestment of
dividends and distributions.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class S
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
7.84 5.96 3.51 2.58 3.70 5.25 4.70 4.85 4.83 4.55
--------------------------------------------------------------------------------
`90 `91 `92 `93 `94 `95 `96 `97 `98 `99
--------------------------------------------------------------------------------
2000 Total Return as of June 30: 2.67%
Best Quarter: 1.93%, Q2 1990 Worst Quarter: 0.62%, Q2 1993
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Fund -- Class S* 4.55 4.83 4.77
--------------------------------------------------------------------------------
To find out the fund's current seven-day yield, call 1-800-SCUDDER.
The total return for 1998 and 1999 would have been lower if operating expenses
hadn't been reduced.
* Performance for Class AARP shares is not provided because this class does
not have a full calendar year of performance.
12 | Scudder Cash Investment Trust
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder of either Class AARP or Class S
you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.41%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.40%
----------
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.81%
--------------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.40%.
Information in the table above has been restated to reflect a new fixed
administrative fee and a new investment management agreement.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
This example helps you compare this fund's expenses to those of other mutual
funds. This example assumes the expenses remain the same. It also you assumes
that you invested $10,000, earned 5% annual returns, and reinvested all
dividends and distributions. This is only an example; your actual expenses will
be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$83 $259 $450 $1,002
--------------------------------------------------------------------------------
13 | Scudder Cash Investment Trust
<PAGE>
--------------------------------------------------------------------------------
ticker symbols | Premium Class AARP -- fund numbers | 102
| Premium Class S SPMXX | 402
| Prime Reserve Class AARP APSXX | 109
| Prime Reserve Class S SCRXX | 309
Scudder Money Market Series
--------------------------------------------------------------------------------
Investment Approach
The fund seeks as high a level of current income as is consistent with
liquidity, preservation of capital, and the fund's investment policies. It does
this by investing exclusively in high quality short-term securities, as well as
certain repurchase agreements.
The fund may buy securities from many types of issuers, including the U.S.
government, banks (both U.S. banks and U.S. branches of foreign banks),
corporations and municipalities. The fund may invest more than 25% of total
assets in bank obligations. However, everything the fund buys must meet the
rules for money market fund investments (see sidebar). In addition, the fund
currently intends to buy only securities that are in the top credit grade for
short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term debt
securities and denominated in U.S. dollars
--------------------------------------------------------------------------------
14 | Scudder Money Market Series
<PAGE>
--------------------------------------------------------------------------------
[ICON] With its higher investment minimums and more restrictive transaction
policies, this fund may be appropriate for investors interested in a
longer-term cash investment.
--------------------------------------------------------------------------------
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the fund
or make it perform less well than other investments. Although the fund seeks to
preserve the value of your investment at $1.00 per share, you could lose money
by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yield tends to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors. For
example, banks' repayment abilities could be compromised by broad economic
declines or sharp rises in interest rates. Securities from foreign banks may
have greater credit risk than comparable U.S. securities, for reasons ranging
from political and economic uncertainties to less stringent banking regulations.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
15 | Scudder Money Market Series
<PAGE>
--------------------------------------------------------------------------------
[ICON] While a fund's past performance isn't necessarily a sign of how it
will do in the future, it can be valuable for an investor to know.
This page looks at fund performance two different ways: year by year
and over time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the total returns for the fund's Premium Class S shares
have varied from year to year, which may give some idea of risk. On or about
August 14, 2000, Premium Money Market Shares and Prime Reserve Money Market
Shares were redesignated as Premium Class S shares and Prime Reserve Class S
shares, respectively. The performance of the Premium Class S shares in the bar
chart and the performance table, and the performance of the Prime Reserve Class
S shares in the performance table reflects the performance of the fund's class
formerly known as Premium Money Market Shares and Prime Reserve Money Market
Shares, respectively. The table shows how the classes' returns over different
periods average out. All figures on this page assume reinvestment of dividends
and distributions.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Premium Class S
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.46 5.20
--------------------------------------------------------------------------------
`98 `99
--------------------------------------------------------------------------------
2000 Total Return as of June 30: 3.02%
Best Quarter: 1.42%, Q4 1999 Worst Quarter: 1.19%, Q2 1999
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
--------------------------------------------------------------------------------
1 Year Since Inception
--------------------------------------------------------------------------------
Premium Class S* 5.20 5.36
--------------------------------------------------------------------------------
Prime Reserve Class S** 5.04 5.05
--------------------------------------------------------------------------------
* Class inception: 7/7/97
** Class Inception 10/15/98
To find out current seven-day yield for either share class, call 1-800-SCUDDER.
In the chart, the total returns for 1998 and 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
Performance for each Class AARP shares is not provided because these classes do
not have a full calendar year of performance.
16 | Scudder Money Market Series
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder of any class listed below, you
pay them indirectly.
--------------------------------------------------------------------------------
Premium Class Prime Reserve
AARP and Class AARP
Fee Table Class S and Class S
--------------------------------------------------------------------------------
Shareholder Fees (paid directly
from your investment) None None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.25% 0.25%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None None
--------------------------------------------------------------------------------
Other Expenses* 0.25% 0.40%
-----------------------------------
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.50% 0.65%
--------------------------------------------------------------------------------
Expense Reimbursement 0.15% 0.15%
-----------------------------------
--------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.35% 0.50%
--------------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.25% for Premium Class AARP
and Premium Class S; and 0.40% for Prime Reserve Class AARP and Prime
Reserve Class S.
** By contract, the adviser has reduced its management fee for each class by
0.15% through 9/30/2001. From time to time, the adviser may voluntarily
waive an additional portion of its management fee.
Information in the table has been restated to reflect a new fixed rate
administrative fee.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
This example helps you compare the expenses of each class to those of other
mutual funds (including one year of capped expenses). The example assumes the
expenses remain the same, and includes one year reduced expenses in each period.
It also assumes that you invested $10,000, earned 5% annual returns and
reinvested all dividends and distributions. This is only an example; your actual
expenses will be different.
Share Class 1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Premium Class AARP
and Class S $36 $145 $265 $614
--------------------------------------------------------------------------------
Prime Reserve
Class AARP and
Class S $51 $193 $347 $796
--------------------------------------------------------------------------------
17 | Scudder Money Market Series
<PAGE>
Other Policies and Risks
While the fund-by-fund sections on the previous pages describe the main points
of each fund's strategy and risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder approval.
However, the policy for investing 80% of net assets for the Scudder Tax
Free Money Fund cannot be changed without shareholder approval.
o As a temporary defensive measure, Scudder Tax Free Money Fund could shift
up to 100% of assets into investments such as taxable money market
securities. This would mean that the fund was not pursuing its goal.
o Each fund's investment adviser establishes a security's credit quality when
it buys the security, using independent ratings or, for unrated securities,
its own credit ratings. If a security's credit quality falls, the security
will be sold unless the adviser believes this would not be in the
shareholders' best interests.
For more information
This prospectus doesn't tell you about every policy or risk of investing in the
funds.
If you want more information on a fund's allowable securities and investment
practices and the characteristics and risks of each one, you may want to request
a copy of the Statement of Additional Information (the back cover has
information on how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
18
<PAGE>
--------------------------------------------------------------------------------
[ICON] Scudder Kemper, the company with overall responsibility for managing
the funds, takes a team approach to asset management.
--------------------------------------------------------------------------------
Who Manages and Oversees the Funds
The investment adviser
The investment adviser for these funds is Scudder Kemper Investments, Inc., 345
Park Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds, and currently has more than $290 billion in assets under
management.
Each fund is managed by a team of investment professionals, who individually
represent different areas of expertise and who together develop investment
strategies and make buy and sell decisions. Supporting the fund managers are
Scudder Kemper's many economists, research analysts, traders and other
investment specialists, located in offices across the United States and around
the world.
As payment for serving as investment adviser, Scudder Kemper receives a
management fee from each fund. Below are the actual rates paid by each fund for
the 12 months through its most recently completed fiscal year, as a percentage
of its average daily net assets.
Fund Name Fee Paid
--------------------------------------------------------------------------------
Scudder Tax Free Money Fund 0.44%
--------------------------------------------------------------------------------
Scudder U.S. Treasury Money Fund 0.11%
--------------------------------------------------------------------------------
Scudder Cash Investment Trust 0.29%
--------------------------------------------------------------------------------
Scudder Money Market Series 0.10%
--------------------------------------------------------------------------------
19
<PAGE>
Scudder Cash Investment Trust and Scudder U.S. Treasury Money Fund have entered
into new investment management agreements with Scudder Kemper. This table
describes the fee rates for each fund and the effective dates of these
agreements.
--------------------------------------------------------------------------------
New Investment Management Fee
--------------------------------------------------------------------------------
Average Daily Net Assets Fee Rate
--------------------------------------------------------------------------------
Scudder Cash Investment Trust (as of September 11, 2000)
--------------------------------------------------------------------------------
first $250 million 0.500%
--------------------------------------------------------------------------------
next $250 million 0.450%
--------------------------------------------------------------------------------
next $500 million 0.400%
--------------------------------------------------------------------------------
next $500 million 0.350%
--------------------------------------------------------------------------------
next $500 million 0.335%
--------------------------------------------------------------------------------
over $2 billion 0.320%
--------------------------------------------------------------------------------
Scudder U.S. Treasury Money Fund (as of October 2, 2000)
--------------------------------------------------------------------------------
first $500 million 0.400%
--------------------------------------------------------------------------------
next $500 million 0.385%
--------------------------------------------------------------------------------
over $1 billion 0.370%
--------------------------------------------------------------------------------
Scudder Kemper has agreed to pay a fee to AARP and/or its affiliates in return
for services relating to investments by AARP members in AARP Class shares of
each fund. This fee is calculated on a daily basis as a percentage of the
combined net assets of the AARP Classes of all funds managed by Scudder Kemper.
The fee rates, which decrease as the aggregate net assets of the AARP Classes
become larger, are as follows: 0.07% for the first $6 billion in net assets,
0.06% for the next $10 billion and 0.05% thereafter.
20
<PAGE>
The portfolio managers
The following people handle the day-to-day management of each fund in this
prospectus.
Scudder Tax Free Money Fund Scudder Cash Investment Trust
Scudder Money Market Series
Frank J. Rachwalski, Jr.
Lead Portfolio Manager Frank J. Rachwalski, Jr.
o Began investment career in 1973 Lead Portfolio Manager
o Joined the adviser in 1973 o Began investment career in 1973
o Joined the fund team in 1998 o Joined the adviser in 1973
o Joined the fund team in 1998
Jerri I. Cohen
o Began investment career in 1981 Jerri I. Cohen
o Joined the adviser in 1981 o Began investment career in 1981
o Joined the fund team in 1998 o Joined the adviser in 1981
o Joined the fund team in 2000
Scudder U.S. Treasury Money Fund
Frank J. Rachwalski, Jr.
Lead Portfolio Manager
o Began investment career in 1973
o Joined the adviser in 1973
o Joined the fund team in 1998
Christopher Proctor
o Began investment career in 1990
o Joined the adviser in 1999
o Joined the fund team in 1999
21
<PAGE>
The Board
A mutual fund's Board is responsible for the general oversight of the fund's
business. The majority of each Board is not affiliated with Scudder Kemper.
These independent members have primary responsibility for assuring that each
fund is managed in the best interests of its shareholders. The following people
comprise each fund's Board:
Linda C. Coughlin Joan E. Spero
o Managing Director, o President, Doris Duke Charitable
Scudder Kemper Investments, Inc. Foundation
o President of each fund
Jean Gleason Stromberg
Henry P. Becton, Jr. o Consultant
o President and General Manager,
WGBH Educational Foundation Jean C. Tempel
o Managing Director, First Light
Dawn-Marie Driscoll Capital (venture capital firm)
o Executive Fellow, Center for Business
Ethics, Bentley College Steven Zaleznick
o President, Driscoll Associates o President and Chief Executive
(consulting firm) Officer, AARP Services, Inc.
Edgar Fiedler
o Senior Fellow and Economic Counsellor,
The Conference Board, Inc.
Keith R. Fox
o General Partner, The Exeter Group of
Funds
22
<PAGE>
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by PricewaterhouseCoopers LLP, whose report, along with each fund's financial
statements, is included in that fund's annual report (see "Shareholder reports"
on the back cover).
Scudder Tax Free Money Fund -- Class S
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------------------------------------------------------
-------------------------------------------------------------------------------------
Income from investment
operations:
-------------------------------------------------------------------------------------
Net investment income .030 .010 .029 .031 .029 .032
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income and
net realized gains on
investment transactions (d) (.030) (.010) (.029) (.031) (.029) (.032)
-------------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------------------------------------------------------
-------------------------------------------------------------------------------------
Total Return (%) 3.09(e) 1.03(e)** 2.92(e) 3.10(e) 2.91(e) 3.27
-------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 267 257 249 283 220 239
-------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) .75(f) .75* .71 .76 .75 .75
-------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .66(f) .65* .65 .65 .70 .75
-------------------------------------------------------------------------------------
Ratio of net investment
income (%) 3.04 2.46* 2.87 3.06 2.86 3.21
-------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the five months ended May 31, 1999. On August 10, 1998, the Board
of Trustees of the Fund changed the fiscal year end from December 31 to
May 31.
(c) Years ended December 31.
(d) Net realized capital gains (losses) were less than 6/10 of 1(cent)per
share.
(e) Total returns may 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 .73%
and .65%, respectively.
* Annualized
** Not annualized
23
<PAGE>
Scudder U.S. Treasury Money Fund -- Class S
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-----------------------------------------------------
-------------------------------------------------------------------------------------
Income (loss) from investment operations:
-------------------------------------------------------------------------------------
Net investment income (loss) .047 .040 .047 .045 .048 .046
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income and
net realized gains
on investment transactions (d) (.047) (.040) (.047) (.045) (.048) (.046)
-------------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-----------------------------------------------------
-------------------------------------------------------------------------------------
Total Return (%) (e) 4.83 4.09** 4.83 4.58 4.91 4.70
-------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 365 427 389 399 396 383
-------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.06(f) 1.08* 1.00 .94 .92 .90
-------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .66(f) .65* .65 .65 .65 .65
-------------------------------------------------------------------------------------
Ratio of net investment income
(loss) (%) 4.70 4.37* 4.72 4.49 4.80 4.61
-------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the eleven months ended May 31, 1999. On August 10, 1998, the Board
of Trustees of the Fund changed the fiscal year end of the Fund from
June 30 to May 31.
