SCUDDER
INVESTMENTS(SM)
[LOGO]
Scudder
Institutional Shares:
Scudder Money
Market Series
Fund #403
Annual Report
May 31, 2000
The fund seeks as high a level of current income as is consistent with
liquidity, preservation of capital, and the fund's investment policies.
<PAGE>
Scudder
Institutional Shares
Scudder Money Market Series
Scudder Institutional Funds Client Services
222 South Riverside Plaza, 33rd Floor
Chicago, Illinois 60606-5808
Telephone: 800 537 3177
E-mail: [email protected]
Web site: http://institutionalfunds.scudder.com
Investment Manager
Scudder Kemper Investments, Inc.
Distributor
Kemper Distributors, Inc.
Custodian
State Street Bank and Trust Company
Fund Accounting Agent
Scudder Fund Accounting Corporation
Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
Legal Counsel
Dechert Price & Rhoads
For more information, call or write the Distributor at the address above.
-----------------
Scudder Institutional Shares are not insured or guaranteed by the U.S.
Government. The fund seeks to maintain a constant net asset value of $1.00
per share, but there can be no assurance that the stable net asset value
will be maintained.
This report is for the information of the shareholders. Its use in
connection with any offering of the fund's shares is authorized only in case
of a concurrent or prior delivery of the fund's current prospectus.
2 | Scudder Institutional Shares
<PAGE>
Contents
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4 Letter from the Series' Portfolio Manager
9 Investment Portfolio
12 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
22 Report of Independent Accountants
23 Tax Information
24 Officers and Directors
Scudder Institutional Shares | 3
<PAGE>
Letter from the Series' Portfolio Manager
--------------------------------------------------------------------------------
Dear Shareholders,
The U.S. stock and bond markets winced with each increase in short-term interest
rates over the 12-month period ended May 31, 2000. With the U.S. economy strong,
unemployment near an all time low, and consumer confidence high, concerns over
an acceleration of inflation took center stage. The environment prompted the
Federal Reserve ("the Fed") to raise short-term interest rates six times. The
increases directly benefited money market securities and the series' yield,
which rose significantly over the period.
Despite the Fed's attempts to slow growth by raising the federal funds rate by
one-and-three-quarters percentage points over the 12 months, the resiliency of
the U.S. economy remained impressive. In the first quarter of this year gross
domestic product grew 5.5%. At the same time, the consumer price index rose
3.1%, up significantly from the beginning of the 12-month period.
While we think the Fed is closer to achieving its objectives of slowing the
economy and controlling inflation, we believe another rate hike is likely. With
recent consumer confidence numbers suggesting that consumers are not afraid and
are continuing their buying spree, we think the Fed will need to pursue a policy
of raising interest rates for the near term. However, the Fed may take a
cautious approach to raising rates prior to the November elections.
4 | Scudder Institutional Shares
<PAGE>
Performance
Reflecting the rising interest rate environment, Scudder Money Market Series --
Institutional Shares' 7-day yield increased from 4.83% to 6.39% over the 12
months. These yields translated into compound effective yields of 4.95% and
6.60%, respectively. From a total return standpoint, the Institutional Shares
returned 5.74% for the one-year period ended May 31, 2000. This performance
resulted in Institutional Shares' ranking 3rd (in the top 1%) of 204
institutional money market funds according to Lipper Analytical Services, Inc.^1
Portfolio Strategy
We pursued two strategies, reflecting the two distinct environments over the 12
months -- the period leading up to the end of 1999 and the year-to-date period.
Toward the end of 1999, we focused on maintaining a sufficient level of
liquidity in the portfolio while taking advantage of what the market was
offering. Generally, this meant maintaining a shorter average maturity than our
peers. This strategy was driven by our cautious approach to the Y2K changeover,
which some had speculated might result in a shift to short-term money market
instruments at year-end. We maintained a higher than normal level of liquidity
in the portfolio in order to be prepared for potentially high investor demand
for cash. By maintaining a shorter maturity in the rising rate environment, our
existing holdings matured more quickly, which enabled us to invest in higher
yielding securities sooner than if we
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends and is no
guarantee of future results.
