SCUDDER INSTITUTIONAL FUND INC, 497, 1995-05-05

SCUDDER INSTITUTIONAL FUND INC
497, 1995-05-05

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Institutional Government Portfolio
Institutional Federal Portfolio
Institutional Cash Portfolio
Institutional Tax-Free Portfolio
345 Park Avenue, New York, New York 10154
(800) 854-8525

Investment Manager Institutional Government Portfolio
Scudder, Stevens & Clark, Inc.
345 Park Avenue Institutional Federal Portfolio
New York, New York 10154
Institutional Cash Portfolio
Distributor
Scudder Investor Services, Inc. Institutional Tax-Free Portfolio
Two International Place
Boston, Massachusetts 02110

Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110

Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 2038
Boston, Massachusetts 02106

Legal Counsel
Sullivan & Cromwell
New York, New York

- ---------------------------------------------

No person has been authorized to give any Prospectus
information or to make any representations
not contained in this Prospectus, and May 1, 1995
information or representations not contained
herein must not be relied upon as having been
authorized by the Company or the Distributor.
This Prospectus does not constitute an offer
of any security other than the registered
securities to which it relates or an offer to
any person in any jurisdiction where such
offer would be unlawful.
<PAGE>
Institutional Government Portfolio
Institutional Federal Portfolio
Institutional Cash Portfolio
Institutional Tax-Free Portfolio

345 Park Avenue, New York, New York 10154
1-800-854-8525
Scudder, Stevens & Clark, Inc. - Investment Adviser
Scudder Investor Services, Inc. - Distributor
Institutional Government Portfolio, Institutional Federal Portfolio,
Institutional Cash Portfolio and Institutional Tax-Free Portfolio are series of
Scudder Institutional Fund, Inc. (the "Company"), a no-load, open-end,
diversified, management investment company designed to suit the needs of
institutions, corporations and fiduciaries.

Institutional Government Portfolio, Institutional Federal Portfolio,
Institutional Cash Portfolio and Institutional Tax-Free Portfolio (each, a
"Portfolio" and collectively, the "Portfolios") are money market funds that seek
to provide investors with as high a level of current income as is consistent
with their investment objectives and policies and with preservation of capital
and liquidity. The Portfolios are neither insured nor guaranteed by the U.S.
Government. Each Portfolio intends to maintain a net asset value per share of
$1.00, but there is no assurance it will be able to do so.

The minimum aggregate investment in the Company is $10 million, with a
minimum investment in any single Portfolio of $2 million. Additionally, each
investor must maintain the minimum aggregate investment of $10 million or be
subject to possible involuntary redemption by the Company.

--------------------
This Prospectus sets forth concisely the information about the Company that
a prospective investor should know before investing. Please retain it for future
reference. If you require more detailed information, a Statement of Additional
Information dated May 1, 1995, as amended from time to time, may be obtained
without charge by writing or calling the Company at the address and telephone
number printed above. The Statement of Additional Information, which is
incorporated by reference into this Prospectus, has been filed with the
Securities and Exchange Commission.
--------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>
Table of Contents

Page
Summary 2
Expense Information 5
Financial Highlights 7
Investment Objectives and Policies 11
Additional Information About Policies and Investments 13
Distribution and Performance Information 17
Company Organization 19
Transaction Information 20
Shareholder Benefits 23

Summary

The Company Scudder Institutional Fund, Inc. is a
professionally managed, no-load, open-end,
diversified investment company which offers
the following four investment series:
Institutional Government Portfolio (the
"Government Portfolio"), Institutional
Federal Portfolio (the "Federal Portfolio"),
Institutional Cash Portfolio (the "Cash
Portfolio") and Institutional Tax-Free
Portfolio (the "Tax-Free Portfolio"), (each,
a "Portfolio" and collectively, the
"Portfolios") See "Company Organization."

Objectives and Policies Each Portfolio seeks to provide investors
with as high a level of current income as is
consistent with its stated investment
objective and policies and with preservation
of capital and liquidity. Each Portfolio
invests exclusively in high quality
investments with remaining maturities of not
more than 397 days. Each Portfolio values
its portfolio securities on the basis of
amortized cost rather than at market value.
Thus, although the market value of a
portfolio may vary inversely to changes in
prevailing interest rates and may be
affected by changes in the creditworthiness
of issuers of securities held in its
portfolio and other market factors, each
Portfolio expects to maintain a constant net
asset value of $1.00 per share. There is no
assurance, however, that this can be
achieved.

The Government Portfolio invests in
obligations issued or guaranteed by the
U.S. Government or its agencies or
instrumentalities.

The Federal Portfolio invests in obligations
issued or guaranteed by the U.S. Government
or its agencies or instrumentalities. The
Portfolio seeks to attain the objective of
as high a level of current income that
cannot be subjected to state or local income
tax by reason of federal law as is

2
<PAGE>
consistent with its other stated policies.
Income from the Federal Portfolio may not be
exempt from certain state and local taxes.

The Cash Portfolio invests in obligations
issued or guaranteed by the U.S. Government
or its agencies or instrumentalities,
obligations of certain U.S. or foreign banks
and their branches (such banks in each case
to have total assets of at least $1
billion), corporate commercial paper and
other short-term corporate obligations, and
securities issued by or on behalf of states,
cities, municipalities and other public
authorities (which may or may not be exempt
from federal income taxes).

The Tax-Free Portfolio invests in a broad
range of securities issued by or on behalf
of states, cities, municipalities and other
public authorities ("municipal obligations")
the income of which is exempt from federal
income taxes. Income from the Tax-Free
Portfolio may not be exempt from certain
state and local taxes. See "Investment
Objectives and Policies."

Additional Investment Activities The Cash Portfolio may invest in obligations
of foreign banks, which involve different
risks than those associated with obligations
of domestic banks. In addition, certain
obligations in which each Portfolio may
invest may have a floating or variable rate
of interest. Certain obligations in which
the Cash Portfolio and Tax-Free Portfolio
may invest may be backed by bank letters of
credit. Each Portfolio may enter into
repurchase agreements, and investments in
any of the Portfolios may be purchased on a
when-issued basis and with put features.
Each of these investment practices entails
certain risks. See "Additional Information
About Policies and Investments."

Investment Adviser The Portfolios' investment adviser is
Scudder, Stevens & Clark, Inc., (the
"Adviser"), a leading provider of U.S. and
international investment management services
for clients throughout the world.

The Adviser receives monthly an investment
management fee for its services, equal, on
an annual basis, to 0.15% of each
Portfolio's average daily net assets.

Distributor Scudder Investor Services, Inc., a
wholly-owned subsidiary of the Adviser (the
"Distributor") is the principal underwriter
for the Company.

Custodian State Street Bank and Trust Company (the
"Custodian") is the custodian for the
Company.

Purchasing Shares Shares of any Portfolio may be purchased at
net asset value by writing or calling
Scudder Service Corporation, a wholly-owned
subsidiary of the Adviser (the "Transfer
Agent"). There is no sales charge. There is
a $10 million minimum initial investment in
the Company, with a minimum investment in
any single Portfolio of $2 million.
Subsequent investments may be made in any
Portfolio in any amount. See "Transaction
Information--Purchasing Shares."

3
<PAGE>

Redeeming Shares Shareholders may redeem all or any part of
their investments in the Portfolios by
contacting the Transfer Agent. Shares will
be redeemed at their next determined net
asset value. There is no redemption charge.
The Company reserves the right, upon notice,
to redeem the shares in an investor's
account if the value of such shares falls
below certain levels or if the account does
not have a certified Social Security or
taxpayer identification number. See
"Transaction Information--Redeeming Shares."

Share Price Scudder Fund Accounting Corporation, a
wholly-owned subsidiary of the Adviser,
determines net asset value per share of each
Portfolio on each day the New York Stock
Exchange (the "Exchange") is open for
trading. The net asset value per share of
each Portfolio is determined at 2:00 P.M.
(New York time). See "Transaction
Information--Share Price."

Dividends Dividends on shares of each Portfolio are
declared daily and paid monthly.
Distributions of capital gains, if any, are
paid annually. Dividends and capital gains
distributions with respect to shares of each
Portfolio are automatically paid in
additional shares of the same Portfolio
unless shareholders elect to receive
payments in cash. See "Distribution and
Performance Information--Dividends and
Capital Gains Distributions."

4
<PAGE>

Expense Information

This information is designed to help an investor understand the various costs
and expenses of investing in Government Portfolio and Federal Portfolio.

1) Shareholder Transaction Expenses: Expenses charged directly to an
individual account in a Portfolio for various transactions.

Government Federal
Portfolio Portfolio
---------- ----------
NONE NONE

2) Annual Portfolio Operating Expenses (after expense maintenance, if any):
Expenses paid by a Portfolio before it distributed its net investment
income, expressed as a percentage of that Portfolio's average daily net
assets for the fiscal year ended December 31, 1994.

Investment Management Fees 0.15% 0.08%*
12b-1 Fees NONE NONE
Other Expenses 0.13% 0.62%*
---- ----
Total Portfolio Operating Expenses 0.28% 0.70%*
==== ====

Example

Based on the level of total Portfolio operating expenses listed above, the
total expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Portfolio before it distributes
its net investment income to shareholders.

One year $ 3 $ 7
Three years 9 22
Five years 16 39
Ten years 36 87

See "Company Organization--Investment Adviser" for further information about
investment management fees. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Portfolio
Operating Expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual
Portfolio expenses and return vary from year to year and may be higher or lower
than those shown.

* For the period January 20, 1995 to June 30, 1995, the Adviser has agreed
to maintain the total annualized expenses of the Portfolio at no more than
0.70% of average daily net assets. If the Adviser had not agreed to
maintain the Portfolio's expenses, the total annualized expenses of the
Portfolio expenses would have been 0.77% (of which 0.15% would have
consisted of investment management fees) for the fiscal year ended December
31, 1994.

5
<PAGE>

Expense Information

This information is designed to help an investor understand the various costs
and expenses of investing in Cash Portfolio and Tax-Free Portfolio.

1) Shareholder Transaction Expenses: Expenses charged directly to an
individual account in a Portfolio for various transactions.

Cash Tax-Free
Portfolio Portfolio
--------- ---------
NONE NONE

Investment Management Fees 0.15% 0.15%*
12b-1 Fees NONE NONE
Other Expenses 0.09% 0.12%*
---- ----
Total Portfolio Operating Expenses 0.24% 0.27%*
==== ====

Example

Based on the level of total Portfolio operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Portfolio before it distributes
its net investment income to shareholders.

One year $ 2 $ 3
Three years 8 9
Five years 14 15
Ten years 31 34

* If the Adviser had not agreed to reimburse certain Portfolio operating
expenses, Portfolio expenses would have been: investment management fee,
0.15%, other expenses, 0.14% and total operating expenses, 0.29% for the
fiscal year ended December 31, 1994.

6
<PAGE>

Financial Highlights

Government Portfolio

The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.

If you would like more detailed information concerning the Portfolio's
performance, audited financial statements are available in the Company's
Annual Report dated December 31, 1994 and may be obtained without charge by
writing or calling the Company.

The following information has been audited by Price Waterhouse LLP,
independent accountants, whose unqualified report thereon is included in the
Annual Report to Shareholders, which is incorporated by reference to the
Statement of Additional Information. The financial highlights should be read
in conjunction with the financial statements and notes thereto included in the
Annual Report.

<TABLE>
<CAPTION>
For the Period
June 3, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period
Net investment .040 .030 .037 .057 .079 .090 .073 .065 .036
income
Distributions from (.040) (.030) (.037) (.057) (.079) (.090) (.073) (.065) (.036)
net investment income
and net realized
capital gains
Net asset value, end of $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
period
Total Return (%) 4.09 3.01 3.74 5.94 8.19 9.36 7.58 6.69 3.70(b)
Ratios and Supplemental
Data
Net assets, end of $118 $196 $247 $192 $174 $253 $161 $146 $82
year ($ millions)
Ratio of operating .28 .26 .24 .26 .31 .29 .28 .31 .11(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 3.89 2.97 3.69 5.86 7.89 8.96 7.35 6.56 6.32(c)
income to average net
assets (%)
(a) Operating expense -- -- -- -- -- -- -- -- .41(c)
ratio including expenses
reimbursed, management
fee and other expenses
not imposed (%)

(b) Total return is higher due to maintenance of the Portfolio's expenses.

7
<PAGE>

Federal Portfolio

The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.

<TABLE>
<CAPTION>
For the Period
May 9, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period
Net investment .034 .027 .032 .054 .078 .088 .070 .062 .040
income
Distributions from (.034) (.027) (.032) (.054) (.078) (.088) (.070) (.062) (.040)
net investment income
and net realized
capital gains
Net asset value, end of $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
period
Total Return (%)(b) 3.42 2.74 3.23 5.55 8.04 9.15 7.22 6.40 4.10
Ratios and Supplemental
Data
Net assets, end of $11 $8 $9 $11 $25 $21 $22 $32 $27
year ($ millions)
Ratio of operating .54 .23 .32 .30 .33 .35 .32 .26 .09(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 3.39 2.73 3.13 5.51 7.79 8.81 6.92 6.26 6.23(c)
income to average net
assets (%)
(a) Operating expense .77 .83 .69 .67 .48 .45 .40 .36 .59(c)
ratio including expenses
reimbursed, management
fee and other expenses
not imposed (%)

(b) Total returns are higher due to maintenance of the Portfolio's expenses.

* The Treasury Portfolio was renamed the Federal Portfolio pursuant to a change in its investment objective
effective May 1, 1990.
</TABLE>

8
<PAGE>

Cash Portfolio

The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.

<TABLE>
<CAPTION>
For the Period
June 18, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period
Net investment .041 .031 .038 .059 .080 .089 .074 .065 .034
income
Distributions from (.041) (.031) (.038) (.059) (.080) (.089) (.074) (.065) (.034)
net investment income
and net realized
capital gains
Net asset value, end of $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
period
Total Return (%) 4.13 3.16 3.88 6.12 8.27 9.32 7.60(b) 6.73 3.41(b)
Ratios and Supplemental
Data
Net assets, end of $271 $468 $662 $308 $152 $82 $61 $51 $114
year ($ millions)
Ratio of operating .24 .22 .25 .25 .32 .37 .33 .31 .14(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 3.94 3.12 3.66 5.89 8.02 8.94 7.43 6.43 6.17(c)
income to average net
assets (%)
(a) Operating expense -- -- -- -- -- -- .36 -- .34(c)
ratio including expenses
reimbursed, management
fee and other expenses
not imposed (%)

(b) Total returns are higher due to maintenance of the Portfolio's expenses.

9
<PAGE>

Tax-Free Portfolio

The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the audited financial
statements.

If you would like more detailed information concerning the Portfolio's
performance, audited financial statements are available in the Company's Annual
Report dated December 31, 1994 and may be obtained without charge by writing or
calling the Company.

The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders, which is incorporated by reference to the Statement of
Additional Information. The financial highlights should be read in conjunction
with the financial statements and notes thereto included in the Annual Report.

<TABLE>
<CAPTION>
For the Period
May 12, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period
Net investment .027 .023 .029 .045 .058 .063 .051 .045 .028
income
Distributions from (.027) (.023) (.029) (.045) (.058) (.063) (.051) (.045) (.028)
net investment income
and net realized
capital gains
Net asset value, end of $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
period
Total Return (%) 2.74(b) 2.32 2.92 4.65 5.96 6.45 5.24 4.56(b) 2.80(b)
Ratios and Supplemental
Data
Net assets, end of $168 $125 $96 $75 $88 $155 $168 $103 $134
year ($ millions)
Ratio of operating .27 .29 .31 .36 .32 .30 .30 .30 .27(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 2.73 2.30 2.82 4.55 5.79 6.25 5.15 4.46 4.21(c)
income to average net
assets (%)
(a) Operating expense .29 -- -- -- -- -- -- .31 .37(c)
ratio including expenses
reimbursed, management fee
and other expenses not
imposed (%)

(b) Total returns are higher due to maintenance of the Portfolio's expenses.

10
<PAGE>

Investment Objectives and Policies

Set forth below is a description of the investment objective and policies
of each Portfolio. The Portfolios seek to provide investors with as high a level
of current income through investment in high-quality short-term obligations as
is consistent with their investment objectives and policies and with
preservation of capital and liquidity. The Federal Portfolio seeks to provide
current income that cannot be subjected to state and local taxes by reason of
federal law, and the Tax-Free Portfolio seeks to provide current income that is
exempt from federal income taxes. The investment objective of a Portfolio cannot
be changed without the approval of the holders of a majority of the Portfolio's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act") and a rule thereunder. There can be no assurance that any of the
Portfolios will achieve its investment objective.

Each Portfolio will maintain a dollar-weighted average maturity of
90 days or less in an effort to maintain a net asset value per share of $1.00,
but there is no assurance that it will be able to do so.

Government Portfolio

The Government Portfolio seeks to provide investors with as high a level
of current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Portfolio invests exclusively in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities that have remaining maturities of not more than 397 days and
certain repurchase agreements.

In addition, the Portfolio may invest in variable or floating rate
obligations, when-issued securities and securities with put features.

Federal Portfolio

The Federal Portfolio seeks to provide investors with as high a level of
current income that cannot be subjected to state or local income taxes by reason
of federal law as is consistent with its investment policies and with
preservation of capital and liquidity. To achieve this objective, the Portfolio
invests exclusively in obligations issued or guaranteed by the U.S. Government
that have remaining maturities of not more than 397 days, including securities
issued by the Federal Farm Credit Banks Funding Corp. and the Student Loan
Marketing Association, and in certain repurchase agreements when in the
judgement of the Adviser this is advisable for liquidity purposes, in order to
enhance yield or in other circumstances such as when appropriate securities are
not available.

In addition, the Portfolio may invest in variable or floating rate
obligations, when-issued securities and securities with put features.

Cash Portfolio

The bank obligations in which the Portfolio may invest include negotiable
certificates of deposit, bankers' acceptances, fixed time deposits or other
short-term bank obligations. The Portfolio limits its investments in U.S. bank
obligations to obligations of U.S. banks (including foreign branches, the
obligations of which are guaranteed by the U.S. parent) that have at least $1
billion in total assets at the time of investment. "U.S. banks" include

11
<PAGE>

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 Portfolio may invest in 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 Portfolio limits its investments in foreign bank obligations to
U.S. dollar-denominated obligations of foreign banks (including U.S. branches)
which banks (based upon their most recent annual financial statements) at the
time of investment (i) have more than $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 which obligations, in the opinion of the Adviser, are of an investment
quality comparable to obligations of U.S. banks in which the Portfolio may
invest.

Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties that vary with market conditions and the
remaining maturity of the obligations. The Portfolio may not invest more than
10% of the value of its total assets in investments that are not readily
marketable including fixed time deposits subject to withdrawal penalties
maturing in more than seven calendar days.

The Portfolio may invest in U.S. dollar-denominated certificates of
deposit and promissory notes issued by Canadian affiliates of U.S. banks under
circumstances where the instruments are guaranteed as to principal and interest
by the U.S. bank. While foreign obligations generally involve greater risks than
those of domestic obligations, such as risks relating to liquidity,
marketability, foreign taxation, nationalization and exchange controls,
generally the Adviser believes that these risks are substantially less in the
case of instruments issued by Canadian affiliates that are guaranteed by U.S.
banks than in the case of other foreign money market instruments.