(c) For the year ended June 30.
(d) Net realized capital gains were less than 6/10 of 1(cent)per share.
(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 1.04%
and .65%, respectively.
* Annualized
** Not annualized
24
<PAGE>
Scudder Cash Investment Trust -- Class S
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
--------------------------------------------------------
-------------------------------------------------------------------------------------
Income from investment
operations:
-------------------------------------------------------------------------------------
Net investment income .048 .041 .048 .046 .048 .048
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income and
net realized gains on
investment transactions (d) (.048) (.041) (.048) (.046) (.048) (.048)
-------------------------------------------------------------------------------------
Net asset value, end
of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
--------------------------------------------------------
-------------------------------------------------------------------------------------
Total Return (%) 5.01(e) 4.15(e)** 4.92(e) 4.73 4.89 4.90
-------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 981 1,147 1,182 1,431 1,387 1,520
-------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.05(f) 1.02* .95 .86 .83 .78
-------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .90(f) .85* .85 .86 .83 .78
-------------------------------------------------------------------------------------
Ratio of net investment
income (%) 4.86 4.44* 4.82 4.63 4.79 4.84
-------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the eleven months ended May 31, 1999. On August 10, 1998, the Board
of Trustees of the Trust changed the fiscal year end of the Fund from
June 30 to May 31.
(c) For the years ended June 30.
(d) Net realized gains were less than 6/10 of $.01 per share.
(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 .99%
and .85%, respectively.
* Annualized
** Not annualized
25
<PAGE>
Scudder Money Market Series -- Premium Class S
<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>
Scudder Money Market Series-- Prime Reserve Class S
<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>
How to invest in the funds
The following pages tell you how to invest in these funds and what to expect as
a shareholder. If you're investing directly with Scudder, all of this
information applies to you.
If you're investing through a "third party provider" -- for example, a workplace
retirement plan, financial supermarket or financial adviser -- your provider may
have its own policies or instructions, and you should follow those.
The instructions for buying and selling each share class are slightly different.
Instructions for buying and selling Class AARP shares, which have been created
especially for AARP members, are found on the next two pages. These are followed
by instructions for buying and selling Class S shares. Be sure to use the
appropriate table when placing any orders to buy, exchange or sell shares in
your account.
28
<PAGE>
How to Buy, Sell and Exchange Class AARP Shares
Buying Shares Using these instructions to invest directly with Scudder. Make
out your check to "AARP Investment Program."
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
First investment Additional investments
----------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Series: Money Market Series:
$10,000 for Prime Reserve Class $1,000 or more for either share
AARP class
$25,000 for Premium Class AARP All other funds:
All other funds: $50 or more with an Automatic
$1,000 or more; $500 or more Investment Plan, Payroll
for IRAs* Deduction or Direct Deposit
----------------------------------------------------------------------------------------
By mail o For enrollment forms, call Send a personalized investment
1-800-253-2277 slip or short note that
includes:
o Fill out and sign an
enrollment form o fund and class name
o Send it to us at the o account number
appropriate address, along
with an investment check o check payable to "The AARP
Investment Program"
----------------------------------------------------------------------------------------
By wire o Call 1-800-253-2277 for o Call 1-800-253-2277 for
instructions instructions
----------------------------------------------------------------------------------------
By phone -- o Call 1-800-253-2277 for
instructions
----------------------------------------------------------------------------------------
With an automatic o Fill in the information o To set up regular investments
investment plan required on your enrollment from a bank checking account,
form and include a voided call 1-800-253-2277 (minimum
check $50)
----------------------------------------------------------------------------------------
Payroll Deduction o Select either of these o Once you specify a dollar
or Direct Deposit options on your enrollment amount (minimum $50),
form and submit it. You will investments are automatic.
receive further instructions
by mail.
----------------------------------------------------------------------------------------
Using QuickBuy -- o Call 1-800-253-2277
----------------------------------------------------------------------------------------
On the Internet o Go to "services and forms -- o Call 1-800-253-2277 to ensure
how to open an account" at you have electronic services
aarp.scudder.com
o Register at aarp.scudder.com
o Print out a prospectus and an
enrollment form o Follow the instructions for
buying shares with money from
o Complete and return the your bank account
enrollment form with your
check
----------------------------------------------------------------------------------------
</TABLE>
* Scudder Tax Free Money Fund is not appropriate for IRAs.
--------------------------------------------------------------------------------
[ICON] Regular mail:
The AARP Investment Program, PO Box 2540, Boston, MA
02208-2540
Express, registered or certified mail:
The AARP Investment Program, 66 Brooks Drive, Braintree, MA
02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
--------------------------------------------------------------------------------
29
<PAGE>
Exchanging or Selling Shares Use these instructions to exchange or sell shares
in an account opened directly with Scudder.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Class AARP Exchanging into another fund Selling shares
----------------------------------------------------------------------------------------
<S> <C> <C>
To open a new account: Some transactions, including
same minimum as for a new most for over $100,000, can
investment only be ordered in writing; if
you're in doubt, see page 35
For exchanges between
existing accounts:
Money Market Series:
$1,000 or more for either
share class
All other funds:
$100 or more
----------------------------------------------------------------------------------------
By phone o Call 1-800-253-2277 for o Call 1-800-253-2277 for
instructions instructions
----------------------------------------------------------------------------------------
Using Easy Access o Call 1-800-631-4636 and o Call 1-800-631-4636 and
Line follow the instructions follow the instructions
----------------------------------------------------------------------------------------
By mail or fax Your instructions should Your instructions should
(see previous include: include:
page)
o your account number o your account number
o names of the funds, class and o name of the fund, class and
number of shares or dollar number of shares or dollar
amount you want to exchange amount you want to redeem
----------------------------------------------------------------------------------------
With an automatic -- o To set up regular cash
withdrawal plan payments from an account,
call 1-800-253-2277
----------------------------------------------------------------------------------------
Using QuickSell -- o Call 1-800-253-2277
----------------------------------------------------------------------------------------
On the Internet o Register at aarp.scudder.com --
o Go to "services and forms"
o Follow the instructions for
making on-line exchanges
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Services For Class AARP Investors
----------------------------------------------------------------------------------------
<S> <C>
To reach us: o Web site aarp.scudder.com
o Program representatives 1-800-253-2277, M-F, 8 a.m. - 8 p.m. EST
o Confidential fax line 1-800-821-6234, always open
o TDD line 1-800-634-9454, M-F, 9 a.m. - 5 p.m. EST
Services for o AARP Lump Sum Service For help in making a decision about a lump
participants: sum distribution.
o AARP Legacy Service For organizing financial documents and
planning the orderly transfer of assets to heirs.
o AARP Goal Setting and Asset Allocation Service For allocating
assets and measuring investment progress.
o For more information, please call 1-800-253-2277.
---------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
How to Buy, Sell and Exchange Class S Shares
Buying Shares Use these instructions to invest directly with Scudder. Make out
your check to "The Scudder Funds."
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
First investment Additional investments
-----------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Series: Money Market Series:
$1,000 or more for either
$10,000 or more for Prime share class
Reserve Class S; $25,000 or
more for Premium Class S All other funds:
$100 or more; $50 or more for
All other funds: IRAs or when using an Automatic
Investment Plan
$2,500 or more; $1,000 or
more for IRAs*
-----------------------------------------------------------------------------------------
By mail or o Fill out and sign an o Send a check and a Scudder
express application investment slip to us at the
(see below) appropriate address below
o Send it to us at the
appropriate address, along o If you don't have an
with an investment check investment slip, simply
include a letter with your
name, account number, the
full name of the fund and
class, and your investment
instructions
-----------------------------------------------------------------------------------------
By wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
-----------------------------------------------------------------------------------------
By phone -- o Call 1-800-SCUDDER for
instructions
-----------------------------------------------------------------------------------------
With an automatic -- o To set up regular investments
investment from a bank checking account,
plan call 1-800-SCUDDER
-----------------------------------------------------------------------------------------
Using QuickBuy -- o Call 1-800-SCUDDER
-----------------------------------------------------------------------------------------
On the Internet o Go to the "funds and prices" o Call 1-800-SCUDDER to ensure
section at www.scudder.com you have enabled electronic
services
o Access and print out an
on-line prospectus and a new o Go to www.scudder.com and
account application register
o Complete and return the o Follow instructions for
application with your check buying shares with money from
your bank account
-----------------------------------------------------------------------------------------
</TABLE>
* Scudder Tax Free Money Fund is not appropriate for IRAs.
--------------------------------------------------------------------------------
[ICON] Regular mail:
The Scudder Funds, PO Box 2291, Boston, MA 02107-2291
Express, registered or certified mail:
The Scudder Funds, 66 Brooks Drive, Braintree, MA 02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
--------------------------------------------------------------------------------
31
<PAGE>
Exchanging or Selling Shares Use these instructions to exchange or sell shares
in an account opened directly with Scudder.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Exchanging into another fund Selling shares
----------------------------------------------------------------------------------------
<S> <C> <C>
To open a new account: Some transactions, including
same minimum as for a new most for over $100,000, can
investment only be ordered in writing; if
you're in doubt, see page 35
For exchanges between
existing accounts:
Money Market Series:
$1,000 or more for either
share class
All other funds:
$100 or more
----------------------------------------------------------------------------------------
By phone or wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
----------------------------------------------------------------------------------------
Using SAIL(TM) o Call 1-800-343-2890 and o Call 1-800-343-2890 and
follow the instructions follow the instructions
----------------------------------------------------------------------------------------
By mail, express, Your instructions should Your instructions should
or fax (see include: include:
previous page)
o the fund, class and account o the fund, class and account
number you're exchanging number from which you want
out of to sell shares
o the dollar amount or number o the dollar amount or number
of shares you want to exchange of shares you want to sell
o the name and class of the o your name(s), signature(s)
fund you want to exchange into and address, as they appear
on your account
o your name(s), signature(s)
and address, as they appear o a daytime telephone number
on your account
o a daytime telephone number
----------------------------------------------------------------------------------------
With an automatic -- o To set up regular cash
withdrawal payments from a Scudder fund
plan account, call 1-800-SCUDDER
----------------------------------------------------------------------------------------
Using QuickSell -- o Call 1-800-SCUDDER
----------------------------------------------------------------------------------------
On the Internet o Register at www.scudder.com --
o Follow the instructions for
making on-line exchanges
----------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
--------------------------------------------------------------------------------
[ICON] Questions? You can speak to a Scudder representative between 8
a.m. and 8 p.m. Eastern time on any fund business day by calling
1-800-SCUDDER for Class S and 1-800-253-2277 for Class AARP.
--------------------------------------------------------------------------------
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder. Some of this information, such as the section on dividends
and taxes, applies to all investors, including those investing through
investment providers.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange for all funds, except Scudder Money Market
Series, (typically 4:00 p.m. Eastern time, but sometimes earlier, as in the case
of scheduled half-day trading or unscheduled suspensions of trading) and at 5:00
p.m. Eastern time for Scudder Money Market Series. Except for Scudder Money
Market Series, each fund also calculates its share price as of noon on business
days. Orders for Scudder Money Market Series received between 4:00 p.m. and 5:00
p.m. Eastern time may be rejected based on certain guidelines described in the
Statement of Additional Information.
You can place an order to buy or sell shares at any time. Once your order is
received by Scudder Service Corporation, and they have determined that it is a
"good order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Scudder
Service Corporation before they can be processed, you'll need to allow extra
time. A representative of your investment provider should be able to tell you
when your order will be processed.
Payments transmitted through the Federal Reserve Wire System are in federal
funds. Check or wire orders made through other bank wire systems must be
converted into federal funds, which generally may result in a one day delay in
executing the order.
33
<PAGE>
--------------------------------------------------------------------------------
[ICON] The Scudder Web site can be a valuable resource for shareholders
with Internet access. To get up-to-date information,review
balances or even place orders for exchanges, go to
www.scudder.com (Class S) or aarp.scudder.com (Class AARP)
--------------------------------------------------------------------------------
With all funds except for Scudder Money Market Series, wire transactions that
arrive by 12 noon Eastern time will receive that day's dividend. Wire
investments for Scudder Money Market Series that arrive by 5:00 p.m. Eastern
time will receive that day's dividend. All other investments will start to
accrue dividends the next business day after your purchase is processed.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If you ask us to, we can sell shares in any fund except
Scudder Money Market Series and wire you the proceeds on the same day, as long
as we receive your request before 12 noon. However, you won't receive that day's
dividend. For Scudder Money Market Series, redemption by wire is not available
after 4:00 p.m. Eastern time, but redemptions by other available means may be
made until 5:00 p.m. Eastern time.
Automated phone information is available 24 hours a day. You can use your
automated phone services to get information on Scudder funds generally and on
accounts held directly at Scudder. If you signed up for telephone services, you
can also use this service to make exchanges and sell shares.
For Class AARP Shares
--------------------------------------------------------------------------
Call Easy-Access Line, the AARP Program Automated Information Line, at
1-800-631-4636
--------------------------------------------------------------------------
For Class S Shares
--------------------------------------------------------------------------
Call SAIL(TM), the Scudder Automated Information Line, at 1-800-343-2890
--------------------------------------------------------------------------
QuickBuy and QuickSell let you set up a link between a Scudder account and a
bank account. Once this link is in place, you can move money between the two
with a phone call. You'll need to make sure your bank has Automated Clearing
House (ACH) services. To set up QuickBuy or QuickSell on a new account, see the
account application; to add it to an existing account, call 1-800-SCUDDER for
Class S and 1-800-253-2277 for Class AARP.
34
<PAGE>
Checkwriting lets you sell fund shares by writing a check. Your investment keeps
earning dividends until your check clears. Please note that you should not write
checks for less than $1,000 with Scudder Money Market Series or less than $100
with all other funds. Note as well that we can't honor any check larger than
your balance at the time the check is presented to us, or any check for more
than $5,000,000. It's not a good idea to close out an account using a check
because the account balance could change between the time you write the check
and the time it is processed.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to receive wires, we will deduct a $5 fee from all wires sent from
us to your bank. Your bank may charge its own fees for handling wires. The fund
can only accept wires of $100 or more.
Exchanges among Scudder funds are an option for shareholders who bought their
shares directly from Scudder and for many other investors as well. Exchanges are
a shareholder privilege, not a right: we may reject or limit any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
When you want to sell more than $100,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
35
<PAGE>
--------------------------------------------------------------------------------
[ICON] If you ever have difficulty placing an order by phone or fax,
you can always send us your order in writing.