Scudder Institutional Shares | 5
<PAGE>
had maintained a longer average maturity. A limitation of this strategy is that
we gave up a small amount of current yield by maintaining a shorter maturity.
As it turned out, the Fed pumped a great deal of money into the financial system
by allowing monetary reserves to grow rapidly in the fourth quarter of 1999.
Some speculated that this super-liquid market helped to fuel the strong stock
market rally. We think that remaining very liquid (by maintaining a relatively
short maturity at year-end) was the right approach. If we were invested in
longer term securities and there had been a high demand for cash by investors,
it could have been costly to raise cash at that time.
At the beginning of the year, Y2K concerns essentially evaporated, and it
appeared likely that the Fed would begin reducing the excess market liquidity.
We viewed this as an opportunity to pick up some higher yielding paper and we
extended the portfolio's average maturity slightly. However, the portfolio's
maturity still remained shorter than its peers, given our expectations that
rates would continue to rise. At the end of the period, the portfolio had an
average maturity of 32 days, which compares to about 50 days for the average
first-tier money market fund.
In the portfolio we invest in "first-tier" short-term securities --
specifically, issues with top ratings according to major credit rating agencies,
such as Fitch Investors Service, Moody's Investors Service, or Standard and
Poor's. The top ratings have the lowest risk of default and, while not insured
by the FDIC or guaranteed, these securities are among the safest available
outside of U.S.
6 | Scudder Institutional Shares
<PAGE>
--------------------------------------------------------------------------------
Portfolio Maturity
(Average number of days)
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
38 38 30 39 39 43 36 32 22 24 16 22 32
5/99 6/99 7/99 8/99 9/99 10/99 11/99 12/99 1/00 2/00 3/00 4/00 5/00
Treasury bills. Basically, our philosophy is that it does not pay to take on
additional credit risk given the relatively small yield advantage.
Our investment strategy focuses on maintaining the average life of the portfolio
within a target range and selecting floating-rate securities that, given current
interest rate trends, should benefit the portfolio. As a result, we generally do
not make big asset allocation shifts within the portfolio. We attempt to
maintain exposure to a broad selection of securities, including high quality
commercial paper, variable- and floating-rate securities, U.S. government agency
obligations, certificates of deposit, and repurchase agreements. As of the end
of the period, the majority of the portfolio was invested in high quality
commercial paper (45%), which we maintained because of its attractive values and
high relative yields.
Scudder Institutional Shares | 7
<PAGE>
Outlook
As we mentioned earlier, we think the Fed will raise rates at least one more
time before the November elections. However, we think the Fed may eventually be
able to ease off its current policy of raising short-term interest rates since
we have recently begun to see signs that the economy may be slowing in reaction
to the higher rate environment. Knowing when to stop raising rates is a tough
job for the Fed since the rate increases take time to work their way through the
economy. Typically it takes six months for the effects to begin showing up, so
the braking effects of this year's rate hikes may be yet to come. In any event,
this is a great environment for money market fund investors because interest
rates are rising and real yields (after subtracting inflation) are still
providing investors with very attractive returns.