The Portfolio may invest in U.S. dollar-denominated obligations of foreign
banks. There is no limitation on the amount of the Portfolio's assets that may
be invested in obligations of foreign banks that meet the conditions set forth
above. Such investments may involve greater risks than those affecting U.S.
banks or Canadian affiliates of U.S. banks. In addition, foreign banks are not
subject to examination by any U.S. Government agency or instrumentality.

Except for obligations of foreign banks and foreign branches of U.S.
banks, the Portfolio will not invest in the securities of foreign issuers.
Generally, the Portfolio may not invest less than 25% of the current value of
its total assets in bank obligations (including bank obligations subject to
repurchase agreements).

The commercial paper purchased by the Portfolio is limited to direct
obligations of domestic corporate issuers, including bank holding companies,
which obligations, at the time of investment, are (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's"), "A-1" or better by Standard & Poor's
("S&P") or "F-1" by Fitch Investor Services, 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 Board of
Directors.

The Portfolio may invest in non-convertible corporate debt securities such
as notes, bonds and debentures that have remaining maturities of not more than
397 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 Portfolio 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 Portfolio 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

12
<PAGE>

no secondary trading market for such notes. The Portfolio 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.

All of the securities in which the Portfolio will invest must meet credit
standards applied by the Adviser pursuant to procedures established by the Board
of Directors. Should an issue of securities cease to be rated or if its rating
is reduced below the minimum required for purchase by the Portfolio, the Adviser
will dispose of any such security, as soon as practicable, unless the Directors
of the Company determine that such disposal would not be in the best interests
of the Portfolio.

In addition, the Portfolio may invest in variable or floating rate
obligations, obligations backed by bank letters of credit, when-issued
securities and securities with put features.

Tax-Free Portfolio

The Tax-Free Portfolio seeks to provide investors with as high a level of
current income that cannot be subjected to federal income tax by reason of
federal law as is consistent with its investment policies and with preservation
of capital and liquidity. The Portfolio invests exclusively in high-quality
municipal obligations the interest on which is exempt from federal income taxes
and that have remaining maturities of not more than 397 days. Opinions relating
to the exemption of interest on municipal obligations from federal income tax
are rendered by bond counsel to the municipal issuer. The Portfolio may also
invest in certain taxable obligations on a temporary defensive basis, as
described below.

From time to time the Portfolio may invest 25% or more of the current
value of its total assets in municipal obligations that are related in such a
way that an economic, business or political development or change affecting one
such obligation would also affect the other obligations. For example, certain
municipal obligations accrue interest that is paid from revenues of similar type
projects; other municipal obligations have issuers located in the same state.

The Portfolio may, pending the investment of proceeds of sales of shares
or proceeds from sales of portfolio securities or in anticipation of
redemptions, or to maintain a "defensive" posture when, in the opinion of the
Adviser, it is advisable to do so because of market conditions, elect to invest
temporarily up to 20% of the current value of its total assets in cash reserves
or taxable securities. Under ordinary market conditions, the Portfolio will
maintain at least 80% of the value of its total assets in obligations that are
exempt from federal income taxes and are not subject to the alternative minimum
tax. The foregoing constitutes a fundamental policy that cannot be changed
without the approval of a majority of the outstanding shares of the Portfolio.

The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In addition, certain municipal obligations might lose tax-exempt
status in the event of a change in the tax laws.

In addition, the Portfolio may enter into repurchase agreements, and
invest in variable or floating rate obligations, obligations backed by bank
letters of credit, when-issued securities and securities with put features.

Additional Information About Policies and Investments

Investment Restrictions

The following investment restrictions and those described in the Statement
of Additional Information are fundamental policies of each Portfolio that may be
changed only when permitted by law and approved by the holders of a majority of

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such Portfolio's outstanding voting securities, as described under "Company
Organization" in the Statement of Additional Information.

The Portfolios may not issue senior securities, borrow money or pledge or
mortgage their assets, except that each Portfolio may borrow from banks up to
10% of the current value of that Portfolio's total net assets in order to meet
redemptions, and these borrowings may be secured by pledges of not more than 10%
of the Portfolio's total net assets (but investments may not be purchased by
such Portfolio while any such borrowing exists). Generally, the Cash Portfolio
may not invest less than 25% of the current value of its total assets in bank
obligations, including bank obligations subject to repurchase agreements.

For a more complete description, see "Investment Restrictions" in the
Statement of Additional Information.

Obligations of U.S. Government Agencies and Instrumentalities. Obligations
of U.S. Government agencies and instrumentalities are debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies. Some
of such obligations are supported by (a) the full faith and credit of the U.S.
Treasury (such as Government National Mortgage Association participation
certificates), (b) the limited authority of the issuer to borrow from the U.S.
Treasury (such as securities of the Federal Home Loan Bank), (c) the authority
of the U.S. Government to purchase certain obligations of the issuer (such as
securities of the Federal National Mortgage Association) or (d) only the credit
of the issuer. In the case of obligations not backed by the full faith and
credit of the U.S., the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, which agency may be
privately owned. The Company will invest in obligations of U.S. Government
agencies and instrumentalities only when the Adviser is satisfied that the
credit risk with respect to the issuer is minimal.

Floating and Variable Rate Instruments. Certain of the obligations that
each Portfolio 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. Certain of such obligations may carry a demand feature that
would permit the holder to tender them back to the issuer at par value prior to
maturity. Each Portfolio may invest in floating and variable rate obligations
even if they carry stated maturities in excess of 397 days, if certain
conditions contained in a rule of the Securities and Exchange Commission (the
"SEC") are met, in which case the obligations will be treated as having
maturities of not more than 397 days. Each Portfolio will limit its purchase of
floating and variable rate obligations to those meeting the quality standards
set forth above for such Portfolio. The Adviser will monitor on an ongoing basis
the earning power, cash flow and other liquidity ratios of the issuers of such
obligations, and will similarly monitor the ability of an issuer of a demand
instrument to pay principal and interest on demand. Each Portfolio's right to
obtain payment at par on a demand instrument could be affected by events
occurring between the date the Portfolio elects to demand payment and the date
payment is due that may affect the ability of the issuer of the instrument to
make payment when due except when such demand instruments permit same day
settlement. To facilitate settlement, the same day demand instruments must be
held in book entry form at a bank other than the Portfolio's Custodian subject
to a sub-custodian agreement approved by the Portfolio between that bank and the
Portfolio's Custodian.

The floating and variable rate obligations that the Portfolios may
purchase include certificates of participation in such obligations purchased
from banks. A certificate of participation gives the Portfolio an undivided
interest in the underlying obligations in the proportion that such Portfolio's
interest bears to the total principal amount of such obligations. Certain of
such certificates of participation may carry a demand feature that would permit
the holder to tender them back to the issuer prior to maturity. The Portfolios
may invest in certificates of participation even if the underlying obligations
carry stated maturities in excess of one year, upon compliance with certain
conditions contained in a rule of the SEC. The income received on certificates
of participation in tax-exempt municipal obligations constitutes interest from
tax-exempt obligations. It is presently contemplated that the Tax-Free Portfolio
will not invest more than 20% of its total assets in these certificates.

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<PAGE>

To the extent that floating and variable rate instruments without demand
features are not readily marketable, they will be subject to the investment
restriction that no Portfolio may invest an amount equal to 10% or more of the
current value of its total assets in securities that are not readily marketable.

Repurchase Agreements. Each Portfolio may enter into repurchase agreements
wherein the seller of a security to the Portfolio agrees to repurchase that
security from the Portfolio at a mutually agreed-upon time and price. Sellers of
repurchase agreements are banks that are issuers of eligible bank obligations
(see "Cash Portfolio" under "Investment Objectives and Policies" above) and
dealers that meet guidelines established by the Board of Directors. The period
of maturity is usually quite short, often overnight or a few days, although it
may extend over a number of months. Each Portfolio may enter into repurchase
agreements only with respect to obligations that could otherwise be purchased by
the Portfolio. While the maturities of the underlying securities may be greater
than one year, the term of the repurchase agreement is always less than one
year. If the seller defaults and the value of the underlying securities has
declined, the Portfolio may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, the Portfolio's
disposition of the security may be delayed or limited.

A Portfolio may not enter into a repurchase agreement if, as a result,
more than 10% of the market value of that Portfolio's total net assets would be
invested in repurchase agreements with a maturity of more than seven days,
illiquid securities and securities for which current market quotations or bids
are not readily available.

Municipal Obligations. Municipal obligations, which are debt obligations
issued by or on behalf of states, cities, municipalities and other public
authorities, and may be general obligation, revenue, or industrial development
bonds, include municipal bonds, municipal notes and municipal commercial paper.

The Tax-Free Portfolio may invest in excess of 25% of its assets in
industrial development bonds subject to the Portfolio's fundamental investment
policy requiring that it maintain at least 80% of the value of its total assets
in obligations that are exempt from federal income tax and are not subject to
the alternative minimum tax. For purposes of the Portfolio's fundamental
investment limitation regarding concentration of investments in any one
industry, industrial development bonds will be considered representative of the
industry for which purpose the bond was issued.

The Cash and Tax-Free Portfolios' 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 Portfolios' 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 Portfolios may
invest in municipal commercial paper that is rated at the date of purchase "P-1"
by Moody's, "A-1" or "A-1+" by S&P or "F-1" by Fitch. If a municipal obligation
is not rated, the Portfolios may purchase the obligation if, in the opinion of
the Adviser, it is of investment quality comparable to other rated investments
that are permitted in the Portfolios.

Letters of Credit. Municipal obligations, including certificates of
participation, commercial paper and other short-term obligations may be backed
by an irrevocable letter of credit of a bank which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Only
banks which, in the opinion of the Adviser, are of investment quality comparable
to other permitted investments of the Portfolios may be used for letter of
credit backed investments.

Securities with Put Rights. The Portfolios may enter into put transactions
with respect to obligations held in their portfolios with broker/dealers
pursuant to a rule under the 1940 Act and with commercial banks.

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<PAGE>

The right of the Portfolios to exercise a put is unconditional and
unqualified. A put is not transferable by a Portfolio, although the Portfolio
may sell the underlying securities to a third party at any time. If necessary
and advisable, any Portfolio 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 Portfolios expect, however, that puts generally will be
available without the payment of any direct or indirect consideration.

The Portfolios 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
Portfolios 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 Portfolio might be unable
to recover all or a portion of any loss sustained from having to sell the
security elsewhere.

The Portfolios intend to enter into puts solely to maintain liquidity and
do not intend to exercise their rights thereunder for trading purposes. The puts
will only be for periods substantially less than the life of the underlying
security. The acquisition of a put will not affect the valuation by the
Portfolio of the underlying security. The actual put will be valued at zero in
determining net asset value of the Portfolios. Where a Portfolio 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 Portfolio and will be reflected
in realized gain or loss when the put is exercised or expires. If the value of
the underlying security increases, the potential for unrealized or realized gain
is reduced by the cost of the put. The maturity of a municipal obligation
purchased by a Portfolio will not be considered shortened by any put to which
such obligation is subject.

Third Party Puts. The Portfolios may also purchase long-term fixed rate
bonds that have been coupled with an option granted by a third party financial
institution allowing a Portfolio at specified intervals, not exceeding 397
calendar days, to tender (or "put") the bonds to the institution and receive the
face value thereof (plus accrued interest). These third party puts are available
in several different forms, may be represented by custodial receipts or trust
certificates and may be combined with other features such as interest rate
swaps. A Portfolio receives a short-term rate of interest (which is periodically
reset), and the interest rate differential between that rate and the fixed rate
on the bond is retained by the financial institution. The financial institution
granting the option does not provide credit enhancement, and in the event that
there is a default in the payment of principal or interest, or downgrading of a
bond to below investment grade, or a loss of the bond's tax-exempt status, the
put option will terminate automatically, the risk to a Portfolio will be that of
holding such a long-term bond and the dollar-weighted average maturity of the
Portfolio would be adversely affected.

When-Issued Securities. Each Portfolio may purchase securities on a
when-issued basis, in which case delivery and payment normally take place within
45 days after the date of the commitment to purchase. The Portfolios will only
make commitments to purchase securities on a when-issued basis with the
intention of actually acquiring the securities, but may sell them before the
settlement date if it is deemed advisable. When-issued securities are subject to
market fluctuation and no income accrues to the purchaser prior to issuance. The
purchase price, and the interest rate that will be received on debt securities,
are fixed at the time the purchaser enters into the commitment. Purchasing a
security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed upon purchase price, in which case
there could be an unrealized loss at the time of delivery.

Each Portfolio will establish a segregated account in which it will
maintain liquid assets in an amount at least equal in value to that Portfolio's
commitments to purchase when-issued securities. If the value of these assets
declines, the Portfolio will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.

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Distribution and Performance Information

Dividends and Capital Gains Distributions

The Company declares dividends on the outstanding shares of each Portfolio
from each Portfolio's net investment income at the close of each business day to
shareholders of record at 2:00 P.M. (New York time) on the day of declaration.
Realized capital gains and losses may be taken into account in determining the
daily distribution. Shares purchased will begin earning dividends on the day the
purchase order is executed and shares redeemed will earn dividends through the
previous day. Net investment income for a Saturday, Sunday or holiday will be
declared as a dividend on the previous business day to shareholders of record at
2:00 P.M. (New York time) on that day.

Investment income for a Portfolio 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 Portfolio at net asset value and credited to the
shareholder's account on the payment date or, at the shareholder's election,
paid in cash. Dividend checks and Statements of Account will be mailed
approximately two business days after the payment date. Each Portfolio 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.
(See also "Transaction Information--Redeeming Shares.")

Taxes

Each of the Company's Portfolios has in the past qualified, and intends to
continue to qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Each Portfolio will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies generally will be applied to each Portfolio
separately, rather than to the Company as a whole. In addition, net capital
gains, net investment income, and operating expenses will be determined
separately for each Portfolio. By complying with the applicable provisions of
the Code, each Portfolio will not be subject to federal income taxes with
respect to net investment income and net capital gains distributed to its
shareholders. A 4% non-deductible excise tax will be imposed on each Portfolio
(except the Tax-Free Portfolio to the extent of its tax-exempt income) to the
extent such Portfolio does not meet certain distribution requirements by the end
of each calendar year.

Dividends from net investment income (including net short-term capital gains
in excess of net long-term capital losses), except "exempt-interest dividends"
(described below), will be taxable as ordinary income for federal income tax
purposes. Most states exempt from personal income tax dividends paid by a
regulated investment company attributable to interest derived from obligations
of the U.S. Government and certain of its agencies and instrumentalities. For
example, shareholders of a regulated investment company will not be subject to
New York State or City personal income tax on the dividends paid by such a fund
to the extent attributable to interest on obligations of the U.S. Government and
certain of its agencies and instrumentalities, provided that at the close of
each quarter of the fund's taxable year at least 50% of the value of the total
assets of the fund consists of such obligations. Dividends paid by the Federal
Portfolio are intended to qualify for this treatment, and dividends paid by the
Government Portfolio may qualify. Dividends distributed by the Tax-Free
Portfolio are not excluded in determining New York State or City franchise taxes
on corporations and financial institutions. In addition to the distributions

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<PAGE>
described above, in the case of the dividends distributed by the Tax-Free
Portfolio, that part of its net investment income that is attributable to
interest from tax-exempt securities and that is distributed to shareholders will
be designated by the Company as an "exempt-interest dividend," and, as such,
will be exempt from federal income tax. Income from the Federal Portfolio and
Tax-Free Portfolio may not be exempt from certain state and local taxes.

Distributions of net long-term capital gains in excess of net short-term
capital losses, if any, will be taxable as long-term capital gains, whether
received in cash or reinvested in additional shares, regardless of how long the
shareholder has held the shares. Because substantially all of the income of each
Portfolio will arise from interest, no part of the distributions to shareholders
is expected to qualify for the dividends received deduction available to
corporations. Each year the Company will notify shareholders of the federal
income tax status of distributions.

In the case of the shareholders of the Tax-Free Portfolio, interest on
indebtedness incurred, or continued, to purchase or carry shares of the
Portfolio will not be deductible for federal income tax purposes to the extent
that the Portfolio's distributions are exempt from federal income tax. In
addition, a portion of an exempt-interest dividend allocable to certain
tax-exempt obligations may be treated as a preference item for purposes of the
alternative minimum tax imposed on both individuals and corporations. Persons
who may be "substantial users" (or "related persons" of substantial users) of
facilities financed by private activity bonds should consult their tax advisors
before purchasing shares in the Tax-Free Portfolio.

The Company will be required to withhold, subject to certain exemptions,
at a rate of 31% on dividends paid or credited to individual shareholders
(except shareholders of the Tax-Free Portfolio to the extent it distributes
exempt-interest dividends) and on redemption proceeds, if a correct Social
Security or taxpayer identification number, certified when required, is not on
file with the Company or Transfer Agent. (See also "Transaction
Information--Redeeming Shares.")

The exemption of interest income for federal income tax purposes may not
result in similar exemptions under the tax law of state and local tax
authorities. In general, interest earned on obligations issued by the state or
locality in which the investor resides may be exempt from state and local taxes.
State and local laws differ, however, with respect to the tax treatment of
dividends attributable to interest on obligations of: (i) the U.S. Government
and certain of its agencies and instrumentalities, and (ii) obligations of
states and localities, and shareholders should consult their tax advisors about
the taxability of dividends. The Company furnishes each shareholder of record
with a statement of the portion of the previous year's income derived from: (i)
U.S. Government Obligations and (ii) various agencies and instrumentalities,
each of which is specified by name.

Shareholders are urged to consult their own tax advisors regarding specific
questions as to federal, state or local taxes.

Performance Information

From time to time, quotations of a Portfolio's performance may be included
in advertisements, sales literature or shareholder reports. All performance
figures are historical, show the performance of a hypothetical investment and
are not intended to indicate future performance. The "yield" of a Portfolio
refers to income generated by an investment in a Portfolio over a specified
seven-day period. Yield is expressed as an annualized percentage. The "effective
yield" of a Portfolio is expressed similarly but, when annualized, the income
earned by an investment in a Portfolio is assumed to be reinvested and will
reflect the effects of compounding. "Total return" is the change in value of an
investment in a Portfolio for a specified period. The "average annual total
return" of a Portfolio is the average annual compound rate of return of an
investment in a Portfolio assuming the investment has been held for one year,
five years and ten years as of a stated ending date. If a Portfolio has not been
in operation for at least ten years, the life of the Portfolio will be used
where applicable. "Cumulative total return" represents the cumulative change in
value of an investment in a Portfolio for various periods. Total return
calculations assume that all dividends and capital gains distributions during
the period were reinvested in shares of a Portfolio. Performance will vary based

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<PAGE>

upon, among other things, changes in market conditions and the level of a
Portfolio's expenses.

Company Organization

The Company was formed on January 2, 1986 as a corporation under the laws
of the State of Maryland. The Company is a no-load, diversified, open-end
management investment company registered under the 1940 Act. The Company's
activities are supervised by its Board of Directors. The Board of Directors,
under applicable laws of the State of Maryland, in addition to supervising the
actions of the Company's Adviser and Distributor, as set forth below, decides
upon matters of general policy.