--------------------------------------------------------------------------------
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the
SEC to allow further delays.
How the funds calculate share price
For each share class of each fund, the share price is the net asset value per
share, or NAV. To calculate NAV, each share class of each fund uses the
following equation:
TOTAL ASSETS - TOTAL LIABILITIES
------------------------------------ = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
36
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if we have
been notified by the IRS that you are subject to backup withholding, or
if you fail to provide us with a correct taxpayer ID number or
certification that you are exempt from backup withholding
o with Scudder Money Market Series, close your account and send you the
proceeds if your balance falls below the minimum for your share class,
which is $7,500 for Prime Reserve Class S and Prime Reserve Class AARP
and $20,000 for Premium Class S and Premium Class AARP; in either case,
we will give you 60 days' notice so you can either increase your
balance or close your account (these policies don't apply to retirement
accounts or to investors with $100,000 or more in Scudder fund shares)
o for Class S shareholders of all other funds, charge you $10 a year if
your account balance falls below $2,500; for Class S and Class AARP
shareholders, close your account and send you the proceeds if your
balance falls below $1,000; the notification and exemption policies are
the same as in the bullet above
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been
opened, we may give you 30 days' notice to provide the correct number
o pay you for shares you sell by "redeeming in kind," that is, by giving
you marketable securities (which typically will involve brokerage costs
for you to liquidate) rather than cash; in most cases, a fund won't
make a redemption-in-kind unless your requests over a 90-day period
total more than $250,000 or 1% of the fund's net assets, whichever is
less
o change, add, or withdraw various services, fees and account policies
(for example, we may change or terminate the exchange privilege at any
time)
37
<PAGE>
--------------------------------------------------------------------------------
[ICON] Because each shareholder's tax situation is unique, it's always
a good idea to ask your tax professional about the tax
consequences of your investments, including any state and local
tax consequences.
--------------------------------------------------------------------------------
Understanding Distributions and Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchases and sales of shares.) A
fund may not always pay a distribution for a given period.
The funds intend to declare income dividends daily, and pay them monthly.
Scudder Tax Free Money Fund may make short- or long-term capital gain
distributions in November or December. The taxable money funds may take into
account capital gains and losses (other than net long-term capital gains) in
their daily dividend declarations. The funds may make additional distributions
for tax purposes if necessary.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares or all sent to you by check.
Tell us your preference on your application. If you don't indicate a preference,
your dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
38
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on which fund you are in and which type of transaction is
involved. The following tables show the usual tax status of transactions in fund
shares as well as that of any taxable distributions from the funds:
Generally taxed at ordinary income rates
---------------------------------------------------------------
o short-term capital gains from selling fund shares
---------------------------------------------------------------
o taxable income dividends you receive from a fund
---------------------------------------------------------------
o short-term capital gains distributions you receive from a
fund
---------------------------------------------------------------
Generally taxed at capital gains rates
---------------------------------------------------------------
o long-term capital gains from selling fund shares
---------------------------------------------------------------
o long-term capital gains distributions you receive from a
fund
---------------------------------------------------------------
Because each fund seeks to maintain a stable share price, you are unlikely to
have a capital gain or loss when you sell fund shares. For tax purposes, an
exchange is the same as a sale.
For most shareholders, dividends from Scudder Tax Free Money Fund are generally
free from federal income tax, and a portion of the dividends from Scudder U.S.
Treasury Money Fund are generally free from state and local income tax. However,
there are a few exceptions:
o a portion of a fund's dividends may be taxable as ordinary income if it
came from investments in taxable securities, tax-exempt market discount
bonds, or as the result of short- or long-term capital gains
o with Scudder Tax Free Money Fund, because the fund can invest up to 20%
of assets in securities whose income is subject to the federal
alternative minimum tax (AMT), you may owe taxes on a portion of your
dividends if you are among those investors who must pay AMT
Each fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
39
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call 1-800-SCUDDER.
Statement of Additional Information (SAI) -- Each fund's SAI tells you more
about its features and policies, including additional risk information. The
funds' SAIs are incorporated by reference into this document (meaning that it's
legally part of this prospectus).
If you'd like to ask for copies of these documents, please contact Scudder or
the SEC (see below). If you're a shareholder and have questions, please contact
Scudder. Materials you get from Scudder are free; those from the SEC involve a
copying fee. If you like, you can look over these materials in person at the
SEC's Public Reference Room in Washington, DC or request them electronically at
[email protected].
AARP Investment Program
from Scudder Scudder Funds SEC
P.O. Box 2540 PO Box 2291 450 Fifth Street,
Boston, MA 02208-2540 Boston, MA N.W. Washington, DC
02107-2291 20549-6009
1-800-253-2277 1-800-SCUDDER 1-202-942-8090
aarp.scudder.com www.scudder.com www.sec.gov
Fund Name SEC File #
------------------------------------------------------------------------
Scudder Tax Free Money Fund 811-2959
------------------------------------------------------------------------
Scudder U.S. Treasury Money Fund 811-3043
------------------------------------------------------------------------
Scudder Cash Investment Trust 811-2613
------------------------------------------------------------------------
Scudder Money Market Series 811-3495
------------------------------------------------------------------------
<PAGE>
SCUDDER MONEY MARKET TRUST
Two International Place
Boston, MA 02110-4103
1-800-553-6360
1-800-537-3177 (Institutional Shares)
Scudder Money Market Trust is a professionally managed,
open-end management investment company.
SCUDDER MONEY MARKET SERIES
Prime Reserve Class S
Prime Reserve Class AARP
Premium Class S
Premium Class AARP
Institutional Shares
Managed Shares
A mutual fund seeking as high a level of current income as is consistent with
liquidity, preservation of capital and the Fund's investment policies through
investing exclusively in high quality short-term securities and certain
repurchase agreements.
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
August 14, 2000
--------------------------------------------------------------------------------
This combined Statement of Additional Information is not a prospectus and should
be read in conjunction with the applicable prospectus of Scudder Money Market
Trust, dated August 14, 2000, 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. The Annual
Report to Shareholders of Scudder Money Market Series dated May 31, 2000 is
incorporated by reference into and is hereby deemed to be part of this Statement
of Additional Information. The Annual Report may be obtained without charge by
calling 1-800-225-5163.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES..........................................................................1
General Investment Objectives and Policies...................................................................1
Master/feeder Structure......................................................................................3
Investment Restrictions......................................................................................3
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES............................................................................4
PURCHASING SHARES-- PRIME RESERVE CLASS S AND CLASS AARP SHARES,
PREMIUM CLASS S AND CLASS AARP SHARES, MANAGED SHARES........................................................8
Wire Transfer of Federal Funds...............................................................................9
Additional Information About Making Subsequent Investments by QuickBuy.......................................9
Share Certificates..........................................................................................10
Other Information...........................................................................................10
EXCHANGES AND REDEMPTIONS-- PRIME RESERVE CLASS S, PRIME RESERVE CLASS AARP,
PREMIUM CLASS S, PREMIUM CLASS AARP AND MANAGED SHARES .....................................................10
Exchanges...................................................................................................11
Redemption by Telephone.....................................................................................12
Redemption by QuickSell.....................................................................................13
Redemption by Mail or Fax...................................................................................13
Redemption by Checkwriting..................................................................................13
Redemption-in-Kind..........................................................................................14
Minimum Balances for Managed Shares.........................................................................14
Minimum Balances for Prime Reserve Shares, Class S and Class AARP...........................................14
Minimum Balances for Premium Shares, Class S and Class AARP.................................................14
PURCHASING SHARES-- INSTITUTIONAL SHARES.............................................................................14
Wire Transfer of Federal Funds..............................................................................14
Share Certificates..........................................................................................15
REDEMPTIONS-- INSTITUTIONAL SHARES...................................................................................15
Expedited Redemption Service................................................................................15
Redemption by Wire..........................................................................................16
Redemption by Telephone.....................................................................................16
Redemption by Mail or Fax...................................................................................16
Redemption-in-Kind..........................................................................................17
Minimum balance for Institutional Shares of Scudder Money Market Series.....................................17
FEATURES AND SERVICES OFFERED BY THE FUND............................................................................17
The No-Load Concept.........................................................................................17
Internet access.............................................................................................18
Dividends and Capital Gains Distribution Options -- Premium Class S, Premium Class AARP,
Prime Reserve Class S, Prime Reserve Class AARP and Managed Shares.....................................18
Reports to Shareholders.....................................................................................19
Transaction Summaries.......................................................................................19
THE SCUDDER FAMILY OF FUNDS..........................................................................................19
SPECIAL PLAN ACCOUNTS................................................................................................22
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations
and Self-Employed Individuals..........................................................................22
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........22
Scudder IRA: Individual Retirement Account..................................................................22
Scudder Roth IRA: Individual Retirement Account.............................................................23
Scudder 403(b) Plan.........................................................................................23
Automatic Withdrawal Plan...................................................................................23
Group or Salary Deduction Plan..............................................................................24
Automatic Investment Plan...................................................................................24
Uniform Transfers/Gifts to Minors Act.......................................................................24
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
DIVIDENDS............................................................................................................24
PERFORMANCE INFORMATION..............................................................................................25
Yield.......................................................................................................25
Effective Yield.............................................................................................25
Average Annual Total Return.................................................................................26
Cumulative Total Return.....................................................................................26
Total Return................................................................................................27
Comparison of Fund Performance..............................................................................27
THE PROGRAM..........................................................................................................28
ORGANIZATION OF THE FUND.............................................................................................28
INVESTMENT ADVISER...................................................................................................29
Administrative Fee..........................................................................................31
AMA InvestmentLink(SM) Program..............................................................................32
Code of Ethics..............................................................................................32
DISTRIBUTOR..........................................................................................................32
TRUSTEES AND OFFICERS ...............................................................................................33
REMUNERATION.........................................................................................................36
Responsibilities of the Board -- Board and Committee Meetings...............................................36
Compensation of Officers and Trustees.......................................................................36
TAXES................................................................................................................37
PORTFOLIO TRANSACTIONS...............................................................................................38
Brokerage Commissions.......................................................................................38
NET ASSET VALUE......................................................................................................39
ADDITIONAL INFORMATION...............................................................................................40
Experts.....................................................................................................40
Other Information...........................................................................................40
FINANCIAL STATEMENTS.................................................................................................41
APPENDIX
</TABLE>
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
General Investment Objectives and Policies
Scudder Money Market Series (the "Fund") is a diversified investment
portfolio of Scudder Money Market Trust (the "Trust"), a professionally managed
open-end, management investment company. The Fund seeks to provide investors
with as high a level of current income as is consistent with liquidity,
preservation of capital and the Fund's investment policies through investing
exclusively in high-quality short-term securities and certain repurchase
agreements. There can be no assurance that the Fund will achieve its investment
objectives.
The Fund currently offers five classes of shares as follows: Premium
Class S Shares, Prime Reserve Class S Shares, Managed Shares, Institutional
Shares, and Prime Reserve Class AARP. On or about October 2, 2000, Premium Class
AARP will also be offered. These different classes are offered to provide
investors with different purchase options. Each class has its own important
features and policies. On or about August 14, 2000, all outstanding shares of
AARP Premium Money Fund were reorganized into Prime Reserve Class AARP shares,
and all outstanding Premium shares and Prime Reserve shares of Scudder Money
Market Series were redesignated as Premium Class S shares and Prime Reserve
Class S shares, respectively. Shares of each Class AARP will be especially
designed for members of AARP.
Securities in which the Fund invests 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. The Fund will seek to
maintain a dollar-weighted average maturity of 90 days or less in an effort to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so.
Except as otherwise indicated, the Fund's investment objectives and
policies are not fundamental and may be changed without a vote of shareholders.
The Fund's 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."
Descriptions in the Statement of Additional Information of a particular
investment practice or technique in which the Fund may engage, or a financial
instrument which the Fund may purchase, are meant to describe the spectrum of
investments that the Adviser, in its discretion, might, but is not required to,
use in managing the Fund's portfolio assets. The Adviser may, in its discretion,
at any time employ such practice, technique or instrument for one or more funds
but not for all funds advised by it. Furthermore, it is possible that certain
types of financial instruments or investment techniques described herein may not
be available, permissible, economically feasible or effective for their intended
purposes in all markets. Certain practices, techniques, or instruments may not
be principal activities of the Fund, but, to the extent employed, could from
time to time have a material impact on the Fund's performance.
The Fund invests exclusively in a broad range of high quality
short-term securities that have remaining maturities of not more than 397
calendar days and certain repurchase agreements. These securities consist of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, taxable and tax-exempt municipal obligations, corporate and
bank obligations, certificates of deposit ("CD's"), bankers' acceptances and
variable amount master demand notes.
The bank obligations in which the Fund may invest include negotiable
certificates of deposit, bankers' acceptances, fixed time deposits or other
short-term bank obligations. The Fund limits its investments in U.S. bank
obligations to 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) 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 the obligations must be, in the
opinion of the Adviser, of an investment quality comparable to obligations of
U.S. banks in which the Fund may invest.
<PAGE>
Fixed time deposits may be withdrawn on demand by the investor, but may
be subject to early withdrawal penalties that vary with market conditions and
the remaining maturity of the obligations. The Fund may not invest more than 10%
of the value of its total assets in illiquid securities including fixed time
deposits subject to withdrawal penalties maturing in more than seven calendar
days.
The Fund may invest in U.S. dollar-denominated certificates of deposit
and promissory notes issued by Canadian affiliates of U.S. banks under
circumstances where the instruments are guaranteed as to principal and interest
by the U.S. bank. While foreign obligations generally involve greater risks than
those of domestic obligations, such as risks relating to liquidity,
marketability, foreign taxation, nationalization and exchange controls,
generally the Adviser believes that these risks are substantially less in the
case of instruments issued by Canadian affiliates that are guaranteed by U.S.
banks than in the case of other foreign money market instruments.
There is no limitation on the amount of the Fund's assets that may be
invested in obligations of foreign banks that meet the conditions set forth
above. Such investments may involve greater risks than those affecting U.S.
banks or Canadian affiliates of U.S. banks. In addition, foreign banks are not
subject to examination by any U.S. Governmental 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 Ratings Services ("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 Trust's Board of Trustees.