Sincerely,
/s/Frank J. Rachwalski
Frank J. Rachwalski
Vice President and Lead Portfolio Manager,
Scudder Money Market Series -- Institutional Shares
8 | Scudder Institutional Shares
<PAGE>
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Investment Portfolio as of May 31, 2000
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Repurchase Agreements 1.3%
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State Street Bank and Trust Company, 6.37%, to be
repurchased at $61,940,958 on 6/1/2000**
(Cost $61,930,000) ............................. 61,930,000 61,930,000
--------------------------------------------------------------------------------
Short-Term Investments 15%
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Firstar NA, 6.81%, 6/1/2000 ....................... 225,000,000 225,000,000
Norwest Bank, 6.81%, 6/1/2000 ..................... 160,000,000 160,000,000
Suntrust Bank, 6.78%, 6/1/2000 .................... 120,000,000 120,000,000
Wachovia Bank, 6.81%, 6/1/2000 .................... 225,000,000 225,000,000
Total Short-Term Investments (Cost $730,000,000) ... 730,000,000
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Commercial Paper 45.3%
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Alpine Securitization Corp., 6.1%, 6/13/2000 ...... 84,000,000 83,829,200
American Home Products, 6.46%, 6/8/2000 ........... 100,000,000 100,000,000
Amsterdam Funding Corp., 6.1%, 6/12/2000 .......... 25,000,000 24,953,403
Amsterdam Funding Corp., 6.53%, 6/19/2000 ......... 50,000,000 49,836,750
Asset Portfolio Funding, 6.53%, 6/16/2000 ......... 35,187,000 35,091,262
Barton Capital Corp., 6.8%, 6/8/2000 .............. 31,000,000 30,963,351
Bavaria University Funding Corp., 6.5%, 6/12/2000 . 99,000,000 98,802,165
Capital One Fund (99-F), 6.7%, 6/1/2000 ........... 10,657,000 10,657,000
CIT Group Holdings Inc., 6.61%, 6/1/2000 .......... 40,000,000 39,977,371
Clipper Receivables Corp., 6.52%, 6/19/2000 ....... 80,087,000 79,825,916
Corporate Asset Funding Corp., 6.12%, 6/9/2000 .... 50,000,000 49,932,000
Corporate Receivables Corp., 6.09%, 6/7/2000 ...... 70,000,000 69,928,950
CXC Incorporated, 6.11%, 6/19/2000 ................ 50,000,000 49,847,250
CXC Incorporated, 6.11%, 6/21/2000 ................ 50,000,000 49,830,278
Enterprise Funding Corp., 6.11%, 6/20/2000 ........ 71,805,000 71,573,449
FCC National Bank, 6.77%, 6/1/2000 ................ 20,000,000 20,013,036
Forrestal Funding Master TR, 6.13%, 6/12/2000 ..... 79,000,000 78,852,029
Four Winds Funding Corp., 6.54%, 6/19/2000 ........ 61,000,000 60,800,530
Galaxy Funding, 6.1%, 6/5/2000 .................... 40,000,000 39,972,889
Galaxy Funding, 6.55%, 6/26/2000 .................. 73,800,000 73,464,313
Giro Funding US Corp., 6.09%, 6/15/2000 ........... 50,000,000 49,881,583
Giro Funding US Corp., 6.31%, 6/21/2000 ........... 25,995,000 25,903,873
Goldman Sachs Promissory Note, 6.63%, 6/28/2000 ... 50,000,000 50,000,000
Goldman Sachs Promissory Note, 6.75%, 8/7/2000 .... 40,000,000 40,026,252
Goldman Sachs Promissory Note, 6.29%, 10/2/2000 ... 30,000,000 30,000,000
Intrepid Funding, 6.17%, 7/10/2000 ................ 79,726,000 79,193,098
Kitty Hawk Funding Corp., 6.11%, 6/9/2000 ......... 50,000,000 49,932,111
The accompanying notes are an integral part of the financial statements.
Scudder Institutional Shares | 9
<PAGE>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
Merrill Lynch & Co. Inc., 6.59%, 4/20/2001 .... 70,000,000 69,993,936
Moat Funding LLC, 6.53%, 6/20/2000 ............ 65,000,000 64,775,985
Moat Funding LLC, 6.15%, 7/6/2000 ............. 24,377,000 24,231,246
Monte Rosa Capital Corp., 6.08%, 6/7/2000 ..... 30,000,000 29,969,600
Morgan Stanley Dean Witter Discover Co.,
6.55%, 6/26/2000 ........................... 14,200,000 14,135,410
Norwest Financial Inc., 6.45%, 9/7/2000 ....... 50,000,000 49,992,098
PNC NA, 6.37%, 6/7/2000 ....................... 25,000,000 24,999,799
Receivables Capital Corp., 6.25%, 6/5/2000 .... 15,000,000 14,989,583
Receivables Capital Corp., 6.11%, 6/15/2000 ... 50,000,000 49,881,194
Sallie Mae, 6.54%, 8/1/2000 ................... 30,000,000 29,997,658
Scaldis Capital LLC, 6.16%, 7/10/2000 ......... 40,000,000 39,733,067
Sheffield Receivables Corp., 6.53%, 6/20/2000 . 46,510,000 46,349,708
Sigma Finance, 5.92%, 6/1/2000 ................ 50,000,000 50,000,000
Surrey Funding Corp., 6.53%, 3/1/2001 ......... 100,000,000 100,000,000
WCP Funding Inc., 6.27%, 6/19/2000 ............ 45,000,000 44,858,925
Windmill Funding Corp., 6.09%, 6/21/2000 ...... 25,000,000 24,915,417
Xerox Credit Corp., 6.63%, 12/8/2000 .......... 75,000,000 74,985,665
Total Commercial Paper (Cost $2,196,897,350) ... 2,196,897,350
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Certificates Of Deposit 17.1%
