Filed electronically with the Securities and Exchange
Commission on April 30, 1996
File No. 33-2648
File No. 811-4555
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----
Post-Effective Amendment No. 16
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 14
----
Scudder Institutional Fund, Inc.
--------------------------------
(Exact name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
-----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
--------------
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
345 Park Avenue, New York, NY 10154
-----------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b),
----
X on May 1, 1996 pursuant to paragraph (b),
----
60 days after filing pursuant to paragraph (a)(1),
----
on pursuant to paragraph (a)(1)
---- -------------------
75 days after filing pursuant to paragraph (a)(2)
----
on pursuant to paragraph (a)(2) of Rule 485.
---- -------------------
The Registrant previously filed a declaration registering an indefinite amount
of securities pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. The Registrant intends to file the notice required by Rule 24f-2 for
its most recent fiscal year on or about February 29, 1996.
<PAGE>
Scudder Institutional Fund, Inc.
Calculation of Registration Fee under the Securities Act of 1933
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Share (1) Price (1,2) Fee (2)
---------- ---------- ---------- ---------- ----------
Shares of Capital
Stock, $.001
par value:
Cash Portfolio 21,866,671 $1.00 $290,000 $100.00
Government 38,235,759 $1.00 $290,000 $100.00
Portfolio
Tax-Free Portfolio 89,098,083 $1.00 $290,000 $100.00
--------
$300.00
This Post-Effective Amendment No. 16 seeks to register 21,866,671,
38,235,759 and 89,098,083 additional shares of Cash Portfolio, Government
Portfolio and Tax-Free Portfolio, respectively, under the Securities Act of
1933.
(1) Computed under Rule 457(d) on the basis of the net asset values
per share of registrant's shares of Cash Portfolio, Government
Portfolio and Tax-Free Portfolio at the close of business on April
17, 1996. The above calculation shall not be deemed a
representation as to the actual offering price.
(2) Calculated pursuant to Rule 24e-2 under the Investment Company Act
of 1940.
Cash Government Tax-Free
Portfolio Portfolio Portfolio
(a) Total number of shares
redeemed during
previous fiscal year 953,063,076 471,317,385 611,981,728
(b) Total number of shares
included in (a)
previously used under
Rule 24e-2 this fiscal
year
0 0 0
<PAGE>
Cash Government Tax-Free
Portfolio Portfolio Portfolio
(c) Total number of shares
included in (a)
previously used under
Rule 24f-2(c) this
fiscal year 931,486,405 433,371,626 523,173,645
(d) Total number of shares
included in (a) being
used to reduce maximum
aggregate offering
price in this
Post-Effective
Amendment 21,576,671 37,945,759 88,808,083
While no fee is required for the 21,576,671, 37,945,759 and 88,808,083
shares of Cash Portfolio, Government Portfolio and Tax-Free Portfolio,
respectively, the Registrant has elected to register for $300.00 an
additional 290,000 shares of each Portfolio.
<PAGE>
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
INSTITUTIONAL GOVERNMENT PORTFOLIO
INSTITUTIONAL FEDERAL PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Items Required by Form N-1A
---------------------------
PART A
- - ------
<TABLE>
<S> <C> <C>
Item No. Item Caption Prospectus Caption
- - -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
SUMMARY
3. Condensed Financial Information FINANCIAL HIGHLIGHTS
4. General Description of Registrant SUMMARY
INVESTMENT OBJECTIVES AND POLICIES
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
COMPANY ORGANIZATION
5. Management of the Fund SUMMARY
FINANCIAL HIGHLIGHTS
COMPANY ORGANIZATION--Investment Adviser, Transfer Agent
BACK COVER PAGE
5A. Management's Discussion of Fund NOT APPLICABLE
Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and Capital Gains Distributions, Taxes
COMPANY ORGANIZATION
BACK COVER PAGE
7. Purchase of Securities Being Offered TRANSACTION INFORMATION--Purchasing Shares, Share Price
COMPANY ORGANIZATION--Distributor
8. Redemption or Repurchase TRANSACTION INFORMATION--Redeeming Shares
9. Pending Legal Proceedings NOT APPLICABLE
</TABLE>
Cross Reference - Page 1
<PAGE>
INSTITUTIONAL GOVERNMENT PORTFOLIO
INSTITUTIONAL FEDERAL PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
(continued)
PART B
- - ------
<TABLE>
<S> <C> <C>
Caption in Statement of
Item No. Item Caption Additional Information
- - -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and COMPANY ORGANIZATION
History
13. Investment Objectives and THE PORTFOLIOS AND THEIR OBJECTIVES
Policies PORTFOLIO TRANSACTIONS
14. Management of the INVESTMENT ADVISER
Registrant DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and PORTFOLIO TRANSACTIONS
Other Practices
18. Capital Stock and Other COMPANY ORGANIZATION
Securities DIVIDENDS
19. Purchase, Redemption and PURCHASE OF SHARES
Pricing of Securities REDEMPTION OF SHARES
Being Offered NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 2
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Items Required by Form N-1A
---------------------------
PART A
- - ------
<TABLE>
<S> <C> <C>
Item No. Item Caption Prospectus Caption
- - -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial Information FINANCIAL HIGHLIGHTS
4. General Description of Registrant INVESTMENT OBJECTIVE AND POLICIES
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
COMPANY ORGANIZATION
5. Management of the Fund COMPANY ORGANIZATION--Investment Adviser, Transfer Agent, Experienced
Professional Management
BACK COVER PAGE
5A. Management's Discussion of Fund NOT APPLICABLE
Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and Capital Gains Distributions, Taxes
COMPANY ORGANIZATION
BACK COVER PAGE
7. Purchase of Securities Being Offered TRANSACTION INFORMATION--Purchasing Shares, Share Price
COMPANY ORGANIZATION--Distributor
8. Redemption or Repurchase TRANSACTION INFORMATION--Redeeming Shares
9. Pending Legal Proceedings NOT APPLICABLE
</TABLE>
Cross Reference - Page 3
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
(continued)
PART B
- - ------
<TABLE>
<S> <C> <C>
Caption in Statement of
Item No. Item Caption Additional Information
- - -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and COMPANY ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS
14. Management of the INVESTMENT ADVISER
Registrant DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and PORTFOLIO TRANSACTIONS
Other Practices
18. Capital Stock and Other COMPANY ORGANIZATION
Securities DIVIDENDS
19. Purchase, Redemption and PURCHASE OF SHARES
Pricing of Securities REDEMPTION OF SHARES
Being Offered NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 4
<PAGE>
Filed electronically with the Securities and Exchange Commission on April , 1996
File No. 33-2648
File No. 811-4555
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----
Post-Effective Amendment No. 16
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 14
----
Scudder Institutional Fund, Inc.
--------------------------------
(Exact name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
-----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
--------------
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
345 Park Avenue, New York, NY 10154
-----------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b),
----
X on May 1, 1996 pursuant to paragraph (b),
----
60 days after filing pursuant to paragraph (a)(1),
----
on pursuant to paragraph (a)(1)
---- -------------------
75 days after filing pursuant to paragraph (a)(2)
----
on pursuant to paragraph (a)(2) of Rule 485.
---- -------------------
The Registrant previously filed a declaration registering an indefinite amount
of securities pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. The Registrant intends to file the notice required by Rule 24f-2 for
its most recent fiscal year on or about February 29, 1996.
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
INSTITUTIONAL GOVERNMENT PORTFOLIO
INSTITUTIONAL FEDERAL PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Items Required by Form N-1A
---------------------------
PART A
- - ------
<TABLE>
<S> <C> <C>
Item No. Item Caption Prospectus Caption
- - -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
SUMMARY
3. Condensed Financial Information FINANCIAL HIGHLIGHTS
4. General Description of Registrant SUMMARY
INVESTMENT OBJECTIVES AND POLICIES
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
COMPANY ORGANIZATION
5. Management of the Fund SUMMARY
FINANCIAL HIGHLIGHTS
COMPANY ORGANIZATION--Investment Adviser, Transfer Agent
BACK COVER PAGE
5A. Management's Discussion of Fund NOT APPLICABLE
Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and Capital Gains Distributions, Taxes
COMPANY ORGANIZATION
BACK COVER PAGE
7. Purchase of Securities Being Offered TRANSACTION INFORMATION--Purchasing Shares, Share Price
COMPANY ORGANIZATION--Distributor
8. Redemption or Repurchase TRANSACTION INFORMATION--Redeeming Shares
9. Pending Legal Proceedings NOT APPLICABLE
</TABLE>
Cross Reference - Page 1
<PAGE>
INSTITUTIONAL GOVERNMENT PORTFOLIO
INSTITUTIONAL FEDERAL PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
(continued)
PART B
- - ------
<TABLE>
<S> <C> <C>
Caption in Statement of
Item No. Item Caption Additional Information
- - -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and COMPANY ORGANIZATION
History
13. Investment Objectives and THE PORTFOLIOS AND THEIR OBJECTIVES
Policies PORTFOLIO TRANSACTIONS
14. Management of the INVESTMENT ADVISER
Registrant DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and PORTFOLIO TRANSACTIONS
Other Practices
18. Capital Stock and Other COMPANY ORGANIZATION
Securities DIVIDENDS
19. Purchase, Redemption and PURCHASE OF SHARES
Pricing of Securities REDEMPTION OF SHARES
Being Offered NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 2
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Items Required by Form N-1A
---------------------------
PART A
- - ------
<TABLE>
<S> <C> <C>
Item No. Item Caption Prospectus Caption
- - -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial Information FINANCIAL HIGHLIGHTS
4. General Description of Registrant INVESTMENT OBJECTIVE AND POLICIES
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
COMPANY ORGANIZATION
5. Management of the Fund COMPANY ORGANIZATION--Investment Adviser, Transfer Agent, Experienced
Professional Management
BACK COVER PAGE
5A. Management's Discussion of Fund NOT APPLICABLE
Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and Capital Gains Distributions, Taxes
COMPANY ORGANIZATION
BACK COVER PAGE
7. Purchase of Securities Being Offered TRANSACTION INFORMATION--Purchasing Shares, Share Price
COMPANY ORGANIZATION--Distributor
8. Redemption or Repurchase TRANSACTION INFORMATION--Redeeming Shares
9. Pending Legal Proceedings NOT APPLICABLE
</TABLE>
Cross Reference - Page 3
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
(continued)
PART B
- - ------
<TABLE>
<S> <C> <C>
Caption in Statement of
Item No. Item Caption Additional Information
- - -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and COMPANY ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS
14. Management of the INVESTMENT ADVISER
Registrant DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and PORTFOLIO TRANSACTIONS
Other Practices
18. Capital Stock and Other COMPANY ORGANIZATION
Securities DIVIDENDS
19. Purchase, Redemption and PURCHASE OF SHARES
Pricing of Securities REDEMPTION OF SHARES
Being Offered NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 4
<PAGE>
Institutional Government Portfolio
Institutional Federal Portfolio
Institutional Cash Portfolio
Institutional Tax-Free Portfolio
PROSPECTUS
MAY 1, 1996
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
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Distributor
Scudder Investor Services, Inc.
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 information or to make any
representations not contained in this Prospectus, and 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, 1996, 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.
May 1, 1996
<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
consistent with its other stated policies.
Income from the Federal Portfolio may not be
exempt from certain state and local taxes.
2
<PAGE>
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 The Cash Portfolio may invest in obligations
Activities 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
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 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
subsidiary of the Adviser, determines net
asset value per share of each Portfolio on
each day the Nw 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. (eastern 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.
<TABLE>
<S> <C> <C>
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: 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, 1995.
Investment Management Fees 0.15% 0.15%*
12b-1 Fees NONE NONE
Other Expenses 0.24% 0.37%*
----- -----
Total Portfolio Operating Expenses 0.39% 0.52%*
===== =====
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 $ 4 $ 5
Three years 13 17
Five years 22 29
Ten years 49 65
</TABLE>
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 October 31, 1996, the Adviser agreed to
waive a portion of its management fee to the extent necessary so that the
total annualized expenses of the Portfolio do not exceed 0.70% of average
daily net assets. Because the Portfolio's expenses did not exceed 0.70%
during the fiscal year ended December 31, 1995, no such waiver was
required.
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.
<TABLE>
<S> <C> <C>
1) Shareholder Transaction Expenses: Expenses charged directly to an individual account in a Portfolio for
various transactions.
Cash Tax-Free
Portfolio Portfolio
--------- ---------
NONE NONE
2) Annual Portfolio Operating Expenses: 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, 1995.
Investment Management Fees 0.15% 0.15%
12b-1 Fees NONE NONE
Other Expenses 0.10% 0.20%
----- -----
Total Portfolio Operating Expenses 0.25% 0.35%
===== -----
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 $ 4
Three years 8 11
Five years 14 20
Ten years 32 44
</TABLE>
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.
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, 1995 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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Period
June 3, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
--------------------
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment .055 .040 .030 .037 .057 .079 .090 .073 .065 .036
income
Distributions from (.055) (.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 $1.00
period ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%) 5.60 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 $80 $118 $196 $247 $192 $174 $253 $161 $146 $82
year ($ millions)
Ratio of operating .39 .28 .26 .24 .26 .31 .29 .28 .31 .11(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 5.46 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.
(c) Annualized
</TABLE>
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.
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, 1995 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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Period
May 9, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
--------------------
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990* 1989 1988 1987 1986
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment .049 .034 .027 .032 .054 .078 .088 .070 .062 .040
income
Distributions from (.049) (.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 $1.00
period ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%)(b) 5.06 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 $16 $11 $8 $9 $11 $25 $21 $22 $32 $27
year ($ millions)
Ratio of operating .52 .54 .23 .32 .30 .33 .35 .32 .26 .09(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 4.97 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 .68 .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.
(c) Annualized
* 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.
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, 1995 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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Period
June 18, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
--------------------
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment .057 .041 .031 .038 .059 .080 .089 .074 .065 .034
income
Distributions from (.057) (.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 $1.00
period ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%) 5.88 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 $249 $271 $468 $662 $308 $152 $82 $61 $51 $114
year ($ millions)
Ratio of operating .25 .24 .22 .25 .25 .32 .37 .33 .31 .14(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 5.73 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.
(c) Annualized
</TABLE>
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, 1995 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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Period
May 12, 1986
(commencement
of operations) to
Years Ended December 31, December 31,
--------------------
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment .036 .027 .023 .029 .045 .058 .063 .051 .045 .028
income
Distributions from (.036) (.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 $1.00
period ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (%) 3.69 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 $79 $168 $125 $96 $75 $88 $155 $168 $103 $134
year ($ millions)
Ratio of operating .35 .27 .29 .31 .36 .32 .30 .30 .30 .27(c)
expenses to average
daily net assets (%)(a)
Ratio of net investment 3.61 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.
(c) Annualized
</TABLE>
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.
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.
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 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.
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.
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.
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
13
<PAGE>
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.
14
<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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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. (eastern 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. (eastern 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 realized 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 described above, in the case of
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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
upon, among other things, changes in market conditions and the level of a
Portfolio's expenses.
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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, 1995,
the Adviser and its affiliates had in excess of $100 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
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Company.
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Distributor
Scudder Investor Services, Inc., a 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.
Fund Accounting Agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the general accounting records of each Fund.
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. (eastern time) on the same
day if a bank wire or check is converted to federal funds by 12:00 noon (eastern
time) or a federal funds' wire is received by 12:00 noon (eastern time). In
addition, if investors notify the Company by 2:00 p.m. (eastern 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. (eastern 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,
20
<PAGE>
name of the wiring bank and name and telephone number of the person to be
contacted in connection with the order. An account number will then be assigned.
2. Instruct the wiring bank to transmit the specified amount to:
State Street Bank and Trust Company
Boston, Massachusetts
ABA Number 011000028
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 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.
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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.
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 (eastern 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. (eastern time) will be
honored the same day if such redemption can be accomplished in time to meet the
Federal Reserve Wire System schedules.
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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.
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. 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. (eastern
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.
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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
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, 1996
- - --------------------------------------------------------------------------------
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, 1996, 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 Objectives 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................................................................16
TAXES.......................................................................17
PORTFOLIO TRANSACTIONS......................................................18
NET ASSET VALUE.............................................................19
ADDITIONAL INFORMATION......................................................20
Experts............................................................20
Other Information..................................................20
FINANCIAL STATEMENTS........................................................21
APPENDIX
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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.
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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 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,
"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.
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
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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.
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.
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, "A-1" or "A-1+" by S&P or "F-1" by 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
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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 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.
The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In addition, certain municipal obligations might lose tax-exempt
status in the event of a change in the tax laws.
All of the securities in which the 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.
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(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
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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. (eastern time) on the same day if a bank wire or check
is converted to federal funds by 12:00 noon (eastern time) or a federal funds'
wire is received by 12:00 noon (eastern time). In addition, if investors notify
the Company by 2:00 p.m. (eastern 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. (eastern 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.
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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. (eastern 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.
(eastern 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.
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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, 1995 was 5.26% for the
Government Portfolio, 4.43% for the Federal Portfolio, 5.70% for the Cash
Portfolio and 4.19% 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, 1995 was
5.40% for the Government Portfolio, 4.53% for the Federal Portfolio, 5.86% for
the Cash Portfolio and 4.28% 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, 1995
Life of the
One Year Five Years Portfolio
Government Portfolio 5.60% 4.47% 6.03%(1)
Federal Portfolio 5.06% 4.00% 5.68%(2)
Cash Portfolio 5.88% 4.63% 6.12%(3)
Tax-Free Portfolio 3.69% 3.26% 4.28%(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, 1995
Life of the
One Year Five Years Portfolio
Government Portfolio 5.60% 24.44% 75.24(1)
Federal Portfolio 5.06% 21.64% 70.36(2)
Cash Portfolio 5.88% 25.38% 76.22(3)
Tax-Free Portfolio 3.69% 17.40% 49.81(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 and 100,000,000 have been designated
for the Institutional International Equity Portfolio. The Company is authorized
to issue full and fractional shares in separate series. The Directors have
created 28 series, constituting the Government Portfolio, Federal Portfolio,
Cash Portfolio, Tax-Free Portfolio, Institutional International Equity
Portfolio, Institutional Prime Portfolio, Institutional Municipal Income
Portfolio, Institutional Intermediate Cash Portfolio, Institutional Bond Index
Portfolio, Institutional Cash Plus Portfolio, Institutional Global Equity
Portfolio, Institutional Emerging Markets Equity Portfolio, Institutional Global
Small Company Equity Portfolio, Institutional Latin America Equity Portfolio,
Institutional Japanese Equity Portfolio, Institutional Pacific Basin Equity
Portfolio, Institutional Growth and Income Portfolio, Institutional Quality
Growth Portfolio, Institutional Value Equity Portfolio, Institutional Small
Company Equity Portfolio, Institutional Defensive Limited Volatility Bond
Portfolio, Institutional Intermediate Limited Volatility Bond Portfolio,
Institutional Active Value Bond Portfolio, Institutional Long Duration Bond
Portfolio, Institutional Mortgage Investment Portfolio, Institutional Global
Bond Portfolio, Institutional International Bond Portfolio, and Institutional
Emerging Markets Fixed Income Portfolio. The Directors have 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
11
<PAGE>
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.
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, 1995, the Adviser and its
affiliates had in excess of $100 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, 1995 were $104,332 for the Government Portfolio, $23,561 for the
Federal Portfolio, $476,472 for the Cash Portfolio and $143,025 for the Tax-Free
Portfolio.
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
12
<PAGE>
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.
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, 1995, 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
13
<PAGE>
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.
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.
DIRECTORS AND OFFICERS
The principal occupations of the Directors and executive officers of
the Company for the past five years are listed below.
<TABLE>
<CAPTION>
Position with
Position with Underwriter, Scudder
Name (Age) and Address Company Principal Occupation** Investor Services, Inc.
- - ---------------------- ------- ---------------------- -----------------------
<S> <C> <C> <C>
Daniel Pierce (62)+*# President and Chairman of the Board and Vice President, Director
Director Managing Director of and Assistant Treasurer
Scudder, Stevens & Clark,
Inc.