Shareholders have one vote for each share held on matters on which they
are entitled to vote. The Company is not required to and has no current
intention of holding annual shareholder meetings, although meetings may be
called for purposes such as electing or removing Directors, changing fundamental
investment policies or approving an investment advisory agreement. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Director as if Section 16(c) of the 1940 Act were applicable.

Investment Adviser

The Company retains the investment management firm of Scudder, Stevens &
Clark, Inc. (the "Adviser"), a Delaware corporation, to manage the Company's
daily investment and business affairs subject to the policies established by the
Board of Directors. The Adviser is one of the most experienced investment
counsel firms in the U.S. The Adviser was established in 1919 as a partnership
and was restructured as a Delaware corporation in 1985. The principal source of
the Adviser's income is professional fees received from providing continuing
investment advice. The Adviser provides investment counsel for many individuals
and institutions, including insurance companies, endowments, industrial
corporations and financial and banking organizations. As of December 31, 1994,
the Adviser and its affiliates had in excess of $90 billion under their
supervision, approximately two-thirds of which was invested in fixed-income
securities.

Pursuant to Investment Advisory Agreements (the "Agreements") with the
Company on behalf of each Portfolio, the Adviser regularly provides each
Portfolio with investment research, advice and supervision and furnishes
continuously an investment program for each Portfolio consistent with its
investment objective and policies. The Agreements further provide that the
Adviser will pay the compensation and certain expenses of all officers and
certain employees of the Company and make available to each such Portfolio such
of the Adviser's directors, officers and employees as are reasonably necessary
for such Portfolio's operations or as may be duly elected officers or directors
of the Company. Under the Agreements, the Adviser pays each Portfolio's office
rent and will provide investment advisory research and statistical facilities
and all clerical services relating to research, statistical and investment work.
The Adviser, including the Adviser's employees who serve the Portfolios, may
render investment advice, management and other services to others.

Each Portfolio will bear all expenses not specifically assumed by the
Adviser under the terms of the Agreements, including, among others, the fee
payable to the Adviser as Adviser, the fees of the Directors who are not
"affiliated persons" of the Adviser, the expenses of all Directors and the fees
and out-of-pocket expenses of the Company's Custodian and its Transfer Agent.
For a more complete description of the expenses to be borne by the Portfolios,
see "Investment Adviser" and "Distributor" in the Statement of Additional
Information.

Each Portfolio is charged a management fee at an annual rate of 0.15% of
its average daily net assets. Management fees are computed daily and paid
monthly.

Transfer Agent

Scudder Service Corporation, P.O. Box 2038, Boston, Massachusetts 02106, a
wholly-owned subsidiary of the Adviser, is the transfer, shareholder servicing
and dividend-paying agent for the Company.

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<PAGE>

Distributor

Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser,
is the Company's principal underwriter. Scudder Investor Services, Inc.
confirms, as agent, all purchases of shares of the Company. Under the
Underwriting Agreement with the Company, the Distributor acts as the principal
underwriter and bears the cost of printing and mailing prospectuses to potential
investors and of any advertising expenses incurred by it in connection with the
distribution of shares.

Custodian

State Street Bank and Trust Company is the custodian for the Company.

Transaction Information

Purchasing Shares

There is a $10 million minimum initial investment in the Company, with a
minimum investment in any single Portfolio of $2 million. Subsequent investments
may be made in the Portfolios in any amount. Investment minimums may be waived
for Directors and officers of the Company and certain other affiliates. The
Company and the Distributor reserve the right to reject any purchase order. All
funds will be invested in full and fractional shares.

Shares of any Portfolio may be purchased by writing or calling the
Company's Transfer Agent. Orders for shares of a Portfolio will be executed at
the net asset value per share next determined after an order has become
effective. See "Share Price."

Orders for shares of a Portfolio will become effective when an investor's
bank wire order or check is converted into federal funds (monies credited to the
Custodian's account 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 2:00 P.M. (New York time) on the same
day if a bank wire or check is converted to federal funds by 12:00 Noon (New
York time) or a federal funds' wire is received by 12:00 Noon (New York time).
In addition, if investors notify the Company by 2:00 P.M. (New York time) that
they intend to wire federal funds to purchase shares of a Portfolio 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 2:00 P.M. (New York
time) the same day. Wire transmissions may, however, be subject to delays of
several hours, in which event the effectiveness of the order may be delayed.
Payments transmitted by a bank wire other than the Federal Reserve Wire System
may take longer to be converted into federal funds.

Checks drawn on a non-member bank or a foreign bank may take substantially
longer to be converted into federal funds and, accordingly, may delay the
execution of an order. Checks must be payable in U.S. dollars and will be
accepted subject to collection at full face value.

By investing in a Portfolio, a shareholder appoints the Transfer Agent to
establish an open account to which all shares purchased will be credited,
together with any dividends and capital gains distributions that are paid in
additional shares. See "Distribution and Performance Information--Dividends and
Capital Gains Distributions."

Initial Purchase by Wire

1. Shareholders may open an account by calling toll free from any
continental state: 1-800-854-8525. Give the Portfolio(s) to be invested in,
name(s) in which the account is to be registered, address, Social Security or
taxpayer identification number, dividend payment election, amount to be wired,
name of the wiring bank and name and telephone number of the person to be
contacted in connection with the order. An account number will then be assigned.

2. Instruct the wiring bank to transmit the specified amount to:

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State Street Bank and Trust Company
Boston, Massachusetts
ABA Number 011000028
Custody and Shareholder Services Division
Attention: [Name of Portfolio(s)]
Account (name(s) in which to be registered)
Account Number (as assigned by telephone) and amount
invested in each Portfolio
3. Complete a Purchase Application. Indicate the services to be used. A
completed Purchase Application must be received by the Transfer Agent before the
Expedited Redemption Service can be used. Mail the Purchase Application to:
Scudder Service Corporation
P.O. Box 2038
Boston, Massachusetts 02106

Additional Purchases by Wire

Instruct the wiring bank to transmit the specified amount to the Custodian
with the information stated above.

Initial Purchase by Mail

1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and your check payable to the Portfolio
whose shares are to be purchased, to the Transfer Agent at the address set forth
above.

Additional Purchases by Mail

1. Make a check payable to the Portfolio whose shares are to be purchased.
Write the shareholder's Portfolio account number on the check.
2. Mail the check and the detachable stub from the Statement of Account (or
a letter providing the account number) to the Transfer Agent at the address set
forth above.

Redeeming Shares

Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of any Portfolio will be redeemed at their next determined net asset
value. See "Share Price." For the shareholder's convenience, the Company has
established several different redemption procedures.

Payment of redemption proceeds may be made in securities, subject to
regulation by some state securities commissions. The Company may suspend the
right of redemption during any period when (i) trading on the New York Stock
Exchange (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 Portfolios not reasonably practicable.

A shareholder's account in a Portfolio remains open for up to one year
following complete redemption, and all costs during the period will be borne by
that Portfolio.

The Company reserves the right to redeem involuntarily upon not less than
30 days' written notice all shares in a shareholder's Portfolio accounts if the
combined holdings in those accounts aggregate less than $10 million. However,
any shareholder affected by the exercise of the right will be allowed to make
additional investments prior to the date fixed for redemption to avoid
liquidation of a Portfolio account or accounts.

The Company also reserves the right, following 30 days' notice, to redeem
all shares in accounts without a certified Social Security or taxpayer
identification number. A shareholder may avoid involuntary redemption by
providing the Company with a taxpayer identification number during the 30-day
notice period.

21
<PAGE>

Redemption by Mail

1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Portfolio account number and
give Social Security or taxpayer identification number (where applicable).
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $50,000 or more, the
signature(s) must be guaranteed by a commercial bank that is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing. In
addition, signatures may be guaranteed by other Eligible Guarantor Institutions,
i.e., other banks, other brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. The Transfer Agent, however, may reject redemption
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMPsm"). Signature guarantees
by notaries public are not acceptable. Further documentation, such as copies of
corporate resolutions and instruments of authority, may be requested from
corporations, administrators, executors, personal representatives, trustees or
custodians to evidence the authority of the person or entity making the
redemption request.
4. Mail the letter to the Transfer Agent at the address set forth under
"Purchasing Shares."

Checks for redemption proceeds will normally be mailed the day following
receipt of the request in proper form, although the Company reserves the right
to take up to seven days. Unless other instructions are given in proper form, a
check for the proceeds of a redemption will be sent to the shareholder's address
of record. The Custodian may benefit from the use of redemption proceeds until
the check issued to a redeeming shareholder for such proceeds has cleared.

When proceeds of a redemption are to be paid to someone other than the
shareholder, either by wire or check, the signature(s) on the letter of
instruction must be guaranteed regardless of the amount of the redemption.

Redemption by Expedited Redemption Service

If Expedited Redemption Service has been elected on the Purchase
Application on file with the Transfer Agent, redemption of shares may be
requested by telephoning the Transfer Agent on any day the Company and the
Custodian are open for business.

No redemption of shares purchased by check will be permitted pursuant to
the Expedited Redemption Service until seven business days after those shares
have been credited to the shareholder's account.

1. Telephone the request to the Transfer Agent by calling toll free from
any continental state: 1-800-854-8525, or
2. Mail the request to the Transfer Agent at the address set forth under
"Purchasing Shares."

Proceeds of Expedited Redemptions will be wired to the shareholder's bank
indicated in the Purchase Application. If an Expedited Redemption request is
received by the Transfer Agent by 12:00 Noon (New York time) on a day the
Company and the Custodian are open for business, the redemption proceeds will be
transmitted to the shareholder's bank that same day. Such expedited redemption
requests received after 12:00 Noon and prior to 2:00 P.M. (New York time) will
be honored the same day if such redemption can be accomplished in time to meet
the Federal Reserve Wire System schedules.

Each Portfolio uses procedures designed to give reasonable assurance that
telephone instructions are genuine, including recording telephone calls, testing
a caller's identity and sending written confirmation of telephone transactions.
If a Portfolio does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. Each Portfolio will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.

22
<PAGE>

Exchanging Shares

Shares of any of the Portfolios that have been held for seven days or more
may be exchanged for shares of one of the other Portfolios in an identically
registered account. Shares may be exchanged for shares of another Portfolio only
if shares of such Portfolio may legally be sold under applicable state laws.

A shareholder may exchange shares by calling the Transfer Agent's toll
free number at 1-800-854-8525 by 4:00 P.M. (New York time).

Procedures applicable to redemption of a Portfolio's shares are also
applicable to exchanging shares. The Company and the Distributor may modify or
discontinue exchange privileges at any time upon 60 days' notice.

Share Price

Net asset value per share for each Portfolio is determined by Scudder Fund
Accounting Corporation on each day the Exchange is open for trading. The net
asset value per share of each Portfolio is determined at 2:00 P.M. (New York
time). The net asset value per share of each Portfolio is computed by dividing
the value of the total assets of the Portfolio, less all liabilities, by the
total number of outstanding shares of the Portfolio.

Each Portfolio uses the amortized cost method to value its portfolio
securities and seeks to maintain a constant net asset value of $1.00 per share.
The amortized cost method involves valuing a security at its cost and accreting
any discount and amortizing any premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. See the Statement of Additional Information for a more complete
description of the amortized cost method.

Shareholder Benefits

Account Services

Shareholders will be sent a Statement of Account from the Distributor, as
agent of the Company, whenever a share transaction is effected in the accounts.
Shareholders can write or call the Company at the address and telephone number
on the cover of this Prospectus with any questions relating to their investment
in shares of any of the Portfolios.

Shareholder Services

The Company offers the following shareholder services. See the Statement
of Additional Information for further details about these services or call or
write the Company.

Special Monthly Summary of Accounts. A special service is available to
banks, brokers, investment advisers, trust companies and others who have a
number of accounts in one or more of the Portfolios. A monthly summary of
accounts can be provided, showing for each account the account number, the
month-end share balance and the dividends and distributions paid during the
month.

Shareholder Reports. The fiscal year of the Company ends on December 31 of
each year. The Company sends to its shareholders, semi-annually, reports showing
the investments in each of the Company's Portfolios and other information
(including unaudited financial statements) pertaining to the Company. An annual
report, containing financial statements audited by the Company's independent
accountants, is sent to shareholders each year.

Shareholder inquiries should be addressed to Scudder Institutional Fund,
Inc., 345 Park Avenue, New York, New York 10154.

23
<PAGE>
INSTITUTIONAL GOVERNMENT PORTFOLIO
INSTITUTIONAL FEDERAL PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
INSTITUTIONAL TAX-FREE PORTFOLIO
345 Park Avenue
New York, New York 10154
1-800-854-8525

Scudder Institutional Fund, Inc. (the "Company") is a
professionally managed, no-load, open-end, diversified,
investment company comprised of four money market portfolios
that seek to provide investors with as high a level of
current income as is consistent with their investment
objectives and policies and with preservation of
capital and liquidity.

- --------------------------------------------------------------------------------

Statement of Additional Information

May 1, 1995

- --------------------------------------------------------------------------------

This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus of Scudder Institutional Fund, Inc.
dated May 1, 1995, as may be amended from time to time, a copy of which may be
obtained without charge by writing to Scudder Investor Services, Inc., Two
International Place, Boston, Massachusetts 02110-4103.

<PAGE>
TABLE OF CONTENTS
Page

THE PORTFOLIOS AND THEIR OBJECTIVES..........................................1
General Investment Objective and Policies...........................1
Government Portfolio................................................1
Federal Portfolio...................................................1
Cash Portfolio......................................................1
Tax-Free Portfolio..................................................3
Investment Restrictions.............................................4

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES...................................5

PURCHASING SHARES............................................................6

REDEEMING SHARES.............................................................7

DIVIDENDS....................................................................7

PERFORMANCE INFORMATION......................................................8
Yield...............................................................8
Effective Yield.....................................................8
Average Annual Total Return.........................................9
Cumulative Total Return.............................................9
Total Return.......................................................10
Comparison of Portfolio Performance................................10

SHAREHOLDER BENEFITS........................................................11

COMPANY ORGANIZATION........................................................11

INVESTMENT ADVISER..........................................................12
Personal Investments by Employees of the Adviser...................13

DISTRIBUTOR.................................................................14

DIRECTORS AND OFFICERS......................................................14

REMUNERATION................................................................15

TAXES.......................................................................16

PORTFOLIO TRANSACTIONS......................................................17

NET ASSET VALUE.............................................................18

ADDITIONAL INFORMATION......................................................19
Experts............................................................19
Other Information..................................................19

FINANCIAL STATEMENTS........................................................20

APPENDIX

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<PAGE>
THE PORTFOLIOS AND THEIR OBJECTIVES

(See "Investment Objectives and Policies" and "Additional Information
About Policies and Investments" in the Company's Prospectus)

General Investment Objectives and Policies

Institutional Government Portfolio ("Government Portfolio"),
Institutional Federal Portfolio ("Federal Portfolio"), Institutional Cash
Portfolio ("Cash Portfolio") and Institutional Tax-Free Portfolio ("Tax-Free
Portfolio") (collectively, the "Portfolios") are series of Scudder Institutional
Fund, Inc. (the "Company"), a no-load, open-end, diversified, investment company
designed to suit the needs of institutions, corporations and fiduciaries. The
Portfolios are money market funds that seek to provide investors with as high a
level of current income as is consistent with their investment objectives and
policies and with preservation of capital and liquidity. Set forth below is a
description of the investment objective and policies of each Portfolio. The
Federal Portfolio seeks to provide current income that cannot be subjected to
state and local taxes by reason of federal law, and the Tax-Free Portfolio seeks
to provide current income that is exempt from federal income taxes. The
investment objective of a Portfolio cannot be changed without the approval of
the holders of a majority of the Portfolio's outstanding shares, as defined in
the Investment Company Act of 1940 ( the "1940 Act") and a rule thereunder.
There can be no assurance that any of the Portfolios will achieve its investment
objective.

Securities in which the Portfolios invest may not yield as high a level
of current income as securities of lower quality and longer maturities which
generally have less liquidity and greater market risk. Each Portfolio will
maintain a dollar-weighted average maturity of 90 days or less in an effort to
maintain a net asset value per share of $1.00, but there is no assurance that it
will be able to do so.

The Portfolios' investment adviser is Scudder, Stevens & Clark, Inc.,
(the "Adviser"), a leading provider of U.S. and international investment
management services for clients throughout the world. See "Investment Adviser."

Government Portfolio

The Government Portfolio seeks to provide investors with as high a
level of current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Portfolio invests exclusively in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities that have remaining maturities of not more than 397 days and
certain repurchase agreements.

In addition, the Portfolio may invest in variable or floating rate
obligations, when-issued securities and securities with put features.

Federal Portfolio

The Federal Portfolio seeks to provide investors with as high a level
of current income that cannot be subjected to state or local income taxes by
reason of federal law as is consistent with its investment policies and with
preservation of capital and liquidity. To achieve this objective, the Portfolio
invests exclusively in obligations issued or guaranteed by the U.S. Government
that have remaining maturities of not more than 397 days, including securities
issued by the Federal Farm Credit Banks Funding Corp. and the Student Loan
Marketing Association, and in certain repurchase agreements when in the judgment
of the Adviser this is advisable for liquidity purposes, in order to enhance
yield or in other circumstances such as when appropriate securities are not
available.

In addition, the Portfolio may invest in variable or floating rate
obligations, when-issued securities and securities with put features.

Cash Portfolio

The Cash Portfolio seeks to provide investors with as high a level of
current income as is consistent with its investment policies and with
preservation of capital and liquidity. The Portfolio invests exclusively in a
broad range of short-term money market instruments that have remaining
maturities of not more than 397 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, bankers' acceptances
and variable amount master demand notes.
<PAGE>
The bank obligations in which the Portfolio may invest include
negotiable certificates of deposit, bankers' acceptances, fixed time deposits or
other short-term bank obligations. The Portfolio limits its investments in U.S.
bank obligations to obligations of U.S. banks (including foreign branches, the
obligations of which are guaranteed by the U.S. parent) that have at least $1
billion in total assets at the time of investment. "U.S. banks" include
commercial banks that are members of the Federal Reserve System or are examined
by the Comptroller of the Currency or whose deposits are insured by the Federal
Deposit Insurance Corporation. In addition, the Portfolio may invest in 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 Portfolio limits its investments in foreign bank obligations to
U.S. dollar-denominated obligations of foreign banks (including U.S. branches)
which banks (based upon their most recent annual financial statements) at the
time of investment (i) have more than $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 which obligations, in the opinion of the Adviser, are of an investment
quality comparable to obligations of U.S. banks in which the Portfolio may
invest.

Fixed time deposits may be withdrawn on demand by the investor, but may
be subject to early withdrawal penalties that vary with market conditions and
the remaining maturity of the obligations. The Portfolio may not invest more
than 10% of the value of its total assets in investments that are not readily
marketable including fixed time deposits subject to withdrawal penalties
maturing in more than seven calendar days.

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 Portfolio may
invest in municipal commercial paper that is rated at the date of purchase "P-1"
by Moody's Investors Service, Inc. ("Moody's"), "A-1" or "A-1+" by Standard &
Poor's ("S&P") or "F-1" by Fitch Investors Service, Inc. ("Fitch"). If a
municipal obligation is not rated, the Portfolio may purchase the obligation if,
in the opinion of the Adviser, it is of investment quality comparable to other
rated investments that are permitted in the Portfolio.