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Amsouth Bank NA, 6.21%, 9/11/2000* ............ 40,000,000 40,000,000
Bank of America Corp., 6.65%, 4/27/2001* ...... 83,000,000 83,000,000
Bank Of Montreal, 6.8%, 9/11/2000* ............ 50,000,000 49,993,252
Banc One Corp. 7.17%, 5/8/2001* ............... 50,000,000 50,000,000
Canadian IMP Bank of Comm., 7.18%, 5/10/2001* . 75,000,000 74,993,339
Comerica Bank, 6.41%, 6/12/2000* .............. 25,000,000 24,999,596
Credit Suisse Federal Bank of New York, 6.72%,
6/9/2000* .................................. 50,000,000 50,000,000
Den Danske Bank NY, 6.55%,
6/23/2000* ................................. 30,000,000 29,999,289
Dresdner Bank NY, 6.58%, 7/24/2000* ........... 50,000,000 49,997,178
First Union National Bank, 6.63%, 7/26/2000* .. 15,000,000 15,000,000
First Union National Bank, 6.67%, 5/8/2001* ... 25,000,000 25,000,000
National Bank Kentucky, 6.35%, 7/7/2000* ...... 50,000,000 50,005,176
Old Kent Bank, 6.69%, 6/16/2000* .............. 10,000,000 9,999,838
Rabobank Nederland AV, 7.17%, 5/10/2001* ...... 50,000,000 49,995,559
Royal Bank Scotland, 6.45%, 3/6/2001* ......... 100,000,000 100,000,000
Skandinav Enskilda Banken NY, 6.59%, 7/24/2000* 50,000,000 49,997,855
Skandinav Enskilda Banken NY, 6.62%, 8/29/2000* 25,000,000 24,997,607
The accompanying notes are an integral part of the financial statements.
10 | Scudder Institutional Shares
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------------------
<S> <C> <C>
Union Bank Switzerland, 7.22%, 5/8/2001* ................... 50,000,000 49,991,176
Total Certificates Of Deposit (Cost $827,969,865) . 827,969,865
--------------------------------------------------------------------------------
Short-Term and Medium-Term Notes 21.3%
--------------------------------------------------------------------------------
Allfirst Bank, 6.51%, 1/16/2001* ........................... 50,000,000 49,990,793
Allfirst Bank, 6.18%, 9/5/2000* ............................ 50,000,000 49,996,087
Amsouth Bank NA, 6.72%, 1/19/2001* ......................... 30,000,000 29,992,660
American Express Centurian Bank, 6.58%, 6/19/2001* ......... 50,000,000 49,994,875
Bank One Corp., 6.32%, 10/5/2000* .......................... 25,000,000 24,995,791
Bank One Corp., 6.65%, 11/6/2000* .......................... 20,000,000 19,999,442
Capital One Fund 96-F, 6.7%, 9/1/2011* ..................... 22,259,000 22,259,000
Capital One Fund 96-H, 6.7%, 10/1/2021* .................... 15,159,000 15,159,000
Capital One Fund 97-E, 6.7%, 8/1/2012* ..................... 28,714,000 28,714,000
CIT Group Inc., 6.64%, 5/9/2001* ........................... 40,000,000 39,981,673
CIT Group Inc. MTM, 6.65%, 5/24/2001* ...................... 60,000,000 59,971,397
Comerica Bank, 6.45%, 1/12/2001* ........................... 40,000,000 39,990,316
First Union National Bank, 6.68%, 3/2/2001* ................ 50,000,000 50,000,000
First Union National Bank, 6.4%, 6/8/2000* ................. 20,000,000 20,000,000
Key Bank N.A., 6.42%, 11/8/2000* ........................... 35,000,000 34,990,820
Key Bank N.A., 6.76%, 5/25/2001* ........................... 50,000,000 49,982,326
Merita Bank Ltd. NY, 6.14%, 3/1/2001* ...................... 50,000,000 49,985,411
Merrill Lynch & Co., 6.59%, 4/27/2001* ..................... 30,000,000 29,997,233
MMR Funding One, 6.7%, 9/1/2010* ........................... 5,500,000 5,500,000
National Rural Utility CFC, 6.45%, 9/8/2000* ............... 50,000,000 49,997,295
Old Kent Bank, 6.66%, 5/8/2001* ............................ 25,000,000 24,997,716
Old Kent Bank, 6.67%, 5/30/2001* ........................... 55,000,000 55,000,000
Old Kent Bank, 6.67%, 6/11/2001* ........................... 30,000,000 30,000,000
Sigma Finance Inc., 6.74%, 6/30/2000* ...................... 65,000,000 65,000,000
SMM Trust 1999-A, 6.4%, 9/13/2000* ......................... 50,000,000 50,000,000
Southern California Edison, 6.71%, 10/25/2000* ............. 20,000,000 20,000,000
Transamerica Finance Corp., 6.2%, 12/1/2000* ............... 50,000,000 50,000,000
US Bank N.A., 6.79%, 11/15/2000* ........................... 15,000,000 15,018,182
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Total Short-Term and Medium-Term Notes (Cost $1,031,514,017) 1,031,514,017
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Total Investment Portfolio -- 100.0% (Cost $4,848,311,232) (a) 4,848,311,232
---------------------------------------------------------------------------------------------
</TABLE>
(a) Cost for federal income tax purposes is $4,848,311,232.
* Floating rate notes are securities whose yields vary with a designated
market index or market rate, such as the coupon-equivalent of the
Treasury bill rate. These securities are shown at their rate as of May
31, 2000.