The Fund may invest in non-convertible corporate debt securities such
as notes, bonds and debentures that have remaining maturities of not more than
397 calendar days and that are rated "Aa" or better by Moody's or "AA" or better
by S&P or Fitch, and variable amount master demand notes. A variable amount
master demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder. Its amount
may from time to time be increased by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer and is payable on demand. The rate of
interest varies pursuant to an agreed-upon formula. Generally, master demand
notes are not rated by a rating agency. However, the Fund may invest in a master
demand note that, if not rated, is in the opinion of the Adviser of an
investment quality comparable to rated securities in which the Fund may invest.
The Adviser monitors the issuers of such master demand notes on a daily basis.
Transfer of such notes is usually restricted by the issuer, and there is no
secondary trading market for such notes. The Fund may not invest in a master
demand note if, as a result, more than 10% of the value of its total net assets
would be invested in such notes.
Municipal obligations, which are debt obligations issued by or on
behalf of states, cities, municipalities and other public authorities, and may
be general obligation, revenue, or industrial development bonds, include
municipal bonds, municipal notes and municipal commercial paper.
The Fund's investments in municipal bonds are limited to bonds that are
rated at the date of purchase "Aa" or better by Moody's or "AA" or better by S&P
or Fitch.
The Fund's investments in municipal notes will be limited to notes that
are rated at the date of purchase "MIG 1" or "MIG 2" (or "VMIG 1" or "VMIG 2" in
the case of an issue having a variable rate demand feature) by Moody's, "SP-1"
or "SP-1+" by S&P or "F-1" or "F-1+" by Fitch.
Municipal commercial paper is a debt obligation with a stated maturity
of 270 days or less that is issued to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term debt. The Fund may invest
in municipal commercial paper that is rated at the date of purchase "P-1" or
"P-2" by Moody's, "A-1" or "A-2" or "A-1+" by S&P or "F-1" by Fitch. If a
municipal obligation is not rated, the Fund may purchase the obligation if, in
the opinion of the Adviser, it is of investment quality comparable to other
rated investments that are permitted by the Fund.
2
<PAGE>
For purposes of determining the percentage of the Fund's total assets
invested in securities of issuers having their principal business activities in
a particular industry, asset backed securities will be classified separately,
based on the nature of the underlying assets, according to the following
categories: captive auto, diversified, retail and consumer loans, captive
equipment and business, business trade receivables, nuclear fuel and capital and
mortgage lending.
All of the securities in which the Fund will invest must meet credit,
quality and diversification standards applied by the Adviser pursuant to
procedures established by the Board of Trustees. 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 Trustees of the Trust 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.
Master/feeder Structure
The Board of Trustees has the discretion to retain the current
distribution arrangement for the Fund while investing in a master fund in a
master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities, invests most
or all of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
Investment Restrictions
Unless specified to the contrary, the following restrictions are
fundamental and 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, as amended (the "1940 Act"), and the rules thereunder and
as used in this Statement of Additional Information, means the lesser of (1) 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the Fund.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.
The Fund has elected to be classified as a diversified series of an
open-end investment company.
In addition, as a matter of fundamental policy, the 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
3
<PAGE>
reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities;
(5) purchase physical commodities or contracts relating to
physical commodities;
(6) make loans except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
or
(7) concentrate its investments in a particular industry, as that
term is used in the 1940 Act, as amended, and as interpreted
or modified by regulatory authority having jurisdiction, from
time to time. (The Fund's concentration in the banking
industry is described below.)
As a matter of nonfundamental policy (may be changed without the approval of a
majority of the outstanding voting securities of the Fund), the Fund currently
does not intend to:
(1) borrow money in an amount greater than 5% of its total assets,
except for temporary or emergency purposes; or
(2) lend portfolio securities in an amount greater than 5% of its
total assets.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Municipal Notes. The Fund may invest in municipal notes. Municipal notes
include, but are not limited to, Tax Anticipation Notes ("TANs"), Bond
Anticipation Notes ("BANs"), Revenue Anticipation Notes ("RANs"), Construction
Loan Notes and Project Notes. Municipal Notes generally have maturities at the
time of issuance of three years or less. Notes sold as interim financing in
anticipation of collection of taxes, a bond sale or receipt of other revenues
are usually general obligations of the issuer. Project notes are issued by local
housing authorities to finance urban renewal and public housing projects and are
secured by the full faith and credit of the U.S. Government.
TANs An uncertainty in a municipal issuer's capacity to raise taxes as
a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers
mix various tax proceeds into a general fund that is used to meet
obligations other than those of the outstanding TANs. Use of such a
general fund to meet various obligations could affect the likelihood of
making the issuer's payments on TANs.
BANs The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the
longer term municipal bond market and the likelihood that the proceeds
of such bond sales will be used by the issuers to pay the principal of,
and interest on, BANs.
RANs A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an
issuer's ability to meet its obligations on outstanding RANs. In
addition, the possibility that the revenues would, when received, be
used to meet other obligations could affect the ability of the issuer
to pay the principal of, and interest on, RANs.
Interfund Borrowing and Lending Program. The Fund has received exemptive relief
from the Securities and Exchange Commission (the "SEC") which permits the Fund
to participate in an interfund lending program among certain investment
companies advised by the Adviser. The interfund lending program allows the
participating funds to borrow money from and loan money to each other for
temporary or emergency purposes. The program is subject to a number of
conditions designed to ensure fair and equitable treatment of all participating
funds, including the following: (1) no fund may borrow money through the program
unless it receives a more favorable interest rate than a rate approximating the
lowest interest rate at which bank loans would be available to any of the
participating funds under a loan agreement; and (2) no fund may lend money
through the program unless it receives a more favorable return than that
available from an investment in repurchase agreements and, to the extent
applicable, money market cash sweep arrangements. In addition, a fund may
participate in the program only if and to the extent that such participation is
consistent with the fund's investment objectives and policies (for instance,
money market funds would normally participate only as lenders and tax exempt
funds only as borrowers). Interfund loans and borrowings may extend overnight,
but could have a maximum duration of seven days. Loans may be called on one
day's notice. A fund may have to borrow from a bank at a higher
4
<PAGE>
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity or
additional costs. The program is subject to the oversight and periodic review of
the Boards of the participating funds. To the extent the Fund is actually
engaged in borrowing through the interfund lending program, the Fund, as a
matter of non-fundamental policy, may not borrow for other than temporary or
emergency purposes (and not for leveraging).
Loans of Portfolio Securities. The 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 Fund will not enter into any security lending
arrangement having a duration of longer than one year. Securities that the Fund
may receive as collateral will not become part of the Fund at the time of the
loan. In the event of a default by the borrower, the Fund will, if permitted by
law, dispose of the collateral except for such part thereof that is a security
in which the 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.
The Fund will not lend securities having a value that exceeds 5% of the current
value of its total assets. Loans of securities by the Fund will be subject to
termination at the Fund's or the borrower's option. The 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 Trust or the Adviser.
Investments in the Banking Industry. To the extent the Fund invests in the
banking industry, the 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 Fund's shares could be affected by
economic or regulatory developments in or related to the banking industry, and
the effects of competition within the banking industry as well as with other
types of financial institutions.
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 form 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 Fannie Mae), 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. The
Fund may purchase variable rate demand instruments that are tax-exempt municipal
obligations providing for a periodic adjustment in the interest rate paid on the
instrument according to changes in interest rates generally. These instruments
also permit the Fund to demand payment of the unpaid principal balance plus
accrued interest upon a specified number of days' notice to the issuer or its
agent. The demand feature may be backed by a bank letter of credit or guarantee
issued with respect to such instrument.
The interest rate of the underlying variable rate demand instruments
may change with changes in interest rates generally, but the variable rate
nature of these instruments should decrease changes in value due to interest
rate fluctuations. Accordingly, as interest rates decrease or increase, the
potential for capital gain and the risk of capital loss on the disposition of
portfolio securities are less than would be the case with a comparable portfolio
of fixed income securities. The Fund may purchase variable rate demand
instruments on which stated minimum or maximum rates, or maximum rates set by
state law, limit the degree to which interest on such variable rate demand
instruments may
5
<PAGE>
fluctuate; to the extent it does, increases or decreases in value of such
variable rate demand notes may be somewhat greater than would be the case
without such limits. Because the adjustment of interest rates on the variable
rate demand instruments is made in relation to movements of the applicable rate
adjustment index, the variable rate demand instruments are not comparable to
long-term fixed interest rate securities. Accordingly, interest rates on the
variable rate demand instruments may be higher or lower than current market
rates for fixed rate obligations of comparable quality with similar final
maturities.
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System or any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other obligations the Fund may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest
ratings categories assigned by Moody's, S&P or Fitch.
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities is kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Fund together with the repurchase price upon repurchase. In either case, the
income to the Fund is unrelated to the interest rate on the Obligation itself.
Obligations will be held by the custodian or in the Federal Reserve Book Entry
System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from the Fund to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to the Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Fund may encounter delay and incur costs
before being able to sell the security. Delays may involve loss of interest or
decline in price of the Obligation. If the court characterizes the transaction
as a loan and the Fund has not perfected a security interest in the Obligation,
the Fund may be required to return the Obligation to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured creditor, the
Fund would be at risk of losing some or all of the principal and income involved
in the transaction. As with any unsecured debt Obligation purchased for the
Fund, the Adviser seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Fund may incur a loss if the proceeds to the Fund
of the sale to a third party are less than the repurchase price. However, if the
market value (including interest) of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), the Fund
will direct the seller of the Obligation to deliver additional securities so
that the market value (including interest) of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.
Corporate Obligations. Investment in corporate debt obligations involves credit
and interest rate risk. The value of fixed-income investments will fluctuate
with changes in interest rates and bond market conditions, tending to rise as
interest rates decline and to decline as interest rates rise. Corporate debt
obligations generally offer less current yield than securities of lower quality,
but lower-quality securities generally have less liquidity, greater credit and
market risk, and as a result, more price volatility. Longer term bonds are,
however, generally more volatile than bonds with shorter maturities.
Commercial Paper. Commercial paper represents short-term unsecured promissory
notes issued in bearer form by bank holding companies, corporations and finance
companies. The Fund may invest in commercial paper that is rated "Prime-1" by
Moody's or "A-1" by S&P or, if not rated by Moody's or S&P, is issued by
companies having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or
AA by S&P.
Letters of Credit. Municipal obligations, including certificates of
participation, commercial paper and other short-term obligations, may be backed
by an irrevocable letter of credit of a bank which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Only
banks which, in the opinion of the Adviser, are of
6
<PAGE>
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 its portfolio with broker/dealers pursuant to a
rule under 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, 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 Fund expects, however, that puts generally will be available
without the payment of any direct or indirect consideration.
The Fund may enter into puts only with banks or broker/dealers
that, in the opinion of the Adviser, present minimal credit risks. The ability
of the Fund to exercise a put will depend on the ability of the bank or
broker/dealer to pay for the underlying securities at the time the put is
exercised. In the event that a bank or broker/dealer should default on its
obligation to repurchase an underlying security, the Fund might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere.
The Fund intends to enter into puts solely to maintain
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The puts will only be for periods substantially less than the life of
the underlying security. The acquisition of a put will not affect the valuation
by 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 capital gain or loss when the put is exercised or expires. If the value
of the underlying security increases, the potential for unrealized gain 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.
When-Issued Securities. The Fund may purchase securities on a "when-issued" or
"forward delivery" basis for payment and delivery at a later date. The price of
such securities, which is generally expressed in yield terms, is generally fixed
at the time the commitment to purchase is made, but delivery and payment for the
when-issued or forward delivery securities takes place at a later date. During
the period between purchase and settlement, no payment is made by the purchasing
Fund to the issuer and no interest on the when-issued or forward delivery
securities accrues to the Fund. To the extent that assets of the Fund are held
in cash pending the settlement of a purchase of securities, that Fund will earn
no income; however, it is the Fund's intention to be fully invested to the
extent practicable and subject to the policies stated above. While when-issued
or forward delivery securities may be sold prior to the settlement date, the
Fund intends to purchase such securities with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Fund makes the commitment to purchase a security on a when-issued or forward
delivery basis, it will record the transaction and reflect the value of the
security in determining its net asset value. At the time of settlement, the
market value of the when-issued or forward delivery securities may be more or
less than the purchase price. The Fund does not believe that its net asset value
or income will be adversely affected by its purchase of securities on a
when-issued or forward delivery basis.
Illiquid Securities. The Fund may occasionally purchase securities other than in
the open market. While such purchases may often offer attractive opportunities
for investment not otherwise available on the open market, the securities so
purchased are often "restricted securities" or "not readily marketable," i.e.,
securities which cannot be sold to the public without registration under the
Securities Act of 1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rules 144 or 144A) or because they are
subject to other legal or contractual delays in or restrictions on resale. This
investment practice, therefore, could have the effect of increasing the level of
illiquidity of the Fund. It is the Fund's policy that illiquid securities
(including repurchase agreements of more than seven days duration, certain
restricted securities, and other securities which are not readily marketable)
may not constitute, at the time of purchase, more than 10% of the value of the
Fund's net assets. The Trust's Board of Trustees has approved guidelines for use
by the Adviser in determining whether a security is illiquid.
Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; or (iii) in limited quantities after they have
been held for a specified period of time and other conditions are met pursuant
to an exemption from registration. Issuers of restricted securities may not be
subject to the disclosure and other investor protection requirements that would
be applicable if their securities were publicly traded. If adverse market
conditions were to develop during the period between the Fund's
7
<PAGE>
decision to sell a restricted or illiquid security and the point at which the
Fund is permitted or able to sell such security, the Fund might obtain a price
less favorable than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted securities, the
Fund may be required to bear all or part of the registration expenses. The Fund
may be deemed to be an "underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, in such event, the Fund may be liable
to purchasers of such securities if the registration statement prepared by the
issuer is materially inaccurate or misleading.
The Adviser will monitor the liquidity of such restricted securities
subject to the supervision of the Board of Trustees. In reaching liquidity
decisions, the Adviser will consider the following factors: (1) the frequency of
trades and quotes for the security, (2) the number of dealers wishing to
purchase or sell the security and the number of their potential purchasers, (3)
dealer undertakings to make a market in the security, and (4) the nature of the
security and the nature of the marketplace trades (i.e. the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).