David S. Lee (62)+*# Chairman of the Managing Director of President, Director and
Board and Director Scudder, Stevens & Clark, Assistant Treasurer
Inc.
Edgar R. Fiedler (67)# Director Vice President and Economic --
50114 Manley Counselor, The Conference
Chapel Hill, NC 27514 Board, Inc.
Peter B. Freeman (63) Director Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI 02906
Robert W. Lear (78) Director Executive-in-Residence, --
429 Silvermine Road Visiting Professor, Columbia
New Canaan, CT 06840 University Graduate School
of Business
14
<PAGE>
Position with
Position with Underwriter, Scudder
Name (Age) and Address Company Principal Occupation** Investor Services, Inc.
- - ---------------------- ------- ---------------------- -----------------------
K. Sue Cote (34)+ Vice President Principal of Scudder, --
Stevens & Clark, Inc.
Jerard K. Hartman (63)++ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Kathryn L. Quirk (43)++ Vice President Managing Director of Vice President
Scudder, Stevens & Clark,
Inc.
Thomas W. Joseph (57)+ Vice President and Principal of Scudder, Vice President,
Assistant Secretary Stevens & Clark, Inc. Director, Treasurer and
Assistant Clerk
Thomas F. McDonough (49)+ Vice President and Principal of Scudder, Clerk
Assistant Secretary Stevens & Clark, Inc.
Pamela A. McGrath (42)+ Vice President Managing Director of --
and Treasurer Scudder, Stevens & Clark,
Inc.
Irene McC. Pelliconi (65)++ 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, 1996, 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, 1996, 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 _____% and _____%,
respectively, of the outstanding shares of the Government Portfolio.
Federal Portfolio. Lazard Freres & Co., New York, NY 10020 held of
record, but not beneficially, _____% of the outstanding shares of the Federal
Portfolio.
15
<PAGE>
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 _____%, _____%, _____%, _____% and _____%,
respectively, of the outstanding shares of the Cash Portfolio. In addition,
Lazard Freres & Co., New York, NY 10020 held of record, but not beneficially,
_____% 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 _____%, _____% and _____%, respectively, of the
outstanding shares of the Tax-Free Portfolio.
As of April 1, 1996, 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). Until May 1, 1995 each of these unaffiliated
Directors received from the Company compensation in the amount of $250 per
Portfolio if the average daily net assets of such Portfolio are less than
$500,000,000, or $500 per Portfolio if the average daily net assets of such
Portfolio are in excess of $500,000,000 for each of: quarterly payments of the
annual Director's fee, each Directors' meeting, and each Board Committee meeting
attended. 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
of $500 for each Portfolio with average daily net assets less than $100 million,
and $1,500 for each Portfolio with average daily net assets in excess of $100
million, payable quarterly.
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). Generally, compensation received by
a Director for serving on the board of a Scudder closed-end fund is greater than
the compensation received by a Director for serving on the board of a Scudder
open-end fund.
16
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1995
========================= ============================= ================== ================= ====================
(1) (2) (3) (4) (5)
Pension or Total
Retirement Compensation
Benefits Estimated From Company
Accrued As Part Annual and Company
Name of Person, Aggregate Compensation of Company Benefits Upon Complex Paid to
Position from Company Expenses Retirement Director
========================= ============================= ================== ================= ====================
<S> <C> <C> <C> <C>
Edgar R. Fiedler, $22,400** N/A N/A $33,570
Director (6 Portfolios)
Peter B. Freeman, $11,766 N/A N/A $126,750
Director (31 Portfolios)
Robert W. Lear, $11,766 N/A N/A $40,850
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 $22,400 through a deferred compensation program. As of December
31, 1995, Mr. Fiedler had a total of $206,003 accrued in a deferred compensation
program for serving on the Board of Directors of the Company. Mr. Fiedler also as of
December 31, 1995 had a total of $208,215 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
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
17
<PAGE>
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 generally
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 generally 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
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.
18
<PAGE>
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 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. (eastern 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
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
19
<PAGE>
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 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, 1995, the amount charged to the Portfolios by SFAC aggregated
$30,000 for the Government Portfolio, $4,232 for the Federal Portfolio, $45,686
for the Cash Portfolio, and $31,636 for the Tax-Free Portfolio, of which $2,500,
$574, $3,730, and $2,500, respectively, remain unpaid at December 31, 1995. For
the year ended December 31, 1995 for the Federal Portfolio, SFAC did not impose
fees amounting to $25,768.
Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the 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
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 monthly activity fees for servicing shareholder accounts of
the Company and Scudder Fund, Inc., with a minimum fee of 1/12 of $220,000.
Until September 30, 1995 the difference between the activity fees charged and
the annual $220,000 minimum was allocated among all Portfolios of the Company
and all series of Scudder Fund, Inc. based on relative net assets. Effective
October 1, 1995 the minimum monthly charge to any Portfolio shall be the pro
rata portion of the annual fee, determined by dividing such aggregate fee by the
number of Portfolios of the Company and series of Scudder Fund, Inc. An activity
fee is charged on a monthly basis for the shareholder accounts serviced. When a
Portfolio's monthly activity charges do not equal or exceed the minimum monthly
charge, the minimum will be charged. For the year ended December 31, 1995, the
amount charged to the Portfolios by Service Corporation aggregated $13,570 for
the Government Portfolio, $7,354 for the Federal Portfolio, $32,409 for the Cash
Portfolio, and $15,963 for the Tax-Free Portfolio, of which $2,037 remains
unpaid at December 31, 1995 for each of the Portfolios.
20
<PAGE>
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, 1995 and are hereby deemed to be a part of this Statement of Additional
Information.
21
<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, 1995
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
K. SUE COTE Vice President
JERARD K. HARTMAN Vice President
KATHRYN L. QUIRK Vice 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
</TABLE>
2
<PAGE>
Dear Shareholder:
Operated exclusively for institutions and their clients, Scudder
Institutional Fund, Inc., comprised of Institutional Government Portfolio,
Institutional Federal Portfolio, Institutional Cash Portfolio, and Institutional
Tax-Free Portfolio provided competitive investment results in 1995. These four
money market Portfolios seek to provide high levels of current income while
preserving capital and maintaining liquidity.
All four Portfolios seek to maintain a net asset value of $1.00, and have
done so since their inception (although this cannot be guaranteed). The
Institutional Federal Portfolio seeks to maximize income exempt from state and
local income taxes, while the Institutional Tax-Free Portfolio seeks to provide
income exempt from Federal income tax.
Aggregate net assets were $425 million on December 31, 1995, compared to
$568 million at the start of the year. A table showing dividend payments and
other financial information for the twelve months ended December 31, 1995 is on
page 16. This table also shows dividend payments and financial information for
each Portfolio for the five years ended December 31. In addition, please see the
following pages for audited financial statements for the year ended December 31,
1995, as well as a list of each Portfolio's investments.
If you have any questions concerning Scudder Institutional Fund, Inc.,
please call toll free (800) 854-8525 from any continental state.
/S/David S. Lee
David S. Lee
Chairman
3
<PAGE>
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
<CAPTION>
GOVERNMENT PORTFOLIO
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2A)
-------- --------- ---------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - 8.2%
Donaldson, Lufkin, & Jenrette Securities Corp. dated
12/29/95 at 5.85% (proceeds at maturity $6,542,250)
collateralized by $6,351,000 U.S. Treasury Note,
6.75%, 2/28/97 (cost $6,538,000) (note 3) ................... 1/2/96 $ 6,538,000 $ 6,538,000
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 92.0%
Federal Farm Credit Bank Discount Note ........................ 1/3/96 8,000,000 7,997,514
Federal Farm Credit Bank Discount Note ........................ 1/5/96 5,000,000 4,996,900
Federal Farm Credit Bank Discount Note ........................ 2/6/96 4,000,000 3,977,800
Federal Home Loan Bank Discount Note .......................... 1/9/96 2,000,000 1,997,533
Federal Home Loan Bank Discount Note .......................... 3/1/96 4,000,000 3,964,533
Federal Home Loan Mortgage Corp. Discount Note ................ 1/9/96 2,000,000 1,997,516
Federal Home Loan Mortgage Corp. Discount Note ................ 1/9/96 3,434,000 3,429,757
Federal Home Loan Mortgage Corp. Discount Note ................ 1/16/96 2,600,000 2,593,890
Federal Home Loan Mortgage Corp. Discount Note ................ 2/20/96 2,000,000 1,984,500
Federal Home Loan Mortgage Corp. Discount Note ................ 6/17/96 4,000,000 3,902,000
Federal National Mortgage Assn. Discount Note ................. 1/8/96 4,000,000 3,995,590
Federal National Mortgage Assn. Discount Note ................. 1/16/96 3,000,000 2,993,013
Federal National Mortgage Assn. Discount Note ................. 1/18/96 3,000,000 2,992,053
Federal National Mortgage Assn. Discount Note ................. 1/19/96 2,000,000 1,994,520
Student Loan Marketing Assn. Variable Rate Note, 6.08% ........ 7/1/96* 5,000,000 5,000,000
Student Loan Marketing Assn. Variable Rate Note, 5.22% ........ 1/2/96* 11,700,000 11,700,000
Student Loan Marketing Assn. Variable Rate Note, 5.40% ........ 1/2/96* 8,000,000 8,025,279
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $73,542,398) ........................ 73,542,398
-----------
TOTAL INVESTMENTS - 100.2% (COST $80,080,398)** ..................................... 80,080,398
-----------
OTHER ASSETS AND LIABILITIES - (0.2%)
Interest receivable and other assets ................................................ 361,328
Dividend payable .................................................................... (353,701)
Management fee payable (note 4) ..................................................... (9,957)
Accrued expenses (note 4) ........................................................... (159,707)
-----------
(162,037)
-----------
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<S> <C>
NET ASSETS - 100.0%
Applicable to 79,918,361 shares of $.001 par value Capital Stock outstanding;
5,000,000,000 shares authorized (note 5) .................................... $79,918,361
===========
NET ASSET VALUE PER SHARE ........................................................... $ 1.00
===========
* Date of next interest rate change.
** 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, 1995
<CAPTION>
FEDERAL PORTFOLIO
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2A)
-------- --------- ---------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 99.2%
U.S. Treasury Bill ........................................ 1/4/96 $ 580,000 $ 579,746
U.S. Treasury Bill ........................................ 1/25/96 890,000 886,826
U.S. Treasury Bill ........................................ 2/8/96 3,000,000 2,983,074
U.S. Treasury Bill ........................................ 2/15/96 850,000 844,294
U.S. Treasury Bill ........................................ 3/7/96 1,200,000 1,188,351
U.S. Treasury Bill ........................................ 3/14/96 550,000 544,039
U.S. Treasury Bill ........................................ 3/28/96 3,900,000 3,854,289
U.S. Treasury Bill ........................................ 4/4/96 2,500,000 2,465,599
U.S. Treasury Bill ........................................ 5/2/96 3,000,000 2,949,777
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $16,295,995)** ........................................ 16,295,995
-----------
OTHER ASSETS AND LIABILITIES - 0.8%
Cash ........................................................................................ 334,491
Other assets ................................................................................ 5,194
Dividend payable ............................................................................ (100,244)
Management fee payable (note 4) ............................................................. (23,561)
Accrued expenses (note 4) ................................................................... (91,592)
-----------
124,288
-----------
NET ASSETS - 100.0%
Applicable to 16,420,283 shares of $.001 par value Capital Stock outstanding;
5,000,000,000 shares authorized (note 5) .................................................. $16,420,283
===========
NET ASSET VALUE PER SHARE ................................................................... $ 1.00
===========
** Cost for federal income tax purposes.
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
<CAPTION>
CASH PORTFOLIO
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2A)
-------- --------- ---------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 14.4%
Bayerische Vereinsbank, 5.78% ..................... 4/1/96 7,000,000 7,000,000
Canadian Imperial National Bank (Yankee), 5.8% .... 1/30/96 8,000,000 8,000,000
Credit Suisse Zurich (Yankee), 5.75% .............. 1/19/96 7,000,000 7,000,069
Lloyds Bank (Yankee), 5.76% ....................... 4/10/96 7,000,000 7,000,189
Swiss Bank Corp, 5.67% ........................... 3/25/96 7,000,000 6,998,599
-----------
TOTAL CERTIFICATES OF DEPOSIT (COST $35,998,857) ......................... 35,998,857
-----------
COMMERCIAL PAPER - 61.4%
Abbey National North America ...................... 1/31/96 7,000,000 6,966,632
American General Finance Corp. .................... 1/8/96 7,000,000 6,992,242
AT&T Corp. ........................................ 4/9/96 7,000,000 6,892,393
Associates Corp. of North America ................. 1/10/96 7,000,000 6,990,025
Barclays U.S. Funding Corp. ....................... 1/8/96 4,000,000 3,995,574
Ciesco L.P. Discount Note ......................... 1/18/96 7,000,000 6,981,191
Credit Agricole U.S.A. ............................ 2/14/96 7,000,000 6,952,089
Deere Cap Corp. ................................... 1/29/96 7,000,000 6,968,967
Deutsche Bank Financial Inc. ...................... 4/10/96 7,000,000 6,891,111
Ford Credit Receivables Funding Inc. .............. 1/17/96 7,400,000 7,381,286
General Electric Co. .............................. 1/11/96 8,000,000 7,987,289
H.J. Heinz Co. .................................... 1/10/96 8,000,000 7,988,600
Eli Lilly & Co. ................................... 3/5/96 6,000,000 5,940,053
New Center Asset Trust ............................ 1/16/96 10,000,000 9,976,083
Norwest Corp. ..................................... 1/26/96 7,000,000 6,972,292
Pitney Bowes Credit Corp. ......................... 1/23/96 7,000,000 6,975,745
Pitney Bowes Credit Corp. ......................... 2/1/96 5,000,000 4,975,674
PREFCO ............................................ 1/24/96 8,000,000 7,970,764
Prudential Funding Corp. .......................... 1/9/96 7,000,000 6,991,056
Rincon Securities Inc. (LOC Trust Co. of Georgia) . 1/12/96 7,000,000 6,987,830
Transamerica Financial ............................ 1/12/96 7,000,000 6,987,680
Warner Lambert Co.. ............................... 5/6/96 6,500,000 6,376,013
-----------
TOTAL COMMERCIAL PAPER (COST $153,140,589) ............................... 153,140,589
-----------
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
CASH PORTFOLIO (CONTINUED)
<CAPTION>
MATURITY PRINCIPAL VALUE
DATE AMOUNT (NOTE 2A)
-------- --------- ---------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - 7.7%
Donaldson, Lufkin & Jenrette Securities Corp.
dated 12/29/95 at 5.85% (proceeds at maturity
$19,179,459) collateralized by $19,586,000
U.S. Treasury Bill, 4/11/96
(cost $19,167,000) (note 3) ............................. 1/2/96 $19,167,000 $ 19,167,000
------------
U.S. Government Agency Obligations - 15.7%
Federal National Mortgage Assn.
Variable Rate Note, 5.68% ............................... 3/14/96* 15,000,000 15,000,000
Student Loan Marketing Assn. Variable Rate Note, 5.22% .... 1/2/96* 14,000,000 14,000,000
Student Loan Marketing Assn. Variable Rate Note, 5.40% .... 1/2/96* 10,000,000 10,031,599
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (cost $39,031,599) ............................... 39,031,599
------------
VARIABLE COUPON RENEWABLE NOTES - 1.1%
Adesa Funding Corp. (LOC Banc One), 5.83%
(cost $2,847,000) ....................................... 1/4/96* 2,847,000 2,847,000
------------
TOTAL INVESTMENTS - 100.3% (COST $250,185,045)** .......................................... 250,185,045
------------
OTHER ASSETS AND LIABILITIES - (0.3%)
Interest receivable and other assets ...................................................... 782,005
Dividend payable .......................................................................... (1,292,461)
Management fee payable (note 4) ........................................................... (34,136)
Accrued expenses (note 4) ................................................................. (212,324)
------------
(756,916)
------------
NET ASSETS - 100.0%
Applicable to 249,428,129 shares of $.001 par value Capital Stock outstanding;
5,000,000,000 shares authorized (note 5) ................................................ $249,428,129
============
NET ASSET VALUE PER SHARE ................................................................. $ 1.00
============
* 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.
8
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
<CAPTION>
TAX-FREE PORTFOLIO
CREDIT PRINCIPAL VALUE
RATING* SHORT-TERM MUNICIPAL SECURITIES - 103.5% AMOUNT (NOTE 2A)
- - ------- --------- ---------
<S> <C> <C> <C>
ALASKA - 3.8%
A-1+ Alaska Housing Finance Corp. General Mortgage Revenue Series 1991-A
VRDN, 5.3%, 6/1/26 ..................................................... $3,000,000 $3,000,000
----------
ARIZONA - 4.6%
A-1+ Apache County Industrial Development Revenue Tuscan Electric Co.
Springerville Project Series 1985-A VRDN, 5%, 12/1/20 .................. 500,000 500,000
VMIG-1 Pima County Industrial Development Authority Tucson Electric Power Co.
Series 1982-A VRDN, 5.1%, 7/1/22 ....................................... 100,000 100,000
A-1+ Salt River Project Electric System Revenue Refunding Series 1992-A TOB,
5%, 1/1/09 ............................................................. 3,000,000 3,000,000
----------
TOTAL ARIZONA ........................................................ 3,600,000
----------
ARKANSAS - 0.1%
VMIG-1 Jonesboro Industrial Revenue Bond Farr Co. Project VRDN, 5.6%, 12/1/01 .. 70,000 70,000
----------
CALIFORNIA - 7.6%
SP-1+ California Community College Finance Authority Series B
TRAN, 5%, 8/30/96 ...................................................... 1,500,000 1,504,744
A-1 Lancaster Willows Project Green Meadows Apartments Series 1995-A
VRDN, 5.375%, 2/1/05 ................................................... 1,000,000 1,000,000
SP-1+ Los Angeles County Local Educational Agencies Pool TRAN, 4.75%, 7/5/96 ... 1,000,000 1,003,170
A-1 Riverside Multi-Family Housing Revenue Countrywood Apartments Series
1985-D VRDN, 5.375%, 5/1/05 ............................................ 1,500,000 1,500,000
SP-1+ South Coast Local Education Agencies TRAN, 5%. 8/14/96 ................... 1,000,000 1,002,953
----------
TOTAL CALIFORNIA ..................................................... 6,010,867
----------
COLORADO - 1.8%
A-1+ Clear Creek County Colorado Counties Financing Program Series 1988
VRDN, 5.15%, 6/1/98 .................................................... 400,000 400,000
A-1 Colorado Housing Finance Authority Central Park Coventry Village
& Greenwood Point Series 1985 VRDN, 5.15%, 5/1/97 ...................... 1,000,000 1,000,000
----------
TOTAL COLORADO ....................................................... 1,400,000
----------
CONNECTICUT - 2.5%
A-1+ Hartford Redevelopment Agency Underwood Towers Project Series 1990
FSA Insured VRDN, 5.35%, 6/1/20 ........................................ 2,000,000 2,000,000
----------
FLORIDA - 1.5%
A-1+ Dade County Water and Sewer System Revenue Bond Series 1994
VRDN FGIC Insured, 4.9%, 10/5/22 ....................................... 1,200,000 1,200,000
----------
GEORGIA - 9.2%
A-1+ DeKalb Private Hospital Authority Egleston Children's Hospital at Emory
University Series 1994-B VRDN, 5.05%, 3/1/24 ........................... 1,400,000 1,400,000
P-1 Hapeville Industrial Development Bond Hapeville Hotel VRDN, 6%, 11/1/15 .. 1,100,000 1,100,000
MIG-1 Savannah Downtown Development Authority Series 1985 VRDN, 5.38%,
5/1/15 ................................................................. 4,800,000 4,800,000
----------
TOTAL GEORGIA ........................................................ 7,300,000
----------
</TABLE>
See notes to financial statements.