The Portfolio may invest in U.S. dollar-denominated obligations of
foreign banks. There is no limitation on the amount of the Portfolio's assets
that may be invested in obligations of foreign banks that meet the conditions
set forth above. Such investments may involve greater risks than those affecting
U.S. banks or Canadian affiliates of U.S. banks. In addition, foreign banks are
not subject to examination by any U.S. Government agency or instrumentality.

The commercial paper purchased by the Portfolio 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,
"A-1" or better by S&P or "F-1" by 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 Board of Directors.

2
<PAGE>
notes are not rated by a rating agency. However, the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio'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 Portfolio'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.

All of the securities in which the Portfolio will invest must meet
credit standards applied by the Adviser pursuant to procedures established by
the Board of Directors. Should an issue of securities cease to be rated or if
its rating is reduced below the minimum required for purchase by the Portfolio,
the Adviser will dispose of any such security, as soon as practicable, unless
the Directors of the Company determine that such disposal would not be in the
best interests of the Portfolio.

In addition, the Portfolio may invest in variable or floating rate
obligations, obligations backed by bank letters of credit, when-issued
securities and securities with put features.

Tax-Free Portfolio

The Tax-Free Portfolio seeks to provide investors with as high a level
of current income that cannot be subjected to federal income tax by reason of
federal law as is consistent with its investment policies and with preservation
of capital and liquidity. The Portfolio invests exclusively in high-quality
municipal obligations the interest on which is exempt from federal income taxes
and that have remaining maturities of not more than 397 days. Opinions relating
to the exemption of interest on municipal obligations from federal income tax
are rendered by bond counsel to the municipal issuer. The Portfolio may also
invest in certain taxable obligations on a temporary defensive basis, as
described below.

The Portfolio'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.

If a municipal obligation is not rated, the Portfolio may purchase the
obligation if, in the opinion of the Adviser, it is of investment quality
comparable to other rated investments that are permitted in the Portfolio. From
time to time the Portfolio may invest 25% or more of the current value of its
total assets in municipal obligations that are related in such a way that an
economic, business or political development or change affecting one such
obligation would also affect the other obligations. For example, certain

3
<PAGE>
municipal obligations accrue interest that is paid from revenues of similar type
projects; other municipal obligations have issuers located in the same state.

The floating and variable rate municipal obligations that the Portfolio
may purchase include certificates of participation in such obligations purchased
from banks. A certificate of participation gives the Portfolio an undivided
interest in the underlying municipal obligations, usually private activity
bonds, in the proportion that the Portfolio's interest bears to the total
principal amount of such municipal obligations. Certain of such certificates of
participation may carry a demand feature that would permit the holder to tender
them back to the issuer prior to maturity. The Portfolio may invest in
certificates of participation even if the underlying municipal obligations carry
stated maturities in excess of one year, if compliance with certain conditions
contained in a rule of the Securities and Exchange Commission (the "SEC") is
met. The income received on certificates of participation constitutes interest
from tax-exempt obligations. It is presently contemplated that the Portfolio
will not invest more than 20% of its total assets in these certificates.

The Portfolio may, pending the investment of proceeds of sales of
shares or proceeds from sales of portfolio securities or in anticipation of
redemptions, or to maintain a "defensive" posture when, in the opinion of the
Adviser, it is advisable to do so because of market conditions, elect to invest
temporarily up to 20% of the current value of its total assets in cash reserves
or taxable securities. Under ordinary market conditions, the Portfolio will
maintain at least 80% of the value of its total assets in obligations that are
exempt from federal income taxes and are not subject to the alternative minimum
tax. The foregoing constitutes a fundamental policy that cannot be changed
without the approval of a majority of the outstanding shares of the Portfolio.

All of the securities in which the Portfolio will invest must meet
credit standards applied by the Adviser pursuant to procedures established by
the Board of Directors. Should an issue of securities cease to be rated or if
its rating is reduced below the minimum required for purchase by the Portfolio,
the Adviser will dispose of any such security, as soon as practicable, unless
the Directors of the Company determine that such disposal would not be in the
best interests of the Portfolio.

In addition, the Portfolio may enter into repurchase agreements and
invest in variable or floating rate obligations, obligations backed by bank
letters of credit, when-issued securities and securities with put features.

Investment Restrictions

In connection with its investment objectives and policies as set forth
in the Prospectus, the Company has adopted the following investment
restrictions, on behalf of each Portfolio, none of which may be changed without
the approval of the holders of a majority of a Portfolio's outstanding shares,
as defined in the Investment Company Act of 1940 (the "1940 Act").

As a matter of fundamental policy, the Portfolios may not:

(1) Issue senior securities, borrow money or pledge or
mortgage the assets of any of its Portfolios. However, each Portfolio
may borrow from banks up to 10% of the current value of that
Portfolio's total net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of
not more than 10% of the current value of the Portfolio's total net
assets. Purchases of investments by the Portfolio will not be made
while any such borrowing exists.

(2) Make loans. The purchase or holding of a portion of an
issue of publicly distributed debt obligations, the making of deposits
with banks, and the entering into repurchase agreements shall not
constitute the making of a loan. The Company may also engage in the
practice of lending its portfolio securities.

4
<PAGE>
(3) Invest an amount equal to 10% or more of the current value
of the particular Portfolio's total assets in illiquid securities,
restricted securities, investments that do not have readily available
market quotations and repurchase agreements maturing in more than seven
days.

(4) Act as an underwriter of securities. The purchase of a
permitted investment directly from the issuer thereof, or from an
underwriter for an issuer, and the later disposition of such securities
in accordance with a Portfolio's investment program, shall not be
deemed an underwriting.

(5) Purchase or sell real estate, commodities or commodity
contracts. This limitation shall not apply to securities secured by
real estate or interests therein or issued by persons who deal in real
estate or interests therein.

(6) Purchase securities on margin or make short sales of
securities. This limitation shall not apply to short-term credits
necessary for the clearance of transactions.

(7) Write, purchase or sell puts, calls, warrants or any
combination thereof, except that the Portfolios may enter into put
transactions in order to maintain liquidity, as described under
"Additional Permitted Investment Activities".

(8) Purchase equity securities or securities convertible into
equity securities.

(9) Purchase securities that must be registered under the
Securities Act of 1933 before they may be offered or sold to the
public.

(10) Purchase any securities that would cause more than 25% of
the value of any individual Portfolio's total assets to be invested in
securities of issuers in the same industry, except banks as described
in paragraph 11. This limitation shall not apply to investments in
obligations of the U.S. Government, its agencies or instrumentalities.
Notwithstanding the provisions of this paragraph, the Tax-Free
Portfolio shall not be limited with respect to investments in (i)
municipal obligations (not including industrial development and
pollution control bonds if the payment of principal and interest on
such bonds is the ultimate responsibility of non-governmental users) or
(ii) negotiable certificates of deposit or bankers' acceptances that
are purchased on a temporary basis or for defensive purposes.

(11) The Cash Portfolio may not invest less than 25% of the
current value of its total assets in bank obligations (including bank
obligations subject to repurchase agreements), provided that if at some
future date adverse economic conditions prevail in the banking
industry, the Portfolio, for defensive purposes, may invest temporarily
less than 25% of its assets in bank obligations.

Whenever any investment restriction states a maximum percentage of a
Portfolio's assets, it is intended that if the percentage limitation is met at
the time the action is taken, subsequent percentage changes resulting from
fluctuating asset values will not be considered a violation of such
restrictions.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

(See "Additional Information About Policies and Investments"
in the Company's Prospectus)

Municipal Notes. The Tax-Free Portfolio and the Cash Portfolio 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

5
<PAGE>
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
a municipal issuer's making payments on the TANs.

BANs The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the
longer term municipal bond market and the likelihood that the proceeds
of such bond sales will be used to pay the principal of, and interest
on, BANs.

RANs A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an
issuer's ability to meet its obligations on outstanding RANs. In
addition, the possibility that the revenues would, when received, be
used to meet other obligations could affect the ability of the issuer
to pay the principal of, and interest on, RANs.

Securities of U.S. Government Sponsored Enterprises. The Government
Portfolio, Federal Portfolio and Cash Portfolio may invest in debt securities
issued or guaranteed by U.S. Government sponsored enterprises. These sponsored
enterprises include the World Bank, the Inter-American Development Bank and the
Asian-American Development Bank. None of the Portfolios intends to invest in
securities issued or guaranteed by non-domestic U.S. Government sponsored
enterprises.

Loans of Portfolio Securities. Each Portfolio may lend securities from
its portfolio to brokers, dealers and financial institutions if cash or cash
equivalent collateral, including letters of credit, 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 Portfolio with respect
to the loan is maintained by the borrower with that Portfolio 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 Portfolios will not enter into any security lending
arrangement having a duration of longer than one year. Securities that a
Portfolio may receive as collateral will not become part of that Portfolio at
the time of the loan. In the event of a default by the borrower, such Portfolio
will, if permitted by law, dispose of the collateral except for such part
thereof that is a security in which the Portfolio is permitted to invest. During
the time securities are on loan, the borrower will pay the Portfolio any accrued
income on those securities, and the Portfolio may invest the cash collateral and
earn additional income or receive an agreed upon fee from a borrower that has
delivered cash equivalent collateral. No Portfolio will lend securities having a
value that exceeds 5% of the current value of its net assets. Loans of
securities by a Portfolio will be subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with securities loans 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 Company or the Adviser. The
Portfolios did not lend any of their portfolio securities during 1994 and have
no present intention to do so.

PURCHASING SHARES

(See "Transaction Information--Purchasing Shares"
in the Company's Prospectus)

There is a $10 million minimum initial investment in the Company, with
a minimum investment in any single Portfolio of $2 million. Subsequent
investments may be made in the Portfolios in any amount. Investment minimums may
be waived for Directors and officers of the Company and certain other
affiliates. The Company and Scudder Investor Services, Inc. (the "Distributor")
reserve the right to reject any purchase order. All funds will be invested in
full and fractional shares.

Orders for shares of a Portfolio will become effective when an
investor's bank wire order or check is converted into federal funds (monies
credited to State Street Bank and Trust Company's (the "Custodian") account 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 2:00 P.M. (New York time) on the same day if a bank wire or check
is converted to federal funds by 12:00 Noon (New York time) or a federal funds'
wire is received by 12:00 Noon (New York time). In addition, if investors notify
the Company by 2:00 P.M. (New York time) that they intend to wire federal funds
to purchase shares of a Portfolio 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 2:00 P.M. (New York time) the same day. Wire transmissions may,
however, be subject to delays of several hours, in which event the effectiveness

6
<PAGE>
of the order may be delayed. Payments transmitted by a bank wire other than the
Federal Reserve Wire System may take longer to be converted into federal funds.

Shares of any Portfolio may be purchased by writing or calling Scudder
Service Corporation, a wholly-owned subsidiary of the Adviser (the "Transfer
Agent"). Due to the desire of the Company to afford ease of redemption,
certificates will not be issued to indicate ownership in a Portfolio. Orders for
shares of a Portfolio will be executed at the net asset value per share next
determined after an order has become effective.

Checks drawn on a non-member bank or a foreign bank may take
substantially longer to be converted into federal funds and, accordingly, may
delay the execution of an order. Checks must be payable in U.S. dollars and will
be accepted subject to collection at full face value.

By investing in a Portfolio, a shareholder appoints the Transfer Agent
to establish an open account to which all shares purchased will be credited with
any dividends and capital gains distributions that are paid in additional
shares. See "Distribution and Performance Information--Dividends and Capital
Gains Distributions" in the Company's Prospectus.

REDEEMING SHARES

(See "Transaction Information--Redeeming Shares"
in the Company's Prospectus)

Payment of redemption proceeds may be made in securities, subject to
regulation by some state securities commissions. The Company may suspend the
right of redemption with respect to any Portfolio during any period when (i)
trading on the New York Stock Exchange (the "Exchange") is restricted or the
Exchange is closed, other than customary weekend and holiday closings, (ii) the
SEC has by order permitted such suspension or (iii) an emergency, as defined by
rules of the SEC, exists making disposal of portfolio securities or
determination of the value of the net assets of that Portfolio not reasonably
practicable.

A shareholder's Company account remains open for up to one year
following complete redemption and all costs during the period will be borne by
the Company. This permits an investor to resume investments.

DIVIDENDS

(See "Distribution and Performance Information--Dividends and
Capital Gains Distributions" in the Company's Prospectus.)

The Company declares dividends on the outstanding shares of each
Portfolio from each Portfolio's net investment income at the close of each
business day to shareholders of record at 2:00 P.M. (New York time) on the day
of declaration. Realized capital gains and losses may be taken into account in
determining the daily distribution. Shares purchased will begin earning
dividends on the day the purchase order is executed and shares redeemed will
earn dividends through the previous day. Net investment income for a Saturday,
Sunday or holiday will be declared as a dividend on the previous business day to
shareholders of record at 2:00 P.M. (New York time) on that day.

Investment income for a Portfolio 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 Portfolio at net asset value and credited to the
shareholder's account on the payment date or, at the shareholder's election,
paid in cash. Dividend checks and Statements of Account will be mailed
approximately two business days after the payment date. Each Portfolio forwards
to the Custodian the monies for dividends to be paid in cash on the payment
date.

7
<PAGE>
Shareholders who redeem all their shares prior to a dividend payment
will receive, in addition to the redemption proceeds, dividends declared but
unpaid. Shareholders who redeem only a portion of their shares will be entitled
to all dividends declared but unpaid on such shares on the next dividend payment
date.

PERFORMANCE INFORMATION

(See "Distribution and Performance Information--Performance Information"
in the Company's Prospectus.)

From time to time, quotations of each Portfolio's performance may be
included in advertisements, sales literature or reports to shareholders or
prospective investors. These performance figures may be calculated in the
following manner:

Yield

The Company makes available various yield information with respect to
shares of the Portfolios, including yield and effective yield quotations based
upon the seven-day period ended on the date of calculation. The yield for each
Portfolio for the seven-day period ended December 31, 1994 was 5.61% for the
Government Portfolio, 4.07% for the Federal Portfolio, 5.66% for the Cash
Portfolio and 4.63% for the Tax-Free Portfolio. Each Portfolio's yield may
fluctuate daily and does not provide a basis for determining future yields.

The yield is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the seven-day period and dividing the
difference by the value of the account at the beginning of the seven-day period
to obtain the seven-day period return. The seven-day period return is then
"annualized" by multiplying it by 365/7 with the resulting yield figure carried
to at least 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 all of the Portfolios 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 the expenses allocated to the Portfolios.

Effective Yield

The effective yield is computed in a similar fashion to the 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 result of the calculation is carried out to the nearest one
hundredth of one percent.

The effective yield (i.e., on a compound basis, assuming that the daily
reinvestment of dividends) for the seven-day period ended December 31, 1994 was
5.76% for the Government Portfolio, 4.15% for the Federal Portfolio, 5.82% for
the Cash Portfolio and 4.73% for the Tax-Free Portfolio, respectively.

In computing the yield and effective yield, the calculation of net
change in account value includes the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares and less fees that are charged to all
shareholder accounts in proportion to the length of the seven-day period. The
calculations exclude realized gains and losses from the sale of securities and
unrealized appreciation and depreciation.

8
<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 a
Portfolio, where applicable, all ended on the last day of a recent calendar
quarter. Average annual total return quotations reflect changes in the price of
a Portfolio's shares, if any, and assume that all dividends and capital gains
distributions during the respective periods were reinvested in Portfolio shares.
Average annual total return is calculated by finding the average annual compound
rates of return of a hypothetical investment over such periods, according to the
following formula (average annual total return is then expressed as a
percentage):

T = (ERV/P)^(1/n) - 1
Where:

P = a hypothetical initial investment of $1,000.
T = Average Annual Total Return.
n = number of years.
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.

Average Annual Total Return for periods ended December 31, 1994

Life of the
One Year Five Years Portfolio
-------- ---------- ---------

Government Portfolio 4.09% 4.98% 6.08%(1)
Federal Portfolio 3.42% 4.58% 5.75%(2)
Cash Portfolio 4.13% 5.10% 6.15%(3)
Tax-Free Portfolio 2.74% 3.71% 4.35%(4)

(1) For the period beginning June 3, 1986
(2) For the period beginning May 9, 1986
(3) For the period beginning June 18, 1986
(4) For the period beginning May 12, 1986

Cumulative Total Return

Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Portfolio's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Portfolio shares. Cumulative total return is calculated by finding
the cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):

C = (ERV/P) - 1
Where:

C = Cumulative Total Return.
P = a hypothetical initial investment of $1,000.
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.

9
<PAGE>
Cumulative Total Return for periods ended December 31, 1994

Life of the
One Year Five Years Portfolio
-------- ---------- ---------

Government Portfolio 4.09% 27.49% 65.95%(1)
Federal Portfolio 3.42% 25.09% 62.15%(2)
Cash Portfolio 4.13% 28.22% 66.44%(3)
Tax-Free Portfolio 2.74% 19.97% 44.49%(4)

(1) For the period beginning June 3, 1986
(2) For the period beginning May 9, 1986
(3) For the period beginning June 18, 1986
(4) For the period beginning May 12, 1986

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 Portfolio Performance

Quotations of each Portfolio's performance are based on historical
earnings, show the performance of a hypothetical investment, and are not
intended to indicate future performance of a Portfolio. An investor's shares
when redeemed may be worth more or less than their original cost. Performance of
a Portfolio will vary based on changes in market conditions and the level of a
Portfolio's expenses.

From time to time, in marketing and other fund literature, the
performance of each of the Portfolios may be compared to the performance of
broad groups of mutual funds with similar investment goals, as tracked by
independent organizations. Among these organizations, Lipper Analytical
Services, Inc. ("Lipper") may be cited. When Lipper's tracking results are used,
the Fund will be compared to Lipper's appropriate fund category, that is, by
fund objective and portfolio holdings. For instance, the Portfolios will be
compared with funds within Lipper's money market fund category. Rankings may be
listed among one or more of the asset-size classes as determined by Lipper.

Since the assets in all funds are always changing, the Portfolios may
be ranked within one Lipper asset-size class at one time and in another Lipper
asset-size class at some other time. Footnotes in advertisements and other
marketing literature will include the time period and Lipper asset-size class,
as applicable, for the ranking in question.

From time to time, in marketing pieces and other fund literature, the
yield of one or more of the Portfolios may be compared to the performance of
broad groups of comparable mutual funds, unmanaged indices of comparable
securities, bank money market deposit accounts and fixed-rate insured
certificates of deposit ("CDs"), or unmanaged indices of securities that are
comparable to money market funds in their terms and intent, such as Treasury
bills, bankers' acceptances, negotiable order of withdrawal (NOW) accounts, and
money market certificates. Most bank CDs differ from money market funds in
several ways: the interest rate is fixed for the term of the CD, there are
interest penalties for early withdrawal of the deposit, and the deposit
principal is insured by the Federal Deposit Insurance Corporation. Evaluations
of Fund performance made by independent sources may also be used in
advertisements concerning the Portfolios. In addition, from time to time the
Company may advertise what an initial $10,000 investment in one or more of its
portfolios would grow to over a five-year period as compared to other
institutional money market funds with similar investment objectives and their
related rankings, all as computed by IBC/Donoghue, Inc. Sources for any and all
performance information may include, but are not limited to:

IBC/Donoghue's Money Fund Report, a weekly publication of the
IBC/Donoghue's Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market fund
activity, and including certain averages as performance benchmarks, specifically
"Donoghue's Money Fund Averages m/Tax-Free Money Funds/Institutions-only" and
"Donoghue's Money Fund Average m/Institutions-only."