** Repurchase agreements are fully collateralized by U.S. Treasury and
Government agency securities.
The accompanying notes are an integral part of the financial statements.
Scudder Institutional Shares | 11
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of May 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-----------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $4,848,311,232) ....... $4,848,311,232
Cash ............................................................ 2,154,605
Receivable for investments sold ................................. 96,000
Interest receivable ............................................. 13,441,340
Receivable for Fund shares sold ................................. 51,854,521
Due from Adviser ................................................ 39,599
Other assets .................................................... 39,912
--------------
Total assets .................................................... 4,915,937,209
Liabilities
-----------------------------------------------------------------------------------
Dividends payable ............................................... 27,246,893
Payable for Fund shares redeemed ................................ 7,356,898
Accrued management fee .......................................... 1,109,507
Accrued reorganization costs .................................... 10,266
Accrued Directors' fees and expenses ............................ 119,687
Other accrued expenses and payables ............................. 1,284,693
--------------
Total liabilities ............................................... 37,127,944
Net assets, at value $4,878,809,265
Net Asset Value
--------------------------------------------------------------------------------
Managed Shares:
Net assets applicable to shares outstanding ..................... $ 415,698,726
Shares outstanding of capital stock, $.001 par value, 800,000,000
shares authorized............................................. 415,893,881
Net Asset Value, offering and redemption price per share (net assets
/ shares outstanding)......................................... $ 1.00
Institutional Shares:
Net assets applicable to shares outstanding...................... $3,349,739,373
Shares outstanding of capital stock, $.001 par value, 3,615,000,000
shares authorized............................................. 3,349,868,723
Net Asset Value, offering and redemption price per share (net assets
/ shares outstanding)......................................... $ 1.00
Premium Money Market Shares:
Net assets applicable to shares outstanding...................... $1,067,174,369
Shares outstanding of capital stock, $.001 par value, 2,180,000,000
shares authorized............................................. 1,067,242,867
Net Asset Value, offering and redemption price per share (net assets
/ shares outstanding)......................................... $ 1.00
Prime Reserve Money Market Shares:
Net assets applicable to shares outstanding...................... $ 46,196,797
Shares outstanding of capital stock, $.001 par value, 1,180,000,000
shares authorized............................................. 46,201,590
Net Asset Value, offering and redemption price per share (net assets
/ shares outstanding)......................................... $ 1.00
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 | Scudder Institutional Shares
<PAGE>
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Statement of Operations for the year ended May 31, 2000
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Interest ................................ $ 304,339,172
-------------
Expenses:
Management fee .......................... 13,019,076
Services to shareholders ................ 1,381,424
Custodian and accounting fees ........... 657,717
Auditing ................................ 30,907
Legal ................................... 62,677
Directors' fees and expenses ............ 101,644
Reports to shareholders ................. 188,257
Registration fees ....................... 1,011,149
Reorganization .......................... 10,266
Other ................................... 257,497
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Total expenses, before expense reductions 16,720,614
Expense reductions ...................... (7,666,166)
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Total expenses, after expense reductions 9,054,448
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Net investment income 295,284,724
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 295,284,724
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
Scudder Institutional Shares | 13
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
--------------------------------------------------------------------------------
Operations:
Net investment income ........................................................