9
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
TAX-FREE PORTFOLIO (CONTINUED)
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2A)
- - ------- --------- ---------
<S> <C> <C> <C>
ILLINOIS - 3.8%
SP-1+ Illinois General Obligation Revenue Anticipation Certificates Series 1995,
4.5%, 5/10/96 ............................................................... $2,000,000 $2,004,697
MIG-1 State of Illinois Revenue Anticipation Certificates Series 1995, 4.5%,
6/10/96 ..................................................................... 1,000,000 1,005,150
----------
TOTAL ILLINOIS ............................................................ 3,009,847
----------
INDIANA - 8.1%
A-1+ Purdue University Student Fee Revenue Bonds Series H VRDN, 5%, 7/1/17 ......... 2,200,000 2,200,000
MIG-1 Purdue University Student Fee Revenue Bonds Series 1995L VRDN,
5%, 7/1/20 ............................................................... 2,200,000 2,200,000
A-1+ Sullivan PCR Hoosier Energy Rural Electric Project TECP, 3.75%, 1/25/96 2,000,000 2,000,000
----------
TOTAL INDIANA ............................................................. 6,400,000
----------
IOWA - 1.9%
SP-1+ Iowa School Corporation Warrant Certificates Cash Anticipation
Program Capital Guaranty Insured VRDN, 4.75%, 6/28/96 ....................... 1,500,000 1,506,353
----------
LOUISIANA - 3.8%
A-1+ Louisiana Public Facilities Authority Sisters of Charity Series 1993 TECP,
3.8%, 1/11/96 ............................................................... 3,000,000 3,000,000
----------
MARYLAND - 1.6%
MIG-1 Ann Arundel County Baltimore Electric & Gas Company TECP, 3.6%,
3/8/96 ...................................................................... 1,300,000 1,300,000
----------
MAINE - 1.3%
SP-1+ State of Maine TAN, 4.5%, 6/28/96 ............................................. 1,000,000 1,003,538
----------
MISSOURI - 2.5%
A-1+ Missouri State Environmental Improvement and Energy Resource Authority
Union Electric Company Series 1984-A OP, 4%, 6/1/96 ......................... 2,000,000 2,000,000
----------
NEBRASKA - 1.6%
A-1+ Omaha Public Power District TECP, 3.85%, 2/7/96 ............................... 1,300,000 1,300,000
----------
NEW MEXICO - 1.3%
MIG-1 Albuquerque Gross Receipts/Lodgers Tax Series 1991-A VRDN, 5.15%,
7/1/22 ...................................................................... 1,000,000 1,000,000
----------
NEW YORK - 3.3%
MIG-1 New York City RAN, 4.5%, 4/11/96 .............................................. 2,600,000 2,608,147
----------
OREGON - 4.4%
A-1 Oregon General Obligation Series 1973-G VRDN, 5.25%, 12/1/18 .................. 1,900,000 1,900,000
VMIG-1 Oregon General Obligation Veterans Welfare Series 1973-E VRDN,
5.15%, 12/1/16 .............................................................. 1,600,000 1,600,000
----------
TOTAL OREGON .............................................................. 3,500,000
----------
PENNSYLVANIA - 5.7%
SS&C Elk County Pennsylvania Industrial Development Authority Stackpole
Corporation Series 1989 VRDN, 4.01%, 3/1/04 ................................. 1,000,000 1,000,000
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2A)
- - ------- --------- ---------
<S> <C> <C> <C>
A-1+ Emmaus General Authority Local Government Revenue Bond
Pool Program Series 1989-G VRDN, 5.05%, 3/1/24 .............................. $ 800,000 $ 800,000
A-1+ Emmaus General Authority Local Government Revenue Bond
Pool Program Series 1989-G5 VRDN, 5.15%, 3/1/24 ............................. 1,200,000 1,200,000
A-1 Emmaus General Authority Local Government Revenue Bond
Pool Program Series 1989-G6 VRDN, 5.1%, 3/1/24 .............................. 1,500,000 1,500,000
-----------
TOTAL PENNSYLVANIA ........................................................ 4,500,000
-----------
TENNESSEE - 5.1%
VMIG-1 Franklin Industrial Development Revenue Franklin Oaks Apartments
VRDN, 4.85%, 12/1/07 ........................................................ 4,000,000 4,000,000
-----------
TEXAS - 14.2%
MIG-1+ Gulf Coast Waste Disposal Authority Texas Exxon Project TECP, 3.5%,
3/13/96 ..................................................................... 2,000,000 2,000,000
A-1+ Austin Utility Systems Revenue TECP, 3.85%, 2/8/96 ............................ 1,000,000 1,000,000
A-1+ San Antonio Electric & Gas City Public Services Series 1995 A TECP,
3.8%, 2/14/96 ............................................................... 3,000,000 3,000,000
MIG-1 Lone Star Airport Improvement Authority Series A2 VRDN, 6%, 12/1/14 ........... 1,200,000 1,200,000
SP-1+ State of Texas TRAN, 4.75%, 8/30/96 ........................................... 4,000,000 4,019,724
-----------
TOTAL TEXAS ............................................................... 11,219,724
-----------
UTAH - 1.3%
A-1+ Salt Lake City Pooled Hospital Financings TECP, 3.85%, 2/13/96 ................ 1,000,000 1,000,000
-----------
VERMONT - 4.6%
SS&C Vermont Industrial Development Authority Mount Snow Limited Series 1904
VRDN, 4.1%, 4/1/99 .......................................................... 810,000 810,000
VMIG-1 Vermont Student Assistance Corporations VRDN, 3.75%, 1/1/04 ................... 2,800,000 2,800,000
-----------
TOTAL VERMONT ............................................................. 3,610,000
-----------
VIRGINIA - 1.3%
MIG-1 Louisa Pollution Control Revenue Virginia Electric Power Co. Series
1987 TECP, 3.6%, 3/8/96 ..................................................... 1,000,000 1,000,000
-----------
WASHINGTON - 4.9%
MIG-1 Washington Public Power Supply System Projects -1 and -3 Refunding
Revenue Series 1993-3A1 VRDN, 5.1%, 7/1/18 .................................. 1,475,000 1,475,000
A-1 Washington Public Power Supply System Nuclear Project -1 Series
1993-1A-1 VRDN, 4.95%, 7/1/17 ............................................... 2,400,000 2,400,000
-----------
TOTAL WASHINGTON .......................................................... 3,875,000
-----------
WISCONSIN - 0.6%
A-1+ Wausau Pollution Control Revenue Minnesota Mining and Manufacturing
Series 1982 VRDN, 5.31%, 8/1/17 ............................................. 500,000 500,000
-----------
WYOMING - 1.1%
A-1+ Lincoln County Pollution Control Revenue Pacificorp Project Series 1994
AMBAC Insured, 6.1%, 11/1/24 ................................................ 900,000 900,000
-----------
TOTAL INVESTMENTS - 103.5% (COST $81,813,476)** ............................... 81,813,476
-----------
</TABLE>
See notes to financial statements.
11
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
TAX-FREE PORTFOLIO (CONTINUED)
<CAPTION>
VALUE
(NOTE 2A)
---------
<S> <C>
OTHER ASSETS AND LIABILITIES - (3.5%)
Interest receivable and other assets ..................................................... $ 686,577
Receivable for Investments sold .......................................................... 900,000
Due to custodian bank .................................................................... (2,944,681)
Payable for Investments purchased ........................................................ (1,022,900)
Dividend payable ......................................................................... (275,770)
Management fee payable (note 4) .......................................................... (11,096)
Accrued expenses (note 4) ................................................................ (96,293)
-----------
(2,764,163)
-----------
NET ASSETS - 100.0%
Applicable to 79,049,313 shares of $.001 par value Capital Stock outstanding;
2,000,000,000 shares authorized (note 5) ............................................... $79,049,313
===========
NET ASSET VALUE PER SHARE ................................................................ $ 1.00
===========
** 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.
MIG-1/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
OP Security with a "optional put" feature; date shown SS&C These securities are not rated by either Moody's
represents the earliest date the security may be redeemed or Standard & Poor's. Scudder has determined that
or the interest rate will be reset if the security is not these securities are of comparable quality to
redeemed rated acceptable notes on a cash flow basis and are
of appropriate credit for the standards required
by the Fund's investment objective.
TOB Tender Option Bond is a security with a periodic TRAN Tax Revenue Anticipation Note
"put feature"
RAN Revenue Anticipation Note TAN Tax Anticipation Note
</TABLE>
See notes to financial statements.
12
<PAGE>
<TABLE>
SCUDDER INSTITUTIONAL FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
GOVERNMENT FEDERAL CASH TAX-FREE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income .......................... $4,067,528 $861,963 $19,021,209 $3,775,939
---------- -------- ----------- ----------
EXPENSES (NOTE 2C):
Management fee (note 4) .................. 104,332 23,561 476,472 143,025
Shareholder services (note 4) ............ 15,640 7,670 34,413 17,678
Directors' fees and expenses (note 4) .... 13,770 10,864 20,650 15,601
Custodian and accounting fees (note 4) ... 63,341 36,086 98,449 77,858
Professional services .................... 51,599 14,580 132,668 61,249
Reports to shareholders .................. 1,791 459 8,992 3,423
Registration fees ........................ 3,005 4,156 3,818 6,120
Miscellaneous ............................ 17,120 9,870 27,728 10,745
---------- -------- ----------- ----------
Total expenses before reductions ......... 270,598 107,246 803,190 335,699
Expense reductions (note 4) .............. -- (25,768) -- --
---------- -------- ----------- ----------
Net expenses ........................... 270,598 81,478 803,190 335,699
---------- -------- ----------- ----------
NET INVESTMENT INCOME AND INCREASE IN NET
ASSETS FROM OPERATIONS ................. $3,796,930 $780,485 $18,218,019 $3,440,240
========== ======== =========== ==========
</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,
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------
1995 1994
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income and increase in net assets
from operations .............................................. $ 3,796,930 $ 7,073,834
Dividends (notes 2b and 2d) .................................... (3,796,930) (7,073,834)
------------- -------------
-- --
------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 5):
Proceeds from sales of shares .................................. 432,240,116 803,305,494
Net asset value of shares issued in reinvestment of dividends .. 1,131,510 1,137,637
------------- -------------
433,371,626 804,443,131
Cost of shares redeemed ........................................ (471,317,385) (882,511,092)
------------- -------------
Increase (decrease) in net assets from Capital Stock
transactions ................................................. (37,945,759) (78,067,961)
------------- -------------
Total increase (decrease) in net assets .......................... (37,945,759) (78,067,961)
NET ASSETS:
Beginning of period ............................................ 117,864,120 195,932,081
------------- -------------
End of period .................................................. $ 79,918,361 $ 117,864,120
============= =============
</TABLE>
See notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Federal Portfolio Cash Portfolio Tax-Free Portfolio
- - --------------------------- ------------------------------- -----------------------------
1995 1994 1995 1994 1995 1994
- - ------------ ------------- -------------- --------------- ------------- ------------
<C> <C> <C> <C> <C> <C>
$ 780,485 $ 362,379 $ 18,218,019 $ 15,242,973 $ 3,440,240 $ 3,879,840
(780,485) (362,379) (18,218,019) (15,242,973) (3,440,240) (3,879,840)
- - ------------ ------------ ------------- --------------- ------------- -------------
-- -- -- -- -- --
- - ------------ ------------ ------------- --------------- ------------- -------------
81,622,544 49,187,822 924,578,235 1,756,715,344 522,266,284 908,058,572
690,840 344,539 6,908,170 2,606,116 907,361 1,407,961
- - ------------ ------------ ------------- --------------- ------------- -------------
82,313,384 49,532,361 931,486,405 1,759,321,460 523,173,645 909,466,533
(76,948,070) (46,094,573) (953,063,076) (1,956,022,378) (611,981,728) (866,656,883)
- - ------------ ------------ ------------- --------------- ------------- -------------
5,365,314 3,437,788 (21,576,671) (196,700,918) (88,808,083) 42,809,650
- - ------------ ------------ ------------- --------------- ------------- -------------
5,365,314 3,437,788 (21,576,671) (196,700,918) (88,808,083) 42,809,650
11,054,969 7,617,181 271,004,800 467,705,718 167,857,396 125,047,746
- - ------------ ------------ ------------- --------------- ------------- -------------
$ 16,420,283 $ 11,054,969 $ 249,428,129 $ 271,004,800 $ 79,049,313 $ 167,857,396
============ ============ ============= =============== ============= =============
</TABLE>
See notes to financial statements.
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 Assets (millions)
- - --------------------------------- --------- ---------- --------- --------- ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT PORTFOLIO
Year ended 12/31/95 ........... $1.00 $.055 $(.055) $1.00 5.60% 0.39% 5.46% $ 80
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
FEDERAL PORTFOLIO (a) (b)
Year ended 12/31/95 ........... 1.00 .049 (.049) 1.00 5.06 0.52 4.97 16
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
CASH PORTFOLIO
Year ended 12/31/95 ........... 1.00 .057 (.057) 1.00 5.88 0.25 5.73 249
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
TAX-FREE PORTFOLIO
Year ended 12/31/95 ........... 1.00 .036 (.036) 1.00 3.69 0.35 3.61 79
Year ended 12/31/94 (a) (b) ... 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
(a) The annualized operating expense ratio including expenses reimbursed, management fee and other expenses not imposed would
have been: 0.68%, 0.77%, 0.83%, 0.69%, and 0.67% and for the years ended December 31, 1995, 1994, 1993, 1992, and 1991,
respectively for the Federal Portfolio, and 0.29% for the year ended December 31, 1994 for the Tax-Free Portfolio. (b)
(b) Total returns are higher, for the periods indicated, due to the maintenance of the Fund's expenses.
</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 rate of amortization to maturity
of any premium or discount. This method results in a value approximating market.
(b) Federal Income Taxes--The Fund intends to qualify each Portfolio as
a regulated investment company under subchapter M of 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 date. 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, the investment manager 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%.
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. Effective
January 20, 1995, the adviser agreed not to impose a portion of its management
fee until October 31, 1996 and during such period to maintain the annualized
expenses of the Federal Portfolio at not more than 0.70% of average daily net
assets. During the year ended December 31, 1995, no such reimbursement was
required.
Scudder Service Corporation ("SSC"), a subsidiary of Scudder, is the
Fund's shareholders service, transfer and dividend disbursing agent. For the
year ended December 31, 1995, the amount charged to the Fund by SSC aggregated
$13,570 for the Government Portfolio, $7,354 for the Federal Portfolio, $32,409
for the Cash Portfolio, and $15,963 for the Tax-Free Portfolio, of which $2,037,
remains unpaid at December 31, 1995 for each of the funds.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
is responsible 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, 1995, the amount charged to the Portfolios by
SFAC aggregated $30,000 for the Government Portfolio, $4,232 for the Federal
Portfolio, $45,686 for the Cash Portfolio, and $31,636 for the Tax-Free
Portfolio, of which $2,500, $574, $3,730, and $2,500, respectively, remain
unpaid at December 31, 1995. For the year ended December 31, 1995 for the
Federal Portfolio, SFAC did not impose fees amounting to $25,768.
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 $425,834, an applicable portion of which is included in accrued
expenses of each of the Portfolios.
5. CAPITAL STOCK
At December 31, 1995, 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 $79,838,443 for the Government
Portfolio, $16,403,863 for the Federal Portfolio, $249,178,701 for the Cash
Portfolio and $78,970,264 for the Tax-Free Portfolio. At December 31, 1995, one
holder of record of the Government Portfolio held approximately 49% of the
outstanding shares; two holders of the Federal Portfolio held approximately 31%
and 29% each of the outstanding shares; two holders of the Cash Portfolio held
approximately 43% and 25% each of the outstanding shares; and two holders of
the Tax-Free Portfolio held approximately 44% and 32% each 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, 1995, 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 auditing 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 statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 12, 1996
- - --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1995 DIVIDENDS
The total amount of dividends declared in 1995 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 1995 are
exempt from Federal income tax. However, in accordance with the Internal Revenue
Code, you are required to report them on your 1995 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
Investment Manager
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Distributor
Scudder Investor Services, Inc.
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 9242
Boston, Massachusetts 02205
Legal Counsel
Sullivan & Cromwell
New York, New York
--------------------------
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 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 Company's shares is authorized only in case
of a concurrent or prior delivery of the Company's current prospectus.
INSTITUTIONAL GOVERNMENT PORTFOLIO
INSTITUTIONAL FEDERAL PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
INSTITUTIONAL TAX-FREE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
PART C. - OTHER INFORMATION
---------------------------
Item 24. Financial Statements and Exhibits
- - -------- ---------------------------------
a. Financial Statements
Included in Part A of this Registration Statement
For Institutional Government Portfolio:
Financial Highlights for the period June 3,
1986 (commencement of operations) to
December 31, 1986 and for the nine fiscal
years ended December 31, 1995
For Institutional Federal Portfolio:
Financial Highlights for the period May 9,
1986 (commencement of operations) to
December 31, 1986 and for the nine fiscal
years ended December 31, 1995
For Institutional Cash Portfolio:
Financial Highlights for the period June 18,
1986 (commencement of operations) to
December 31, 1986 and for the nine fiscal
years ended December 31, 1995
For Institutional Tax-Free Portfolio:
Financial Highlights for the period May 12,
1986 (commencement of operations) to
December 31, 1986 and for the nine fiscal
years ended December 31, 1995
For Institutional International Equity
Portfolio:
Financial Highlights (to be filed by
amendment).
Included in Part B of this Registration Statement
For Institutional Government Portfolio:
Statement of Net Assets as of December 31,
1995
Statement of Operations for the fiscal year
ended December 31, 1995
Statements of Changes in Net Assets for the
two fiscal years ended December 31, 1994 and
1995
Financial Highlights for the five years
ended December 31, 1995
Notes to Financial Statements
Report of Independent Accountants
For Institutional Federal Portfolio:
Statement of Net Assets as of December 31,
1995
Statement of Operations for the fiscal year
ended December 31, 1995
Statements of Changes in Net Assets for the
two fiscal years ended December 31, 1994 and
1995
Financial Highlights for the five years
ended December 31, 1995
Notes to Financial Statements Report of
Independent Accountants
Part C - Page 1
<PAGE>
For Institutional Cash Portfolio:
Statement of Net Assets as of December 31,
1995
Statement of Operations for the fiscal year
ended December 31, 1995
Statements of Changes in Net Assets for the
two fiscal years ended December 31, 1994 and
1995
Financial Highlights for the five years
ended December 31, 1995
Notes to Financial Statements
Report of Independent Accountants
For Institutional Tax-Free Portfolio:
Statement of Net Assets as of December 31,
1995
Statement of Operations for the fiscal year
ended December 31, 1995
Statements of Changes in Net Assets for the
two fiscal years ended December 31, 1994 and
1995
Financial Highlights for the five years
ended December 31, 1995
Notes to Financial Statements
Report of Independent Accountants
For Institutional International Equity
Portfolio:
Statement of Assets and Liabilities as of
April 1, 1996.
(Incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement.)
b. Exhibits:
1. (a) Articles of Incorporation.
(Incorporated by reference to
Exhibit 1(a) to original
Registration Statement filed on
January 10, 1986 and filed
herein.)
(b) Articles Supplementary.
(Incorporated by reference to
Exhibit 1(b) to Post-Effective
Amendment No. 9 to this
Registration Statement filed on
March 3, 1988.)
(c) Articles of Amendment.
(Incorporated by reference to
Exhibit 1(c) to Post-Effective
Amendment No. 9 to this
Registration Statement filed on
April 29, 1991.)
(d) Articles Supplementary to the
Articles of Incorporation.
(Incorporated by reference to
Exhibit 1(d) to Post-Effective
Amendment No. 14 to this
Registration Statement filed on
January 19, 1996.)
(e) Articles Supplementary to the
Articles of Incorporation is
filed herein.
2. (a) By-laws.
(Incorporated by reference to
Exhibit 2 to original
Registration Statement filed on
January 10, 1986.)
(b) Amended and Restated By-laws.
(Incorporated by reference to
Exhibit 2(b) to Post Effective
Amendment No. 14 to this
Registration Statement filed on
January 19, 1996.).