10
<PAGE>
Bank Rate Monitor, a weekly newsletter, published by the Advertising
News Service, Inc., that includes a national index of bank money market rates
and yields on CDs and other bank depository instruments of varied maturities for
the 100 leading banks and thrifts in the nation's top 10 Census Statistical
Metropolitan Areas.

SHAREHOLDER BENEFITS

(See "Shareholders Benefits" in the Company's Prospectus)

Special Monthly Summary of Accounts. A special service is available to
banks, brokers, investment advisers, trust companies and others who have a
number of accounts in any Fund. In addition to the copy of the regular Statement
of Account furnished to the registered holder after each transaction, a monthly
summary of accounts can be provided. The monthly summary will show for each
account the account number, the month-end share balance and the dividends and
distributions paid during the month. All costs of this service will be borne by
the Company. For information on the special monthly summary of accounts, contact
the Company.

COMPANY ORGANIZATION

(See "Company Organization" in the Company's Prospectus)

The Company was formed on January 2, 1986 as a corporation under the
laws of the State of Maryland. The authorized capital stock of the Company
consists of 25,000,000,000 shares having a par value of $.001 per share, of
which 5,000,000,000 shares each have been designated for the Government
Portfolio, Federal Portfolio and Cash Portfolio, and 2,000,000,000 shares have
been designated for the Tax-Free Portfolio. The Company is authorized to issue
full and fractional shares in separate series. The Directors have created eight
series, constituting the Government Portfolio, the Federal Portfolio, Cash
Portfolio, Tax-Free Portfolio, Institutional Prime Portfolio, Institutional
Municipal Income Portfolio, Institutional Intermediate Cash Portfolio and
Institutional Bond Index Portfolio and reserved authority to create, in the
future, other series representing shares of additional portfolios.

On any matter submitted to a vote of shareholders, all shares then
entitled to vote will be voted by Portfolio unless otherwise required by the
1940 Act, in which case all shares will be voted in the aggregate. For example,
a change in a Portfolio's fundamental investment policies would be voted upon
only by shareholders of the Portfolio involved. Additionally, approval of the
Investment Advisory Agreements is a matter to be determined separately by each
Portfolio. Approval by the shareholders of one Portfolio is effective as to that
Portfolio whether or not sufficient votes are received from the shareholders of
the other Portfolios to approve the proposal as to those Portfolios. As used in
the Prospectus and in this Statement of Additional Information, the term
"majority," when referring to approvals to be obtained from shareholders of a
Portfolio, means the vote of the lesser of (i) 67% of the shares of the
Portfolio represented at a meeting if the holders of more than 50% of the
outstanding shares of the Portfolio are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of the Portfolio. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Company
as a whole, means the vote of the lesser of (i) 67% of the Company'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 Company's
outstanding shares. Shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held.

Each share of a Portfolio represents an equal proportional interest in
that Portfolio with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Portfolio
as are declared in the discretion of the Directors. In the event of the
liquidation or dissolution of the Company, shares of a Portfolio are entitled to
receive the assets attributable to that Portfolio that are available for
distribution, and a distribution of any general assets not attributable to a
particular Portfolio that are available for distribution in such manner and on
such basis as the Directors in their sole discretion may determine.

Shareholders are not entitled to any pre-emptive rights. All shares,
when issued, will be fully paid and non-assessable by the Company.

11
<PAGE>
INVESTMENT ADVISER

(See "Company Organization--Investment Adviser"
in the Company's Prospectus)

The Company retains Scudder, Stevens & Clark, Inc. (the "Adviser") as
investment adviser on behalf of each of the Portfolios pursuant to Investment
Advisory Agreements (the "Agreements"). The Adviser is one of the most
experienced investment counsel firms in the U.S. It was established in 1919 as a
partnership and was restructured as a Delaware corporation in 1985. The
principal source of the Adviser's income is professional fees received from
providing continuing investment advice, and the firm derives no income from
banking, brokerage, or underwriting of securities. The Adviser's wholly-owned
subsidiary, Scudder Investor Services, Inc. (the "Distributor"), acts as
principal underwriter for shares of registered open-end investment companies.
The Adviser provides investment counsel for many individuals and institutions,
including insurance companies, endowments, industrial corporations and financial
and banking organizations. As of December 31, 1994, the Adviser and its
affiliates had in excess of $90 billion under their supervision, approximately
two-thirds of which was invested in fixed-income securities.

The Adviser maintains a research department with more than 50
professionals, which conducts continuous studies of the factors that affect
various industries, companies and individual securities in the U.S. as well as
abroad. In this work the Adviser utilizes reports, statistics and other
investment information from a wide variety of sources, including brokers and
dealers who may execute portfolio transactions for the Portfolios and for other
clients of the Adviser. Investment decisions, however, are based primarily on
investigations and critical analyses by the Adviser's own research specialists
and portfolio managers.

The Adviser may give advice and take action with respect to any of its
other clients, which may differ from advice given or from the time or nature of
action taken with respect to a Portfolio of the Company. If these clients and
such Portfolio are simultaneously buying or selling a security with a limited
market, the price may be adversely affected. In addition, the Adviser may, on
behalf of other clients, furnish financial advice or be involved in tender
offers or merger proposals relating to companies in which such Portfolio
invests. The best interests of any Portfolio may or may not be consistent with
the achievement of the objectives of the other persons for whom the Adviser is
providing advice or for whom they are acting. Where a possible conflict is
apparent, the Adviser will follow whatever course of action is in its judgment
in the best interests of the Portfolio. The Adviser may consult independent
third persons in reaching its decision.

Under the Agreements, it is the responsibility of the Adviser, subject
to the supervision of the Board of Directors, to manage each such Portfolio's
investments in conformity with the stated policies of the Portfolio by providing
supervision of its investments, including the acquisition, holding or disposal
of securities for the Portfolio, and by effecting purchase and sale orders for
securities of the Portfolio. It also furnishes the Portfolio with bookkeeping,
accounting and administrative services which are not furnished by the Custodian
or Scudder Fund Accounting Corporation, a wholly-owned subsidiary of the
Adviser, office space and equipment, and the services of the officers and
employees of the Company. The Adviser has authorized any of its managing
directors, officers and employees who have been elected as Directors or officers
of the Company to serve in the capacities to which they have been elected.

Total fees paid by the Company to the Adviser for the year ended
December 31, 1994 were $272,538 for the Government Portfolio, $3,068 for the
Federal Portfolio, $580,110 for the Cash Portfolio and $212,854 for the Tax-Free
Portfolio. See "Investment Adviser" in the Prospectus. For the year ended
December 31, 1994, the Adviser did not impose fees amounting to $12,962 and
reimbursed a portion of expenses amounting to $702 for the Federal Portfolio.
For the year ended December 31, 1994, the Adviser reimbursed a portion of
expenses amounting to $32,600 for the Tax-Free Portfolio.

Total fees paid by the Company to the Adviser for the year ended
December 31, 1993 were $289,955 for the Government Portfolio, $0 for the Federal
Portfolio, $921,933 for the Cash Portfolio and $179,949 for the Tax-Free
Portfolio. For the year ended December 31, 1993, the Adviser did not impose fees
amounting to $10,239 and reimbursed a portion of expenses amounting to $31,242
for the Federal Portfolio.

Total fees paid by the Company to the Adviser for the year ended
December 31, 1992 were $352,601 for the Government Portfolio, $0 for the Federal
Portfolio, $703,188 for the Cash Portfolio and $147,482 for the Tax-Free

12
<PAGE>
Portfolio. For the year ended December 31, 1992, the Adviser did not impose fees
amounting to $14,276 and reimbursed a portion of expenses amounting to $20,581
for the Federal Portfolio.

Each Portfolio will bear all expenses not specifically assumed by the
Adviser under the terms of the Agreements. Such expenses will include without
limitation: (a) organization expenses of the Portfolios; (b) clerical salaries;
(c) fees and expenses incurred by the Portfolios in connection with membership
in investment company organizations; (d) brokerage and other expenses of
executing portfolio transactions; (e) payment for portfolio pricing services to
a pricing agent, if any; (f) legal, auditing or accounting expenses; (g) trade
association dues; (h) taxes or governmental fees; (i) the fees and expenses of
the transfer agent of the Portfolios; (j) the cost of preparing share
certificates or any other expenses, including clerical expenses of issue,
redemption or repurchase of shares of the Portfolios; (k) the expenses and fees
for registering and qualifying securities for sale; (l) the fees and expenses of
directors of the Company who are not employees or affiliates of the Adviser or
any of its affiliates; (m) travel expenses of all officers, directors and
employees; (n) insurance premiums; (o) the cost of preparing and distributing
reports and notices to shareholders; (p) public and investor relations expenses;
or (q) the fees or disbursements of custodians of the Portfolios' assets,
including expenses incurred in the performance of any obligations enumerated by
the Articles of Incorporation or By-Laws insofar as they govern agreements with
any such custodian. No sales or promotional expenses are incurred by the
Company, but expenses incurred in complying with laws relating to the issue or
sale of the Company's shares are not deemed sales or promotional expenses.

Each of the Agreements provides that if, in any fiscal year, the "total
expenses" of the relevant Portfolio ("total expenses" generally excludes taxes,
interest, brokerage commission and other portfolio transaction expenses, other
expenditures that are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the management
fee) exceed the expense limitations applicable to such Portfolio imposed by the
securities regulations of any state, the Adviser will pay or reimburse the
Portfolio for the excess. Each of the Agreements, however, limits such payment
or reimbursement to the amount of the annual management fee otherwise payable by
the Portfolio. It is believed that currently the most restrictive state annual
expense limitation is 2.5% of the first $30,000,000 of average daily net assets,
2% of the next $70,000,000 and 1.5% of average daily net assets over
$100,000,000. For the three years ended December 31, 1994, the Adviser has not
had to reimburse any Portfolio because of these limitations.

The Agreements will continue in effect with respect to each Portfolio
if specifically approved annually by a majority of the Directors of the Company,
including a majority of the Directors who are not parties to such contract or
"interested persons" of any such party. Each of the Agreements may be terminated
without penalty by either of the parties on 60 days' written notice and must
terminate in the event of its assignment. Each may be amended or modified only
if approved by vote of the holders of the majority of the particular Portfolio's
outstanding shares as defined in the 1940 Act.

The Agreements provide that the Adviser is not liable for any act or
omission in the course of or in connection with rendering services under the
Agreements in the absence of willful misfeasance, bad faith or gross negligence
of its obligations or duties.

The Adviser places orders for the purchase and sale of securities for
the Portfolios of the Company. The Company will not deal with the Adviser in any
transaction in which the Adviser acts as principal.

Personal Investments by Employees of the Adviser

Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Portfolios. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.

13
<PAGE>
DISTRIBUTOR

(See "Company Organization--Distributor" in the Company's Prospectus)

Pursuant to a contract with the Company, Scudder Investor Services,
Inc. (the "Distributor"), a wholly-owned subsidiary of the Adviser, serves as
the Company's principal underwriter in connection with a continuous offering of
shares of the Company. The Distributor receives no remuneration for its services
as principal underwriter and is not obligated to sell any specific amount of
Company shares. As principal underwriter, it accepts purchase orders for shares
of the Company. In addition, the Underwriting Agreement obligates the
Distributor to pay certain expenses in connection with the offering of the
shares of the Company. After the Prospectuses and periodic reports have been
prepared, set in type and mailed to shareholders, the Distributor will pay for
the printing and distribution of copies thereof used in connection with the
offering to prospective investors. The Distributor will also pay for
supplemental sales literature and advertising costs.

<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS

The principal occupations of the Directors and executive officers of the Company for the past five years
are listed below.

Position with
Position with Underwriter, Scudder
Name (Age) and Address Company Principal Occupation** Investor Services, Inc.
- ---------------------- ------- ---------------------- -----------------------
<S> <C> <C> <C>
Daniel Pierce (61)+*# President and Chairman of the Board and Vice President, Director
Director Managing Director of and Assistant Treasurer
Scudder, Stevens & Clark,
Inc.

David S. Lee (61)+*# Chairman of the Managing Director of President, Director and
Board and Director Scudder, Stevens & Clark, Assistant Treasurer
Inc.

Edgar R. Fiedler (66)# Director Vice President and Economic --
845 Third Avenue Counselor, The Conference
New York, NY 10022 Board, Inc.

Peter B. Freeman (62) Director Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI 02906

Robert W. Lear (77) Director Executive-in-Residence, --
429 Silvermine Road Visiting Professor, Columbia
New Canaan, CT 06840 University Graduate School
of Business

Thomas W. Joseph (56)+ Vice President Principal of Scudder, Vice President,
Stevens & Clark, Inc. Director, Treasurer and
Assistant Clerk

Thomas F. McDonough (48)+ Vice President and Principal of Scudder, Clerk
Assistant Secretary Stevens & Clark, Inc.

Pamela A. McGrath (41)+ Vice President Principal of Scudder, --
and Treasurer Stevens & Clark, Inc.

14
<PAGE>
Position with
Position with Underwriter, Scudder
Name (Age) and Address Company Principal Occupation** Investor Services, Inc.
- ---------------------- ------- ---------------------- -----------------------

Irene McC. Pelliconi# (64)++ Secretary Vice President of Scudder, --
Stevens & Clark, Inc.

* Messrs. Lee and Pierce are considered by the Company to be persons who are "interested persons" of the
Adviser or of the Company (within the meaning of the 1940 Act).
** All the Directors and officers have been associated with their respective companies for more than five
years, but not necessarily in the same capacity.
# Messrs. Pierce, Fiedler and Lee are members of the Executive Committee.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
</TABLE>

Directors of the Company not affiliated with the Adviser receive from
the Company an annual fee and a fee for each Board of Directors and Board
Committee meeting attended and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings. Directors who are affiliated with the
Adviser do not receive compensation from the Company, but the Company may
reimburse such Directors for all out-of-pocket expenses relating to attendance
at meetings.

As of April 1, 1995, the Directors and officers of the Company, as a
group, owned less than 1% of the outstanding shares of each Portfolio of the
Company.

As of April 1, 1995, the following shareholders held of record,
beneficially, or both, more than 5% of the outstanding shares of these
Portfolios:

Government Portfolio. Chemical Bank, Jericho, New York 11753-0900 and
Bowen David & Co., Boston, MA 02105-1647 held of record 27.80% and 42.54%,
respectively, of the outstanding shares of the Government Portfolio.

Federal Portfolio. Lazard Freres & Co., New York, NY 10020 held of
record, but not beneficially, 99.99% of the outstanding shares of the Federal
Portfolio.

Cash Portfolio. Bowen David & Co., Boston, MA 02105-1647, Mercer
Williams & Co., Boston, MA 02105-1647, Vicor Securities Corp., Andover, MA
01810-5424, Lawrence Hite, Summit, NJ 07901-1730 and Peoples Choice TV Corp.,
Shelton, CT 06484-6239 held of record 27.24%, 18.86%, 10.13%, 6.70% and 6.60%,
respectively, of the outstanding shares of the Cash Portfolio. In addition,
Lazard Freres & Co., New York, NY 10020 held of record, but not beneficially,
8.0% of the outstanding shares of the Cash Portfolio.

Tax-Free Portfolio. Bowen David & Co., Boston, MA 02105-1647, Mercer
Williams & Co., Boston, MA 02105-1647 and Amarillo National Bank, Amarillo, TX
79181-0001 held of record 51.02%, 22.62% and 10.90%, respectively, of the
outstanding shares of the Tax-Free Portfolio.

As of April 1, 1995, no other persons, to the knowledge of management,
owned of record or beneficially more than 5% of the outstanding shares of any
Portfolio. To the extent that any shareholder is the beneficial owner of more
than 25% of the outstanding shares of any Portfolio, such shareholder may be
deemed to be a "control person" of that Portfolio for purposes of the 1940 Act.

REMUNERATION

Several of the officers and Directors of the Company may be officers or
employees of the Adviser, Scudder Fund Accounting Corporation, Scudder Investor
Services, Inc., Scudder Service Corporation or Scudder Trust Company, from whom
they receive compensation, as a result of which they may be deemed to
participate in the fees paid by the Company. The Portfolios pay no direct
remuneration to any officer of the Company. However, each of the Company's
Directors who is not affiliated with the Adviser will be compensated for all
expenses relating to Company business (specifically including travel expenses
relating to Company business). Each of these unaffiliated Directors received

15
<PAGE>
from the Company compensation for each of: quarterly payments of the annual
Director's fee, each Directors' meeting, and each Board Committee meeting
attended, in the amount of $250 per Portfolio if the average daily net assets of
each Portfolio are less than $500,000,000, or $500 per Portfolio if the average
daily net assets of each Portfolio are in excess of $500,000,000. For the fiscal
year ended December 31, 1994, such fees totaled $149,564. Effective May 1, 1995,
each of these unaffiliated Directors receives from the Company compensation of
$150 per Portfolio for each Director's meeting attended and each Board Committee
meeting attended and an annual Director's fee, payable quarterly, of $500 for
each Portfolio with average daily net assets less than $100 million, and $1500
for each Portfolio with average daily net assets in excess of $100 million.

The following Compensation Table, provides in tabular form, the following data.

Column (1) All Directors who receive compensation from the Company.
Column (2) Aggregate compensation received by a Director from all Portfolios of
the Company.*
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Company.
Column (5) Total compensation received by a Director from the Company plus
compensation received from all funds managed by the Adviser for which a Director
serves. The total number of funds from which a Director receives such
compensation is also provided in column (5).

<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1994
========================= ============================= ================== ================= ====================
(1) (2) (3) (4) (5)

Pension or Total Compensation
Retirement From Company and
Benefits Accrued Estimated Company Complex
As Part of Annual Benefits Paid to Director
Name of Person, Position Aggregate Compensation from Company Expenses Upon Retirement
Company
========================= ============================= ================== ================= ====================
<S> <C> <C> <C> <C>

Edgar R. Fiedler, $25,500** N/A N/A $30,003
Director (6 Portfolios)

Peter B. Freeman, $23,750 N/A N/A $141,843
Director (31 Portfolios)

Robert W. Lear, $25,500 N/A N/A $62,875
Director (10 Portfolios)

* Scudder Institutional Fund, Inc. consists of Institutional Government Portfolio, Institutional Federal
Portfolio, Institutional Cash Portfolio and Institutional Tax-Free Portfolio.

** Mr. Fiedler received $25,500 through a deferred compensation program. As of December 31, 1994, Mr. Fiedler
had a total of $183,603 accrued in a deferred compensation program for serving on the Board of Directors of
the Company. Mr. Fiedler also as of December 31, 1994 had a total of $182,472 accrued in a deferred
compensation program for serving on the Board of Directors for Scudder Fund, Inc. (which has five active
portfolios).
</TABLE>

TAXES

(See "Distribution and Performance Information--Taxes"
in the Company's Prospectus.)

The Prospectus describes generally the tax treatment of distributions
by the Company. This section of the Statement includes additional information
concerning federal taxes.