Distributions to shareholders from:
Net investment income (Managed Shares) .......................................
Net investment income (Institutional Shares) .................................
Net investment income (Premium Money Market Shares) ..........................
Net investment income (Prime Reserve Money Market Shares) ....................
Fund share transactions:
Managed Shares:
Proceeds from shares sold ...................................................
Reinvestment of distributions ...............................................
Cost of shares redeemed .....................................................
Net increase (decrease) in net assets from Fund share transactions ..........
Institutional Shares:
Proceeds from shares sold ...................................................
Reinvestment of distributions ...............................................
Cost of shares redeemed .....................................................
Net increase (decrease) in net assets from Fund share transactions ..........
Premium Money Market Shares:
Proceeds from shares sold ...................................................
Reinvestment of distributions ...............................................
Cost of shares redeemed .....................................................
Net increase (decrease) in net assets from Fund share transactions ..........
Prime Reserve Money Market Shares:
Proceeds from shares sold ...................................................
Reinvestment of distributions ...............................................
Cost of shares redeemed .....................................................
Net increase (decrease) in net assets from Fund share transactions ..........
Increase (decrease) in net assets ...........................................
Net assets at beginning of period ...........................................
Net assets at end of period .................................................
The accompanying notes are an integral part of the financial statements.
14 | Scudder Institutional Shares
<PAGE>
Five Months Year Ended
Year Ended May Ended May 31, December 31,
31, 2000 1999 1998
--------------------------------------------------
$ 295,284,724 $ 59,023,051 $ 88,278,881
----------------- ---------------- ---------------
(21,023,946) (7,380,665) (18,908,573)
----------------- ---------------- ---------------
(215,221,172) (33,615,524) (38,347,244)
----------------- ---------------- ---------------
(56,686,377) (17,567,663) (30,962,225)
----------------- ---------------- ---------------
(2,353,229) (459,199) (60,839)
----------------- ---------------- ---------------
1,171,602,032 673,318,688 1,521,267,560
4,231,558 1,551,477 5,506,361
(1,155,348,705) (607,192,461) (1,568,154,523)
----------------- ---------------- ---------------
20,484,885 67,677,704 (41,380,602)
----------------- ---------------- ---------------
90,572,901,002 11,712,781,921 5,884,096,724
72,983,474 11,965,433 14,372,769
(89,101,937,654) (10,985,348,196) (5,169,903,810)
----------------- ---------------- ---------------
1,543,946,822 739,399,158 728,565,683
----------------- ---------------- ---------------
2,847,283,440 1,070,305,354 2,381,877,957
54,096,252 15,125,932 24,053,642
(2,770,287,933) (956,923,660) (1,933,144,105)
----------------- ---------------- ---------------
131,091,759 128,507,626 472,787,494
----------------- ---------------- ---------------
111,134,122 41,129,865 15,004,074
2,286,836 341,450 17,985
(101,036,164) (19,992,513) (2,685,634)
----------------- ---------------- ---------------
12,384,794 21,478,802 12,336,425
----------------- ---------------- ---------------
1,707,908,260 957,063,290 1,172,309,000
3,170,901,005 2,213,837,715 1,041,528,715
$4,878,809,265 $3,170,901,005 $2,213,837,715
The accompanying notes are an integral part of the financial statements.