Part C - Page 2
<PAGE>
3. Not Applicable
4. Specimen stock certificate.
(Incorporated by reference to
Exhibit 4 to original
Registration Statement filed on
January 10, 1986.)
5. (a)(i) Investment Advisory Agreement
on behalf of Institutional
Government Portfolio.
(Incorporated by reference to
Exhibit 5(a)(i) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(ii) Investment Advisory Agreement
on behalf of Institutional
Treasury Portfolio.
(Incorporated by reference to
Exhibit 5(a)(ii) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(iii) Investment Advisory Agreement
on behalf of Institutional Cash
Portfolio.
(Incorporated by reference to
Exhibit 5(a)(iii) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(iv) Investment Advisory Agreement
on behalf of Institutional
Tax-Free Portfolio.
(Incorporated by reference to
Exhibit 5(a)(iv) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(v) Investment Advisory Agreement
on behalf of Institutional
Prime Portfolio.
(Incorporated by reference to
Exhibit 5(a)(v) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(vi) Investment Advisory Agreement
on behalf of Institutional
Municipal Income Portfolio.
(Incorporated by reference to
Exhibit 5(a)(vi) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(vii) Investment Advisory Agreement
on behalf of Institutional
Intermediate Portfolio.
(Incorporated by reference to
Exhibit 5(a)(vii) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(viii) Investment Advisory Agreement
on behalf of Institutional Bond
Index Portfolio.
(Incorporated by reference to
Exhibit 5(a)(viii) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(a)(ix) Investment Advisory Agreement
on behalf of Institutional
International Equity Portfolio
is filed herein.
6. (a) Interim Distribution Contract.
(Incorporated by reference to
Exhibit 6(a) to Post-Effective
Amendment No. 4 filed on
March 1, 1989.)
(b) Underwriting Agreement dated
January 18, 1989 (with form of
Dealer Contract Exhibit).
(Incorporated by reference to
Exhibit 6(b) to Post-Effective
Amendment No. 4 filed on March
1, 1989.)
Part C - Page 3
<PAGE>
7. Not Applicable.
8. (a) Custodian Contract.
(Incorporated by reference to
Exhibit 8(a) to Pre-Effective
Amendment No. 1 filed on April
16, 1986.)
(b) Transfer Agency and Service
Agreement dated January 1,
1990.
(Incorporated by reference to
Exhibit 8(b) to Post-Effective
Amendment No. 7 filed on March
1, 1990.)
(b)(i) Fee Schedule for Exhibit 8(b).
(c)(i) Sub-Custodian Agreement with
State Street London Limited.
(Incorporated by reference to
Exhibit 8(c)(i) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(c)(ii) Sub-Custodian Agreement with
Irving Trust.
(Incorporated by reference to
Exhibit 8(c)(ii) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(c)(iii) Sub-Custodian Agreement with
Bankers Trust Company.
(Incorporated by reference to
Exhibit 8(c)(iii) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(c)(iv) Sub-Custodian Agreement with
Bankers Trust Company.
(Incorporated by reference to
Exhibit 8(c)(iv) to
Post-Effective Amendment No. 7
filed on March 1, 1990.)
(c)(v) Fee Schedule for Exhibit 8(a).
(Incorporated by reference to
Exhibit 8(c)(v) to
Post-Effective Amendment No. 13
filed on April 28, 1995.)
(c)(vi) Custodian Contract between the
Registrant, on behalf of
Institutional International
Equity Portfolio, and Brown
Brothers Harriman & Co., is
filed herein.
(c)(vii) Fee Schedule for Exhibit
8(c)(vi).
(Incorporated by reference to
Exhibit 8(c)(vii) to
Post-Effective Amendment No. 15
filed on April 3, 1996.)
9. (a) Application to be filed by
amendment.
(b)(i) Fund Accounting Services
Agreement between the
Registrant, on behalf of
Institutional Cash Portfolio,
and Scudder Fund Accounting
Corporation dated August 1,
1994.
(Incorporated by reference to
Exhibit 9(b)(i) to
Post-Effective Amendment No. 13
filed on April 28, 1995.)
(b)(ii) Fund Accounting Services
Agreement between the
Registrant, on behalf of
Institutional Government
Portfolio, and Scudder Fund
Accounting Corporation dated
August 1, 1994.
(Incorporated by reference to
Exhibit 9(b)(ii) to
Post-Effective Amendment No. 13
filed on April 28, 1995.)
Part C - Page 4
<PAGE>
(b)(iii) Fund Accounting Services
Agreement between the
Registrant, on behalf of
Institutional Federal
Portfolio, and Scudder Fund
Accounting Corporation dated
August 1, 1994.
(Incorporated by reference to
Exhibit 9(b)(iii) to
Post-Effective Amendment No. 13
filed on April 28, 1995.)
(b)(iv) Fund Accounting Services
Agreement between the
Registrant, on behalf of
Institutional Tax-Free
Portfolio, and Scudder Fund
Accounting Corporation dated
August 18, 1994.
(Incorporated by reference to
Exhibit 9(b)(iv) to
Post-Effective Amendment No. 13
filed on April 28, 1995.)
(b)(v) Form of Fund Accounting
Services Agreement between the
Registrant, on behalf of
Institutional International
Equity Portfolio, and Scudder
Fund Accounting Corporation.
(Incorporated by reference to
Exhibit 9(b)(v) to
Post-Effective Amendment No. 15
filed on April 3, 1996.)
10. Opinion of counsel is filed
herein.
11. Consent of Independent
Accountants is filed herein.
12. Not Applicable.
13. Purchase Agreement and
Investment Letter of Lazard
Freres & Co.
(Incorporated by reference to
Exhibit 13 to Pre-Effective
Amendment No. 1 filed on April
16, 1986.)
14. Not Applicable.
15. Not Applicable.
16. (a) Schedules for Computations
of Performance Quotations.
(Incorporated by reference to
Exhibit 16 to Post-Effective
Amendment No. 4 filed on March
1, 1989.)
(b) Schedules for Computations of
Performance Quotations.
(Incorporated by reference to
Exhibit 16(b) to Post-Effective
Amendment No. 13 filed on April
28, 1995.)
(c) Schedules for Computations of
Performance Quotations to be
filed by amendment.
17. Financial Data Schedules are
filed herein.
18. Inapplicable.
Item 25. Persons Controlled by or under Common Control with Registrant.
- - -------- --------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
Part C - Page 5
<PAGE>
Item 26. Number of Holders of Securities.
- - -------- --------------------------------
Set forth below is a table showing the number of record
holders of each class of securities of Scudder Institutional
Fund, Inc. as of February 29, 1996:
<TABLE>
<S> <C> <C>
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Institutional Government Portfolio 53
Institutional Federal Portfolio 38
Institutional Cash Portfolio 37
Institutional Tax-Free Portfolio 21
Institutional Prime Portfolio 1
Institutional Municipal Income Portfolio 1
Institutional Intermediate Cash Portfolio 1
Institutional Bond Index Portfolio 1
</TABLE>
Item 27. Indemnification.
- - -------- ----------------
As permitted by Sections 17(h) and 17(i) of the Investment
Company Act of 1940, as amended (the "1940 Act"), pursuant to
Article IV of the Registrant's By-Laws (filed as Exhibit No. 2
to the Registration Statement), officers, directors, employees
and representatives of the Funds may be indemnified against
certain liabilities in connection with the Funds, and pursuant
to Section 12 of the Underwriting Agreement dated January 18,
1989 (filed as Exhibit No. 6(b) to the Registration
Statement), Scudder Investor Services, Inc. (formerly "Scudder
Fund Distributors, Inc."), as principal underwriter of the
Registrant, may be indemnified against certain liabilities
that it may incur. Said Article IV of the By-Laws and Section
12 of the Underwriting Agreement are hereby incorporated by
reference in their entirety.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be
permitted to directors, officers and controlling persons of
the Registrant and the principal underwriter pursuant to the
foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or
controlling person of the Registrant and the principal
underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant
by such director, officer or controlling person or the
principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business or Other Connections of Investment Adviser
- - -------- ---------------------------------------------------
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for
the purpose of this Item 28.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<TABLE>
<S> <C>
Stephen R. Beckwith Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Part C - Page 6
<PAGE>
Supervisory Director, Scudder Mortgage Fund (investment company) +
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company) +
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Trustee, Scudder Funds Trust (investment company)*
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Director, Inverlatin Dollar Income Fund, Inc. (investment company) Georgetown, Grand
Cayman, Cayman Islands
Director, ProMexico Fixed Income Dollar Fund, Inc. (investment company) Georgetown,
Grand Cayman, Cayman Islands
Director, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
Partner, George Birdsong Co., Rye, NY
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (Director only on Scudder Global Fund,
a series of Scudder Global Fund, Inc.) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporation oo
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director, Scudder Investor Services, Inc. (broker/dealer)**
President & Trustee, AARP Cash Investment Funds (investment company)**
President & Trustee, AARP Growth Trust (investment company)**
President & Trustee, AARP Income Trust (investment company)**
President & Trustee, AARP Tax Free Income Trust (investment company)**
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)*
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Part C - Page 7
<PAGE>
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)*
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)++
Vice President, Scudder Variable Life Investment Fund (investment company)*
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
President & Director, SFA, Inc. (advertising agency)*
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Douglas M. Loudon Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President & Trustee, Scudder Equity Trust (investment company)*
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President & Director, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Trustee, Scudder Securities Trust (investment company)*
Vice President, AARP Cash Investment Funds (investment company)**
Vice President, AARP Growth Trust (investment company)**
Vice President, AARP Income Trust (investment company)**
Vice President, AARP Tax Free Income Trust (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Chairman, World Capital Fund (investment company) Luxembourg ##
Managing Director, Kankaku - Scudder Capital Asset Management Corporation (investment
adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
President, The Japan Fund, Inc. (investment company)**
Trustee, Scudder, Stevens & Clark Supplemental Retirement Income Plan
Trustee, Scudder, Stevens & Clark Profit Sharing Plan **
Chairman & Director, The World Capital Fund (investment company) Luxembourg
Chairman & Director, Scudder, Stevens & Clark (Luxembourg), S.A., Luxembourg#
Chairman, Canadian High Income Fund (investment company) #
Chairman, Hot Growth Companies Fund (investment company) #
Vice President & Director, Scudder Precious Metals, Inc. xxx
Director, Berkshire Farm & Services for Youth
Part C - Page 8
<PAGE>
Board of Governors & President, Investment Counsel Association of America
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Juris Padegs Secretary & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, The Brazil Fund, Inc. (investment company)**
Vice President & Trustee, Scudder Equity Trust (investment company)*
Chairman & Director, The First Iberian Fund, Inc. (investment company)**
Trustee, Scudder Funds Trust (investment company)*
Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment company)**
Trustee, Scudder Investment Trust (investment company)*
Vice President, Assistant Secretary & Director, Scudder International Fund, Inc.
(investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Trustee, Scudder Municipal Trust (investment company)*
Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Assistant Secretary & Director, Scudder New Asia Fund, Inc. (investment
company)**
Trustee, Scudder Securities Trust (investment company)*
Vice President & Trustee, Scudder Tax Free Money Fund (investment company)*
Trustee, Scudder Tax Free Trust (investment company)*
Chairman & Director, The Korea Fund, Inc. (investment company)**
Vice President & Director, The Argentina Fund, Inc. (investment company)**
Secretary, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser),
Toronto, Ontario, Canada
Vice President & Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Assistant Secretary, SFA, Inc. (advertising agency)*
Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)**
Assistant Treasurer & Director, Kankaku - Scudder Capital Asset Management (investment
adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Chairman & Supervisory Director, Sovereign High Yield Investment Company N.V.
(investment company) +
Director, President Investment Trust Corporation (Joint Venture)***
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Director, Vice President & Assistant Secretary, Scudder Precious Metals, Inc. xxx
Vice President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman, Scudder, Stevens & Clark Overseas Corporation oo
Director, Scudder Trust (Cayman) Ltd. (trust services company)xxx
Director, ICI Mutual Insurance Company, Inc., Washington, D.C.
Director, Baltic International USA
Director, Baltic International Airlines (a limited liability company) Riga, Latvia
Daniel Pierce Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, California Tax Free Trust (investment company)*
President & Trustee, Scudder Equity Trust (investment company)**
Director, The First Iberian Fund, Inc. (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
President & Trustee, Scudder Portfolio Trust (investment company)*
Part C - Page 9
<PAGE>
President & Trustee, Scudder Funds Trust (investment company)*
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc. (investment company)**
Director, Scudder International Fund, Inc. (investment company)**
President & Trustee, Scudder Investment Trust (investment company)*
Vice President & Trustee, Scudder Municipal Trust (investment company)*
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Securities Trust (investment company)**
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (until 7/94) (investment company)**
Vice President & Assistant Treasurer, Montgomery Street Income Securities, Inc.
(investment company) o
Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
Chairman, Assistant Treasurer & Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
President & Director, Scudder Precious Metals, Inc. xxx
Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
Director, Scudder Fund Accounting Corporation (in-house fund accounting agent)*
Director, Scudder Realty Holdings Corporation (a real estate holding company)*
Director, Scudder Latin America Investment Trust PLC (investment company)@ Incorporator,
Scudder Trust Company (a trust company)+++
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, AARP Cash Investment Funds (investment company)*
Vice President, AARP Growth Trust (investment company)*
Vice President, AARP Income Trust (investment company)*
Vice President, AARP Tax Free Income Trust (investment company)*
Edmond D. Villani President & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, Scudder Global Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
Trustee, Scudder Securities Trust (investment company)*
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Supervisory Director, Scudder Mortgage Fund (investment company) +
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company)+
Director, The Brazil Fund, Inc. (investment company)**
Part C - Page 10
<PAGE>
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporation oo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, IBJ Global Investment Manager S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# 11, rue Aldringen, L-1118 Luxembourg, Grand-Duchy of Luxembourg
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon
</TABLE>
Item 29. Principal Underwriters.
- - -------- -----------------------
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
The Japan Fund, Inc.
Part C - Page 11
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
E. Michael Brown Assistant Treasurer None
Two International Place
Boston, MA 02110
Mark S. Casady Vice President and Director None
Two International Place
Boston, MA 02110
Linda Coughlin Director None
345 Park Avenue
New York, NY 10154
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Coleen Downs Dinneen Assistant Clerk None
Two International Place
Boston, MA 02110
Paul J. Elmlinger Vice President None
345 Park Avenue
New York, NY 10154
Cuyler W. Findlay Senior Vice President None
345 Park Avenue
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Vice President, Director, Vice President and
Two International Place Treasurer and Assistant Clerk Assistant Secretary
Boston, MA 02110
Dudley H. Ladd Senior Vice President and None
Two International Place Director
Boston, MA 02110
David S. Lee President, Assistant Chairman of the Board and
Two International Place Treasurer and Director Director
Boston, MA 02110
Douglas M. Loudon Senior Vice President None
345 Park Avenue
New York, NY 10154
Thomas F. McDonough Clerk Vice President and
Two International Place Assistant Secretary
Boston, MA 02110
Part C - Page 12
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Juris Padegs Vice President and Director None
345 Park Avenue
New York, NY 10154
Daniel Pierce Vice President, Director President and Director
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Vice President None
345 Park Avenue
New York, NY 10154
Edmund J. Thimme Vice President and Director None
345 Park Avenue
New York, NY 10154
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
</TABLE>
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.
(c)
<TABLE>
<S> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 30. Location of Accounts and Records.
- - -------- ---------------------------------
All accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
thereunder are maintained at the offices of the Custodian, the
Transfer Agent, the Distributor or the Registrant. Documents
required by paragraphs (b)(4), (5), (6), (7), (9), (10), and
(11) and (f) of Rule 31a-1 (the "Rule"), will be kept at the
offices of the Registrant, 345 Park Avenue, New York, New
York; certain documents required to be kept under paragraphs
(b)(1) and (b)(2)(iv) of the Rule will be kept at the offices
of Scudder Service Corporation, Two International Place,
Boston, Massachusetts 02110-4103; documents required to be
kept under paragraph (d) of the Rule will be kept at the
offices of Scudder Investor Services, Inc., Two International
Place, Boston, Massachusetts 02110-4103; and the remaining
Part C - Page 13
<PAGE>
accounts, books and other documents required by the Rule will
be kept at State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, Massachusetts 02171 (on behalf of
Institutional Government Portfolio, Institutional Federal
Portfolio, Institutional Cash Portfolio and Institutional
Tax-Free Portfolio) and at Brown Brothers Harriman & Co., 40
Water Street, Boston, Massachusetts 02109 (on behalf of
Institutional International Equity Portfolio).
Item 31. Management Services.
- - -------- --------------------
Inapplicable.
Item 32. Undertakings.
- - -------- -------------
The Registrant hereby undertakes to file a post-effective
amendment, using reasonably current financial statements of
Institutional International Equity Portfolio, within four to
six months from the effective date of the Registrant's
Registration Statement under the 1933 Act.
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of such Fund's
latest annual report to shareholders upon request and without
change.
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the question of
removal of a Director or Directors when requested to do so by
the holders of at least 10% of the Registrant's outstanding
shares and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
The Registrant hereby undertakes, insofar as indemnification
for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
trustee, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will unless in the opinion of its counsel the
matter has been settled by controlling precedent, submits to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Part C - Page 14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts on the 18th day of April, 1996.
SCUDDER INSTITUTIONAL FUND, INC.
By /s/David S. Lee
------------------------------
David S. Lee,
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - --------- ----- ----
<S> <C> <C>
/s/David S. Lee
- - --------------------------------------
David S. Lee Chairman of the Board (Principal April 18, 1996
Executive Officer) and Director
/s/Daniel Pierce
- - --------------------------------------
Daniel Pierce President and Director April 18, 1996
/s/Edgar R. Fiedler
- - --------------------------------------
Edgar R. Fiedler Director April 18, 1996
/s/Peter B. Freeman
- - --------------------------------------
Peter B. Freeman Director April 18, 1996
/s/Robert W. Lear
- - --------------------------------------
Robert W. Lear Director April 18, 1996
/s/Pamela A. McGrath
- - --------------------------------------
Pamela A. McGrath Vice President and Treasurer April 18, 1996
(Principal Financial and Accounting
Officer)
</TABLE>
<PAGE>
File No. 33-2648
File No. 811-4555
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 16
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 14
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER INSTITUTIONAL FUND, INC.
<PAGE>
SCUDDER INSTITUTIONAL FUND, INC.
EXHIBIT INDEX
-------------
Exhibit 1(a)
Exhibit 1(e)
Exhibit 5(a)(ix)
Exhibit 8(b)(i)
Exhibit 8(c)(vi)
Exhibit 10
Exhibit 11
Exhibit 17
ARTICLES OF INCORPORATION
of
Lazard Freres Institutional Fund, Inc.
FIRST: I, the incorporator, Donald R. Crawshaw whose post office address is
250 Park Avenue, New York, New York 10177, being more than 18 years of age, do,
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, form a corporation.
SECOND: NAME. The name of the corporation (which is hereinafter called the
"Corporation") is Lazard Freres Institutional Fund, Inc.
THIRD: PURPOSES AND POWERS. The purposes for which the Corporation is
formed and the business or objects to be carried on or promoted by it are to
engage in the business of an investment company, and in connection therewith, to
hold part or all of its funds in cash, to acquire by purchase, subscription,
contract, exchange or otherwise, and to own, hold for investment, resale or
otherwise, sell, assign, negotiate, exchange, transfer or otherwise dispose of,
or turn to account or realize upon, and generally to deal in and with, all forms
of stocks, bonds, debentures, notes, evidences of interest, evidences of
indebtedness, warrants, certificates of deposit, bankers' acceptances,
repurchase agreements and other securities, irrespective of
<PAGE>
their form, the name by which they may be described, or the character or form of
the entities by which they are issued or created (hereinafter sometimes called
"Securities"), and to make payment therefor by any lawful means; to exercise any
and all rights, powers and privileges of individual ownership or interest in
respect of any and all such Securities, including the right to vote thereon and
to consent and otherwise act with respect thereto; to do any and all acts and
things for the preservation, protection, improvement and enhancement in value
of any and all such Securities; to acquire or become interested in any such
Securities as aforesaid, irrespective of whether or not such Securities be fully
paid or subject to further payments, and to make payments thereon as called for
or in advance of calls or otherwise.