Qualification by each Portfolio as a regulated investment company under
the Internal Revenue Code of 1986 (the "Code") requires, among other things,
that (a) at least 90% of the Portfolio'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

16
<PAGE>

the sale or other disposition of securities; (b) the Portfolio derive less than
30% of its gross income from gains (without offset for losses) from the sale or
other disposition of securities held for less than three months; and (c) the
Portfolio 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 Portfolio's assets is
represented by cash, government securities and other securities limited in
respect of any one issuer to an amount not greater than 5% of the value of the
Portfolio's assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of the Portfolio's assets is invested in
the securities of any one issuer (other than the U.S. government securities or
securities of other regulated investment companies) or of two or more issuers
which the taxpayer controls and which are determined to be engaged in the same
or similar trade or business. As a regulated investment company, each Portfolio
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 shareholders at least 90% of its net taxable investment income (including
net short-term capital gains) and at least 90% of the excess of its tax-exempt
interest income over attributable expenses earned in each year. In addition, in
the case of the Tax-Free Portfolio, the Portfolio intends that at least 50% of
the value of its total assets at the close of each quarter of its taxable year
will consist of obligations the interest on which is exempt from federal income
tax, so that the Portfolio will qualify under the Code to pay exempt-interest
dividends.

A 4% nondeductible excise tax will be imposed on a Portfolio (except
the Tax-Free Portfolio to the extent of its tax-exempt income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. For this purpose, any income or gain retained by a Portfolio that
is subject to 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 each Portfolio and
received by shareholders on December 31 of the calendar year in which the
dividend was declared. Each Portfolio intends that it will timely distribute
substantially all of its net investment income and net capital gains and, thus,
expects not to be subject to the excise tax.

Any gain or loss realized upon a sale or redemption of shares of a
Portfolio by a shareholder who is not a dealer in securities is treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the sale or redemption of shares of a Portfolio
held for six months or less is treated as long-term capital loss to the extent
of any long-term capital gain distribution received by the shareholder. Any loss
realized by a shareholder upon the sale or redemption of shares of the Tax-Free
Portfolio held for six months or less is disallowed to the extent of any
exempt-interest dividends received by the shareholder.

Gains or losses on sales of securities by a Portfolio will be long-term
capital gains or losses if the securities have been held by it for more than one
year, except in certain cases where the Portfolio acquires a put or writes a
call thereon. Other gains or losses on the sale of securities will be short-term
capital gains or losses.

Exempt-interest dividends allocable to interest received by the
Tax-Free Portfolio on certain "private activity" obligations issued after August
7, 1986 will be treated as interest on such obligations and thus will give rise
to an item of tax preference that will increase a shareholder's alternative
minimum taxable income. Exempt-interest dividends paid to a corporate
shareholder by the Tax-Free Portfolio (whether or not from interest on private
activity bonds) will be taken into account (i) in determining the alternative
minimum tax imposed on 75% of the excess of adjusted current earnings of the
corporation over alternative minimum taxable income, (ii) in calculating the
environmental tax equal to 0.12% of a corporation's modified alternative minimum
taxable income in excess of $2 million, and (iii) in determining the foreign
branch profits tax imposed on the effectively connected earnings and profits tax
(with adjustments) of U.S. branches of foreign corporations.

Any loss realized on a sale or exchange of shares of a Portfolio will
be disallowed to the extent shares of such Portfolio are reacquired within the
61-day period beginning 30 days before and ending 30 days after the shares are
disposed of. Income from the Federal Portfolio and Tax-Free Portfolio may not be
exempt from certain state and local taxes.

PORTFOLIO TRANSACTIONS

Subject to the supervision of the Board of Directors, the Adviser is
primarily responsible for the Company's investment decisions and the placing of
the Company's portfolio transactions. In placing orders, it is the policy of the
Adviser to obtain the most favorable net results, taking into account such
factors as price, size of order, difficulty of execution and skill required of

17
<PAGE>
the executing broker. While the Adviser will generally seek reasonably
competitive spreads or commissions, the Company will not necessarily be paying
the lowest spread or commission available.

To the maximum extent feasible, the Adviser places orders for portfolio
transactions for the Company through the Distributor, which in turn places
orders on behalf of the Company. The Distributor receives no commissions, fees
or other remuneration from the Company for this service. Allocation of portfolio
transactions by the Distributor is supervised by the Adviser.

The Company's purchases and sales of portfolio securities are generally
placed by the Adviser with the issuer or a primary market maker for these
securities on a net basis, without any brokerage commissions being paid by the
Company. Trading, however, does involve transactions costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid and
asked prices. Transaction costs may also include fees paid to third parties for
information as to potential purchasers or sellers of securities but only for the
purpose of seeking for the Company the most favorable net results, including
such fees, on a particular transaction. Purchases of underwritten issues may be
made, which will include an underwriting fee paid to the Distributor. During the
Company's last three fiscal years, the Portfolios paid no brokerage commissions.

Research and Statistical Information. When it can be done consistently
with the policy of obtaining the most favorable net results, it is the Adviser's
practice to place orders with brokers and dealers who supply market quotations
to the fund accounting agent of the Portfolio for valuation purposes, or who
supply research, market and statistical information to the Adviser. Except for
implementing the policy stated above, there is no intention on the part of the
Adviser to place portfolio transactions with particular brokers or dealers or
groups thereof, and the Adviser does not place orders with brokers or dealers on
the basis that such broker or dealer has or has not sold shares of the
Portfolios. Although such research, market and statistical information is useful
to the Adviser, it is the Adviser's opinion that such information is only
supplementary to its own research efforts, since the information must still be
analyzed, weighed and reviewed by the Adviser's staff. Information so received
will be in addition to, and not in lieu of, the services required to be
performed by the Adviser under the investment advisory contracts with the
Portfolios, and the expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. Such information may be useful to the
Adviser in providing services to clients other than the Portfolios, and not all
such information is used by the Adviser in connection with the Portfolios.

NET ASSET VALUE

Net asset value per share for each Portfolio is determined by Scudder
Fund Accounting Corporation, a wholly-owned subsidiary of the Adviser, on each
day the Exchange is open for trading. The net asset value per share of each
Portfolio is determined at 2:00 P.M. (New York time). The net asset value per
share of each Portfolio is computed by dividing the value of the total assets of
the Portfolio, less all liabilities, by the total number of outstanding shares
of the Portfolio. The Exchange is closed on Saturdays, Sundays, and on New
Year's Day, Presidents' Day (the third Monday in February), Good Friday,
Memorial Day (the last Monday in May), Independence Day, Labor Day (the first
Monday in September), Thanksgiving Day and Christmas Day (collectively, the
"Holidays"). When any Holiday falls on a Saturday, the Exchange is closed the
preceding Friday, and when any Holiday falls on a Sunday, the Exchange is closed
the following Monday. Although the Company intends to declare dividends with
respect to each of its Money Market Funds on all other days, including Martin
Luther King, Jr. Day (the third Monday in January), Columbus Day (the second
Monday in October) and Veterans' Day, no redemptions will be made on these three
bank holidays nor on any of the Holidays.

As indicated under "Transaction Information--Share Price" in the
Prospectus, each Portfolio uses the amortized cost method to determine the value
of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Portfolio would receive if the security were sold. During these periods
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of a Portfolio's portfolio on a particular
day, a prospective investor in that Portfolio would be able to obtain a somewhat
higher yield than would result from investment in a fund using solely market

18
<PAGE>
values, and existing Portfolio shareholders would receive correspondingly less
income. The converse would apply during periods of rising interest rates.

Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, each Portfolio must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities (as defined in Rule 2a-7) of no more than 397 calendar days and
invest only in securities determined by the Board of Directors to be of high
quality with minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to Rule 2a-7, the Board is
required to establish procedures designed to stabilize, to the extent reasonably
possible, such Portfolio's price per share as computed for the purpose of sales
and redemptions at $1.00. Such procedures include review of the Portfolio's
portfolio holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Portfolio's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Directors. If such deviation exceeds 1/2 of 1%, the Board will promptly consider
what action, if any, will be initiated. In the event the Board determines that a
deviation exists that may result in material dilution or other unfair results to
investors or existing shareholders, the Board will take such corrective action
as it regards as appropriate, including the redemption of shares in kind, the
sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.

ADDITIONAL INFORMATION

Experts

The financial highlights of each Portfolio included in the Prospectus
and the Financial Statements incorporated by reference in this Statement of
Additional Information have been audited by Price Waterhouse LLP, 1177 Avenue of
the Americas, New York, New York 10036, independent accountants, and are
included in the Prospectus and this Statement of Additional Information in
reliance upon the accompanying report of said firm, which report is given upon
their authority as experts in accounting and auditing.

Other Information

The CUSIP number of the Government Portfolio is 811161207.
The CUSIP number of the Federal Portfolio is 811161108.
The CUSIP number of the Cash Portfolio is 811161405.
The CUSIP number of the Tax-Free Portfolio is 811161504.

Each Portfolio has a fiscal year end of December 31.

The law firm of Sullivan & Cromwell is counsel to the Company.

Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts 02110-4103, a wholly-owned subsidiary of the Adviser,
computes net asset value for the Portfolios. Each Portfolio pays SFAC an annual
fee equal to 0.020% of the first $150 million of average daily net assets,
0.0060% of such assets in excess of $150 million and 0.0035% of such assets in
excess of $1 billion, plus holding and transaction charges for this service. For
the year ended December 31, 1994, the amount charged to the Portfolios by SFAC
aggregated $13,451 for the Government Portfolio, $1,203 for the Federal
Portfolio, $19,023 for the Cash Portfolio, and $15,731 for the Tax-Free
Portfolio, of which $2,598, $256, $3,375, and $3,684, respectively, remain
unpaid at December 31, 1994. For the year ended December 31, 1994 for the
Federal Portfolio, SFAC did not impose fees amounting to $11,297.

Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the Adviser, is
the transfer, dividend-paying and shareholder service agent for the Company 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 Company

19
<PAGE>
shares and promptly effecting such orders; (ii) recording purchases of Company
shares and, if requested, issuing stock certificates; (iii) reinvesting
dividends and distributions in additional shares or transmitting payments
therefor; (iv) receiving for acceptance in proper form transfer requests and
effecting such transfers; (v) responding to shareholder inquiries and
correspondence regarding shareholder account status; (vi) reporting abandoned
property to the various states; and (vii) recording and monitoring daily the
issuance in each state of shares of each Portfolio of the Company. The Service
Corporation applies a minimum annual charge of $220,000 for servicing all
Portfolios of the Company. An activity fee is charged on a monthly basis for the
shareholder accounts serviced. The difference between the activity fees charged
and the annual $220,000 minimum is allocated among all the Portfolios based on
relative net assets. For the year ended December 31, 1994, the amount charged to
the Portfolios by Service Corporation aggregated $18,928 for the Government
Portfolio, $1,355 for the Federal Portfolio, $39,639 for the Cash Portfolio, and
$11,780 for the Tax-Free Portfolio, of which $2,118, $118, $3,064, and $331
respectively remain unpaid at December 31, 1994.

The Company's Prospectus and this Statement of Additional Information
omit certain information contained in the Registration Statement and its
amendments which the Company 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 Company and the securities offered hereby. The
Registration Statement and its amendments are available for inspection by the
public at the SEC in Washington, D.C.

FINANCIAL STATEMENTS

The financial statements, including the investment portfolios of the
Company, together with the Report of Independent Accountants, Financial
Highlights and notes to financial statements are incorporated herein by
reference in the Annual Report to the Shareholders of the Company dated December
31, 1994 and are hereby deemed to be a part of this Statement of Additional
Information.

20
<PAGE>
APPENDIX

The following is a description of the ratings given by Moody's, S&P and
Fitch to corporate and municipal bonds, corporate and municipal commercial paper
and municipal notes.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa". Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest degree of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds rated
"A" possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated "Baa" are considered to be medium grade
obligations, neither highly protected nor poorly secured. Moody's applies
numerical modifiers 1, 2 and 3 in each rating category from "Aa" through "Baa"
in its rating system. The modifier 1 indicates that the security ranks in the
higher end of the category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB". Bonds rated "AAA" have the highest ratings assigned
by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the higher rated issues only in small degree".
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible to" adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead a "weakened capacity" to make such payments. The ratings
from "AA" to "BBB" may be modified by the addition of a plus or minus sign to
show relative standing within the category.

Fitch: The four highest ratings of Fitch for corporate and municipal
bonds are "AAA," "AA," "A" and "BBB". Bonds rated "AAA" are considered to be
investment-grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated "AA" are
considered to be investment grade and of very high credit quality. The obligor's
ability to pay interest and repay principal is very strong, although not quite
as strong as bonds rated "AAA". Because bonds rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F1+". Bonds rated "A" are
considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher rates. Bonds rated "BBB" are considered to be investment
grade and of satisfactory credit quality. The obligor's ability to pay interest
and repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse effects
on these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with greater ratings.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior ability for
repayment of senior short-term obligations".

S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is strong".
Commercial paper with "overwhelming safety characteristics" will be rated
"A-1+".

Fitch: The rating "F-1" is the highest rating assigned by Fitch. Among
the factors considered by Fitch in assigning this rating are: (1) the issuer's
liquidity; (2) its standing in the industry; (3) the size of its debt; (4) its
ability to service its debt; (5) its profitability; (6) its return on equity;
(7) its alternative sources of financing; and (8) its ability to access the
capital markets. Analysis of the relative strength or weakness of these factors
and others determines whether an issuer's commercial paper is rated "F-1".

<PAGE>
Municipal Notes

Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality". Notes rated "MIG 2"
or "VMIG 2" are of "high quality," with margins or protection "ample although
not as large as in the preceding group". Notes rated "MIG 3" or "VMIG 3" are of
"favorable quality," with all security elements accounted for but lacking the
strength of the preceding grades.

S&P: The "SP-1" rating reflects a "very strong or strong capacity to
pay principal and interest". Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+". The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Fitch: The highest ratings for state and municipal short-term
obligations are "F-1+," "F-1," and "F-2".
<PAGE>

Institutional Government Portfolio
Institutional Federal Portfolio
Institutional Cash Portfolio
Institutional Tax-Free Portfolio

ANNUAL REPORT
DECEMBER 31, 1994
<PAGE>
Board of Directors

DAVID S. LEE(1) Chairman of the Board; Managing Director,
Scudder, Stevens & Clark, Inc.

EDGAR R. FIEDLER(1)(2)(3) Vice President and Economic Counsellor, The
Conference Board; formerly Assistant Secretary of
the Treasury for Economic Policy

PETER B. FREEMAN(2)(3) Corporate Director and Trustee

ROBERT W. LEAR(2)(3) Executive-in-Residence and Visiting Professor,
Columbia University Graduate School of Business;
Director or Trustee, Various Organizations

DANIEL PIERCE(1) President; Chairman of the Board, Scudder,
Stevens & Clark, Inc.

(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee

Officers

DAVID S. LEE Chairman of the Board
DANIEL PIERCE President
THOMAS W. JOSEPH Vice President and Assistant Secretary
THOMAS F. McDONOUGH Vice President and Assistant Secretary
PAMELA A. McGRATH Vice President and Treasurer
IRENE McC. PELLICONI Secretary

2
<PAGE>
February 21, 1995

Dear Shareholder:

The Fund provided competitive investment results to its shareholders in
1994. The Fund, operated exclusively for institutions and their clients,
includes four money market portfolios: Institutional Government Portfolio,
Institutional Federal Portfolio, Institutional Cash Portfolio and Institutional
Tax-Free Portfolio.

Each Portfolio seeks to provide as high a level of current income as is
consistent with preservation of capital and liquidity. The Institutional Federal
Portfolio seeks to maximize income that cannot be subjected to state and local
income taxes by reason of Federal law, and the Institutional Tax-Free Portfolio
seeks to provide income exempt from Federal income tax. The Portfolios differ
from each other in the types of money market instruments in which each invests.

Aggregate net assets of the Portfolios were $568 million at December 31,
1994. A table showing dividend payments and other financial information for the
five years ended December 31 for each Portfolio is on page 16.

Net asset value per share of each Portfolio was maintained at $1.00.

Audited financial statements for the year ended December 31, 1994 and a
list of each Portfolio's investments as of that date are set forth on the
following pages.

If you have questions concerning your Fund or any of its Portfolios, please
call toll free (800) 854-8525 from any continental state. We will be glad to
hear from you at any time.

/s/David S. Lee
David S. Lee
Chairman

3
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
GOVERNMENT PORTFOLIO

<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2A)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- 2.7%

Donaldson, Lufkin & Jenrette Securities Corp. dated 12/30/94
(proceeds at maturity $3,222,102) collateralized by
$3,244,000 US Treasury Note, 6.75%, 2/28/97
(cost $3,220,000) (note 3) . . . . . . . . . . . . . . . . 5.96% 1/3/95 $ 3,220,000 $ 3,220,000
------------
U.S. AGENCY OBLIGATIONS -- 97.7%

Federal Home Loan Bank Discount Note . . . . . . . . . . . . 5.88 1/6/95 14,485,000 14,473,331
Federal Home Loan Bank Discount Note . . . . . . . . . . . . 5.68 1/10/95 7,855,000 7,844,003
Federal Home Loan Bank Discount Note . . . . . . . . . . . . 5.71 1/17/95 10,000,000 9,974,977
Federal Home Loan Bank Discount Note . . . . . . . . . . . . 6.18 3/9/95 8,000,000 7,909,177
Federal Home Loan Mortgage Corp. Discount Note . . . . . . . 5.93 1/3/95 24,745,000 24,736,958
Federal Home Loan Mortgage Corp. Discount Note . . . . . . . 5.99 1/23/95 13,500,000 13,451,243
Federal National Mortgage Association Discount Note . . . . . 5.98 1/6/95 3,000,000 2,997,542
Federal National Mortgage Association Discount Note . . . . . 5.65 1/11/95 5,000,000 4,992,264
Federal National Mortgage Association Discount Note . . . . . 6.06 2/7/95 4,000,000 3,975,416
Student Loan Marketing Assn. Variable Rate Note . . . . . . . 5.89 1/4/95* 11,700,000 11,700,000
Student Loan Marketing Assn. Variable Rate Note . . . . . . . 6.07 1/4/95* 8,000,000 8,038,671
Student Loan Marketing Assn. Variable Rate Note . . . . . . . 5.48 6/30/95* 5,000,000 5,000,000
------------
TOTAL U.S. AGENCY OBLIGATIONS (cost $115,093,582) . . . . . . . . . . . . . . . . . . . . . . 115,093,582
------------
TOTAL INVESTMENTS -- 100.4% (cost $118,313,582)** . . . . . . . . . . . . . . . . . . . . . . 118,313,582
------------
OTHER ASSETS AND LIABILITIES -- (0.4)%

Interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,463
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,872)
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (635,386)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,395)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143,272)
------------
(449,462)
------------
NET ASSETS -- 100.0%
Applicable to 117,864,120 shares of $.001 par value Capital Stock outstanding;
5,000,000,000 shares authorized (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . $117,864,120
============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>
* Date of next interest rate change.

**Cost for federal income tax purposes.
</TABLE>

See notes to financial statements.