Scudder Institutional Shares | 15
<PAGE>
Financial Highlights
The following table includes selected data for a share of the Institutional
Shares class outstanding throughout each period and other performance
information derived from the financial statements.
Institutional Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(d)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.000 $1.000 $1.000 $1.000
-----------------------------------
------------------------------------------------------------------------------------
Net investment income .056 .020 .054 .022
------------------------------------------------------------------------------------
Distributions from net investment income (.056) (.020) (.054) (.022)
------------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000 $1.000
-----------------------------------
------------------------------------------------------------------------------------
Total Return (%) (e) 5.74 2.03** 5.52 2.25**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 3,350 1,806 1,066 338
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .30(f) .28* .29 .31*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .15(f) .14* .18 .26*
------------------------------------------------------------------------------------
Ratio of net investment income (%) 5.73 4.87* 5.34 5.39*
------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the five months ended May 31, 1999. On November 13, 1998, the Board
of Directors of the Corporation changed the fiscal year end of the Fund
from December 31 to May 31.
(c) For the year ended December 31, 1998.
(d) For the period August 4, 1997 (commencement of sale of Institutional
Shares) to December 31, 1997.
(e) Total returns would have been lower had certain expenses not been
reduced.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .30%
and .15%, respectively.
* Annualized
** Not annualized
16 | Scudder Institutional Shares
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Money Market Series (the "Fund") is the diversified investment portfolio
comprising Scudder Fund, Inc. (the "Corporation"), which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Fund offers four classes of shares: Premium
Money Market Shares, Prime Reserve Money Market Shares, Managed Shares and
Institutional Shares.
On November 13, 1998 the Board of Directors changed the fiscal year end of the
Fund from December 31 to May 31.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class such as shareholder
services, administrative services and certain other class specific expenses.
Differences in class expenses may result in payment of different per share
dividends by class. All shares of the Fund have equal rights with respect to
voting subject to class specific arrangements.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the use of
management estimates. The policies described below are followed consistently by
the Fund in the preparation of its financial statements.
Security Valuation. The Fund values portfolio securities utilizing the amortized
cost method permitted in accordance with Rule 2a-7 under the 1940 Act and
pursuant to which the Fund must adhere to certain conditions. Under this method,
which does not take into account unrealized gains or losses on securities, an
instrument is initially valued at its cost and thereafter assumes a constant
amortization to maturity of any discount or premium.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Scudder Institutional Shares | 17
<PAGE>
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At May 31, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $91,000 which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until May 31, 2007
($1,000) and May 31, 2008 ($90,000), the respective expiration dates, whichever
occurs first.
In addition, from November 1, 1999 through May 31, 2000, the Fund incurred
approximately $7,400 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
occurring in the fiscal year ended May 31, 2001.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. Net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed, and, therefore,
will be distributed to shareholders at least annually.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Original issue discounts are accreted for both tax and financial
reporting purposes.
B. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies
and restrictions. The Adviser determines the securities, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.25% of average daily
net assets for the Fund, computed and accrued daily and payable monthly. The
Adviser has agreed to waive a portion of its investment management fee for the
Fund by 0.05% through
18 | Scudder Institutional Shares
<PAGE>
September 30, 2000. From time to time the Adviser may voluntarily waive an
additional portion of its management fee.
For the year ended May 31, 2000, the Adviser did not impose fees of $7,384,398
and did impose fees of $5,634,678 which amounted to an annual effective rate of
0.10%.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. Each class
of the Fund has entered into a Transfer Agency and Service Agreement with SSC.
SSC receives account fees that vary according to the account size and type of
account of the shareholders of the respective classes. For the year ended May
31, 2000, the following amounts were charged to the classes of the Fund:
Managed Shares .................................................... $102,310
Institutional Shares .............................................. 48,176
Premium Shares .................................................... 461,604
Prime Reserve Shares .............................................. 132,243
$744,333
Amount unpaid at May 31, 2000 $ 99,963
The Managed Shares of the Fund has arrangements with certain banks, institutions
and other persons under which they receive compensation from the Fund and the
Adviser for performing shareholder servicing functions for their customers who
own shares in the Fund. In connection with these arrangements for the year ended
May 31, 2000, the total expense charged to the Managed Shares of the Fund
amounted to $337,281 and the receivable for the Adviser's portion aggregated
$161,692.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Fund. For the year ended
May 31, 2000, the amount charged to the Fund by SFAC aggregated $478,549, of
which $125,067 remains unpaid at May 31, 2000.