And, in general, to do any or all such other things in connection with the
objects and purposes of the Corporation hereinbefore set forth, as are, in the
opinion of the Board of Directors of the Corporation, necessary, incidental,
relative or conducive to the attainment of such objects and purposes; and to do
such acts and things; and to exercise any and all such powers to the same extent
authorized or permitted to a Corporation under any laws that may be now or
hereafter applicable or available to the Corporation.
-2-
<PAGE>
In addition, the Corporation may issue, sell, acquire through purchase,
exchange, or otherwise hold, dispose of, resell, transfer, reissue or cancel
shares of its capital stock in any manner and to the extent now or hereafter
permitted by the laws of Maryland and by these Articles of Incorporation.
The foregoing matters shall each be construed as purposes, objects and
powers, and none of such matters shall be in any wise limited by reference to,
or inference from, any other of such matters or any other Article of these
Articles of Incorporation, but shall be regarded as independent purposes,
objects and powers and the enumeration of specific purposes, objects and powers
shall not be construed to limit or restrict in any manner the meaning of general
terms or the general powers of the Corporation now or hereafter conferred by
the laws of the State of Maryland, nor shall the expression of one thing be
deemed to exclude another, although it be of like nature, not expressed.
Nothing herein contained shall be construed as giving the Corporation any
rights, powers or privileges not permitted to it by law.
FOURTH: PRINCIPAL OFFICE. The post office address of the principal office
of the Corporation in Maryland is c/o The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202. The resident agent of the Corporation
is The Corporation Trust Incorporated, the
-3-
<PAGE>
post office address of which is 32 South Street, Baltimore, Maryland 21202. Said
resident agent is a corporation of the State of Maryland.
FIFTH: CAPITAL STOCK. A. The total number of shares of all classes of
stock which the Corporation has authority to issue is 25,000,000,000 shares of
common stock ("Shares") of par value of $.001 each, having an aggregate par
value of $25,000,000. There shall initially be six classes of Shares, designated
as the "Government Class," the "Treasury Class," the "Cash Class" and the "Prime
Class," each consisting of 5,000,000,000 shares, and the "Intermediate Cash
Class" and the "Bond Index Class," each consisting of 100,000,000 shares (such
classes together with any further class or classes of shares from time to time
created by the Board of Directors being herein referred to individually as a
"Class" and collectively as "Classes"). The Board of Directors of the
Corporation shall have the power and authority to further classify or reclassify
any unissued Shares from time to time by setiting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of such unissued
shares.
B. A description of the relative preferences, conversion and other
rights, vofiing powers, restrictions, limitations as to dividends,
qualifications and terms and
-4-
<PAGE>
conditions of redemption of all Classes of Shares is as follows, unless
otherwise set forth in the Articles Supplementary filed with the Maryland
State Department of Assessments and Taxation describing any further Class or
Classes from time to time created by the Board of Directors:
(i) ASSETS BELONGING TO CLASS. All consideration
received by the Corporation for the issue or sale of Shares
of a particular Class, together with all assets in which
such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to that Class for all purposes,
subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and
proceeds, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in
whatever form the same may be, together with any General
Items (as hereinafter defined) allocated to that Class as
provided in the following sentence, are herein referred to
as "assets belonging to" that Class. In the event that there
are any assets, income, earnings, profits or proceeds
thereof, funds or payments which are not readily identifi-
able as belonging to any particular Class (collectively
"General Items"), the Board of Directors shall allocate such
General Items to and among any one or more of the Classes
created from time to time in such manner and on such basis
as it, in its sole discretion, deems fair and equitable; and
any General Items so allocated to a particular Class shall
belong to that Class. Each such allocation by the Board of
Directors shall be conclusive and binding upon the
stockholders of all Classes for all purposes.
-5-
<PAGE>
(ii) LIABILITIES BELONGING TO CLASS. The assets
belonging to each particular Class shall be charged with the
liabilities of the Corporation in respect of that Class and
with all expenses, costs, charges and reserves attributable
to that Class, and shall be so recorded upon the books of
account of the Corporation. Such liabilities, expenses,
costs, charges and reserves, together with any General Items
(as hereinafter defined) allocated to that Class as provided
in the following sentence, so charged to that Class are
herein referred to as "liabilities belonging to" that Class.
In the event there are any general liabilities, expenses,
costs, charges or reserves of the Corporation which are not
readily identifiable as belonging to any particular Class
(collectively "General Items"), the Board of Directors shall
allocate and charge such General Items to and among any one
or more of the Classes created from time to time in such
manner and on such basis as the Board of Directors in its
sole discretion deems fair and equitable; and any General
Items so allocated and charged to a particular Class shall
belong to that Class. Each such allocation by the Board of
Directors shall be conclusive and binding upon the
stockholders of all Classes for all purposes.
(iii) DIVIDENDS. Dividends and distributions on Shares
of a particular Class may be paid to the holders of Shares
of that Class at such times, in such manner and from such of
the income and capital gains, accrued or realized, from the
assets belonging to that Class, after providing for actual
and accrued liabilities belonging to that Class, as the
Board of Directors may determine.
(iv) LIQUIDATION. In event of the liquidation or
dissolution of the Corporation, the stockholders of each
Class that has been created shall be entitled to receive, as
a Class, when and as declared by the Board of Directors, the
excess of the assets belonging to that Class over the
liabilities belonging to that Class. The assets so
distributable to the stockholders of any particular Class
shall be distributed
-6-
<PAGE>
among such stockholders in proportion to the number of
Shares of that Class held by them and recorded on the books
of the Corporation.
(v) VOTING. On each matter submitted to vote of the
stockholders, each holder of a Share shall be entitled to
one vote for each such Share standing in his name on the
books of the Corporation irrespective of the Class thereof
and all Shares of all Classes shall vote as a single class
("Single Class Voting"); provided, however, that (A) as to
any matter with respect to which a separate vote of any
Class is required by the Investment Company Act of 1940 or
would be required under the Maryland General Corporation
Law, such requirements as to a separate vote by that Class
shall apply in lieu of Single Class Voting as described
above; (B) in the event that the separate vote requirements
referred to in (A) above apply with respect to one or more
Classes, then, subject to (C) below, the Shares of all other
Classes shall vote as a single class; and (C) as to any
matter which does not affect the interest of a particular
Class, only the holders of Shares of the one or more
affected Classes shall be entitled to vote.
(vi) EQUALITY. All Shares of each particular Class
shall represent an equal proportionate interest in the
assets belonging to that Class (subject to the liabilities
belonging to that Class), and each Share of any particular
Class shall be equal to each other Share of that Class; but
the provisions of this sentence shall not restrict any
distinctions permissible pursuant to subsection (iii) of
this paragraph B of this Article or otherwise under these
Articles of Incorporation that may exist with respect to
stockholder elections to receive dividends or distributions
in cash or Shares of the same Class or that may otherwise
exist with respect to dividends and distributions on Shares
of the same Class.
C. No holder of shares shall be entitled as such, as a matter of right, to
purchase or subscribe for any part
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of any new or additional issue of shares or securities of the Corporation.
All shares now or hereafter authorized, and of any Class, shall be "subject
to redemption" and "redeemable", in the sense used in the General Laws of the
State of Maryland authorizing the formation of corporations, at the redemption
or repurchase price for shares of that Class, determined in the manner set out
in these Articles of Incorporation or in any amendment thereto. In the absence
of any contrary specification as to the purpose for which Shares are repurchased
by it, all Shares so repurchased shall be deemed to be "acquired for retirement"
in the sense contemplated by the laws of the State of Maryland. Shares retired
by repurchase or retired by redemption shall thereafter have the status of
authorized but unissued Shares of the Corporation.
All persons who shall acquire Shares shall acquire the same subject to the
provisions of these Articles of Incorporation.
SIXTH: DIRECTORS. The Corporation has five directors in office, and the
names of the five directors in office are as follows:
Karl A. Deavers
Edgar R. Fiedler
Robert T. Johnson
Peter Quinn
Robert L. Werner
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The number of directors in office may be changed from time to time in such
lawful manner as the By-Laws of the Corporation shall provide.
SEVENTH: PROVISIONS FOR DEFINING, LIMITING AND
REGULATING THE POWERS OF THE CORPORATION, DIRECTORS AND
STOCKHOLDERS.
A. BOARD OF DIRECTORS: The Board of Directors shall have the general
management and control of the business and property of the Corporation, and may
exercise all the powers of the Corporation, except such as are by statute or by
these Articles of Incorporation or by the By-Laws conferred upon or reserved to
the stockholders. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is hereby empowered:
1. To authorize the issuance and sale, from time to
time, of Shares of any Class whether for cash at not less
than the par value thereof or for such other consideration
as the Board of Directors may deem advisable, in the manner
and to the extent now or hereafter permitted by the laws of
Maryland; provided, however, the consideration (or the value
thereof as determined by the Board of Directors) per share
to be received by the Corporation upon the sale of shares of
any Class (including treasury Shares) shall not be less than
the net asset value (determined as provided in Article NINTH
hereof) per Share of that Class outstanding at the time
(determined by the Board of Directors) as of which the
computation of such net asset value shall be made.
2. To authorize the execution and performance by the
Corporation of an agreement or agreements, which may be
exclusive contracts, with Lazard
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Freres & Co. or any other person, as distributor, providing
for the distribution of Shares of any Class.
3. To specify, in instances in which it may be
desirable, that Shares of any Class repurchased by the
Corporation are not acquired for retirement and to specify
the purposes for which such Shares are repurchased.
4. To authorize the execution and performance by the
Corporation of an agreement or agreements with Lazard Freres
& Co. or any successor providing for the investment and
other operations of the Corporation, subject to the control
of the Board of Directors.
The Corporation may in its By-Laws confer powers on the Board of Directors
in addition to the powers expressly conferred by statute.
B. QUORUM; ADJOURNMENT; MAJORITY VOTE: The presence in person or by proxy
of the holders of one-third of the Shares of all Classes issued and outstanding
and entitled to vote thereat shall constitute a quorum for the transaction of
any business at all meetings of the stockholders except as otherwise provided by
law or in these Articles of Incorporation and except that where the holders of
Shares of any Class are entitled to a separate vote as a Class (a "Separate
Class") or where the holders of Shares of two or more (but not all) Classes are
required to vote as a single Class (a "Combined Class"), the presence in person
or by proxy of the holders of one-third of the Shares of that Separate Class or
Combined Class, as the case may be, issued
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and outstanding and entitled to vote thereat shall constitute a quorum
for such vote. If, however, a quorum with respect to all Classes, a Separate
Class or a Combined Class, as the case may be, shall not be present or
represented at any meeting of the shareholders, the holders of a majority of
the Shares of all Classes, such Separate Class or such Combined Class, as the
case may be, present in person or by proxy and entitled to vote shall have
power to adjourn the meeting from time to time as to all Classes, such Separate
Class or such Combined Class, as the case may be, without notice other than
announcement at the meeting, until the requisite number of Shares entitled to
vote at such meeting shall be present. At such adjourned meeting at which the
requisite number of Shares entitled to vote thereat shall be represented any
business may be transacted which might have been transacted at the meeting as
originally notified. The absence from any meeting of stockholders of the
number of Shares in excess of one-third of the Shares of all Classes or of the
affected Class or Classes, as the case may be, which may be required by the
laws of the State of Maryland, the Investment Company Act of 1940 or any other
applicable law, these Articles of Incorporation, for action upon any given
matter shall not prevent action of such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the number of Shares
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required for action in respect of such other matter or matters. Notwithstanding
any provision of law requiring any action to be taken or authorized by the
holders of a greater proportion than a majority of the Shares of all Classes or
of the Shares of a particular Class or Classes, as the case may be, entitled to
vote thereon, such action shall be valid and effective if taken or authorized by
the affirmative vote of the holders of a majority of the Shares of all Classes
or of such Class or Classes, as the case may be, outstanding and entitled to
vote thereon.
EIGHTH: REDEMPTIONS AND REPURCHASES.
A. The Corporation shall under some circumstances redeem, and may under
other circumstances repurchase or redeem, Shares as follows:
1. OBLIGATION OF THE CORPORATION TO REDEEM SHARES: Each
holder of Shares of any Class shall be entitled at his
option to require the Corporation to redeem all or any part
of the Shares of that Class owned by such holder, upon
written or telegraphic request to the Corporation or its
designated agent, accompanied by surrender of the certifi-
cate or certificates for such Shares, or such other evidence
of ownership as shall be specified by the Board of
Directors, for the proportionate interest per Share in the
assets of the Corporation belonging to that Class, or the
cash equivalent thereof (being the net asset value per Share
of that Class determined as provided in Article NINTH
hereof), subject to and in accordance with the provisions of
paragraph B of this Article.
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<PAGE>
2. RIGHT OF THE CORPORATION TO REDEEM SHARES. In
addition the Board of Directors may, from time to time in
its discretion, authorize the Corporation to require the
redemption of all or any part of the outstanding Shares of
any Class, for the proportionate interest per Share in the
assets of the Corporation belonging to that Class, or the
cash equivalent thereof (being the net asset value per Share
of that Class determined as provided in Article NINTH
hereof), subject to and in accordance with the provisions of
paragraph B of this Article, upon the sending of written
notice thereof to each stockholder any of whose Shares are
so redeemed and upon such terms and conditions as the Board
of Directors shall deem advisable.
3. RIGHT OF THE CORPORATION TO REPURCHASE SHARES. In
addition the Board of Directors may, from time to time in
its discretion, authorize the officers of the Corporation to
repurchase Shares of any Class, either directly or through
an agent, subject to and in accordance with the provisions
of paragraph B of this Article. The price to be paid by the
Corporation upon any such repurchase shall be determined, in
the discretion of the Board of Directors, in accordance with
any provision of the Investment Company Act of 1940 or any
rule or regulation thereunder, including any rule or
regulation made or adopted pursuant to Section 22 of the
Investment Company Act of 1940 by the Securities and
Exchange Commission or any securities association registered
under the Securities Exchange Act of 1934.
B. The following provisions shall be applicable with respect to redemptions
and repurchases of Shares of any Class pursuant to paragraph A hereof:
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1. The time as of which the net asset value per Share
of a particular Class applicable to any redemption pursuant
to subparagraph A(1) or A(2) of this Article shall be
computed shall be such time as may be determined by or
pursuant to the direction of the Board of Directors (which
time may differ from Class to Class).
2. Certificates for Shares of any Class to be redeemed
or repurchased shall be surrendered in proper form for
transfer, together with such proof of the authenticity of
signatures as may be required by resolution of the Board of
Directors.
3. Payment of the redemption or repurchase price by the
Corporation or its designated agent shall be made in cash
within seven days after the time used for determination of
redemption or repurchase price, but in no event prior to
delivery to the Corporation or its designated agent of the
certificate or certificates for the Shares of the particular
Class so redeemed or repurchased or of such other evidence
of ownership as shall be specified by the Board of
Directors; except that any payment may be made in whole or
in part in securities or other assets of the Corporation
belonging to that class if, in the event of the closing of
the New York Stock Exchange or the happening of any event at
any time prior to actual payment which makes the liquidation
of Securities in orderly fashion impractical or impossible,
the Board of Directors shall determine that payment in cash
would be prejudicial to the best interests of the remaining
stockholders of that Class. In making any such payment in
whole or in part in Securities or other assets of the
Corporation belonging to that Class, the Corporation shall,
as nearly as may be practicable, deliver Securities or other
assets of a gross value (determined in the manner provided
in Article NINTH hereof) representing the same
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<PAGE>
proportionate interest in the Securities and other
assets of the Corporation belonging to that Class as is
represented by the Shares of that Class so to be paid for.
Delivery of the Securities included in any such payment
shall be made as promptly as any necessary transfers on
the books of the several corporations whose Securities are
to be delivered may be made.
4. The right of the holder of Shares of any Class
redeemed or repurchased by the Corporation as provided in
this Article to receive dividends thereon and all other
rights of such holder with respect to such Shares shall
forthwith cease and terminate from and after the time as of
which the redemption or repurchase price of such Shares
has been determined (except the right of such holder to
receive (a) the redemption or repurchase price of such
Shares from the Corporation or its designated agent, in cash
and/or in securities or other assets of the Corporation
belonging to that Class, and (b) any dividend to which
such holder had previously become entitled as the record
holder of such Shares on the record date for such dividend,
and, with respect to Shares otherwise entitled to vote,
except the right of such holder to vote at a meeting of
stockholders such Shares owned of record by him on the
record date for such meeting).
NINTH: DETERMINATION OF NET ASSET VALUE. For the purposes referred to in
Articles SEVENTH and EIGHTH hereof the net asset value per share of any Class
shall be determined by or pursuant to the direction of the Board of Directors in
accordance with the following provisions:
A. Such net asset value per Share of a particular Class on any day shall be
computed as follows:
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<PAGE>
The net asset value per Share of that Class shall be
the quotient obtained by dividing the "net value of the
assets" of the Corporation belonging to that Class by the
total number of Shares of that Class at the time deemed to
be outstanding (including Shares sold whether paid for and
issued or not, and excluding Shares redeemed or repurchased
on the basis of previously determined values, whether paid
for, received and held in treasury, or not).
The "net value of the assets" of the Corporation
belonging to a particular Class shall be the "gross value"
of the assets belonging to that Class after deducting the
amount of all expenses incurred and accrued and unpaid
belonging to that Class, such reserves belonging to that
Class as may be set up to cover taxes and any other
liabilities, and such other deductions belonging to that
Class as in the opinion of the officers of the Corporation
are in accordance with accepted accounting practice.
The "gross value" of the assets belonging to a
particular Class shall be the amount of all cash and
receivables and the market value of all Securities and other
assets held by the Corporation and belonging to that Class
at the time as of which the determination is made.
Securities held shall be valued at market value or, in the
absence of readily available market quotations, at fair
value, both as determined pursuant to methods approved by
the Board of Directors and in accordance with applicable
statutes and regulations.
B. The Board of Directors is empowered, in its absolute discretion, to
establish other methods for determining such net asset value whenever such
other methods are deemed by it to be necessary or desirable and are consistent
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<PAGE>
with the provisions of the Investment Company Act of 1940 and the rules and
regulations thereunder.
TENTH: DETERMINATION BINDING. Any determination made by or pursuant to
the direction of the Board of Directors in good faith, and so far as accounting
matters are involved in accordance with accepted accounting practice, as to the
amount of the assets, obligations or liabilities of the Corporation belonging
to any Class, as to the amount of the net income of the Corporation belonging
to any Class for any period or amounts that are any time legally available for
payment of dividends of Shares of any Class, as to the amount of any reserves
or charges set up with respect to any Class and the propriety thereof, as to
the time of or purpose for creating any reserves or charges with respect to any
Class, as to the use, alteration or cancellation of any reserves or charges
with respect to any Class (whether or not any obligation or liability for which
such reserves or charges shall have been created shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged),
as to the price or closing bid or asked price of any security owned or held by
the Corporation and belonging to any Class, as to the market value of any
security or fair value of any other asset owned by the Corporation and
belonging to any Class, as to the number of Shares of any Class outstanding or
deemed to be outstanding, as to the impracticability or impossibility of
liquidating
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<PAGE>
Securities in orderly fashion, as to the extent to which it is practicable to
deliver the proportionate interest in the Securities and other assets of the
Corporation belonging to any Class represented by any Shares belonging to any
Class redeemed or repurchased in payment for any such Shares, as to the method
of payment for any such Shares redeemed or repurchased, or as to any other
matters relating to the issue, sale, redemption, repurchase, and/or other
acquisition or disposition of Securities or Shares of the Corporation shall be
final and conclusive and shall be binding upon the Corporation and all holders
of Shares of all Classes past, present and future, and Shares of all Classes are
issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid. No provision of these Articles of
Incorporation shall be effective to (a) bind any person to waive compliance with
any provision of the Securities Act of 1933 or the Investment Company Act of
1940 or of any valid rule, regulation or order of the Securities and Exchange
Commission thereunder, or (b) protect or purport to protect any director or
officer of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of wilfull
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
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<PAGE>
ELEVENTH: AMENDMENTS. The Corporation reserves the right to take any
lawful action and to make any amendment of these Articles of Incorporation,
including the right to make any amendment which changes the terms of any Shares
of any Class now or hereafter authorized by classification, reclassification,
or otherwise, and to make any amendment authorizing any sale, lease, exchange
or transfer of the property and assets of the Corporation or belonging to any
Class or Classes as an entirety, or substantially as an entirety, with or
without its good will and franchise, if a majority of all the Shares of all
Classes or of the affected Class or Classes, as the case may be, at the time
issued and outstanding and entitled to vote, vote in favor of any such action
or amendment, or consent thereto in writing, and reserves the right to make any
amendment of these Articles of Incorporation in any form, manner or substance
now or hereafter authorized or permitted by law.