4
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
FEDERAL PORTFOLIO

<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2A)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 101.0%

U.S. Treasury Bill . . . . . . . . . . . . . . . . . . . 4.78% 1/12/95 $ 9,495,000 $ 9,481,326
U.S. Treasury Bill . . . . . . . . . . . . . . . . . . . 5.21 3/2/95 1,700,000 1,685,437
------------
TOTAL U.S. TREASURY OBLIGATIONS (cost $11,166,763)** . . . . . . . . . . . . . . . . . . . . 11,166,763
------------
OTHER ASSETS AND LIABILITIES -- (1.0)%

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,839
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,194
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,990)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,068)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,769)
------------
(111,794)
------------
NET ASSETS -- 100.0%
Applicable to 11,054,969 shares of $.001 par value Capital Stock outstanding;
5,000,000,000 shares authorized (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,054,969
============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>

** Cost for federal income tax purposes.
</TABLE>

See notes to financial statements.

5
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
CASH PORTFOLIO
<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2A)
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 11.4%
American Express Centurion Bank . . . . . . . . . . . . . 6.13% 1/20/95 $ 10,000,000 $10,000,000
Banque National de Paris . . . . . . . . . . . . . . . . 5.88 1/5/95 11,000,000 11,000,012
Bayerische Landesbank (Yankee) . . . . . . . . . . . . . 5.96 1/23/95 10,000,000 10,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT (cost $31,000,012) . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,000,012
-----------

COMMERCIAL PAPER -- 34.1%
Abbey National North America . . . . . . . . . . . . . . 6.31 3/6/95 11,900,000 11,768,412
AT&T Corp. . . . . . . . . . . . . . . . . . . . . . . . 5.95 2/10/95 9,000,000 8,941,300
Ford Credit Receivables Funding Inc. . . . . . . . . . . 5.93 1/30/95 9,000,000 8,957,588
General Electric Capital Corp. . . . . . . . . . . . . . 6.13 2/27/95 9,000,000 8,913,788
J.P. Morgan & Co. Inc. . . . . . . . . . . . . . . . . . 6.24 3/1/95 9,000,000 8,909,288
New Center Asset Trust . . . . . . . . . . . . . . . . . 6.14 1/20/95 10,000,000 9,968,017
PREFCO . . . . . . . . . . . . . . . . . . . . . . . . . 6.03 1/18/95 9,000,000 8,974,713
Rincon Securities Inc. (LOC Trust Co. of Georgia) . . . . 6.14 1/10/95 8,175,000 8,162,615
Santander Finance Inc. (Delaware) . . . . . . . . . . . . 5.70 2/14/95 9,000,000 8,938,125
UBS Finance Inc. (Delaware) . . . . . . . . . . . . . . . 5.74 1/3/95 9,000,000 8,997,170
-----------

TOTAL COMMERCIAL PAPER (cost $92,531,016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,531,016
-----------

REPURCHASE AGREEMENTS -- 14.0%
Donaldson, Lufkin & Jenrette Securities Corp.
dated 12/30/94 (proceeds at maturity $37,863,700)
collateralized by $37,816,000 U.S. Treasury
Note, 4.75%, 2/15/97 (cost $37,839,000) (note 3) . . . 5.96 1/3/95 37,839,000 37,839,000
-----------

U.S. GOVERNMENT AGENCY OBLIGATIONS -- 29.9%
Federal Farm Credit Bank Discount Note . . . . . . . . . 5.81 1/6/95 30,000,000 29,976,124
Federal National Mortgage Assn. Variable Rate Note . . . 6.15 3/14/95* 15,000,000 15,000,000
Student Loan Marketing Assn. Variable Rate Note . . . . . 5.89 1/4/95* 14,000,000 14,000,000
Student Loan Marketing Assn. Variable Rate Note . . . . . 6.07 1/4/95* 10,000,000 10,048,338
Tennessee Valley Authority Discount Note . . . . . . . . 5.83 1/9/95 12,000,000 11,984,667
-----------

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (cost $81,009,129) . . . . . . . . . . . . . . . . . . . . . . 81,009,129
-----------
</TABLE>

6
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED MATURITY PRINCIPAL VALUE
YIELD DATE AMOUNT (NOTE 2A)
---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
VARIABLE COUPON RENEWABLE NOTES -- 10.9%
Adesa Funding Corp. (LOC Banc One) . . . . . . . . . . . 6.28% 1/5/95* $ 3,524,000 $ 3,524,000
Banc One Texas NA . . . . . . . . . . . . . . . . . . . . 5.72 1/3/95* 10,000,000 10,000,000
Citibank Money Market Credit Card Trust . . . . . . . . 6.31 1/10/95* 10,909,090 10,909,090
Society Bank NA . . . . . . . . . . . . . . . . . . . . . 5.67 1/3/95* 5,000,000 4,998,845
------------

TOTAL VARIABLE COUPON RENEWABLE NOTES (cost $29,431,935) . . . . . . . . . . . . . . . . . . 29,431,935
------------

TOTAL INVESTMENTS -- 100.3% (cost $271,811,092)** . . . . . . . . . . . . . . . . . . . . . . 271,811,092
------------

OTHER ASSETS AND LIABILITIES -- (0.3)%
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,466
Interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,283
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,124,536)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,159)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (167,346)
------------
(806,292)
------------
NET ASSETS -- 100.0%
Applicable to 271,004,800 shares of $.001 par value Capital Stock outstanding;
5,000,000,000 shares authorized (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . $271,004,800
============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>
* Date of next interest rate change.

** Cost for federal income tax purposes.

ABBREVIATIONS USED IN THE STATEMENT:

LOC Letter of Credit
</TABLE>

See notes to financial statements.

7
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
TAX-FREE PORTFOLIO
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* SHORT-TERM MUNICIPAL SECURITIES -- 99.6% AMOUNT (NOTE 2A)
- ------- ------------ ------------
<S> <C> <C> <C>
ALASKA -- 2.4%
VMIG-1 Alaska Housing Finance Corp. General Mortgage Revenue Series 1991-A
VRDN, 5.75%, 6/1/26 . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000,000 $ 4,000,000
------------
ARIZONA -- 10.1%
A-1 Apache County Industrial Development Revenue Tuscon Electric Co.
Springerville Project VRDN, 5.75%, 12/15/18 . . . . . . . . . . . . . 1,800,000 1,800,000
A-1+ Apache County Industrial Development Revenue Tuscon Electric Co.
Springerville Project Series 1985-A VRDN, 5.625%, 12/1/20 . . . . . . 9,200,000 9,200,000
A-1+ Maricopa County Pollution Control Revenue Refunding Arizona Public
Service Palo Verde Project, Series C VRDN, 5.85%, 5/1/29 . . . . . . 1,800,000 1,800,000
A-1+ Phoenix General Obligation Series 1994-2 VRDN, 5.85%, 6/1/18 . . . . . . 1,100,000 1,100,000
VMIG-1 Pima County Industrial Development Authority Tucson Electric Power Co. .
Series 1982-A VRDN, 5.625%, 7/1/22 . . . . . . . . . . . . . . . . . 100,000 100,000
A-1+ Salt River Project Electric System Revenue Refunding Series 1992-A TOB,
5.75%, 1/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000
------------
TOTAL ARIZONA . . . . . . . . . . . . . . . . . . . . . . . . . 17,000,000
------------
ARKANSAS -- 0.0%
VMIG-1 Jonesboro Industrial Revenue Bond Farr Co. Project VRDN, 6.25%, 12/1/01. 70,000 70,000
------------
CALIFORNIA -- 5.5%
SP-1+ California State RAN, 5%, 6/28/95 . . . . . . . . . . . . . . . . . . . 750,000 752,869
A-1 Lancaster Multi-Family Housing Willows Project Green Meadows VRDN,
6.125%, 2/1/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
SP-1+ Los Angeles County TRAN, 4.5%, 6/30/95 . . . . . . . . . . . . . . . . . 5,000,000 5,013,774
SP-1+ Los Angeles County Unified School District TRAN, 4.5%, 7/10/95 . . . . . 1,000,000 1,004,519
A-1 Riverside Multi-Family Housing Revenue Countrywood Apartments
Series 1985-D VRDN, 6.125%, 5/1/05 . . . . . . . . . . . . . . . . . 1,500,000 1,500,000
------------
TOTAL CALIFORNIA . . . . . . . . . . . . . . . . . . . . . . . 9,271,162
------------
COLORADO -- 1.4%
A-1+ Clear Creek County Colorado Counties Financing Program Series 1988
VRDN, 5%, 6/1/98 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400,000 2,400,000
------------

DISTRICT OF COLUMBIA -- 1.0%
A-1+ District of Columbia General Obligation VRDN, 5.4%, 10/1/07 . . . . . . 900,000 900,000
A-1+ District of Columbia General Obligation VRDN, 5.4%, 10/1/07 . . . . . . 800,000 800,000
------------
TOTAL DISTRICT OF COLUMBIA . . . . . . . . . . . . . . . . . . 1,700,000
------------
FLORIDA -- 5.2%
VMIG-1 Florida Local Government Finance Authority Series 1985 VRDN,
5.5%, 9/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120,000 1,120,000
A-1+ Jacksonville Pollution Control Revenue Florida Power & Light Series 1994
TECP, 3.9%, 2/14/95 . . . . . . . . . . . . . . . . . . . . . . . . . 2,100,000 2,100,000
VMIG-1 University of Northern Florida Capital Improvement Revenue VRDN,
5.5%, 11/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500,000 5,500,000
------------
TOTAL FLORIDA . . . . . . . . . . . . . . . . . . . . . . . . 8,720,000
------------
</TABLE>

8
<PAGE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2A)
- ------- ------------ ------------
<S> <C> <C> <C>
GEORGIA -- 6.4%
A-1+ DeKalb Private Hospital Authority Egleston Children's Hospital at Emory
University Series 1984-B VRDN, 5.4%, 3/1/24 . . . . . . . . . . . . . . $ 1,400,000 $ 1,400,000
A-1+ Gordon County Industrial Development Authority Sara Lee Corp. VRDN,
5.7%, 3/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600,000 4,600,000
SS&C Savannah Downtown Development Authority Series 1985 VRDN,
6%, 5/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800,000 4,800,000
------------
TOTAL GEORGIA . . . . . . . . . . . . . . . . . . . . . . . . . . 10,800,000
------------
IDAHO -- 0.6%
SP-1+ Idaho General Obligation TAN, 4.5%, 6/29/95 . . . . . . . . . . . . . . . 1,000,000 1,003,211
------------

ILLINOIS -- 10.9%
P-1 Illinois Development Finance Authority Marriott Corporation Oakbrook
Terrace Project Series 1984 VRDN, 5%, 12/1/14 . . . . . . . . . . . . . 4,700,000 4,700,000
VMIG-1 Illinois Educational Facilities Authority University Pooled Finance
Program VRDN FGIC Insured, 5.6%, 12/1/05 . . . . . . . . . . . . . . . 5,990,000 5,990,000
VMIG-1 Illinois Educational Facilities Authority Northwestern University
Revenue VRDN, 5.6%, 3/1/28 . . . . . . . . . . . . . . . . . . . . . . 1,200,000 1,200,000
A-1+ Illinois Health Facilities Authority Highland Park Hospital Revenue
Series 1991-B OP, 3.75%, 6/1/95 . . . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000
VMIG-1 Illinois Health Facilities Authority LaGrange Memorial Health
System Series 1990 VRDN, 6%, 12/1/16 . . . . . . . . . . . . . . . . . 4,400,000 4,400,000
------------
TOTAL ILLINOIS . . . . . . . . . . . . . . . . . . . . . . . . . 18,290,000
------------
INDIANA -- 1.4%
MIG-1 Jasper County Northern Indiana Public Service Series 1988 TECP,
3.65%, 1/13/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400,000 2,400,000
------------
LOUISIANA -- 0.2%
A-1+ Louisiana Recovery District Sales Tax Revenue Series 1988 VRDN
FGIC Insured, 5.85%, 7/1/97 . . . . . . . . . . . . . . . . . . . . . . 300,000 300,000
------------
MASSACHUSETTS -- 2.7%
A-1+ Commonwealth of Massachusetts Bay Transportation Authority
Series 1984-A OP, 3.75%, 3/1/95 . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
SP-1 Commonwealth of Massachusetts Bay Transportation Authority
Series 1994-A OP, 5%, 9/8/95 . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,514,469
SS&C Commonwealth of Massachusetts General Obligation, 5.5%, 11/1/95 . . . . . 1,000,000 1,006,396
------------
TOTAL MASSACHUSETTS . . . . . . . . . . . . . . . . . . . . . . . 4,520,865
------------
MISSOURI -- 3.3%
A-1+ Missouri State Environmental Improvement and Energy Resource
Authority OP, 3.75%, 6/1/95 . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000
VMIG-1 Missouri State Health and Educational Facilities Health Facilities Revenue
Sisters of Mercy VRDN, 5.2%, 6/1/19 . . . . . . . . . . . . . . . . . . 2,500,000 2,500,000
------------
TOTAL MISSOURI . . . . . . . . . . . . . . . . . . . . . . . . . 5,500,000
------------

</TABLE>

9
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
TAX-FREE PORTFOLIO (CONTINUED)

<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2A)
- ------- ------------ ------------
<S> <C> <C> <C>
NORTH CAROLINA -- 1.4%
A-1+ North Carolina Educational Facilities Duke University Series 1991-B VRDN,
5.45%, 12/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,300,000 $ 2,300,000
------------
OHIO -- 1.8%
MIG-1 Ohio Water Development Authority Cleveland Electric TECP FGIC Insured,
4.25%, 1/13/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000
------------
PENNSYLVANIA -- 9.5%
SS&C Elk County Stackpole Corporation Series 1989 VRDN, 4.245%, 3/1/04. . . . . 1,000,000 1,000,000
A-1 Emmaus General Authority Local Government Revenue Bond Pool
Series 1985-D7 VRDN, 5.7%, 3/1/24 . . . . . . . . . . . . . . . . . . . 2,600,000 2,600,000
A-1+ Emmaus General Authority Local Government Revenue Bond Pool
Series F-4 VRDN, 5.7%, 3/1/24 . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000
A-1 Emmaus General Authority Local Government Revenue Bond Pool
Series G-4 VRDN, 5.7%, 3/1/24 . . . . . . . . . . . . . . . . . . . . . 2,900,000 2,900,000
SP-1+ Pennsylvania TAN, 4.75%, 6/30/95 . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,505,752
SP-1+ Philadelphia School District TRAN, 4.75%, 6/30/95 . . . . . . . . . . . . 4,900,000 4,914,853
------------
TOTAL PENNSYLVANIA . . . . . . . . . . . . . . . . . . . . . . . 15,920,605
------------
TENNESSEE -- 6.0%
VMIG-1 Franklin Industrial Development Revenue Franklin Oaks Apartments VRDN,
6%, 12/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,000,000
SP-1+ Tennessee Local Development Authority BAN, 4.5%, 6/1/95 . . . . . . . . . 5,000,000 5,013,685
------------
TOTAL TENNESSEE . . . . . . . . . . . . . . . . . . . . . . . . . 10,013,685
------------
TEXAS -- 14.0%
P-1 Angelina & Neches River Authority Solid Waste Disposal Series 1984-B
VRDN, 6%, 5/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,000 1,300,000
VMIG-1 Harris County Texas Health Authority Children's Hospital VRDN,
5.75%, 10/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,500,000
A-1+ Harris County Texas Health Facilities Authority St. Luke's Episcopal
Hospital Series 1985-D VRDN, 5.85%, 2/15/16 . . . . . . . . . . . . . . 3,200,000 3,200,000
A-1+ Harris County Texas Toll Road Subordinate Lien VRDN, 5.75%, 8/1/20 . . . . 3,500,000 3,500,000
MIG-1 North Central Texas Health Authority Methodist Hospital of Dallas TECP,
3.7%, 2/28/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 1,200,000
A-1 North Central Texas Health Development Corp. Methodist
Hospital of Dallas VRDN BIG Insured, 5.85%, 10/1/15 . . . . . . . . . 6,700,000 6,700,000
A-1+ North Central Texas Health Development Corp. Presbyterian Medical Center
VRDN MBIA Insured, 5.95%, 12/1/15 . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
A-1+ San Antonio Water Systems Revenue TECP, 3.9%, 2/14/95 . . . . . . . . . . 1,000,000 1,000,000
SP-1+ Texas Revenue Anticipation Note, 5%, 8/31/95 . . . . . . . . . . . . . . . 4,000,000 4,023,666
------------
TOTAL TEXAS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,423,666
------------

UTAH -- 5.0%
AAA Intermountain Power Agency Utah Power Revenue Refunding Prerefunding
Series-I, 8.6%, 7/1/95 . . . . . . . . . . . . . . . . . . . . . . . . 1,135,000 1,174,218
A-1+ Salt Lake City Pooled Hospital Financing Program TECP, 3.85%, 1/13/95 . . 2,000,000 2,000,000

</TABLE>

10
<PAGE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2A)
- ------- ------------ ------------
<S> <C> <C> <C>
VMIG-1 Utah Housing Finance Agency Single-Family Mortgage Bond
Series 1993-D VRDN, 5.7%, 7/1/16 . . . . . . . . . . . . . . . . . . . $ 2,665,000 $ 2,665,000
VMIG-1 Utah Housing Finance Agency Single-Family Mortgage Series 1993-C
VRDN, 5.7%, 1/1/27 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,500,000
------------
TOTAL UTAH . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,339,218
------------
VERMONT -- 2.3%
SS&C Vermont Industrial Development Authority Mount Snow Project VRDN,
4.245%, 4/1/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 980,000 980,000
VMIG-1 Vermont Student Assistance Corporation VRDN, 3.75%, 1/1/04 . . . . . . . . 2,900,000 2,900,000
------------
TOTAL VERMONT . . . . . . . . . . . . . . . . . . . . . . . . . . 3,880,000
------------
VIRGINIA -- 1.2%
MIG-1 Chesterfield County Industrial Development Authority Electric Power
Company TECP, 3.6%, 1/18/95 . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000
------------
WASHINGTON -- 4.9%
VMIG-1 Washington Health Care Facilities Authority Fred Hutchinson Cancer
Research Center Series-B VRDN, 6%, 1/1/18 . . . . . . . . . . . . . . . 1,710,000 1,710,000
A-1+ Washington Health Care Facilities Authority Series 1985-E VRDN,
6%. 10/1/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300,000 2,300,000
A-1+ Washington Public Power Supply Authority Project #1 and #3 VRDN,
5.6%, 7/1/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
VMIG-1 Washington Health Care Facilities Authority Fred Hutchinson Cancer
Research Center Series-A VRDN, 6%, 1/1/18 . . . . . . . . . . . . . . . 2,210,000 2,210,000
VMIG-1 Washington Health Care Facilities Authority Fred Hutchinson Cancer
Research Center Series-C VRDN, 6%, 1/1/18 . . . . . . . . . . . . . . . 1,000,000 1,000,000
------------
TOTAL WASHINGTON . . . . . . . . . . . . . . . . . . . . . . . . 8,220,000
------------
WEST VIRGINIA -- 0.6%
A-1+ Marshall County Pollution Control Revenue British Petroleum VRDN,
5.85%, 12/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
------------
WISCONSIN -- 1.8%
A-1+ Wausau Pollution Control Revenue Minnesota Mining and
Manufacturing Series 1982 VRDN, 5.5%, 8/1/17 . . . . . . . . . . . . . 500,000 500,000
SP-1+ Wisconsin General Obligation, 4.5%, 6/15/95 . . . . . . . . . . . . . . . 1,700,000 1,704,050
A-1+ Wisconsin State Health Care Facilities Authority Franciscan Memorial
Hospital Series-A1 VRDN, 5.4%, 1/1/16 . . . . . . . . . . . . . . . . . 900,000 900,000
------------
TOTAL WISCONSIN . . . . . . . . . . . . . . . . . . . . . . . . . 3,104,050
------------
TOTAL INVESTMENT PORTFOLIO -- 99.6% (Cost $167,176,462)** . . . . . . . . 167,176,462
------------
</TABLE>

11
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
TAX-FREE PORTFOLIO (CONTINUED)

<CAPTION>
VALUE
(NOTE 2A)
------------
<S> <C>
OTHER ASSETS AND LIABILITIES -- 0.4%
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,189
Receivable for Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,191,343
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (529,142)
Management fee payable (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,126)
Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115,330)
------------
680,934
------------
NET ASSETS -- 100.0%
Applicable to 167,857,396 shares of $.001 par value Capital Stock outstanding;
2,000,000,000 shares authorized (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . $167,857,396
============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
=====
<FN>

**Cost for federal income tax purposes.
</TABLE>

<TABLE>
- --------------------------------------------------------------------------------------------------------------
* CREDIT RATINGS (UNAUDITED) SHOWN ARE EITHER BY MOODY'S INVESTORS SERVICE, INC., STANDARD & POOR'S
CORPORATION OR SCUDDER:
<CAPTION>
MOODY'S STANDARD & POOR'S
<S> <C> <C>
P-1 A-1/A-1+ Commercial paper of the highest quality.