Real Estate. The Fund has reserved the freedom of action to hold or sell real
estate acquired as a result of the Fund's ownership of securities. In the event
that the Fund holds or sells real estate, changes in the financial condition or
market assessment of the financial condition of these entities could have a
significant adverse impact on the Fund. Consequently, if the Fund were to hold
and to sell real estate, an investment in the Fund may be riskier than an
investment in a money market fund that does not reserve the freedom of action to
hold or sell real estate.
Maintenance of $1.00 Net Asset Value and Credit Quality. Pursuant to a Rule of
the SEC, the Fund effects sales, redemptions and repurchases at the net asset
value per share, normally $1.00. In fulfillment of their responsibilities under
that Rule, the Trustees of the Fund have approved policies established by the
Fund's Adviser reasonably calculated to prevent the Fund's net asset value per
share from deviating from $1.00 except under unusual or extraordinary
circumstances and the Trustees of the Fund will periodically review the
Adviser's operations under such policies at regularly scheduled Trustees'
meetings. Those policies include a weekly monitoring by the Adviser of
unrealized gains and losses in the Fund's portfolio, and when necessary, in an
effort to avoid deviation, taking corrective action, such as adjusting the
maturity of the portfolio, or, if possible, realizing gains or losses to offset
in part unrealized losses or gains. The result of those policies may be that the
yield on shares of the Fund will be lower than would be the case if the policies
were not in effect. Such policies also provide for certain action to be taken
with respect to portfolio securities which experience a downgrade in rating or
suffer a default.
Securities eligible for investment by the Fund are those securities
which are generally rated (or issued by an issuer with comparable securities
rated) in the highest short-term rating category by at least two rating services
(or by one rating service, if no other rating agency has issued a rating with
respect to that security). These securities are known as "first tier
securities." Securities generally rated (or issued by an issuer with comparable
securities rated) in the top two categories by at least two rating agencies (or
one, if only one rating agency has rated the security) which do not qualify as
first tier securities are known as "second tier securities." To ensure diversity
of the Fund's investments, as a matter of non-fundamental policy, the Fund will
not invest more than 5% of its total assets in the securities of a single
issuer, other than the U.S. Government. The Fund may, however, invest more than
5% of its total assets in the first tier securities of a single issuer for a
period of up to three business days after purchase, although the Fund may not
make more than one such investment at any time during such period. The Fund may
not invest more than 5% of its total assets in securities which were second tier
securities when acquired by the Fund. Further, the Fund may not invest more than
the greater of (1) 1% of its total assets, or (2) one million dollars, in the
securities of a single issuer which were second tier securities when acquired by
the Fund.
PURCHASING SHARES -- PRIME RESERVE CLASS S AND CLASS AARP SHARES,
PREMIUM CLASS S AND CLASS AARP SHARES, MANAGED SHARES
The Fund has specific minimum initial investment requirements for each
class of shares as follows:
<TABLE>
<CAPTION>
--------------------------- ------------------------------------- --------------------------------------
Class of Shares Minimum Initial Investment Subsequent Minimum Investment
--------------------------- ------------------------------------- --------------------------------------
<S> <C> <C>
Prime Reserve Class S $10,000 $1,000
--------------------------- ------------------------------------- --------------------------------------
Prime Reserve Class AARP $10,000 $1,000
--------------------------- ------------------------------------- --------------------------------------
8
<PAGE>
--------------------------- ------------------------------------- --------------------------------------
Class of Shares Minimum Initial Investment Subsequent Minimum Investment
--------------------------- ------------------------------------- --------------------------------------
Premium Class S $25,000 $1,000
--------------------------- ------------------------------------- --------------------------------------
Premium Class AARP $25,000 $1,000
--------------------------- ------------------------------------- --------------------------------------
Managed Shares $100,000 $1,000 (regular accounts)
$100 (IRAs)
$50 or more (Automatic Investment
Plan)
--------------------------- ------------------------------------- --------------------------------------
</TABLE>
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 Fund and for investments effected on a group basis
by certain other entities and their employees, such as pursuant to a payroll
deduction plan and for investments made in an Individual Retirement Account
offered by the Fund. Investment minimums may also be waived for Trustees and
officers of the Trust. The Fund, Scudder Investor Services, Inc. and Cash
Products Group each reserve the right to reject any purchase order. The Fund
will be invested in full and fractional shares.
Wire Transfer of Federal Funds
Orders for shares of the 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. 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. In addition, if
investors known to the Fund notify the Fund by 4:00 p.m. that they intend to
wire federal funds to purchase shares of the 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. 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 Fund on the
business day after the check is deposited.
Shares of the Fund may be purchased by writing or calling State Street
Bank and Trust Company (the "Transfer Agent"). Orders for shares of a particular
class of the Fund will be executed at the net asset value per share of such
class next determined after an order has become effective.
Checks drawn on a non-member bank or a foreign bank may take
substantially longer to be converted into federal funds and, accordingly, may
delay the execution of an order. Checks must be payable in U.S. dollars and will
be accepted subject to collection at full face value.
By investing in the 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.
Additional Information About Making Subsequent Investments by QuickBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on The
New York Stock Exchange, Inc. (the "Exchange"), normally 4 p.m. Eastern time.
Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
purchased at the net asset value per share calculated at the close of trading on
the day of your call. QuickBuy requests received after the close of regular
trading on the Exchange will begin their processing and be purchased at the net
asset value calculated the following business day. If you purchase shares by
QuickBuy and redeem them within seven days of the purchase, the Fund may hold
the redemption proceeds for a period of up to seven business
9
<PAGE>
days. If you purchase shares and there are insufficient funds in your bank
account the purchase will be canceled and you will be subject to any losses or
fees incurred in the transaction. QuickBuy transactions are not available for
most retirement plan accounts. However, QuickBuy transactions are available for
Scudder IRA accounts.
In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form,
shareholders should allow 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 the Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Share certificates now in a shareholder's possession may be sent to the Fund's
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.
All issued and outstanding shares of what were formerly AARP Funds that
were subsequently reorganized into existing Scudder Funds were simultaneously
cancelled on the books of the AARP Funds. Share certificates representing
interests in shares of the relevant AARP Fund will represent a number of shares
of the Class AARP of the relevant Scudder Fund into which the AARP Fund was
reorganized. The Class AARP shares of each fund will not issue certificates
representing shares received in connection with the reorganization.
Other Information
The Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for its shares. Those
brokers may also designate other parties to accept purchase and redemption
orders on the Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by the Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between the Fund and the
broker, ordinarily orders will be priced at a class's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of the 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 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 the Fund at any
time for any reason.
The "Tax Identification Number" section of the Application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g., from exempt organizations a certification of exempt status), will be
returned to the investor. The Fund 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.
The Trust may issue shares at net asset value in connection with any
merger or consolidation with, or acquisition of the assets of, any investment
company or personal holding company, subject to the requirements of the 1940
Act.
EXCHANGES AND REDEMPTIONS-- PRIME RESERVE CLASS S, PRIME RESERVE CLASS AARP,
PREMIUM CLASS S, PREMIUM CLASS AARP AND MANAGED SHARES
Payment of redemption proceeds may be made in securities. The Trust may
suspend the right of redemption with respect to the Fund during any period when
(i) trading on the Exchange is restricted or the Exchange is closed, other
10
<PAGE>
than customary weekend and holiday closings, (ii) the SEC has by order permitted
such suspension or (iii) an emergency, as defined by rules of the SEC, exists
making disposal of portfolio securities or determination of the value of the net
assets of the 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 Trust.
This permits an investor to resume investments.
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The exchange privilege is not applicable for
Institutional Shares. 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.
------------------------------- -----------------------------------
Class of shares Minimum Exchange Amount
------------------------------- -----------------------------------
Prime Reserve Class S $10,000
------------------------------- -----------------------------------
Prime Reserve Class AARP $10,000
------------------------------- -----------------------------------
Premium Class S $25,000
------------------------------- -----------------------------------
Premium Class AARP $25,000
------------------------------- -----------------------------------
Managed Shares $100,000
------------------------------- -----------------------------------
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.
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. These 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 Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder and the
proceeds of such 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 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
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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. The Fund
and the Transfer Agent each reserves the right to suspend or terminate the
privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a prospectus of
the Scudder fund into which the exchange is being contemplated. The exchange
privilege may not be available for certain Scudder funds or classes of Scudder
Funds. For more information, please call 1-800-225-5163 for Prime Reserve Class
S, Premium Class S or Managed shares or 1-800-253-2277 for Prime Reserve Class
AARP or Premium Class AARP.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
(a) In order to request redemptions by telephone, shareholders
must have completed and returned to the Transfer Agent the
application, including the designation of a bank account to
which the redemption proceeds are to be sent. Shareholders
currently receive the right to redeem up to $100,000 to their
address of record automatically, without having to elect it.
Shareholders may also request to have the proceeds mailed or
wired to their pre-designated bank account. NEW INVESTORS
wishing to establish the telephone redemption privilege 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
proceeds 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. An original signature and an original
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 Prime Reserve
Class S, Prime Reserve Class AARP, Premium Class AARP and Premium Class S 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.
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 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.
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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. Redemptions
must be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, normally 4:00 p.m. Eastern time, shares will be redeemed at the net
asset value per share calculated at the close of trading on the day of your
call. QuickSell requests received after the close of regular trading on the
Exchange will begin their processing and be redeemed at the net asset value
calculated the following business day. QuickSell transactions are not available
for Scudder IRA accounts and most other retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which redemption proceeds will be credited. New
investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow 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.
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 Checkwriting
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 the
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 Fund pays the bank charges for this service. However,
the Fund will review the cost of operation periodically and reserve the right to
determine if direct charges to the persons who
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avail themselves of this service would be appropriate. The Fund, Scudder Service
Corporation and State Street Bank and Trust Company reserve the right at any
time to suspend or terminate the Checkwriting procedure.
Redemption-in-Kind
Although the Trust has no present intention of doing so, the Trust
reserves the right, if conditions exist which make cash payments undesirable, to
honor any request for redemption or repurchase order by making payment in whole
or in part in readily marketable securities chosen by the Fund and valued as
they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Fund at the beginning of the
period.
Minimum Balances for Managed Shares
The initial minimum investment requirement in the Managed Shares of the
Fund is $100,000. Shareholders should maintain a share balance worth at least
$100,000 (which minimum amount may be changed by the Board of Trustees).
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 the account and the account balance is not increased in 60 days, the
Adviser 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.
Minimum Balances for Prime Reserve Shares, Class S and Class AARP
Initial minimum investment in these shares is $10,000. Shareholders
should maintain a share balance worth at least $7,500. Account balances will be
reviewed periodically and the Adviser reserves the right, following 60 days
written notice to shareholders, to redeem all shares in accounts that have a
value below $7,500 where such a reduction in value has occurred due to a
redemption, exchange, or transfer out of the account.
Minimum Balances for Premium Shares, Class S and Class AARP
Initial minimum investment in these shares is $25,000. Shareholders
should maintain a share balance worth at least $20,000. Account balances will be
reviewed periodically and the Adviser reserves the right, following 60 days
written notice to shareholders, to redeem all shares in accounts that have a
value below $20,000 where such a reduction in value has occurred due to a
redemption, exchange, or transfer out of the account.
PURCHASING SHARES -- INSTITUTIONAL SHARES
The Fund has specific minimum initial investment requirements for each
class of shares. 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 Fund and for
investments effected on a group basis by certain other entities and their
employees, such as pursuant to a payroll deduction plan and for investments made
in an Individual Retirement Account offered by the Fund. Investment minimums may
also be waived for Trustees and officers of the Trust. The Fund, Scudder
Investor Services, Inc. and Scudder Financial Intermediary Services Group each
reserves the right to reject any purchase order. The Fund will be invested in
full and fractional shares.
Wire Transfer of Federal Funds
Orders for shares of the 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. on the same day if a bank wire or check is converted to
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federal funds or a federal funds' wire is received by 4:00 p.m. In addition, if
investors known to the Fund notify the Fund by 4:00 p.m. that they intend to
wire federal funds to purchase shares of the 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 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 Fund on the
business day after the check is deposited.
Shares of the Fund may be purchased by writing or calling State Street
Bank and Trust Company (the "Transfer Agent"). Orders for shares of a particular
class of the Fund will be executed at the net asset value per share of such
class next determined after an order has become effective.
Checks drawn on a non-member bank or a foreign bank may take
substantially longer to be converted into federal funds and, accordingly, may
delay the execution of an order. Checks must be payable in U.S. dollars and will
be accepted subject to collection at full face value.
By investing in the 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.
Share Certificates
Due to the desire of the Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the 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 Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Fund's shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on the Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by the Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between the Fund and the
broker, ordinarily orders will be priced at the Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of the 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 Fund's 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 the Fund at any time for any reason.
REDEMPTIONS -- INSTITUTIONAL SHARES
Payment of redemption proceeds may be made in securities. The Trust may
suspend the right of redemption with respect to the 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 the 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 Trust.
This permits an investor to resume investments.
Expedited Redemption Service
In order to request the Expedited Redemption Service for Institutional
Shares, shareholders must have completed and returned to the Transfer Agent the
application electing this option. Redemption of shares may be requested by
calling 1-800-537-3177 or by faxing a request to 1-800-537-9960. Expedited
Redemption Service orders that arrive before 12 noon will be processed that day,
and, if possible, those arriving between noon and 4 p.m. will be processed that
day as well. Expedited Redemption Service is not available between 4:00 p.m. and
5:00 p.m., but redemptions by other available means may be made until 5:00 p.m.
Eastern time.
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Redemption by Wire
Shareholders may request to have redemption proceeds wired to
their pre-designated bank account. 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 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.
Redemption by Telephone
In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
Shareholders currently receive the right to redeem up to $100,000 to their
address of record automatically, without having to elect it.
(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 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 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.
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, they 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 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 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.
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
16
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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.
Redemption-in-Kind
Although the Trust has no present intention of doing so, the Trust
reserves the right, if conditions exist which make cash payments undesirable, to
honor any request for redemption or repurchase order by making payment in whole
or in part in readily marketable securities chosen by the Fund and valued as
they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Fund at the beginning of the
period.
Minimum balance for Institutional Shares of Scudder Money Market Series
The initial minimum investment requirement in the Institutional Shares
of the Fund is $1,000,000. Shareholders should maintain a share balance worth at
least $1,000,000 (which minimum amount may be changed by the Board of Trustees).
Shareholders whose account balance falls below $1,000,000 for at least
30 days may 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 out of the
account and the account balance is not increased in 60 days, the Adviser
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.