I acknowledge this document to be my act, and state under the penalties
of perjury that with respect to all matters and facts therein, to the best of
my knowledge, information and belief such matters and facts are true in all
material respects.
/s/ Donald R. Crawshaw
DATE: December 30, 1985 ----------------------
Donald R. Crawshaw
SCUDDER INSTITUTIONAL FUND, INC.
ARTICLES SUPPLEMENTARY
Scudder Institutional Fund, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly granted by Article V of the
Articles of Incorporation of the Corporation, as amended from time to time (the
"Charter"), the Board of Directors has further classified the authorized but
unissued shares of capital stock of certain Classes (as defined in the Charter)
by making further provision for the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the capital stock of the following
Classes, including provision of sub-classes that have differing preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as specified
herein or, with respect to unissued capital stock, as may be determined by the
Board of Directors and reflected in subsequent Articles Supplementary: (a)
Institutional Cash Plus Portfolio; (b) Institutional Global Equity Portfolio;
(c) Institutional Emerging Markets Equity Portfolio; (d) Institutional
International Equity Portfolio; (e) Institutional Global Small Company Equity
Portfolio; (f) Institutional Latin America Equity Portfolio; (g) Institutional
Japanese Equity Portfolio; (h) Institutional Pacific Basin Equity Portfolio ;
(i) Institutional Growth and Income Portfolio; (j) Institutional Quality Growth
Portfolio; (k) Institutional Value Equity Portfolio; (l) Institutional Small
Company Equity Portfolio; (m) Institutional Defensive Limited Volatility Bond
Portfolio; (n) Institutional Intermediate Limited Volatility Bond Portfolio; (o)
Institutional Active Value Bond Portfolio; (p) Institutional Long Duration Bond
Portfolio; (q) Institutional Mortgage Investment Portfolio; (r) Institutional
Global Bond Portfolio; (s) Institutional International Bond Portfolio; and (t)
Institutional Emerging Markets Fixed Income Portfolio.
SECOND:. The authorized but unissued shares of capital stock of any
Class referred to in ARTICLE FIRST of these Articles Supplementary shall be
subject to the further provisions of this ARTICLE SECOND.
(a) (1) The shares of each Class may, by further action of the Board of
Directors, be divided into two or more sub-classes (each, a "Sub-Class" and,
collectively, "Sub-Classes"). All such Sub-Classes of a particular Class of
capital stock shall represent the same interest in the Corporation and have,
except as provided to the contrary in these Articles Supplementary or in any
subsequently filed charter document, identical voting, dividend, liquidation,
and other rights, terms and conditions with any other shares of capital stock of
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that Class; provided however, that notwithstanding anything in the Charter of
the Corporation to the contrary, shares of the various Sub-Classes of that Class
shall be subject to such differing front-end sales loads, contingent deferred
sales charges, 12b-1 administrative or service fees, and other administrative,
recordkeeping, or service fees, each as may be established from time to time by
the Board of Directors in accordance with the Investment Company Act of 1940, as
amended, and any rules or regulations promulgated thereunder (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc. (the "NASD") and as shall be set forth in the applicable
prospectus for the shares; and provided further that expenses related solely to
a particular Sub-Class of a Class of capital stock (including, without
limitation, distribution expenses under a Rule 12b-1 administrative or service
plan and administrative expenses under an administration or service agreement,
plan or other arrangement, however designated) shall be borne solely by such
Sub-Class and shall be appropriately reflected (in the manner determined by the
Board of Directors) in the net asset value, dividends, distribution and
liquidation rights of the shares of the Sub-Class in question.
(2) The assets belonging to each particular Class or Sub-Class
shall be charged with all expenses, costs, charges and reserves attributable to
that Class or Sub-Class, and any general liabilities, expenses, costs, charges
or reserves of the Corporation that are not readily identifiable as pertaining
to any particular Class or Sub-Class, shall be allocated and charged by or under
the supervision of the Board of Directors to and among any one or more of the
Class or Sub-Class established and designated from time to time in such manner
and on such basis as the Board of Directors, in its sole discretion, deems fair
and equitable, and each allocation of liabilities, expenses, costs, charges and
reserves by or under the supervision of the Board of Directors shall be
conclusive and binding for all purposes.
(b) On each matter submitted to a vote of the stockholders, including
without limitation, the provisions of any distribution plan adopted by the Board
of Directors pursuant to Rule 12b-1 under the 1940 Act, each holder of a Share
shall be entitled to one vote for each such Share standing in his name on the
books of the Corporation irrespective of the Class or Sub-Class thereof, and all
Shares of all Classes or Sub-Classes shall vote as a single class ("Single Class
Voting"); provided, however, that (A) as to any matter with respect to which a
separate vote of any Class or Sub-Class is required or permitted by the 1940 Act
or would be required under the Maryland General Corporation Law, such
requirements as to a separate vote by that Class or Sub-Class, as applicable,
shall apply in lieu of Single Class Voting as described above; (B) in the event
that the separate vote requirements referred to in (A) above apply with respect
to one or more Classes or Sub-Classes, then the Shares of all other Classes or
Sub-Classes shall vote as a single Class, unless such Shares are not required to
be voted under clause (C) of this paragraph or otherwise under law; and (C) as
to any matter which does not materially affect the interest of a particular
Class or Sub-Class, only the holders of Shares of the one or more affected
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<PAGE>
Classes or Sub-Classes, as applicable, shall be entitled to vote. To the extent
inconsistent with previously existing provisions of the Charter of the
Corporation, the provisions of this paragraph (b) shall control.
(c) Shares of a Sub-Class shall be automatically converted into shares
of another Sub-Class at such time, not to exceed 20 years from the date of
initial issuance, as shall be set forth in the applicable prospectus for such
Class as amended from time to time, and in the event no such provision is set
forth in the prospectus, shall not be so convertible.
(d) The holders of each Sub-Class of capital stock classified or
designated by these Articles Supplementary shall have such rights to exchange
their shares for stock of any other Sub-Class of the same or a different Class
or shares of another investment company upon such terms as may be approved by
the Board of Directors from time to time and set forth in appropriate disclosure
documents under the applicable law, rules and regulations of the Securities and
Exchange Commission and the rules of the NASD, including but not limited to such
rights to credit holding periods of the stock exchanged with respect to the
stock received in the exchange.
(e) In furtherance but not in limitation of this Article SECOND, and
without limiting the ability of the Corporation to effect a transaction
contemplated by this paragraph (e) under authority of applicable law or any
other independent provision of the Charter, the assets belonging to a particular
Class of shares of capital stock may be invested partially or entirely in the
shares of a registered or unregistered investment company formed to implement a
"master-feeder" or similar structure operated in conformity with the 1940 Act
and orders issued pursuant thereto, or in any similar structure however
designated. The Corporation shall also be authorized to exchange the assets
belonging to a Class for shares in such a registered or unregistered investment
company formed to be a master portfolio upon the approval of the Board of
Directors and without further authorization by the shareholders of the Class in
question or any other Class or Classes of capital stock of the Corporation.
(f) Shares of a Class or a Sub-Class shall be redeemable at the option
of the Corporation, at the respective net asset value per share and out of
legally available funds, at such times and for such purposes as shall be
determined by the Board of Directors in accordance with any applicable
provisions of the 1940 Act.
(g) By action of the Board of Directors of the Corporation but without
shareholder approval, the assets belonging to a Class or a Sub-Class may be
transferred in accordance with the applicable requirements of the 1940 Act to
another Class or a Sub-Class of the Corporation or to another registered or
unregistered investment company or portfolio thereof, in exchange for shares of
the transferee Class, investment company, or portfolio or in exchange for cash,
as determined in accordance with the 1940 Act and any applicable agreement or
plan of reorganization adopted by the Board of Directors of the Corporation.
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<PAGE>
This paragraph (g) shall not limit the authority of the Corporation to effect a
transaction described by this paragraph (g) under authority of applicable law or
any other independent provision of the Charter
(h) To the extent inconsistent with the previously existing provisions
of the Charter of the Corporation regarding "equality" of shares of a particular
Class of the capital stock of the Corporation, the provisions of this ARTICLE
SECOND shall control.
THIRD: The shares aforesaid have been duly classified by the Board of
Directors pursuant to authority and power contained in the Charter of the
Corporation. These Articles Supplementary do not increase the aggregate
authorized capital stock of the Corporation.
IN WITNESS WHEREOF, the Scudder Institutional Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its Chairman of the
Board of Directors and witnessed by its Assistant Secretary on January 25,
1996.
WITNESS: SCUDDER INSTITUTIONAL FUND, INC.
/s/Thomas F. McDonough By: /s/David S. Lee
Thomas F. McDonough David S. Lee
Assistant Secretary Chairman of the Board of Directors
THE UNDERSIGNED, Chairman of the Board of Directors of the Scudder
Institutional Fund, Inc., who executed on behalf of the Corporation Articles
Supplementary of which this Certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles Supplementary
to be the corporate act of said Corporation and hereby certifies that the
matters and facts set forth herein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
/s/David S. Lee
David S. Lee
Chairman of the Board of Directors
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EXHIBIT 5(a)(ix)
SCUDDER INSTITUTIONAL FUND, INC.
345 Park Avenue
New York, New York 10154
April 3, 1996
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Institutional International Equity Portfolio
Ladies and Gentlemen:
Scudder Institutional Fund, Inc. (the "Corporation"), has been established
as a Maryland corporation to engage in the business of an investment company.
Pursuant to the Corporation's Articles of Incorporation, as amended from
time-to-time (the "Articles"), the Board of Directors has divided the
Corporation's capital shares, par value $.001 per share, (the "Shares") into
separate series, or funds, including Institutional International Equity
Portfolio (the "Fund"). Series may be abolished and dissolved, and additional
series established, from time to time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation under the Investment Company
Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933, as
amended. Copies of the documents referred to in the preceding sentence have been
furnished to you by the Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
<PAGE>
(a) The Articles dated December 30, 1985, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation selecting you as investment
manager and approving the form of this Agreement.
(d) Articles Supplementary dated April 24, 1995 relating to the establishment
of the Fund.
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder" and "Scudder, Stevens &
Clark," trademarks (together, the "Scudder Marks"), you hereby grant the
Corporation a nonexclusive right and sublicense to use (i) the "Scudder" name
and mark as part of the Corporation's name (the "Fund Name"), and (ii) the
Scudder Marks in connection with the Corporation's investment products and
services, in each case only for so long as this Agreement, any other investment
management agreement between you and the Corporation, or any extension, renewal
or amendment hereof or thereof remains in effect, and only for so long as you
are a licensee of the Scudder Marks, provided however, that you agree to use
your best efforts to maintain your license to use and sublicense the Scudder
Marks. The Corporation agrees that it shall have no right to sublicense or
assign rights to use the Scudder Marks, shall acquire no interest in the Scudder
Marks other than the rights granted herein, that all of the Corporation's uses
of the Scudder Marks shall inure to the benefit of Scudder Trust Company as
owner and licensor of the Scudder Marks (the "Trademark Owner"), and that the
Corporation shall not challenge the validity of the Scudder Marks or the
Trademark Owner's ownership thereof. The Corporation further agrees that all
services and products it offers in connection with the Scudder Marks shall meet
commercially reasonable standards of quality, as may be determined by you or the
Trademark Owner from time to time, provided that you acknowledge that the
services and products the Corporation rendered during the one-year period
preceding the date of this Agreement are acceptable. At your reasonable request,
the Corporation shall cooperate with you and the Trademark Owner and shall
execute and deliver any and all documents necessary to maintain and protect
(including but not limited to in connection with any trademark infringement
action) the Scudder Marks and/or enter the Corporation as a registered user
thereof. At such time as this Agreement or any other investment management
2
<PAGE>
agreement shall no longer be in effect between you (or your successor) and the
Corporation, or you no longer are a licensee of the Scudder Marks, the
Corporation shall (to the extent that, and as soon as, it lawfully can) cease to
use the Fund Name or any other name indicating that it is advised by, managed by
or otherwise connected with you (or any organization which shall have succeeded
to your business as investment manager) or the Trademark Owner. In no event
shall the Corporation use the Scudder Marks or any other name or mark
confusingly similar thereto (including, but not limited to, any name or mark
that includes the name "Scudder") if this Agreement or any other investment
advisory agreement between you (or your successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation to comply with the requirements of the 1940 Act and other
applicable laws. To the extent required by law, you shall furnish to regulatory
authorities having the requisite authority any information or reports in
connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
3
<PAGE>
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open-end investment
company and not provided by persons not parties to this Agreement including, but
not limited to, preparing reports to and meeting materials for the Corporation's
Board of Directors and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of, accounting agents, custodians, depositories,
transfer and pricing agents, accountants, attorneys, printers, underwriters,
brokers and dealers, insurers and other persons in any capacity deemed to be
necessary or desirable to Fund operations; preparing and making filings with the
Securities and Exchange Commission (the "SEC") and other regulatory and
self-regulatory organizations, including, but not limited to, preliminary and
definitive proxy materials, post-effective amendments to the Registration
Statement, semi-annual reports on Form N-SAR and notices pursuant to Rule 24f-2
under the 1940 Act; overseeing the tabulation of proxies by the Fund's transfer
agent; assisting in the preparation and filing of the Fund's federal, state and
local tax returns; preparing and filing the Fund's federal excise tax return
pursuant to Section 4982 of the Code; providing assistance with investor and
public relations matters; monitoring the valuation of portfolio securities, the
calculation of net asset value and the calculation and payment of distributions
to Fund shareholders; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
4
<PAGE>
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent and the custodian with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Corporation as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Corporation's Board of Directors. Nothing in this Agreement shall
be deemed to shift to you or to diminish the obligations of any agent of the
Fund or any other person not a party to this Agreement which is obligated to
provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
5
<PAGE>
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act, or (iii) the Corporation
on behalf of the Fund shall have adopted a non-Rule 12b-1 shareholder servicing
plan, providing that the Fund (or some other party) shall assume some or all of
such expenses. You shall be required to pay such of the foregoing sales expenses
as are not required to be paid by the principal underwriter pursuant to the
underwriting agreement or are not permitted to be paid by the Fund (or some
other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you on the last day of each month
the unpaid balance of a fee equal to the excess of (a) 1/12 of 0.90 of 1 percent
of the average daily net assets as defined below of the Fund for such month;
over (b) the greater of (i) the amount by which the Fund's expenses exceed the
lowest applicable expense limitation (as more fully described below) or (ii) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
6
<PAGE>
unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Fund,
shall cause the aggregate expenses of the Fund to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Fund may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Fund the amount of
any payment received in excess of the limitation pursuant to this section 6 as
promptly as practicable after the end of such fiscal year, provided that you
shall not be required to pay the Fund an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this section 6,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Fund; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
statute or regulation referred to above in this section 6.
7
<PAGE>
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until July 31, 1997, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
8
<PAGE>
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. This Agreement shall terminate automatically in the event of its
assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Fund and by the Corporation's Board of Directors, including a
majority of the Directors who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
9
<PAGE>
fail to comply with the requirements of Subchapter M of the Code.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER INSTITUTIONAL FUND, INC.
on behalf of Institutional International
Equity Portfolio
By: /s/Daniel Pierce
------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By: /s/David S. Lee
------------------
Managing Director
10
Exhibit 8(b)(i)
SCUDDER SERVICE CORPORATION
FEE INFORMATION FOR SERVICES PROVIDED UNDER
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Fund, Inc.
Scudder Institutional Fund, Inc.
Annual fee
The aggregate minimum fee shall be $220,000 per year. 1/12th of the annual fee
shall be charged and payable each month. The minimum monthly charge to any fund
shall be the pro rata portion of the annual fee, based on the number of funds
listed in Attachment A, as may from time to time be updated. The account
activity fee shall be charged for any account which at any time during the month
had a share balance in any fund of a Corporation. When a fund's monthly activity
charges do not equal or exceed the minimum monthly charge, the minimum will be
charged.
Account Activity Fee $16.00 per year
Other fees
New Account Set Up $ 3.15 each
Disaster Recovery - per account 0.25 per year
Closed Accounts - per account 1.20 per year
Check Writing:
Retail Check Clearance 1.00 per check
Out of pocket expenses shall be reimbursed by the fund to Scudder Service
Corporation or paid directly by the fund. Such expenses include but are not
limited to the following:
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Stationery and envelopes
Shareholder Statements - printing and postage
Checks - stock supply, printing and postage
Data circuits Lease and maintenance of S.A.I.L and Easy Access
Forms
Microfilm and microfiche
Expenses incurred at the specific direction of the fund
Payment
The above will be billed within the first five (5) business days of each month
for the previous month and will be paid by wire within five (5) business days of
receipt.
On behalf of the Funds listed on
Attachment A: Scudder Service Corporation:
By: /s/Daniel Pierce By:/s/David S. Lee
---------------------- ----------------------
Daniel Pierce David S. Lee
President Vice President
Dated as of October 1, 1995 Dated as of October 1, 1995
<PAGE>
ATTACHMENT A
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Fund, Inc.
Managed Cash Fund
Managed Federal Securities Fund
Managed Government Securities Fund
Managed Intermediate Government Fund
Managed Tax Free Fund
Scudder Institutional Fund, Inc.