Aaa AAA Judged to be the best quality and carry the smallest amount of investment risk.

Aa AA Judged to be of high quality by all standards. Moody's applies numerical
modifiers 1, 2, and 3 in each rating classification. The modifier 1 indicates
that the security ranks in the higher end of its rating category, and the
modifier 3 indicates that the security ranks in the lower end of its rating
category. Standard & Poor's assigns a corresponding + or - to indicate the
issue's ranking in its associated category.

MIG-1 SP-1/SP-1+ Short-term tax-exempt instrument of the best quality with strong protection.

VMIG-1 Short-term tax-exempt variable rate demand instrument of the best quality
with strong protection.
</TABLE>

<TABLE>
ABBREVIATIONS USED IN THE STATEMENT:
<S> <C> <C> <C>
TECP Tax Exempt Commercial Paper VRDN Variable Rate Demand Note

BAN Bond Anticipation Note SS&C These securities are not rated by either
Moody's or Standard & Poor's. Scudder has
determined that these securities are of
MP, OP Security with a "mandatory or optional comparable quality to rated acceptable
put" feature; date shown represents the notes on a cash flow basis and are of
earliest date the security may be redeemed appropriate credit for the standards
or the interest rate will be reset if the required by the Fund's investment
security is not redeemed objective.

RAN Revenue Anticipation Note TOB Tender Option Bond is a security with a
periodic "put feature"

TAN Tax Anticipation Note TRAN Tax Revenue Anticipation Note
</TABLE>

See notes to financial statements.

12
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994

<CAPTION>
GOVERNMENT FEDERAL CASH TAX-FREE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income . . . . . . . . . . . . . . $ 7,589,243 $ 419,829 $16,170,864 $ 4,262,670
----------- ------------ ----------- ------------
EXPENSES (note 2c):
Management fee (note 4) . . . . . . . . . . 272,538 3,068 580,110 212,854
Shareholder services (note 4) . . . . . . . 21,917 1,518 43,210 13,796
Directors' fees and expenses (note 4) . . . 39,358 21,515 45,490 43,201
Custodian and Accounting fees (note 4) . . 74,334 11,325 79,450 59,355
Professional services . . . . . . . . . . . 88,958 14,569 145,068 75,312
Reports to shareholders . . . . . . . . . . 2,877 240 6,355 2,166
Registration fees . . . . . . . . . . . . . 2,651 1,995 5,000 2,394
Miscellaneous . . . . . . . . . . . . . . . 12,776 3,922 23,208 6,352
----------- ------------ ----------- ------------

Total expenses before reimbursement . . 515,409 58,152 927,891 415,430

Reimbursement from Manager (note 4) . . . . -- (702) -- (32,600)
----------- ------------ ----------- ------------

Net expenses . . . . . . . . . . . . . . 515,409 57,450 927,891 382,830
----------- ------------ ----------- ------------

NET INVESTMENT INCOME AND INCREASE IN NET
ASSETS FROM OPERATIONS . . . . . . . . . $ 7,073,834 $ 362,379 $15,242,973 $ 3,879,840
=========== ============ =========== ============
</TABLE>

See notes to financial statements.

13
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
GOVERNMENT PORTFOLIO
--------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:

Net investment income and increase in net assets
from operations . . . . . . . . . . . . . . . . . . . . . $ 7,073,834 $ 5,748,512
Dividends (notes 2b and 2d) . . . . . . . . . . . . . . . . . (7,073,834) (5,748,512)
-------------- --------------

-- --
-------------- --------------
CAPITAL STOCK TRANSACTIONS (note 5):
Proceeds from sale of shares . . . . . . . . . . . . . . . . 803,305,494 981,057,356
Net asset value of shares issued in reinvestment of dividends 1,137,637 617,320
-------------- --------------
804,443,131 981,674,676
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . (882,511,092) (1,032,572,717)
-------------- --------------

Increase (decrease) in net assets from Capital Stock
transactions . . . . . . . . . . . . . . . . . . . . . . . (78,067,961) (50,898,041)
-------------- --------------

Total increase (decrease) in net assets . . . . . . . . . . . . (78,067,961) (50,898,041)

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . 195,932,081 246,830,122
-------------- --------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . $ 117,864,120 $ 195,932,081
============== ==============
</TABLE>

See notes to financial statements.

14
<PAGE>
<TABLE>
FEDERAL PORTFOLIO CASH PORTFOLIO
--------------------------- -----------------------------
1994 1993 1994 1993
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:

Net investment income and increase in net assets
from operations . . . . . . . . . . . . . . . . . . . . . $ 362,379 $ 186,015 $ 15,242,973 $ 19,181,456
Dividends (notes 2b and 2d) . . . . . . . . . . . . . . . . . (362,379) (186,015) (15,242,973) (19,181,456)
------------ ----------- -------------- --------------

-- -- -- --
------------ ----------- -------------- --------------

CAPITAL STOCK TRANSACTIONS (note 5):
Proceeds from sale of shares . . . . . . . . . . . . . . . . 49,187,822 33,535,898 1,756,715,344 3,526,151,850
Net asset value of shares issued in reinvestment of dividends 344,539 187,206 2,606,116 2,545,413
------------ ----------- -------------- --------------
49,532,361 33,723,104 1,759,321,460 3,528,697,263

Cost of shares redeemed . . . . . . . . . . . . . . . . . . . (46,094,573) (35,085,412) (1,956,022,378) (3,723,052,911)
------------ ----------- -------------- --------------

Increase (decrease) in net assets from Capital Stock
transactions . . . . . . . . . . . . . . . . . . . . . . . 3,437,788 (1,362,308) (196,700,918) (194,355,648)
------------ ----------- -------------- --------------
Total increase (decrease) in net assets . . . . . . . . . . . . 3,437,788 (1,362,308) (196,700,918) (194,355,648)

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . 7,617,181 8,979,489 467,705,718 662,061,366

------------ ----------- -------------- --------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . $ 11,054,969 $ 7,617,181 $ 271,004,800 $ 467,705,718
============ =========== ============== ==============
</TABLE>

<TABLE>
TAX-FREE PORTFOLIO
-------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:

Net investment income and increase in net assets
from operations . . . . . . . . . . . . . . . . . . . . . $ 3,879,840 $ 2,754,175
Dividends (notes 2b and 2d) . . . . . . . . . . . . . . . . . (3,879,840) (2,754,175)
-------------- --------------

-- --
-------------- --------------

CAPITAL STOCK TRANSACTIONS (note 5):
Proceeds from sale of shares . . . . . . . . . . . . . . . . 908,058,572 697,636,873
Net asset value of shares issued in reinvestment of dividends 1,407,961 721,041
-------------- --------------
909,466,533 698,357,914

Cost of shares redeemed . . . . . . . . . . . . . . . . . . . (866,656,883) (669,756,384)
-------------- --------------

Increase (decrease) in net assets from Capital Stock
transactions . . . . . . . . . . . . . . . . . . . . . . . 42,809,650 28,601,530
-------------- --------------
Total increase (decrease) in net assets . . . . . . . . . . . . 42,809,650 28,601,530

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . 125,047,746 96,446,216
-------------- --------------

End of period . . . . . . . . . . . . . . . . . . . . . . . . $ 167,857,396 $ 125,047,746
============== ==============
See notes to financial statements.
</TABLE>

15
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
FINANCIAL HIGHLIGHTS

THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR AND OTHER PERFORMANCE INFORMATION
DERIVED FROM THE FINANCIAL STATEMENTS.

<CAPTION>
RATIO OF RATIO OF NET
NET ASSET NET ASSET OPERATING INVESTMENT NET ASSETS
VALUE, AT NET VALUE, AT EXPENSES INCOME END OF
BEGINNING INVESTMENT DIVIDENDS END TOTAL TO AVERAGE TO AVERAGE PERIOD
PERIOD OF PERIOD INCOME PAID OF PERIOD RETURN NET ASSETS NET ASSET (MILLIONS)
- ------------------------------- --------- ---------- -------- --------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT PORTFOLIO
Year ended 12/31/94 . . . . $1.00 $.040 $(.040) $1.00 4.09% 0.28% 3.89% $118
Year ended 12/31/93 . . . . 1.00 .030 (.030) 1.00 3.01 0.26 2.97 196
Year ended 12/31/92 . . . . 1.00 .037 (.037) 1.00 3.74 0.24 3.69 247
Year ended 12/31/91 . . . . 1.00 .057 (.057) 1.00 5.94 0.26 5.86 192
Year ended 12/31/90 . . . . 1.00 .079 (.079) 1.00 8.19 0.31 7.89 174

FEDERAL PORTFOLIO (a) (b) (c)
Year ended 12/31/94 . . . . 1.00 .034 (.034) 1.00 3.42 0.54 3.39 11
Year ended 12/31/93 . . . . 1.00 .027 (.027) 1.00 2.74 0.23 2.73 8
Year ended 12/31/92 . . . . 1.00 .032 (.032) 1.00 3.23 0.32 3.13 9
Year ended 12/31/91 . . . . 1.00 .054 (.054) 1.00 5.55 0.30 5.51 11
Year ended 12/31/90 . . . . 1.00 .078 (.078) 1.00 8.04 0.33 7.79 25

CASH PORTFOLIO
Year ended 12/31/94 . . . . 1.00 .041 (.041) 1.00 4.13 0.24 3.94 271
Year ended 12/31/93 . . . . 1.00 .031 (.031) 1.00 3.16 0.22 3.12 468
Year ended 12/31/92 . . . . 1.00 .038 (.038) 1.00 3.88 0.25 3.66 662
Year ended 12/31/91 . . . . 1.00 .059 (.059) 1.00 6.12 0.25 5.89 308
Year ended 12/31/90 . . . . 1.00 .080 (.080) 1.00 8.27 0.32 8.02 152

TAX-FREE PORTFOLIO
Year ended 12/31/94 (a) (c) 1.00 .027 (.027) 1.00 2.74 0.27 2.73 168
Year ended 12/31/93 . . . . 1.00 .023 (.023) 1.00 2.32 0.29 2.30 125
Year ended 12/31/92 . . . . 1.00 .029 (.029) 1.00 2.92 0.31 2.82 96
Year ended 12/31/91 . . . . 1.00 .045 (.045) 1.00 4.65 0.36 4.55 75
Year ended 12/31/90 . . . . 1.00 .058 (.058) 1.00 5.96 0.32 5.79 88

<FN>
(a) Had the investment manager not voluntarily waived all or a portion of the management fee, and not reimbursed
certain expenses, the expense ratios would have been: 0.77% for the year ended December 31, 1994, 0.83%, 0.69%,
0.67% and 0.48% for the years ended December 31, 1993, 1992, 1991 and 1990, respectively for the Federal Portfolio,
and 0.29% for the year ended December 31, 1994 for the Tax-Free Portfolio.

(b) Name changed from Treasury Portfolio effective May 1, 1990.

</TABLE>

16
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Scudder Institutional Fund, Inc. (the "Fund") is an open-end diversified
management investment company which currently has four active money market
investment portfolios: the Government Portfolio, Federal Portfolio, Cash
Portfolio and Tax-Free Portfolio (collectively the "Portfolios").

2. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies followed by the Fund are:

(a) Security Valuation--Each of the Portfolios values its investments using
the amortized cost method, which involves initially valuing an investment at its
cost and thereafter assuming a constant amortization to maturity of any premium
or discount. This method results in a value approximating market.

(b) Federal Income Taxes--The Fund's policy is to qualify each Portfolio as
a regulated investment company under the Internal Revenue Code and to distribute
all of its taxable and tax-exempt income, including any realized net capital
gains, to shareholders. Therefore, no Federal income tax provision is required.

(c) Allocation of Expenses--Expenses not directly chargeable to a specific
Portfolio are allocated primarily on the basis of relative net assets.

(d) Dividends--Dividends from net investment income are declared each
business day to shareholders of record that day and paid on the first business
day of the following month.

(e) Other--Investment transactions are recorded on trade dates. Interest
income, including the accretion or amortization of discount or premium, is
recorded on the accrual basis. Discounts or premiums on securities purchased are
accreted or amortized, respectively, on a straight line basis over the life of
the respective securities. Distributions to shareholders are recorded on the
ex-dividend date.

The Cash Portfolio must have at least 25% of its investment portfolio
invested in bankers' acceptances, certificates of deposits, commercial paper,
fixed time deposits or other obligations of domestic and foreign banks.

3. REPURCHASE AGREEMENTS

It is the Fund's policy to obtain possession, through its custodian, of the
securities underlying each repurchase agreement to which it is a party, either
through physical delivery or book entry transfer in the Federal Reserve System
or Participants Trust Company. Payment by the Fund in respect of a repurchase
agreement is authorized only when proper delivery of the underlying securities
is made to the Fund's custodian. The Fund's investment manager values such
underlying securities each business day using quotations obtained from a
reputable, independent source. If the Fund's investment manager determines that
the value of such underlying securities (including accrued interest thereon)
does not at least equal the value of each repurchase agreement (including
accrued interest thereon) to which such securities are subject, it will ask for
additional securities to be delivered to the Fund's custodian. In connection
with each repurchase agreement transaction, if the seller defaults and the value
of the collateral declines or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.

17
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

The investment advisory agreements between Scudder, Stevens & Clark, Inc.
("Scudder"), the Fund's investment manager, and the Fund on behalf of each
Portfolio provide for a management fee payable each month, based upon the
average daily value of each Portfolio's net assets, at annual rates of 0.15%.
For the year ended December 31, 1994, Scudder did not impose fees amounting to
$12,962 for the Federal Portfolio. In addition, Scudder reimbursed a portion of
expenses amounting to $32,600 for the Tax-Free Portfolio; and $702 for the
Federal Portfolio.

Under certain state regulations, if the total expenses of any of the
Portfolios, exclusive of taxes, interest, and extraordinary expenses exceed
certain limitations, the Fund's investment adviser is required to reimburse the
Portfolio for such excess up to the amount of management fees. During the year
ended December 31, 1994, no such reimbursement was required.

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of Scudder,
is the Fund's shareholders service, transfer and dividend disbursing agent. For
the year ended December 31, 1994, the amount charged to the Fund by SSC
aggregated $18,928 for the Government Portfolio, $1,355 for the Federal
Portfolio, $39,639 for the Cash Portfolio, and $11,780 for the Tax-Free
Portfolio, of which $2,118, $118, $3,064, and $331 respectively remain unpaid at
December 31, 1994.

Effective August 1, 1994 for the Government Portfolio, Federal Portfolio,
and Cash Portfolio, and August 18, 1994 for Tax Free Portfolio, Scudder Fund
Accounting Corporation ("SFAC"), a wholly-owned subsidiary of Scudder, assumed
responsibility for determining the daily net asset value per share and
maintaining the portfolio and general accounting records for the Portfolios. For
the year ended December 31, 1994, the amount charged to the Portfolios by SFAC
aggregated $13,451 for the Government Portfolio, $1,203 for the Federal
Portfolio, $19,023 for the Cash Portfolio, and $15,731 for the Tax-Free
Portfolio, of which $2,598, $256, $3,375, and $3,684, respectively, remain
unpaid at December 31, 1994. For the year ended December 31, 1994 for the
Federal Portfolio, SFAC did not impose fees amounting to $11,297.

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 all active Portfolios comprising the Fund aggregates
$390,447, an applicable portion of which is included in accrued expenses of each
of the Portfolios.

5. CAPITAL STOCK

At December 31, 1994, the Fund had 25,000,000,000 shares of $.001 par value
Capital Stock authorized, of which 5,000,000,000 shares each have been
designated for the Government Portfolio, Federal Portfolio and Cash Portfolio,
and 2,000,000,000 shares have been designated for the Tax-Free Portfolio. Net
paid in capital in excess of par value was $117,746,256 for the Government
Portfolio, $11,043,914 for the Federal Portfolio, $270,733,795 for the Cash
Portfolio and $167,689,539 for the Tax-Free Portfolio. At December 31, 1994, one
holder of record of the Government Portfolio held approximately 51% of the
outstanding shares and one holder of the Federal Portfolio held approximately
53% of the outstanding shares.

18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
SCUDDER INSTITUTIONAL FUND, INC.

In our opinion, the accompanying statements of net assets, 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
the Institutional Government Portfolio, Institutional Federal Portfolio,
Institutional Cash Portfolio, and Institutional Tax-Free Portfolio (each a
separate portfolio of Scudder Institutional Fund, Inc., hereafter referred to as
the "Fund") at December 31, 1994, the results of each of their operations for
the year then ended, the changes in each of their net assets for each of the two
years in the period then ended and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted accounting standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial presentation. We believe that our audits, which included confirmation
of securities at December 31, 1994 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
February 21, 1995

- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1994 DIVIDENDS

The total amount of dividends declared in 1994 by each of the Federal
Portfolio, Government Portfolio and Cash Portfolio of Scudder Institutional
Fund, Inc. is taxable as ordinary dividend income for Federal income tax
purposes. None of this amount qualifies for the dividends received deduction
available to corporations.

All of the dividends from the Tax-Free Portfolio declared in 1994 are
exempt from Federal income tax. However, in accordance with the Internal
Revenue Code, you are required to report them on your 1994 Federal income tax
return.

Although dividend income from the Tax-Free Portfolio is exempt from
Federal taxation, it may not be exempt from state or local taxation. You should
consult your tax advisor as to the state and local tax status of the dividends
you received.
- --------------------------------------------------------------------------------

19
<PAGE>
Institutional Government Portfolio
Institutional Federal Portfolio
Institutional Cash Portfolio
Institutional Tax-Free Portfolio
345 Park Avenue, New York, New York 10154
(800) 854-8525

Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110

Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 2038
Boston, Massachusetts 02106

Legal Counsel
Sullivan & Cromwell
New York, New York

The Portfolios are neither insured nor ANNUAL REPORT
guaranteed by the U.S. Government. Each DECEMBER 31, 1994
Portfolio intends to maintain a net asset
value per share of $1.00 but there is no
assurance that it will be able to do so.

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.