FEATURES AND SERVICES OFFERED BY THE FUND
The No-Load Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its Scudder Family
of Funds from the vast majority of mutual funds available today. The primary
distinction is between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Conduct Rules, 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 funds and classes in the Scudder Family of Funds do not pay any
asset-based sales charges or service fees, Scudder uses the phrase no-load to
distinguish Scudder funds and classes from other no-load 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.
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Internet access
World Wide Web Site -- The address of the Scudder Funds' site is
http://www.scudder.com (for Premium Class S, Prime Reserve Class S and Managed
Shares). The address of the Scudder Institutional Funds' site is
http://institutionalfunds.scudder.com. The address for the Class AARP of shares
is aarp.scudder.com.
These sites offer guidance on global investing and developing strategies to help
meet financial goals and provide access to the Scudder investor relations
department via e-mail. The sites also enable users to access or view Fund
prospectuses and profiles with links between summary information in Fund
Summaries and details in the Prospectus. Users can fill out new account forms
on-line, order free software, and request literature on funds.
Account Access (for Premium Class S, Premium Class AARP, Prime Reserve Class S
Shares, Prime Reserve Class AARP and Managed Shares) -- The Adviser 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.
The Adviser'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.
Dividends and Capital Gains Distribution Options -- Premium Class S, Premium
Class AARP, Prime Reserve Class S, Prime Reserve Class AARP and Managed Shares
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 Fund. For retirement plans, reinvestment is
the only option. A change of instructions for the method of payment must be
received by the Transfer Agent at least five days prior to a dividend record
date. Shareholders also may change their dividend option either by calling
1-800-225-5163 for Premium Class S shares, Prime Reserve Class S shares and
Managed shares and 1-800-253-2277 for Premium Class AARP and Prime Reserve Class
AARP or by sending written instructions to the Transfer Agent. Please include
your account number with your written request.
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 distribution 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 Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's Direct
Distributions Program. Shareholders who elect to participate in the Direct
Distributions 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 gain distributions automatically deposited to their personal bank
account usually within three business days after the Fund pays its distribution.
A Direct Distributions request form can be obtained by calling 1-800-225-5163
for Premium Class S shares, Prime Reserve Class S shares and Managed shares and
1-800-253-2277 for Premium Class AARP and Prime Reserve Class AARP. Confirmation
statements will be mailed to shareholders as notification that distributions
have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
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Reports to Shareholders
The Trust issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Trust presently intends to
distribute to shareholders informal quarterly reports during the intervening
quarters, containing a statement of the investments of the Fund.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163 for
Premium Shares, Prime Reserve Shares and Managed Shares or 1-800-537-3177 for
Institutional Shares.
THE SCUDDER FAMILY OF FUNDS
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds; a list of Scudder's
funds follows.
MONEY MARKET
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series +
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund
TAX FREE
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund**
Scudder California Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
U.S. INCOME
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
-------------------------------
+ The institutional class of shares is not part of the Scudder Family of
Funds.
** Only the Scudder Shares are part of the Scudder Family of Funds.
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Scudder High Yield Bond Fund
GLOBAL INCOME
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio
Scudder Pathway Series: Balanced Portfolio
Scudder Pathway Series: Growth Portfolio
U.S. GROWTH AND INCOME
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder Small Company Stock Fund
Scudder S&P 500 Index Fund
U.S. GROWTH
Value
Scudder Large Company Value Fund
Scudder Value Fund**
Scudder Small Company Value Fund
Growth
Scudder Classic Growth Fund**
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund**
** Only the Scudder Shares are part of the Scudder Family of Funds.
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GLOBAL EQUITY
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 Health Care Fund
Scudder Technology Fund
SCUDDER PREFERRED SERIES
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
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 (for Premium Shares, Prime Reserve Shares and
Managed Shares only) or 1-800-537-1988 (for Institutional Shares).
Certain Scudder funds or classes thereof may not be available for
purchase or exchange. For more information, please call 1-800-225-5163 (for
Premium Shares, Prime Reserve Shares and Managed Shares) or 1-800-537-3177 (for
Institutional Shares).
-------------------------------
*** Only the International Shares are part of the Scudder Family of Funds.
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SPECIAL PLAN ACCOUNTS
The information regarding Special Plan Accounts does not apply to
Institutional Shares of Scudder Money Market Series.
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, 1-800-225-5163. The
discussions of the plans below describe only certain aspects of the federal
income tax treatment of the plan. The state tax treatment may be different and
may vary from state to state. It is advisable for an investor considering the
funding of the investment plans described below to consult with an attorney or
other investment or tax adviser with respect to the suitability requirements and
tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRAs 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 Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code as to form.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account ("IRA") 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, even 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>
Scudder Roth IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for a
Roth Individual Retirement Account ("Roth IRA") which meets the requirements of
Section 408A of the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions of earnings from a Roth IRA
are taxable and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, certain medical expenses, the
purchase of health insurance for an unemployed individual and qualified higher
education expenses.
An individual with an income of $100,000 or less (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 Fund 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). Any
such requests must be received by the Fund's 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 Trust or its agent on written
notice, and will be terminated when all shares of the Fund under the Plan have
been liquidated or upon receipt by the Trust of notice of death of the
shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163 for Premium Class S shares, Prime Reserve Class S shares and
Managed shares and 1-800-253-2277 for Premium Class AARP and Prime Reserve Class
AARP shares.
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<PAGE>
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 Trust and its agents reserve the right to establish a maintenance
charge in the future depending on the services required by the investor.
The Trust 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.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Trust 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
The Trust declares dividends on the outstanding shares of the Fund from
the Fund's net investment income at the close of each business day to
shareholders of record at 4:00 p.m. 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 4:00 p.m. on that day.
Investment income for the 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
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<PAGE>
Statements of Account will be mailed approximately two business days after the
payment date. The 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
From time to time, quotations of the 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 the 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. These performance figures may be calculated in the following manner:
Yield
The Trust makes available various yield quotations with respect to
shares of the Fund. The annualized yield for the Fund for the seven-day period
ended May 31, 2000 for the Institutional Shares and Managed Shares was 6.39% and
6.20%, respectively. The annualized yield for the Premium Class S and Prime
Reserve Class S shares for the seven-day period ended May 31, 2000 was 6.34% and
5.74%, respectively. If the Adviser had not absorbed a portion of the Fund's
expenses and had imposed a full management fee, the Fund's yield for the
seven-day period ended May 31, 2000 would have been lower.
The Fund's yield may fluctuate daily and does not provide a basis for
determining future yields. The foregoing yields were computed separately for
each class of the Fund by determining the net change in value, exclusive of
capital changes, of a hypothetical account having a balance of one share at the
beginning of the period, dividing the net change in value by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by 365/7, with the resulting yield figure
carried to the nearest hundredth of one percent. The net change in value of an
account consists of the value of additional shares purchased with dividends from
the original share plus dividends declared on both the original share and any
such additional shares (not including realized gains or losses and unrealized
appreciation or depreciation) less applicable expenses, including the management
fee payable to the Adviser.
Current yield for the 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 the Fund. 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 the 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 Fund 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 the Fund, for the seven-day period ended May 31,
2000 for the Institutional Shares and Managed Shares was 6.60% and 6.39%,
respectively. The effective yield for the Premium Class S and Prime Reserve
Class S for the seven-day period ended May 31, 2000 was 6.54% and 5.90%,
respectively. If the Adviser had not absorbed a portion of the fund's expenses
and had imposed a full management fee, the Fund's yield for the seven-day period
ended May 31, 2000 would have been lower.
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<PAGE>
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 the
Fund, where applicable, all ended on the last day of a recent calendar quarter
and is calculated separately for each class of the Fund. Average annual total
return quotations reflect changes in the price of the Fund's shares, if any, and
assume that all dividends and capital gains distributions during the respective
periods were reinvested in the same class of Fund shares. Average annual total
return is calculated by finding the average annual compound rates of return of a
hypothetical investment over such periods, according to the following formula
(average annual total return is then expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
T = Average Annual Total Return
P = a hypothetical initial investment of
$1,000
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 May 31, 2000^(1)
<TABLE>
<CAPTION>
Since
Inception* One Year Five Years Ten Years
<S> <C> <C> <C> <C>
Institutional Shares 5.52 5.74 N/A N/A
Managed Shares 7.10 5.60 5.26 4.97
Premium Money Market Class S Shares 5.45 5.68 N/A N/A
Prime Reserve Money Market Class S Shares 5.16 5.30 N/A N/A
</TABLE>
* The Institutional shares of Scudder Money Market Series commenced
operations on August 4, 1997.
The Premium shares of Scudder Money Market Series commenced operations on
August 4, 1997.
The Prime Reserve shares of Scudder Money Market Series commenced
operations on October 15, 1998.
^(1) The Adviser maintained Fund expenses for the fiscal year ending May 31,
2000. The Average Annual Total Return for the fiscal year ended May 31,
2000 would have been lower if the Adviser had not maintained expenses.
As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for a class will vary based on changes in market conditions and the
level of the Fund's and class's expenses.
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 the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated separately for
each class of shares of the Fund by finding the cumulative rates of return of a
hypothetical investment over such periods, according to the following formula
(cumulative total return is then expressed as a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
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<PAGE>
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 May 31, 2000^(1)
<TABLE>
<CAPTION>
Since Inception* One Year Five Years Ten Years
<S> <C> <C> <C> <C>
Institutional Shares 16.40 5.74 N/A N/A
Managed Shares 277.92 5.60 29.25 62.44
Premium Class S Money Market Shares 16.66 5.68 N/A N/A
Prime Reserve Class S Money Market Shares 8.53 5.30 N/A N/A
</TABLE>
* The Institutional shares of Scudder Money Market Series commenced
operations on August 4, 1997.
The Premium shares of Scudder Money Market Series commenced operations on
August 4, 1997.
The Prime Reserve shares of Scudder Money Market Series commenced
operations on October 15, 1998.
(1) The Adviser maintained Fund expenses for the fiscal year ending May 31,
2000. The Average Annual Total Return for the fiscal year ended May 31,
2000 would have been lower if the Adviser had not maintained expenses.
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.
Comparison of Fund Performance
In connection with communicating its performance to current or
prospective shareholders, the 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.
From time to time, in advertising and marketing literature, the Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations.
From time to time, in marketing and other Fund literature, Trustees and
officers of the Fund, the Fund's 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
Fund. 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 Fund may be advertised as an investment choice in Scudder's college
planning program.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund 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 Fund 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
27
<PAGE>
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.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about the Fund.
THE PROGRAM
Scudder Treasurers Trust(TM) (the "Program") is a corporate and
institutional cash investment program with respect to the Fund. The Program is
designed especially for treasurers and financial officers of small- and
middle-sized corporations and financial institutions. The Program reduces
substantially the costs and inconvenience of direct investment in individual
securities and helps reduce risk by diversifying investments across a broad
range of securities. The Program also provides flexibility since shares can be
redeemed from or exchanged between any of the participating money market funds
at no extra cost, with the exception of the Institutional Shares which are not
exchangeable.
The Program seeks 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. The Fund 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 Program allows 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 Fund also anticipates lower expense ratios than those of money
market mutual funds designed for individual investors because the Fund's 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.
The Fund 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 FUND
Scudder Fund, Inc. (the "Corporation") was formed on June 18, 1982
under the laws of the State of Maryland. The Corporation was reorganized as a
Massachusetts business trust (the "Trust") established pursuant to a Declaration
of Trust dated April 17, 2000. The authorized capital stock of the Trust
consists of shares having a par value of $.001 per share. The Trust's
Declaration of Trust authorizes the Board of Trustees to classify or reclassify
any unissued shares of beneficial interest. The Board of Trustees has designated
one series, Scudder Money Market Series, (the "Fund"). The Fund has six classes
of shares, to be referred to for all purposes as "Managed shares,"
"Institutional shares"; "Premium Class S", "Premium Class AARP", "Prime Reserve
Class AARP" and "Prime Reserve Class S."
Each share of each class of the Fund shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters that such shares
shall be entitled to vote. Shareholders of the Fund shall vote together on any
matter,
28
<PAGE>
except to the extent otherwise required by the 1940 Act, or when the Board of
Trustees of the Trust 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 that 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 Trust's Declaration of Trust. As used 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 Fund and all additional portfolios (e.g., election of trustees),
means the vote of the lesser of (i) 67% of the Trust'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 Trust's outstanding shares. The
term "majority," when referring to the approvals to be obtained from
shareholders in connection with matters affecting a single Fund, class or any
other single portfolio (e.g., annual approval of investment management
contracts), means the vote of the lesser of (i) 67% of the shares of the
portfolio represented at a meeting if the holders of more than 50% of the
outstanding shares of the class or portfolio are present in person or by proxy,
or (ii) more than 50% of the outstanding shares of the portfolio. Shareholders
are entitled to one vote for each full share held and fractional votes for
fractional shares held.
Each share of the Fund represents an equal proportionate interest in
the Fund with each other share of the Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Trust's Board of Trustees. In the event of
the liquidation or dissolution of the Trust, holders of the shares of the Fund
are entitled to receive as a class the assets attributable to the Fund that are
available for distribution, and a proportionate distribution, based upon the
relative net assets of the Fund, of any general assets not attributable to the
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 Trust.
INVESTMENT ADVISER
Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the predecessor
of which is Scudder, Stevens & Clark, Inc., is one of the most experienced
investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Adviser introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On December 31, 1997, Zurich
Insurance Company ("Zurich") acquired a majority interest in the Adviser, and
Zurich Kemper Investments, Inc., a Zurich subsidiary, became part of the
Adviser. The Adviser's name changed to Scudder Kemper Investments, Inc. On
September 7, 1998, the businesses of Zurich (including Zurich's 70% interest in
Scudder Kemper) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings have
resulted from its operations as an insurer as well as from its ownership of its
subsidiaries and affiliated companies (the "Zurich Insurance Group"). Zurich and
the Zurich Insurance Group provide an extensive range of insurance products and
services and have branch offices and subsidiaries in more than 40 countries
throughout the world.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations as well as providing investment advice to over 280 open and
closed-end mutual funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Adviser receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. The Adviser's international
investment management team travels the world, researching
29
<PAGE>
hundreds of companies. In selecting the securities in which the Fund may invest,
the conclusions and investment decisions of the Adviser with respect to the Fund
are based primarily on the analyses of its own research department.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same day. In
such event, such transactions will be allocated among the clients in a manner
believed by the Adviser to be equitable to each. In some cases, this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by a fund. Purchase and sale orders for a fund may be combined with
those of other clients of the Adviser in the interest of achieving the most
favorable net results to that fund.