The Fund pays each of its Directors not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the year ended May 31, 2000, Directors' fees and expenses aggregated $22,446. In
addition, a one-time fee of $79,198 was accrued for payment to those Directors
not affiliated with the Adviser who are not standing for re-election, under the
reorganization discussed in Note E. Inasmuch as the
Scudder Institutional Shares | 19
<PAGE>
Adviser will also benefit from administrative efficiencies of a consolidated
Board, the Adviser has agreed to bear $39,599 of such costs.
The Fund has a compensation arrangement under which payment of Directors' fees
may be deferred. Interest is accrued (based on the rate of return earned on the
90 day Treasury Bill as determined at the beginning of each calendar quarter) on
the deferred balances and is included in "Directors' fees and expenses." The
accumulated balance of deferred Directors' fees and interest thereon relating to
the Fund aggregated $101,929 as of May 31, 2000, which is included in accrued
expenses of the Fund.
Other. Printing and postage expenses related to preparing and distributing
material such as shareholder reports, prospectuses and proxy materials to
current shareholders are charged to each class pro rata based on relative net
assets. For the year ended May 31, 2000, the following amounts were expensed by
the Fund:
Managed Shares .................................................... $ 50,462
Institutional Shares .............................................. 81,955
Premium Shares .................................................... 43,824
Prime Reserve Shares .............................................. 12,016
$188,257
Amount unpaid at May 31, 2000 $115,262
C. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the year ended May 31, 2000, the
custodian and transfer agent fees were reduced as follows:
Custodian ........................................................ $ 66,320
Transfer Agent ................................................... 175,849
$242,169
D. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated, pro rata based on net assets, among each of the
Participants. Interest is calculated based on the market rates at the time
20 | Scudder Institutional Shares
<PAGE>
of the borrowing. The Fund may borrow up to a maximum of 33 percent of its net
assets under the agreement.
E. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
Scudder Institutional Shares | 21
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder Fund, Inc. and Shareholders of
Scudder Money Market Series:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Scudder Money Market Series (the "Fund") at May 31, 2000, the results
of its operations, the changes in its net assets, and the financial
highlights for each of the periods indicated therein, in conformity
with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at May 31,
2000 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 21, 2000
22 | Scudder Institutional Shares
<PAGE>
Tax Information
--------------------------------------------------------------------------------
Please consult a tax adviser if you have questions about federal or
state income tax laws, or on how to prepare your tax returns. If you
have specific questions about your account, please call 1-800-537-3177.
Scudder Institutional Shares | 23
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
<TABLE>
Board of Directors
<S> <C>
Kathryn L. Quirk* President and Assistant Secretary
Dr. Rosita P. Chang^(2) (3) Professor of Finance, University of Hawaii
Edgar R. Fiedler^(1) (2) (3) (4) Senior Fellow and Economic Counsellor,
The Conference Board, Inc.
Peter B. Freeman^(1) (2) (3) (4) Corporate Director and Trustee
Dr. J.D. Hammond^(2) (3) Dean, Smeal College of Business Administration
Richard M. Hunt^(2) (3) University Marshal and Senior Lecturer,
Harvard University
^(1) Member of Executive Committee
^(2) Member of Nominating Committee
^(3) Member of Audit Committee
^(4) Member of Valuation Committee
</TABLE>
--------------------------------------------------------------------------------
Officers
Ann M. McCreary* Vice President
Frank J. Rachwalski, Jr.* Vice President
John Millette* Vice President and Secretary
John R. Hebble* Treasurer
Caroline Pearson* Assistant Secretary
*Scudder Kemper Investments, Inc.
24 | Scudder Institutional Shares
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
INVESTMENTS(SM)
[LOGO]
222 South Riverside Plaza, 33rd Floor
Chicago, IL 60606-5808
Tel: 800 537 3177
E-mail: [email protected]
Web: http://institutionalfunds.scudder.com