Institutional Cash Portfolio
Institutional Federal Portfolio
Institutional Government Portfolio
Institutional International Equity Portfolio
Institutional Tax Free Portfolio
Dated as of October 1, 1995
revised as of January 18, 1996
2
EXHIBIT 8(c)(vi)
CUSTODIAN AGREEMENT
Dated as of
April 3, 1996
Between
SCUDDER INSTITUTIONAL FUND, INC.
and
BROWN BROTHERS HARRIMAN & CO.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
APPOINTMENT OF CUSTODIAN
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
2.1. Safekeeping................................................... 2
2.2. Manner of Holding Securities.................................. 2
2.3. Registered Name; Nominee...................................... 2
2.4. Purchases by the Fund......................................... 3
2.5. Exchanges of Securities....................................... 4
2.6. Sales of Securities........................................... 4
2.7. Depositary Receipts........................................... 5
2.8. Exercise of Rights; Tender Offers............................. 5
2.9. Stock Dividends, Rights, Etc.................................. 5
2.10. Options....................................................... 6
2.11. Futures and Forward Contracts................................. 6
2.12. Borrowings.................................................... 7
2.13. Bank Accounts................................................. 7
2.14. Interest-Bearing Deposits..................................... 8
2.15. Foreign Exchange Transactions.................................. 8
2.16. Securities Loans............................................... 9
2.17. Collections.................................................... 9
2.18. Dividends, Distributions and
Redemptions................................................ 10
2.19. Proxies; Communications Relating to
Portfolio Securities....................................... 10
2.20. Bills......................................................... 11
2.21. Nondiscretionary Details...................................... 11
2.22. Deposit of Fund Assets in Securities
Systems.................................................... 11
2.23. Other Transfers............................................... 12
2.24. Establishment of Segregated Accounts.......................... 13
2.25. Custodian Advances............................................ 13
i
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
3.1. Proper Instructions and Special
Instructions.................................................14
3.2. Authorized Persons..............................................15
3.3 Persons Having Access to Assets of the Fund.....................15
3.4. Actions of Custodian Based on Proper
Instructions and Special Instructions........................15
ARTICLE IV
SUBCUSTODIANS
4.1. Domestic Subcustodians..........................................16
4.2. Foreign Subcustodians and Interim
Subcustodians................................................16
4.3. Termination of a Subcustodian...................................18
4.4. Agents..........................................................18
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
5.1. Standard of Care................................................19
5.2. Liability of Custodian for Actions of
Other Persons................................................20
5.3. Indemnification.................................................21
5.4. Investment Limitations..........................................22
5.5. Fund's Right to Proceed.........................................22
ARTICLE VI
RECORDS
6.1. Preparation of Reports..........................................23
6.2. Custodian's Books and Records...................................23
6.3. Opinion of Fund's Independent Certified
Public Accountants...........................................24
6.4. Reports of Custodian's Independent
Certified Public Accountants.................................24
6.5. Calculation of Net Asset Value..................................24
6.6. Information Regarding Foreign
Subcustodians and Foreign Depositories......................26
ii
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE VII
CUSTODIAN FEES
ARTICLE VIII
TERMINATION
ARTICLE IX
MISCELLANEOUS
9.1. Execution of Documents.......................................... 29
9.2. Entire Agreement................................................ 29
9.3. Waivers and Amendments.......................................... 29
9.4. Captions........................................................ 29
9.5. Governing Law................................................... 29
9.6. Notices......................................................... 29
9.7. Successors and Assigns.......................................... 30
9.8. Counterparts.................................................... 30
9.9. Representative Capacity; Nonrecourse
Obligations.................................................. 30
Appendix A Procedures Relating to Custodian's Security Interest
Appendix B Subcustodians, Foreign Countries, and Foreign Depositories
iii
<PAGE>
Form of Custodian Agreement
---------------------------
CUSTODIAN AGREEMENT dated as of April 3, 1996, between Scudder
Institutional Fund, Inc. (the "Fund"), a Maryland corporation, and Brown
Brothers Harriman & Co. (the "Custodian"), a New York limited partnership. The
Fund is entering into this Agreement on behalf of Institutional International
Equity Portfolio. In the event the Fund establishes one or more additional
series after the date hereof, with respect to which the Fund desires to have the
Custodian render services as Custodian hereunder, the Fund shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series shall become a Fund or Funds hereunder. The Custodian
shall then treat the assets of each series as a separate Fund hereunder, and any
reference to Fund shall refer to a series of the Fund as the context shall
require.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
The Fund hereby employs and appoints the Custodian as a custodian for the
term of and subject to the provisions of this Agreement. The Fund agrees to
deliver to the Custodian all securities, cash and other assets owned by it, and
all payments of income, payments of principal or capital distributions received
by it with respect to all securities owned by the Fund from time to time, and
the cash consideration received by it for such new or treasury shares of capital
stock of the Fund as may be issued or sold from time to time.
The Custodian shall not be under any duty or obligation to require the Fund
to deliver to it any securities, cash or other assets owned by the Fund and
shall have no responsibility or liability for or on account of securities, cash
or other assets not so delivered. The Fund will deposit with the Custodian
copies of the Articles of Incorporation and By-Laws (or comparable documents) of
the Fund and all amendments thereto, and copies of such votes and other
proceedings of the Fund as may be necessary for or convenient to the Custodian
in the performance of its duties.
<PAGE>
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
The Custodian shall have and perform, or cause to be performed in
accordance with this Agreement, the powers and duties set forth in this Article
II. Pursuant to and in accordance with Article IV, the Custodian may appoint one
or more Subcustodians (as that term is defined in Article IV) to exercise the
powers and perform the duties of the Custodian set forth in this Article II and,
except as the context shall otherwise require, references to the Custodian in
this Article II shall include any Subcustodian so appointed.
2.1. Safekeeping. The Custodian shall keep safely the cash, securities and
other assets of the Fund that have been delivered to the Custodian and from time
to time shall accept delivery of cash, securities and other assets for
safekeeping.
2.2. Manner of Holding Securities. (a) The Custodian shall hold securities
of the Fund (i) by physical possession of the share certificates or other
instruments representing such securities in registered or bearer form, or the
broker's receipts or confirmations for forward contracts, futures contracts,
options and similar contracts and securities, or (ii) in book-entry form by a
Securities System (as that term is defined in section 2.22) or (iii) by a
Foreign Depository (as that term is defined in section 4.2(a)).
(b) The Custodian shall identify securities and other assets held by it
hereunder as being held for the account of the Fund and shall require each
Subcustodian to identify securities and other assets held by such Subcustodian
as being held for the account of the Custodian for the Fund (or, if authorized
by Special Instructions, for customers of the Custodian) or for the account of
another Subcustodian for the Fund (or, if authorized by Special Instructions,
for customers of such Subcustodian); provided that if assets are held for the
account of the Custodian or a Subcustodian for customers of the Custodian or
such Subcustodian, the records of the Custodian shall at all times indicate the
Fund and other customers of the Custodian for which such assets are held in such
account and their respective interests therein.
2.3. Registered Name; Nominee. (a) The Custodian shall hold registered
securities and other assets of the Fund (i) in the name of the Custodian
(including any Subcustodian), the Fund, a Securities System, a Foreign
Depository or any nominee of any such person or (ii) in street certificate form,
so-called, and in any case with or without any indication of fiduciary capacity,
provided that such securities and other assets of the Fund are held in an
account of the Custodian containing only assets of the Fund or only assets held
as fiduciary or custodian for customers.
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(b) Except with respect to securities or other assets which under local
custom and practice generally accepted by Institutional Clients are held in the
investor's name, the Custodian shall not hold registered securities or other
assets in the name of the Fund, and shall require each Subcustodian not to hold
registered securities or other assets in the name of the Fund, unless the
Custodian or such Subcustodian promptly notifies the Fund that such registered
securities are being held in the Fund's name and causes the Securities System,
Foreign Depository, issuer or other relevant person to direct all correspondence
and payments to the address of the Custodian or such Subcustodian, as the case
may be.
2.4. Purchases by the Fund. Upon receipt of Proper Instructions (as that
term is defined in section 3.1(a)) and insofar as funds are available for the
purpose (or as funds are otherwise provided by the Custodian at its discretion
pursuant to section 2.25), the Custodian shall pay for and receive securities or
other assets purchased for the account of the Fund, payment being made only upon
receipt of the securities or other assets (a) by the Custodian, or (b) by credit
to an account which the Custodian may have with a Securities System, clearing
corporation of a national securities exchange, Foreign Depository or other
financial institution approved by the Fund. Notwithstanding the foregoing, upon
receipt of Proper Instructions: (i) in the case of repurchase agreements entered
into by the Fund in a transaction involving a Securities System or a Foreign
Depository, the Custodian may release funds to the Securities System or Foreign
Depository prior to the receipt of advice from the Securities System or Foreign
Depository that the securities underlying such repurchase agreement have been
transferred by book entry into the Account (as defined in section 2.22) of the
Custodian maintained with such Securities System or similar account with a
Foreign Depository, provided that the instructions of the Custodian to the
Securities System or Foreign Depository require that the Securities System or
Foreign Depository, as the case may be, may make payment of such funds to the
other party to the repurchase agreement only upon transfer by book-entry of the
securities underlying the repurchase agreement into the Account, (ii) in the
case of futures and forward contracts, options and similar securities, foreign
currency purchased from third parties, time deposits, foreign currency call
account deposits, and other bank deposits, and transactions pursuant to sections
2.10, 2.11, 2.13, 2.14 and 2.15, the Custodian may make payment therefor prior
to delivery of the contract, currency, option or security without receiving an
instrument evidencing said contract, currency, option, security or deposit, and
(iii) in the case of the purchase of securities or other assets the settlement
of which occurs outside the United States of America, the Custodian may make
payment therefor and receive delivery thereof in accordance with local custom
and practice generally accepted by Institutional Clients (as defined below) in
the country in which settlement occurs, provided that in every case the
Custodian shall be subject to the standard of care set forth in Article V and to
any Special Instructions given in accordance with section 3.1(b). Except in the
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cases provided for in the immediately preceding sentence, in any case where
payment for purchase of securities or other assets for the account of the Fund
is made by the Custodian in advance of receipt of the securities or other assets
so purchased in the absence of Proper Instructions to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such securities or other
assets to the same extent as if the securities or other assets had been received
by the Custodian. For purposes of this Agreement, "Institutional Clients" means
U.S. registered investment companies, or major, U.S.-based commercial banks,
insurance companies, pension funds or substantially similar financial
institutions which, as a substantial part of their business operations, purchase
or sell securities and make use of custodial services.
2.5. Exchanges of Securities. Upon receipt of Proper Instructions, the
Custodian shall exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization, recapitalization,
split-up of shares, change of par value, conversion or other event, and to
deposit any such securities in accordance with the terms of any reorganization
or protective plan. Without Proper Instructions, the Custodian may surrender
securities in temporary form for definitive securities, may surrender securities
for transfer into a name or nominee name as permitted in section 2.3, and may
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of indebtedness,
provided that the securities to be issued are to be delivered to the Custodian.
2.6. Sales of Securities. Upon receipt of Proper Instructions, the
Custodian shall make delivery of securities or other assets which have been sold
for the account of the Fund, but only against payment therefor (a) in cash, by a
certified check, bank cashier's check, bank credit, or bank wire transfer, or
(b) by credit to the account of the Custodian with a Securities System, clearing
corporation of a national securities exchange, Foreign Depository or other
financial institution approved by the Fund by Proper Instructions. However, (i)
in the case of delivery of physical certificates or instruments representing
securities, the Custodian may make delivery to the broker acting as agent for
the buyer of the securities, against receipt therefor, for examination in
accordance with "street delivery" custom, provided that the Custodian shall have
taken reasonable steps to ensure prompt collection of the payment for, or the
return of, such securities by the broker or its clearing agent and (ii) in the
case of the sale of securities or other assets the settlement of which occurs
outside the United States of America, such securities shall be delivered and
paid for in accordance with local custom and practice generally accepted by
Institutional Clients in the country in which settlement occurs, provided that
in every case the Custodian shall be subject to the standard of care set forth
in Article V and to any Special Instructions given in accordance with section
3.1(b). Except in the cases provided for in the immediately preceding sentence,
in any case where delivery of securities or other assets for the account of the
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Fund is made by the Custodian in advance of receipt of payment for the
securities or other assets so sold in the absence of Proper Instructions to so
deliver in advance, the Custodian shall be absolutely liable to the Fund for
such payment to the same extent as if such payment had been received by the
Custodian.
2.7. Depositary Receipts. Upon receipt of Proper Instructions, the
Custodian shall surrender securities to the depositary used by an issuer of
American Depositary Receipts, European Depositary Receipts, Global Depositary
Receipts, International Depositary Receipts and other types of Depositary
Receipts (hereinafter collectively referred to as "ADRs") for such securities
against a written receipt therefor adequately describing such securities and
written evidence satisfactory to the Custodian that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
securities in the name of the Custodian, or a nominee of the Custodian, for
delivery to the Custodian in Boston, Massachusetts, or at such other place as
the Custodian may from time to time designate.
Upon receipt of Proper Instructions, the Custodian shall surrender ADRs to
the issuer thereof against a written receipt therefor adequately describing the
ADRs surrendered and written evidence satisfactory to the Custodian that the
issuer of the ADRs has acknowledged receipt of instructions to cause its
depositary to deliver the securities underlying such ADRs to the Custodian.
2.8. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall (a) deliver to the issuer or trustee thereof,
or to the agent of either, warrants, puts, calls, futures contracts, options,
rights or similar securities for the purpose of being exercised or sold,
provided that the new securities and cash, if any, acquired by such action are
to be delivered to the Custodian, and (b) deposit securities upon invitations
for tenders of securities, provided that the consideration is to be paid or
delivered or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the Custodian
shall take all necessary action, unless otherwise directed to the contrary by
Proper Instructions, to comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions or similar rights of security ownership
of which the Custodian receives notice or otherwise becomes aware, and shall
promptly notify the Fund of any such action in writing by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
2.9. Stock Dividends, Rights, Etc. The Custodian shall receive and collect
all stock dividends, rights and other items of like nature and shall deal with
the same as it would other deposited assets or as directed in Proper
Instructions.
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2.10. Options and Swaps. Upon receipt of Proper Instructions or
instructions from a third party properly given under any Procedural Agreement,
the Custodian shall (a) receive and retain confirmations or other documents (to
the extent confirmations or other documents are provided to the Custodian)
evidencing the purchase, sale or writing of an option or swap of any type on or
in respect of a security, securities index, currency or similar form of property
by the Fund; (b) deposit and maintain in a segregated account, either physically
or by book-entry in a Securities System or Foreign Depository or with a broker,
dealer or other party designated by the Fund, securities, cash or other assets
in connection with options transactions or swap agreements entered into by the
Fund; (c) transfer securities, cash or other assets to a Securities System,
Foreign Depository, broker, dealer or other party or organization, as margin
(including variation margin) or other security for the Fund's obligations in
respect of an option or swap; and (d) pay, release and/or transfer such
securities, cash or other assets only in accordance with a notice or other
communication evidencing the expiration, termination, exercise of any such
option or default under any such option or swap furnished by The Options
Clearing Corporation, the securities or options exchange on which such option is
traded, or such other organization, party, broker or dealer as may be
responsible for handling such options or swap transactions or have authority to
give such notice or communication under a Procedural Agreement. Subject to the
standard of care set forth in Article V (and to its safekeeping duties set forth
in section 2.1), the Custodian shall not be responsible for the sufficiency of
assets held in any segregated account established and maintained in accordance
with Proper Instructions or instructions from a third party properly given under
any Procedural Agreement or for the performance by the Fund or any third party
of its obligations under any Procedural Agreement. For purposes of this
Agreement, a "Procedural Agreement" is a procedural agreement relating to
options, swaps (including caps, floors and similar arrangements), futures
contracts, forward contracts or borrowings by the Fund to which the Fund, the
Custodian and a third party are parties.
2.11. Futures and Forward Contracts. Upon receipt of Proper Instructions or
instructions from a third party properly given under any Procedural Agreement,
the Custodian shall (a) receive and retain confirmations or other documents (to
the extent confirmations or other documents are provided to the Custodian)
evidencing the purchase or sale of a futures contract or an option on a futures
contract by the Fund or the entry into a forward contract by the Fund; (b)
deposit and maintain in a segregated account, either physically or by book entry
in a Securities System or Foreign Depository, for the benefit of any futures
commission merchant, or pay to such futures commission merchant, securities,
cash or other assets designated by the Fund as initial, maintenance or variation
"margin" deposits intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold or any options on futures
contracts written, purchased or sold by the Fund or any forward contracts
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entered into, in accordance with the provisions of any Procedural Agreement
designed to comply with the rules of the Commodity Futures Trading Commission
and/or any contract market, or any similar organization or organizations on
which such contracts or options are traded; and (c) pay, release and/or transfer
securities, cash or other assets into or out of such margin accounts only in
accordance with any such agreements or rules. Subject to the standard of care
set forth in Article V, the Custodian shall not be responsible for the
sufficiency of assets held in any such margin account established and maintained
in accordance with Proper Instructions or instructions from a third party
properly given under any Procedural Agreement or for the performance by the Fund
or any third party of its obligations under any Procedural Agreement.
2.12. Borrowings. Upon receipt of Proper Instructions or instructions from
a third party properly given under any Procedural Agreement, the Custodian shall
deliver securities of the Fund to lenders or their agents, or otherwise
establish a segregated account as agreed to by the Fund and the Custodian, as
collateral for borrowings effected by the Fund, but only against receipt of the
amounts borrowed (or to adjust the amount of such collateral in accordance with
the Procedural Agreement), provided that if such collateral is held in
book-entry form by a Securities System or Foreign Depository, such collateral
may be transferred by book-entry to such lender or its agent against receipt by
the Custodian of an undertaking by such lender to pay such borrowed money to or
upon the order of the Fund on the next business day following such transfer of
collateral.
2.13. Bank Accounts. The Custodian shall open and operate one or more
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U.S. bank for a similar deposit.
Upon receipt of Proper Instructions, the Custodian may open and operate
additional accounts in such other banks or trust companies, including any
Subcustodian, as may be designated by the Fund in such instructions (any such
bank or trust company other than the Custodian so designated by the Fund being
referred to hereafter as a "Banking Institution"), provided that any such
account shall be in the name of the Custodian for the account of the Fund (or,
if authorized by Special Instructions, for the account of the Custodian's
customers generally) and subject only to the Custodian's draft or order;
provided that if assets are held in such an account for the account of the
Custodian's customers generally, the records of the Custodian shall at all times
indicate the Fund and other customers for which such assets are held in such
account and their respective interests therein. Such accounts may be opened with
Banking Institutions in the United States and in other countries and may be
denominated in U.S. Dollars or such other currencies as the Fund may determine.
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So long as the Custodian exercises reasonable care and diligence in executing
Proper Instructions, the Custodian shall have no responsibility for the failure
of any Banking Institution to make payment from such an account upon demand.
2.14. Interest-Bearing Deposits. The Custodian shall place interest-bearing
fixed term and call deposits with such banks and in such amounts as the Fund may
authorize pursuant to Proper Instructions. Such deposits may be placed with the
Custodian or with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U.S. Dollars or other currencies, as
the Fund may determine, and need not be evidenced by the issuance or delivery of
a certificate to the Custodian, provided that the Custodian shall include in its
records with respect to the assets of the Fund, appropriate notation as to the
amount and currency of each such deposit, the accepting Banking Institution and
all other appropriate details, and shall retain such forms of advice or receipt
evidencing such deposits as may be forwarded to the Custodian by the Banking
Institution in question. The responsibility of the Custodian for such deposits
accepted on the Custodian's books shall be that of a U.S. bank for a similar
deposit. With respect to interest-bearing deposits other than those accepted on
the Custodian's books, (a) the Custodian shall be responsible for the collection
of income as set forth in section 2.17, and (b) so long as the Custodian
exercises reasonable care and diligence in executing Proper Instructions, the
Custodian shall have no responsibility for the failure of any Banking
Institution to make payment in accordance with the terms of such an account.
Upon receipt of Proper Instructions, the Custodian shall take such reasonable
steps as the Fund deems necessary or appropriate to cause such deposits to be
insured to the maximum extent possible by the Federal Deposit Insurance
Corporation and any other applicable deposit insurers.
2.15. Foreign Exchange Transactions. (a) Upon receipt of Proper
Instructions, the Custodian shall settle foreign exchange contracts or options
to purchase and sell foreign currencies for spot and future delivery on behalf
and for the account of the Fund with such currency brokers or Banking
Institutions as the Fund may direct pursuant to Proper Instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or Banking Institution with which the contract or
option is made, the safekeeping of all certificates and other documents and
agreements received by the Custodian evidencing or relating to such foreign
exchange transactions and the maintenance of proper records as set forth in
section 6.2. In connection with such transactions, upon receipt of Proper
Instructions, the Custodian shall be authorized to make free outgoing payments
of cash in the form of U.S. Dollars or foreign currency without receiving
confirmation of a foreign exchange contract or option or confirmation that the
countervalue currency completing the foreign exchange contract has been
delivered or that the option has been delivered or received. The Custodian shall
have no authority to select third party foreign exchange dealers and, so long as
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the Custodian exercises reasonable care and diligence in executing Proper
Instructions, shall have no responsibility for the failure of any such dealer to
settle any such contract or option in accordance with its terms. The Fund shall
reimburse the Custodian for any interest charges or reasonable out-of-pocket
expenses incurred by the Custodian resulting from the failure or delay of third
party foreign exchange dealers to deliver foreign exchange, other than interest
charges and expenses occasioned by or resulting from the negligence, misfeasance
or misconduct of the Custodian.