In certain cases, the investments for the Fund are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser,
that have similar names, objectives and investment styles. You should be aware
that the Fund is likely to differ from these other mutual funds in size, cash
flow pattern and tax matters. Accordingly, the holdings and performance of the
Fund can be expected to vary from those of these other mutual funds.
The present investment management agreement (the "Agreement") was
approved by the Trustees on August 7, 2000 and became effective August 7, 2000.
The Agreement will continue in effect until September 30, 2001 and from year to
year thereafter only if its continuance is approved annually by the vote of a
majority of those Trustees who are not parties to such Agreement or interested
persons of the Adviser or the Trust, cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Trust's Trustees
or of a majority of the outstanding voting securities of the Fund. The Agreement
may be terminated at any time without payment of penalty by either party on
sixty days' written notice and automatically terminate in the event of its
assignment.
Under the Agreement each Fund is responsible for all of its other
expenses including: fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; legal, auditing and
accounting expenses; the calculation of net asset value; taxes and governmental
fees; the fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses of issue, sale, underwriting, distribution,
redemption or repurchase of shares; the expenses of and the fees for registering
or qualifying securities for sale; the fees and expenses of Trustees, officers
and employees of a Fund who are not affiliated with the Adviser; the cost of
printing and distributing reports and notices to stockholders; and the fees and
disbursements of custodians. A Fund may arrange to have third parties assume all
or part of the expenses of sale, underwriting and distribution of shares of a
Fund. A Fund is also responsible for its expenses of shareholders' meetings, the
cost of responding to shareholders' inquiries, and its expenses incurred in
connection with litigation, proceedings and claims and the legal obligation it
may have to indemnify its officers and Trustees of the Trust with respect
thereto.
The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Corporation, with respect to a Fund, has the
non-exclusive right to use and sublicense the Scudder name and marks as part of
its name, and to use the Scudder Marks in the Trusts' investment products and
services.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees of a Fund who are not
"interested persons" of the Adviser are represented by independent counsel at a
Fund's expense.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Under the Investment Management Agreement between the Fund and the
Adviser (the "Agreement"), the Fund agrees to pay the Adviser a fee equal to a
rate of 1/12 of 0.25% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. By contract, the adviser has reduced its
management fee for each class by 0.15%
30
<PAGE>
through September 30, 2001. As manager of the assets of the Fund, 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.
For the Fund's fiscal year ended May 31, 2000, the Adviser did not
impose fees of $7,384,398, and did impose fees of $5,634,678.
For the five-month period ended May 31, 1999, the Adviser did not
impose fees of $1,698,744, and did impose fees of $1,334,728.
For the Fund's fiscal year ended December 31, 1998, the Adviser did not
impose fees of $1,846,622, and did impose fees of $2,304,035.
For the Fund's fiscal year ended December 31, 1997, the Adviser did not
impose fees of $374,936 and did impose fees of $1,301,440.The Agreement also
provides that the Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with matters
to which the Agreement relates, provided that nothing in the agreement shall be
deemed to protect or purport to protect against any liability to the Trust, the
Fund or the Fund's shareholders to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
duties, or by reason of reckless disregard of the obligations and duties
hereunder.
Any person, even though also employed by Scudder, 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 an agent of Scudder.
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 Trust's Board of
Trustees and (ii) by a majority of the Trustees of the Trust who are not parties
to the Agreement or "interested persons" (as defined in the 1940 Act) of any
such party. The Agreement may be terminated on 60 days' written notice by either
party and will terminate automatically if assigned.
Administrative Fee
The Fund has entered into an administrative services agreement with
Scudder Kemper (the "Administration Agreements"), pursuant to which Scudder
Kemper will provide or pay others to provide substantially all of the
administrative services required by the Fund (other than those provided by
Scudder Kemper under its investment management agreement with the Fund, as
described above) in exchange for the payment by each class of an administrative
services fee (each an "Administrative Fee") for Prime Reserve Class S and Prime
Reserve Class AARP of 0.400% of its average daily net assets, for Premium Class
S and Premium Class AARP 0.250% of its average daily net assets, for Managed
0.250% of its average daily net assets with a contractual reduction of 0.05% by
the adviser through September 30, 2001, and for Institutional shares 0.100% of
its average daily net assets with a contractual reduction of 0.05% by the
adviser through September 30, 2001. One effect of these arrangements is to make
the Fund's future expense ratio more predictable. Each Administrative Fee will
become effective on or about August 14, 2000.
Various third-party service providers (the "Service Providers"), some
of which are affiliated with Scudder Kemper, provide certain services to the
Fund pursuant to separate agreements with the Fund. Scudder Fund Accounting
Corporation, a subsidiary of Scudder Kemper, computes net asset value for the
Fund and maintains its accounting records. Scudder Service Corporation, also a
subsidiary of Scudder Kemper, is the transfer, shareholder servicing and
dividend-paying agent for the shares of the Fund. Scudder Trust Company, an
affiliate of Scudder Kemper, provides subaccounting and recordkeeping services
for shareholders in certain retirement and employee benefit plans. As custodian,
Brown Brothers Harriman holds the portfolio securities of the Fund, pursuant to
a custodian agreement. PricewaterhouseCoopers LLP audits the financial
statements of the Fund and provides other audit, tax, and related services.
Dechert Price & Rhoads acts as general counsel for the Fund. In addition to the
fees it pays under its investment management agreement with Scudder Kemper, the
Fund pays the fees and expenses associated with these service arrangements, as
well as the Fund's insurance, registration, printing, postage and other costs.
31
<PAGE>
Scudder Kemper will pay the Service Providers for the provision of
their services to the Fund and will pay other Fund expenses, including
insurance, registration, printing and postage fees. In return, the Fund will pay
Scudder Kemper an Administrative Fee.
The Administration Agreement has an initial term of three years,
subject to earlier termination by the Fund's Board. The fee payable by the Fund
to Scudder Kemper pursuant to the Administration Agreements is reduced by the
amount of any credit received from the Fund's custodian for cash balances.
Certain expenses of the Fund will not be borne by Scudder Kemper under
the Administration Agreements, such as taxes, brokerage, interest and
extraordinary expenses; and the fees and expenses of the Independent Trustees
(including the fees and expenses of their independent counsel). In addition, the
Fund will continue to pay the fees required by its investment management
agreement with Scudder Kemper.
AMA InvestmentLink(SM) Program
Pursuant to an Agreement between the Adviser and AMA Solutions, Inc., a
subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997,
the Adviser has agreed, subject to applicable state regulations, to pay AMA
Solutions, Inc. royalties in an amount equal to 5% of the management fee
received by the Adviser with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLink(SM) Program. The Adviser
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of the Adviser (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.
Code of Ethics
The Fund, the Adviser and principal underwriter have each adopted codes
of ethics under rule 17j-1 under the Investment Company Act. Board members,
officers of the Fund and employees of the Adviser and principal underwriter are
permitted to make personal securities transactions, including transactions in
securities that may be purchased or held by the Fund, subject to requirements
and restrictions set forth in the applicable Code of Ethics. The Adviser's Code
of Ethics contains provisions and requirements designed to identify and address
certain conflicts of interest between personal investment activities and the
interests of the Fund. Among other things, the Adviser's Code of Ethics
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
quarterly 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
Adviser's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.
DISTRIBUTOR
Pursuant to a contract with the Trust, Scudder Investor Services, Inc.,
Two International Place, Boston, Massachusetts 02110-4103, a subsidiary of the
Adviser, serves as the Trust's principal underwriter in connection with a
continuous offering of shares of the Trust. The Distributor may enter into
agreements with other broker/dealers for the distribution of Fund shares. The
Distributor receives no remuneration for its services as principal underwriter
and is not obligated to sell any specific amount of Fund shares. As principal
underwriter, it accepts purchase orders for shares of 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 Prospectus and
periodic reports have been prepared, set in type and mailed to shareholders, the
Distributor will pay for the printing and distribution of copies thereof used in
connection with the offering to prospective investors. The Distributor will also
pay for supplemental sales literature and advertising costs. The Distributor may
enter into agreements with other broker dealers for the distribution of Fund
shares.
The Trust's underwriting agreement dated August 7, 2000, will remain in
effect until September 30, 2001, and from year to year thereafter only if its
continuance is approved annually by a majority of the members of the Board of
Trustees who are not parties to such agreement or interested persons of any such
party and either by vote of a majority of the Board of Trustees or a majority of
the outstanding voting securities of the Trust. The underwriting agreement was
last approved by the Trustees on August 7, 2000. Under the principal
underwriting agreement, the Trust is responsible
32
<PAGE>
for: the payment of all fees and expenses in connection with the preparation and
filing with the SEC of its registration statement and prospectus and any
amendments and supplements thereto; the registration and qualification of shares
for sale in the various states, including registering the Trust as a
broker/dealer in various states as required; the fees and expenses of preparing,
printing and mailing prospectuses annually to existing shareholders (see below
for expenses relating to prospectuses paid by the Distributor), notices, proxy
statements, reports or other communications to shareholders of the Fund; the
cost of printing and mailing confirmations of purchases of shares and the
prospectuses accompanying such confirmations; any issuance taxes and/or any
initial transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of shareholder service representatives; the cost of wiring funds for
share purchases and redemptions (unless paid by the shareholder who initiates
the transaction); the cost of printing and postage of business reply envelopes;
and a portion of the cost of computer terminals used by both the Trust and the
Distributor.
The Distributor pays for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Fund to the public.
The Distributor pays all fees and expenses in connection with its qualification
and registration as a broker/dealer under federal and state laws, a portion of
the cost of toll-free telephone service and expenses of shareholder service
representatives, a portion of the cost of computer terminals, and expenses of
any activity which is primarily intended to result in the sale of shares issued
by the Fund, unless a Rule 12b-1 plan is in effect which provides that the Fund
shall bear some or all of such expenses.
Note: Although the Trust does not currently have a 12b-1 Plan and
the Trustees have no current intention of adopting one, the
Trust will also pay those fees and expenses permitted to be
paid or assumed by the Trust pursuant to a 12b-1 Plan, if any,
were adopted by the Trust, notwithstanding any other provision
to the contrary in the underwriting agreement.
As agent the Distributor currently offers shares of the Fund on a
continuous basis to investors in all states in which shares of the Fund may from
time to time be registered or where permitted by applicable law. The
underwriting agreement provides that the Distributor accepts orders for shares
at net asset value as no sales commission or load is charged to the investor.
The Distributor has made no firm commitment to acquire shares of the Fund.
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive officers of the
Trust for the past five years are listed below.
<TABLE>
<CAPTION>
Position with
Underwriter, Scudder
Position with Investor
Name, Age and Address Trust Principal Occupation* Services,Inc.
--------------------- ----- --------------------- -------------
<S> <C> <C> <C>
Henry P. Becton (56) Trustee President and General None
WGBH Manager, WGBH Educational
125 Western Avenue Foundation
Allston, MA 02134
Linda C. Coughlin (48) # ** President and Trustee Managing Director of Senior Vice President
Scudder Kemper Investments,
Inc.
Dawn-Marie Driscoll (53) Trustee Executive Fellow, Center None
4909 SW 9th Place for Business Ethics,
Cape Coral, FL 33914 Bentley College; President,
Driscoll Associates
(consulting firm)
Edgar R. Fiedler (70) Trustee Senior Fellow and Economic None
50023 Brogden Counsellor, The Conference
Chapel Hill, NC Board, Inc.
33
<PAGE>
Position with
Underwriter, Scudder
Position with Investor
Name, Age and Address Trust Principal Occupation* Services,Inc.
--------------------- ----- --------------------- -------------
Keith R. Fox (46) Trustee General Partner, Exeter None
10 East 53rd Street Group of Funds
New York, NY 10022
Joan Edelman Spero (55) Trustee President, Doris Duke None
Doris Duke Charitable Foundation Charitable Foundation;
650 Fifth Avenue Department of State -
New York, NY 10128 Undersecretary of State for
Economic, Business and
Agricultural Affairs (March
1993 to January 1997)
Jean Gleason Stromberg (56) Trustee Consultant; Director, None
3816 Military Road, NW Financial Institutions
Washington, D.C. Issues, U.S. General
Accounting Office
(1996-1997); Partner,
Fulbright & Jaworski (law
firm) (1978-1996)
Jean C. Tempel (56) Trustee Managing Director, First None
One Boston Place Light Capital (venture
23rd Floor capital firm)
Boston, MA 02108
Steven Zaleznick (45) # Trustee President and CEO, AARP None
Services, Inc.
Ann M. McCreary (43)## Vice President Managing Director of None
Scudder Kemper Investments,
Inc.
Frank J. Rachwalski, Jr. (55) *** Vice President Managing Director of None
Scudder Kemper Investments,
Inc.
John R. Hebble (42) ** Treasurer Senior Vice President of Assistant Treasurer
Scudder Kemper Investments,
Inc.
John Millette (37)** Vice President and Vice President of Scudder None
Secretary Kemper Investments, Inc.
Caroline Pearson (38)** Assistant Secretary Senior Vice President of Clerk
Scudder Kemper
Investments, Inc.;
Associate, Dechert Price &
Rhoads (law firm) 1989 to
1997
Thomas V. Bruns (43)*** Vice President Managing Director None
34
<PAGE>
Position with
Underwriter, Scudder
Position with Investor
Name, Age and Address Trust Principal Occupation* Services,Inc.
--------------------- ----- --------------------- -------------
William F. Glavin (41)** Vice President Managing Director Vice President
James E. Masur (40)** Vice President Senior Vice President None
Kathryn L. Quirk (47) ## Vice President and Managing Director Director, Senior Vice
Assistant Secretary President, Chief Legal
Officer and Assistant
Clerk
Howard Schneider (43)** Vice President Managing Director None
Brenda Lyons (37) ** Assistant Treasurer Senior Vice President None
</TABLE>
# Mr. Zaleznick and Ms. Coughlin are considered by the Fund and its
counsel to be Trustees who are "interested persons" of the Adviser of
the Fund, within the meaning of the 1940 Act, as amended.
* All of the Trustees and Officers have been associated with their
respective companies for more than five years, but not necessarily in
the same capacity.
** Address: Two International Place, Boston, Massachusetts
## Address: 345 Park Avenue, New York, New York
*** Address: 222 South Riverside Plaza, Chicago, Illinois
Trustees of the Trust not affiliated with the Adviser receive from the
Trust an annual fee and a fee for each Board of Trustees and Board
Committee meeting attended and are reimbursed for all out-of-pocket
expenses relating to attendance at such meetings. Trustees who are
affiliated with the Adviser do not receive compensation from the Trust,
but the Trust may reimburse such Trustees for all out-of-pocket
expenses relating to attendance at meetings.
The Trustees and officers of the Trust also serve in similar capacities
with respect to other Scudder Funds.
Certain accounts for which Scudder Kemper acts as investment adviser
owned 265,439,693 shares in the aggregate, or 63.31% of the outstanding shares
of Scudder Money Market Series - Managed shares on July 15, 2000. Scudder Kemper
may be deemed to be the beneficial owner of such shares, but disclaims any
beneficial ownership therein.
As of July 15, 2000, the Trustees and Officers of Trust, as a group,
owned less than 1% of the outstanding shares of Scudder Money Market Series
(Managed and Institutional shares, Premium S Class and Prime Reserve S Class
shares) as of the commencement of operations.
As of July 15, 2000, the following shareholders held of record more
than five percent of the Fund:
Scudder Money Market Series (Managed shares): Turtle & Co. Sweep, P.O.
Box 927, Boston, MA 02209; Chase Manhattan (Client Services Dept.) P.O. Box
2558, Houston, TX 77252; Citibank Private Banking, 333 W. 34th Street, New York,
NY 10001; Hare & Co., One Wall Street, New York, NY 10005; Wilmington Trust
Company, 1100 North Market Street, Wilmington, DE 19890 held of record 29.29%,
27.09%, 9.22%, 5.73% and 12.49%, respectively, of the outstanding shares of the
Fund.
Scudder Money Market Series (Institutional shares) Donald, Lufkin &
Jenrette, 277 Park Avenue, New York, NY 10172; Zurich Holding Company of
America, Cash Management, 1400 American Lane, Schaumberg, IL 60196; Aetna Life
Insurance Company, 10 State House Square, Hartford, CT 06103 held of record
5.88%, 5.25% and 8.58%, respectively, of the outstanding shares of the Fund.
As of July 15, 2000, no other persons, to the knowledge of management,
owned of record or beneficially more than 5% of the outstanding shares of the
Fund. To the extent that any of the above institutions is the beneficial owner
of
35
<PAGE>
more than 25% of the outstanding Shares of the Trust or the Fund, it may be
deemed to be a "control" person of the Trust or the Fund for purposes of the
1940 Act.
REMUNERATION
Responsibilities of the Board -- Board and Committee Meetings
The Board of Trustees is responsible for the general oversight of the
Fund's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Trustees meets at least quarterly to review the investment
performance of the Fund and other operational matters, including policies and
procedures designed to ensure compliance with various regulatory requirements.
At least annually, the Independent Trustees 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, the
Fund's investment performance, the quality and efficiency of the various other
services provided, costs incurred by the Adviser and its affiliates and
comparative information regarding fees and expenses of competitive funds. They
are assisted in this process by the Fund's independent public accountants and by
independent legal counsel selected by the Independent Trustees.
All the Independent Trustees serve on the Committee on Independent
Trustees, which nominates Independent Trustees and considers other related
matters, and the Audit Committee, which selects the Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Trustees from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
Compensation of Officers and Trustees
Each Independent Trustee receives compensation for his or her services,
which includes an annual retainer and an attendance fee for each meeting
attended. The Independent Trustee who serves as lead trustee receives additional
compensation for his or her service. No additional compensation is paid to any
Independent Trustee for travel time to meetings, attendance at trustee's
educational seminars or conferences, service on industry or association
committees, participation as speakers at trustees' conferences or service on
special trustee task forces or subcommittees. Independent Trustees do not
receive any employee benefits such as pension or retirement benefits or health
insurance. Notwithstanding the schedule of fees, the Independent Trustees have
in the past and may in the future waive a portion of their compensation.
The Independent Trustees also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Trustee fee schedules. The
following table shows the aggregate compensation received by each Independent
Trustee during 1999 from the Trust and from all of the Scudder funds as a group.
In 1999, the Trustees of the Fund met six times.
Name Scudder Money Market Trust* All Scudder Funds
---- -------------------------- -----------------
Henry P. Becton, Jr.** $0 $140,000 (30 funds)
Dawn-Marie Driscoll** $0 $150,000 (30 funds)
Edgar R. Fiedler $9,900*** $73,230 (29 funds)+
Keith R. Fox** $0 $160,325 (23 funds)
Joan E. Spero** $0 $175,275 (23 funds)
Jean Gleason Stromberg** $0 $40,935 (16 funds)
Jean C. Tempel** $0 $140,000 (30 funds)
*During 1999 Scudder Money Market Trust, formerly known as Scudder
Fund, Inc., had three series.
** Newly-elected Trustee. On July 13, 2000, shareholders of the Fund
elected a new Board of Trustees. See the "Trustees and Officers" section for the
newly-constituted Board of Trustees.
36
<PAGE>
*** Mr. Fiedler has accrued, but did not receive, this amount through a
deferred compensation program for serving on the Board of Trustees of Scudder
Money Market Trust, formerly known as Scudder Fund, Inc. As of December 31,
1999, Mr. Fiedler had a total of $271,718 accrued over a number of years in a
deferred compensation program for serving on the Scudder Money Market Trust
Board.
+ Mr. Fiedler's total compensation includes the $9,900 accrued, but not
received, through the deferred compensation program.
Members of the Board of Trustees who are employees of the Adviser or
its affiliates receive no direct compensation from the Trust, although they are
compensated as employees of the Adviser, or its affiliates, as a result of which
they may be deemed to participate in fees paid by the Fund.
TAXES
The Prospectus for each class of shares of the Fund describes generally
the tax treatment of distributions by the Trust. This section of the Statement
includes additional information concerning federal taxes.
Qualification by the Fund as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
requires, among other things, that (a) at least 90% of the Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; or other income derived with respect to its business of investing in
stock securities or currencies (b) the Fund diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), 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, the 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 investment
company taxable income (including net short-term capital gain) and at least 90%
of the excess of its tax exempt interest income over attributable expenses
earned in each year.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders).
A 4% nondeductible excise tax will be imposed on the Fund 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 the Fund that is
subject to income tax will be considered to have been distributed by year-end.
In addition, 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 the Fund and received
by shareholders on December 31 of the calendar year in which the dividend was
declared. The 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 the
Fund by an individual shareholder who is not a dealer in securities generally
will be long- or short-term capital gain or loss, depending on the shareholder's
holding period for the shares. However, any loss realized by a shareholder upon
the sale or redemption of shares of the 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 on such shares. Any loss realized on a
sale or exchange of shares of the 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 the Fund's investment company taxable income
(which includes, among other items, dividends, interest and net short-term
capital gain in excess of net long-term capital losses) will be taxable to a
shareholder as ordinary income. Because no portion of the Fund's income is
expected to consist of dividends paid by U.S. corporations, no portion of the
dividends paid by the Fund is expected to be eligible for the corporate
dividends-
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received deduction. Properly designated distributions of net capital gains (the
excess of net long-term capital gains over net short-term capital losses), if
any, are taxable to shareholders 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
(both paid or reinvested) those shares.
Investments by the Fund in zero coupon or other original issue discount
securities (other than tax-exempt 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 the 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 the 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), held by the Fund will be taxed as
ordinary income to the extent of the accrued market discount up to the amount of
realized capital gain on the bonds, unless the Fund elects to include the market
discount in income as it accrues which will be taxed as ordinary income as
accrued.
The 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 if the Fund has
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 the
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 the Fund.
Fund shareholders may be subject to state and local taxes on their Fund
distributions. 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 the Fund.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Fund to reported commissions paid by
others. The Adviser routinely reviews commission rates, execution and settlement
services performed and makes internal and external comparisons.
The Fund's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
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When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or the
Fund. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for
the Fund to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of research services. The Adviser has negotiated arrangements,
which are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services,
to the Adviser or the Fund in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser will not place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of the Fund. In effecting transactions
in over-the-counter securities, orders are placed with the principal market
makers for the security being traded unless, after exercising care, it appears
that more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Adviser will
place orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker/dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Fund for this service.
Although certain research services from broker/dealers may be useful to
the Fund and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's own research effort since the
information must still be analyzed, weighed, and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund, and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to
the Fund.
The Trustees review, from time to time, whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal
transactions directly from the issuer or from an underwriter or market maker.
There usually are no brokerage commissions paid by a Fund for such purchases.
During the last three fiscal years each Fund paid no portfolio brokerage
commissions. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
NET ASSET VALUE
Net asset value per share for each class of the 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 Fund is
determined at 5:00 p.m. Eastern time. The Exchange normally is closed on the
following national holidays: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas, and on the preceding Friday or subsequent Monday
when one of these holidays falls on a Saturday or Sunday, respectively. 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 that class, by the total number of outstanding shares of that class. The
valuation of the Fund's portfolio securities is based upon their amortized cost
which does not take into account unrealized securities gains or losses. This
method involves initially valuing an instrument at its cost and thereafter
amortizing to maturity any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Fund would receive if it sold the instrument. During periods of declining
interest rates, the quoted yield on shares of the Fund may tend to be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio instruments. Thus, if the use of amortized cost by the Fund
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher yield if he
purchased shares of the Fund on that day than would result from investment in a
fund utilizing solely market values, and existing investors in the Fund would
receive less investment income. The converse would apply in a period of rising
interest rates. Other securities and assets for which market quotations are not
readily
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available are valued in good faith at fair value using methods determined by the
Trustees and applied on a consistent basis. For example, securities with
remaining maturities of more than 60 days for which market quotations are not
readily available are valued on the basis of market quotations for securities of
comparable maturity, quality and type. The Trustees review the valuation of the
Fund's securities through receipt of regular reports from the Adviser at each
regular Trustees' meeting. Determinations of net asset value made other than as
of the close of the Exchange may employ adjustments for changes in interest
rates and other market factors.
ADDITIONAL INFORMATION
Experts
The financial highlights of the Fund included in the Institutional
Shares, the Money Market Series Premium and Prime Reserve shares, and the
Managed Shares prospectuses and the Financial Statements incorporated by
reference in this Statement of Additional Information have been so included or
incorporated by reference in reliance on the report of PricewaterhouseCoopers
LLP, 160 Federal Street, Boston, MA 02110, independent accountants, and given on
the authority of that firm as experts in accounting and auditing.
PricewaterhouseCoopers LLP audits the financial statements of the Fund and
provides other audit, tax and related services.
Other Information
The CUSIP number of the Scudder Premium Class S is 81118P-855.
The CUSIP number of the Premium Class AARP is 81118P-863.
The CUSIP number of the Scudder Institutional Shares is 81118P-871.
The CUSIP number of the Scudder Managed Shares is 81118P-202.
The CUSIP number of the Scudder Prime Reserve Class S is 81118P-707.
The CUSIP number of the Prime Reserve Class AARP is 81118P-848.
The Fund has a fiscal year end of May 31.
On November 13, 1998, the Trust's Board of Trustees approved a change
in the Fund's fiscal year end from December 31 to May 31, effective May 31,
1999.
Portfolio securities of the Fund are held separately, pursuant to a
custodian agreement, by State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02101 as custodian.
Information enumerated below is provided at the Fund level.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Funds. The 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 fiscal year ended May
31, 2000, Scudder Fund Accounting Corporation's fee amounted to $478,549, of
which $125,067 was unpaid at May 31, 2000. For the five-month period ended May
31, 1999, Scudder Fund Accounting Corporation's fee amounted to $129,426. For
the fiscal years ended December 31, 1998, and 1997, Scudder Fund Accounting
Corporation's fee amounted to $189,715,and $56,782, respectively.
Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Trust 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
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<PAGE>
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 the Fund of the Trust.
Effective October 1, 1995, the Service Corporation applies an aggregate minimum
annual fee of $220,000 for servicing shareholder accounts. The minimum monthly
charge to the Fund shall be the pro rata portion of the aggregate annual fee,
determined by dividing such aggregate annual fee by the number of Funds of the
Corporation. An account activity fee of $16.00 per year shall be charged for any
account which at any time during any month had a share balance in any Fund of
the Corporation. When the Fund's monthly activity charges do not equal or exceed
the minimum monthly charge, the minimum will be charged. For the fiscal year
ended May 31, 2000, the Service Corporation's fee amounted to $102,310 for
Managed Shares, $48,176 for Institutional Shares, $461,604 for Premium Shares
and $132,243 for Prime Reserve Shares, for a total of $744,333, $99,963 of which
is unpaid as of May 31, 2000. For the five months ended May 31, 1999, the
Service Corporation's fee amounted to $43,274 for Managed Shares, $13,203 for
Institutional Shares, $184,338 for Premium Shares and $41,608 for Prime Reserve
Shares. For the year ended December 31, 1998, the Service Corporation's fee
amounted to $244,534 for Managed Shares, $20,571 for Institutional Shares,
$273,356 for Premium Shares and $749 for Prime Reserve Shares. For the year
ended December 31, 1997, the Service Corporation's fee amounted to $60,124 for
Premium Shares, $192,796 for Managed Shares and $23,214 for Institutional
Shares.
The Fund, on behalf of its Managed Shares, 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 Managed Shares class only. For the
fiscal year ended May 31, 2000, the receivable for the Adviser's portion of
shareholder servicing paid to certain banks and institutions aggregated
$161,692. For the five months ended May 31, 1999, the receivable for the
Adviser's portion of shareholder servicing paid to certain banks and
institutions aggregated $90,000. For the fiscal year ended December 31, 1998,
the receivable for the Adviser's portion of shareholder servicing paid to
certain banks and institutions aggregated $234,051. For the period from July 7,
1997 to December 31, 1997, the receivable for the Adviser's portion of
shareholder servicing paid to certain banks and institutions aggregated $84,364.
The Fund's Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement and its amendments
which the Trust 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 Trust and the securities offered hereby. The Registration
Statement and its amendments are available for inspection by the public at the
SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio of the
Fund, together with the Report of Independent Accountants, Financial Highlights
and notes to financial statements in the Annual Report to the Shareholders of
the Fund dated May 31, 2000 are incorporated herein by reference and are hereby
deemed to be a part of this Statement of Additional Information.
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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."