(b) The Custodian shall not be obligated to enter into foreign exchange
transactions as principal. However, if the Custodian has made available to the
Fund its services as principal in foreign exchange transactions, upon receipt of
Proper Instructions, the Custodian shall enter into foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
on behalf of and for the account of the Fund with the Custodian as principal.
The responsibility of the Custodian with respect to foreign exchange contracts
and options executed with the Custodian as principal shall be that of a U.S.
bank with respect to a similar contract or option.
2.16. Securities Loans. Upon receipt of Proper Instructions, the Custodian
shall deliver securities of the Fund, in connection with loans of securities by
the Fund, to the borrower thereof in accordance with the terms of a written
securities lending agreement to which the Fund is a party or which is otherwise
approved by the Fund.
2.17. Collections. The Custodian shall promptly collect, receive and
deposit in the account or accounts referred to in section 2.13 all income,
payments of principal and other payments with respect to the securities and
other assets held hereunder, promptly endorse and deliver any instruments
required to effect such collections and in connection therewith deliver the
certificates or other instruments representing securities to the issuer thereof
or its agent when securities are called, redeemed, retired or otherwise become
payable; provided that the payment is to be made in such form and manner and at
such time, which may be after delivery by the Custodian of the instrument
representing the security, as is in accordance with the terms of the instrument
representing the security, such Proper Instructions as the Custodian may
receive, governmental regulations, the rules of the Securities System or Foreign
Depository in which such security is held or, with respect to securities
referred to in clause (iii) of the second sentence of section 2.4, in accordance
with local custom and practice generally accepted by Institutional Clients in
the market where payment or delivery occurs, but in all events subject to the
standard of care set forth in Article V. The Custodian shall promptly execute
ownership and other certificates and affidavits for all federal, state and
foreign tax purposes in connection with receipt of income or other payments with
respect to securities or other assets of the Fund or in connection with transfer
of securities or
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other assets. Pursuant to Proper Instructions, the Custodian shall take such
other actions, which may involve an investment decision, as the Fund may request
with respect to the collection or receipt of funds or the transfer of
securities. Except in the cases provided for in the first sentence of this
section, in any case where delivery of securities for the account of the Fund is
made by the Custodian in advance of receipt of payment with respect to such
securities in the absence of Proper Instructions to so deliver in advance, the
Custodian shall be absolutely liable to the Fund for such payment to the same
extent as if such payment had been received by the Custodian. The Custodian
shall promptly notify the Fund in writing by facsimile transmission or in such
other manner as the Fund and the Custodian may agree in writing if any amount
payable with respect to securities or other assets of the Fund is not received
by the Custodian when due.
2.18. Dividends, Distributions and Redemptions. Upon receipt of Proper
Instructions, or upon receipt of instructions from the Fund's shareholder
servicing agent or agent with comparable duties (the "Shareholder Servicing
Agent") (given by such person or persons and in such manner on behalf of the
Shareholder Servicing Agent as the Fund shall have authorized by Proper
Instructions), the Custodian shall release funds or securities, insofar as
available, to the Shareholder Servicing Agent or as such Shareholder Servicing
Agent shall otherwise instruct (a) for the payment of dividends or other
distributions to Fund shareholders or (b) for payment to the Fund shareholders
who have delivered to such Shareholder Servicing Agent a request for repurchase
or redemption of their shares of capital stock of the Fund.
2.19. Proxies; Communications Relating to Portfolio Securities. The
Custodian shall, as promptly as is appropriate under the circumstances, deliver
or mail to the Fund all forms of proxies and all notices of meetings and any
other notices, announcements or information (including, without limitation,
information relating to pendency of calls and maturities of securities and
expirations of rights in connection therewith, notices of exercise of call and
put options written by the Fund, and notices of the maturity of futures
contracts (and options thereon) purchased or sold by the Fund) affecting or
relating to securities owned by the Fund that are received by the Custodian.
Upon receipt of Proper Instructions, the Custodian shall execute and deliver or
cause its nominee to execute and deliver such proxies or other authorizations as
may be required. Neither the Custodian nor its nominees shall vote upon any of
such securities or execute any proxy to vote thereon or give any consent or take
any other action with respect to securities or other assets of the Fund (except
as otherwise herein provided) unless ordered to do so by Proper Instructions.
The Custodian shall notify the Fund on or before ex-date (or if later
within 24 hours after receipt by the Custodian of the notice of such corporate
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action) of all corporate actions affecting portfolio securities of the Fund
received by the Custodian from the issuers of the securities involved, from
third parties proposing a corporate action, from subcustodians, or from commonly
utilized sources (including proprietary sources) providing corporate action
information, a list of which will be provided by the Custodian to the Fund from
time to time upon request. Information as to corporate actions shall include
information as to dividends, distributions, stock splits, stock dividends,
rights offerings, conversions, exchanges, tender offers, recapitalizations,
mergers, redemptions, calls, maturity dates and similar transactions, including
ex-, record and pay dates and the amounts or other terms thereof. If the Fund
desires to take action with respect to any corporate action, the Fund shall
notify the Custodian within such period as will give the Custodian (including
any Subcustodian) a sufficient amount of time to take such action.
2.20. Bills. Upon receipt of Proper Instructions, the Custodian shall pay
or cause to be paid, insofar as funds are available for the purpose, bills,
statements, or other obligations of the Fund (including but not limited to
interest charges, taxes, advisory fees, compensation to Fund officers and
employees, and other operating expenses of the Fund).
2.21. Nondiscretionary Details. Without the necessity of express
authorization from the Fund, the Custodian shall (a) attend to all
nondiscretionary details in connection with the sale, exchange, substitution,
purchase, transfer or other dealings with securities, cash or other assets of
the Fund held by the Custodian except as otherwise directed from time to time by
the Board of Directors of the Fund, and (b) make payments to itself or others
for minor expenses of handling securities or other assets and for other similar
items relating to the Custodian's duties under this Agreement, provided that all
such payments shall be accounted for to the Fund.
2.22. Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in (a) The Depository Trust
Company, (b) the Participants Trust Company, (c) any book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31
CFR Part 350, or the book-entry regulations of federal agencies substantially in
the form of Subpart O, or (d) any other domestic clearing agency registered with
the Securities and Exchange Commission (the "SEC") under Section 17A of the
Securities Exchange Act of 1934, as amended, which acts as a securities
depository and whose use the Fund has previously approved by Special
Instructions (as that term is defined in section 3.1(b)) (each of the foregoing
being referred to in this Agreement as a "Securities System"). Utilization of a
Securities System shall be in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following provisions:
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(i) The Custodian may deposit and/or maintain securities held hereunder in
a Securities System, provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not include
any assets of the Custodian other than assets held as a fiduciary, custodian, or
otherwise for customers;
(ii) The records of the Custodian with respect to securities of the Fund
which are maintained in a securities System shall identify by book entry those
securities belonging to the Fund;
(iii) The Custodian shall pay for securities purchased for the account of
the Fund only upon (A) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (B) the making of an entry
on the records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities sold for the
account of the Fund only upon (1) receipt of advice from the Securities System
that payment for such securities has been transferred to the Account, and (2)
the making of an entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advices from the
Securities System of transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian and be provided
to the Fund at its request. The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System for the account of
the Fund on the next business day;
(iv) The Custodian shall provide the Fund with any report obtained by the
Custodian on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the Securities
System; and the Custodian shall send to the Fund such reports on its own systems
of internal accounting control as the Fund may reasonably request from time to
time; and
(v) Upon receipt of Special Instructions, the Custodian shall terminate the
use of any such Securities System on behalf of the Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
securities of the Fund that had been maintained with such Securities System.
2.23. Other Transfers. The Custodian shall deliver securities, cash, and
other assets of the Fund to a Subcustodian as necessary to effect transactions
authorized by Proper Instructions. Upon receipt of Proper Instructions in
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writing in advance, the Custodian shall make such other disposition of
securities, cash or other assets of the Fund in a manner other than or for
purposes other than as enumerated in this Agreement, provided that such written
Proper Instructions relating to such disposition shall include a statement of
the purpose for which the delivery is to be made, the amount of funds and/or
securities to be delivered and the name of the person or persons to whom
delivery is to be made.
2.24. Establishment of Segregated Accounts. Upon receipt of Proper
Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of the Fund, into which account
or accounts may be transferred cash and/or securities or other assets of the
Fund, including securities maintained by the Custodian in a Securities System,
said account to be maintained (a) for the purposes set forth in sections 2.10,
2.11, 2.12 and 2.15; (b) for the purposes of compliance by the Fund with the
procedures required by Release No. 10666 under the Investment Company Act of
1940, as amended (the "1940 Act"), or any subsequent release or releases of the
SEC relating to the maintenance of segregated accounts by registered investment
companies; or (c) for such other purposes as set forth, from time to time, in
Special Instructions.
2.25. Custodian Advances. (a) In the event that the Custodian is directed
by Proper Instructions to make any payment or transfer of funds on behalf of the
Fund for which there would be, at the close of business on the date of such
payment or transfer, insufficient funds held by the Custodian on behalf of the
Fund, the Custodian may, in its discretion without further Proper Instructions,
provide an advance ("Advance") to the Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Proper Instructions to make any payment or transfer of funds on behalf of the
Fund as to which it is subsequently determined that the Fund has overdrawn its
cash account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable on demand by the Custodian, unless otherwise agreed by the Fund
and the Custodian, and shall accrue interest from the date of the Advance to the
date of payment by the Fund at a rate agreed upon in writing from time to time
by the Custodian and the Fund. It is understood that any transaction in respect
of which the Custodian shall have made an Advance, including but not limited to
a foreign exchange contract or other transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund, and not, by reason of such Advance, deemed to be a transaction
undertaken by the Custodian for its own account and risk. The Custodian and the
Fund acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of securities for prompt delivery or to meet redemptions or
emergency expenses or cash needs that are not reasonably foreseeable by the
Fund. The Custodian shall promptly notify the Fund in writing (an "Notice of
Advance") of any Advance by facsimile transmission or in such other manner as
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the Fund and the Custodian may agree in writing. At the request of the
Custodian, the Fund shall pledge, assign and grant to the Custodian a security
interest in certain specified securities of the Fund, as security for Advances
provided to the Fund, under the terms and conditions set forth in Appendix A
attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
3.1. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used in this Agreement, the term "Proper
Instructions" shall mean: (i) a tested telex from the Fund or the Fund's
investment manager or adviser, or a written request, direction, instruction or
certification (which may be given by facsimile transmission) signed or initialed
on behalf of the Fund by, one or more Authorized Persons (as that term is
defined in section 3.2); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication (other than facsimile
transmission) effected directly between electro-mechanical or electronic devices
or systems (including, without limitation, computers) by the Fund or the Fund's
investment manager or adviser or by one or more Authorized Persons on behalf of
the Fund; provided that communications of the types described in clauses (ii)
and (iii) above purporting to be given by an Authorized Person shall be
considered Proper Instructions only if the Custodian reasonably believes such
communications to have been given by an Authorized Person with respect to the
transaction involved. Instructions given in the form of Proper Instructions
under clause (i) shall be deemed to be Proper Instructions if they are
reasonably believed by the Custodian to be genuine. Proper Instructions in the
form of oral communications shall be confirmed by the Fund in the manner set
forth in clauses (i) or (iii) above, but the lack of such confirmation shall in
no way affect any action taken by the Custodian in reliance upon such oral
instructions prior to the Custodian's receipt of such confirmation. The Fund,
the Custodian and any investment manager or adviser of the Fund each is hereby
authorized to record any telephonic or other oral communications between the
Custodian and any such person. Proper Instructions may relate to specific
transactions or to types or classes of transactions, provided that Proper
Instructions may take the form of standing instructions only if they are in
writing.
(b) Special Instructions. As used in this Agreement, the term "Special
Instructions" shall mean Proper Instructions countersigned or confirmed in
writing by the Treasurer or any Assistant Treasurer of the Fund or any other
person designated by the Treasurer of the Fund in writing, which
countersignature or confirmation shall be (i) included on the instrument
containing the Proper Instructions or on a separate instrument relating thereto,
and (ii) delivered by hand, facsimile transmission, mail or courier service or
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in such other manner as the Fund and the Custodian agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian at the
address and/or telephone, telecopy or telex number agreed upon from time to time
by the Custodian and the Fund.
3.2. Authorized Persons. Concurrently with the execution of this Agreement
and from time to time thereafter, as appropriate, the Fund shall deliver to the
Custodian a certificate, duly certified by the Secretary or Assistant Secretary
of the Fund, setting forth: (a) the names, titles, signatures and scope of
authority of all persons authorized to give Proper Instructions or any other
notice, request, direction, instruction, certificate or instrument on behalf of
the Fund (each an "Authorized Person"); and (b) the names, titles and signatures
of those persons authorized to issue Special Instructions. Such certificate may
be accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary. Upon
delivery of a certificate which deletes the name(s) of a person previously
authorized to give Proper Instructions or to issue Special Instructions, such
persons shall no longer be considered an Authorized Person or authorized to
issue Special Instructions.
3.3. Persons Having Access to Assets of the Fund. Notwithstanding anything
to the contrary in this Agreement, the Custodian shall not deliver any assets of
the Fund held by the Custodian to or for the account of any Authorized Person,
director, officer, employee or agent of the Fund, provided that nothing in this
section 3.3 shall prohibit (a) any Authorized Person from giving Proper
Instructions, or any person authorized to issue Special Instructions from
issuing Special Instructions, provided such action does not result in delivery
of or access to assets of the Fund prohibited by this section 3.3; or (b) the
Fund's independent certified public accountants from examining or reviewing the
assets of the Fund held by the Custodian. The Fund shall provide a list of such
persons to the Custodian, and the Custodian shall be entitled to rely upon such
list and any modifications thereto that are provided to the Custodian from time
to time by the Fund.
3.4. Actions of Custodian Based on Proper Instructions and Special
Instructions. So long as and to the extent that the Custodian acts in accordance
with Proper Instructions or Special Instructions, as the case may be, and the
terms of this Agreement, the Custodian shall not be responsible for the title,
validity or genuineness of any property, or evidence of title thereof, received
or delivered by it pursuant to this Agreement.
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ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians and Interim Subcustodians (as such terms are defined
below) to act on behalf of the Fund. For purposes of this Agreement, all duly
appointed Domestic Subcustodians, Foreign Subcustodians and Interim
Subcustodians are referred to collectively as "Subcustodians."
4.1. Domestic Subcustodians. The Custodian may, at any time and from time
to time, at its own expense, appoint any bank as defined in section 2(a)(5) of
the 1940 Act meeting the requirements of a custodian under section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of the Fund
as a subcustodian for purposes of holding cash, securities and other assets of
the Fund and performing other functions of the Custodian within the United
States (a "Domestic Subcustodian"), provided that the Custodian shall notify the
Fund in writing of the identity and qualifications of any proposed Domestic
Subcustodian at least 30 days prior to appointment of such Domestic
Subcustodian, and the Fund may, in its sole discretion, by written notice to the
Custodian executed by an Authorized Person disapprove of the appointment of such
Domestic Subcustodian. If following notice by the Custodian to the Fund
regarding appointment of a Domestic Subcustodian and the expiration of 30 days
after the date of such notice, the Fund shall have failed to notify the
Custodian of its disapproval thereof, the Custodian may, in its discretion,
appoint such proposed Domestic Subcustodian as its subcustodian.
4.2 Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time to
time, at its own expense, appoint: (i) any bank, trust company or other entity
meeting the requirements of an "eligible foreign custodian" under section 17(f)
of the 1940 Act and the rules and regulations thereunder or exempted therefrom
by order of the SEC, or (ii) any bank as defined in section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under section 17(f) of the 1940 Act
and the rules and regulations thereunder to act on behalf of the Fund as a
subcustodian for purposes of holding cash, securities and other assets of the
Fund and performing other functions of the Custodian in countries other than the
United States of America (a "Foreign Subcustodian"); provided that prior to the
appointment of any Foreign Subcustodian, the Custodian shall have obtained
written confirmation of the approval of the Board of Directors of the Fund
(which approval may be withheld in the sole discretion of such Board of
Directors) with respect to (A) the identity and qualifications of any proposed
Foreign Subcustodian, (B) the country or countries in which, and the securities
depositories or clearing agencies (meeting the requirements of an "eligible
foreign custodian" under section 17(f) of the 1940 Act and the rules and
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<PAGE>
regulations thereunder or exempted therefrom by order of the SEC) through which,
any proposed Foreign Subcustodian is authorized to hold Securities, cash and
other assets of the Fund (each a "Foreign Depository") and (C) the form and
terms of the subcustodian agreement to be entered into between such proposed
Foreign Subcustodian and the Custodian. In addition, the Custodian may utilize
directly any Foreign Depository, provided the Board of Directors shall have
approved in writing the use of such Foreign Depository by the Custodian. Each
such duly approved Foreign Subcustodian and the countries where and the Foreign
Depositories through which it may hold securities and other assets of the Fund
and the Foreign Depositories that the Custodian may utilize shall be listed in
Appendix B, as it may be amended from time to time in accordance with the
provisions of section 9.3. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be held
in a country in which no Foreign Subcustodian is authorized to act, in order
that there shall be sufficient time for the Custodian to effect the appropriate
arrangements with a proposed Foreign Subcustodian, including obtaining approval
as provided in this section 4.2(a). The Custodian shall not agree to any
material amendment to any subcustodian agreement entered into with a Foreign
Subcustodian, or agree to permit any material changes thereunder, or waive any
material rights under such agreement, except upon prior approval pursuant to
Special Instructions. The Custodian shall promptly provide the Fund with notice
of any such amendment, change, or waiver, whether or not material, including a
copy of any such amendment. For purposes of this subsection, a material
amendment, change or waiver means an amendment, change or waiver that may
reasonably be expected to have an adverse effect on the Fund in any material
way, including but not limited to the Fund's or the Board's obligations under
the 1940 Act, including Rule 17f-5 thereunder.
(b) Interim Subcustodians. In the event that the Fund shall invest in a
security or other asset to be held in a country in which no Foreign Subcustodian
is authorized to act (whether because the Custodian has not appointed a Foreign
Subcustodian in such country and entered into a subcustodian agreement with it
or because the Board of Directors of the Fund has not approved the Foreign
Subcustodian appointed by the Custodian in such country and the related
subcustodian agreement), the Custodian shall promptly notify the Fund in writing
by facsimile transmission or in such other manner as the Fund and Custodian
shall agree in writing that no Foreign Subcustodian is approved in such country
and the Custodian shall, upon receipt of Special Instructions, appoint any
person designated by the Fund in such Special Instructions to hold such security
or other asset. Any person appointed as a Subcustodian pursuant to this section
4.2(b) is hereinafter referred to herein as an "Interim Subcustodian." Each
Interim Custodian and the securities or assets of the Fund that it is authorized
to hold shall be set forth in Appendix B.
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In the absence of such Special Instructions, such security or other asset
shall be held by such agent as the Custodian may appoint unless and until the
Fund shall instruct the Custodian to move the security or other asset into the
possession of the Custodian or a Subcustodian.
4.3. Termination of a Subcustodian. The Custodian shall (a) cause each
Domestic Subcustodian and Foreign Subcustodian to, and (b) use its best efforts
to cause each Interim Subcustodian to, perform all of its obligations in
accordance with the terms and conditions of the subcustodian agreement between
the Custodian and such Subcustodian. In the event that the Custodian is unable
to cause such Subcustodian to fully perform its obligations thereunder, the
Custodian shall forthwith, upon the receipt of Special Instructions, exercise
its best efforts to recover any Losses (as hereinafter defined) incurred by the
Fund because of such failure to perform from such Subcustodian under the
applicable subcustodian agreement and, if necessary or desirable, terminate such
subcustodian and appoint a replacement Subcustodian in accordance with the
provisions of this Agreement. In addition to the foregoing, the Custodian (i)
may, at any time in its discretion, upon written notification to the Fund,
terminate any Domestic Subcustodian, Foreign Subcustodian or Interim
Subcustodian, and (ii) shall, upon receipt of Special Instructions, terminate
any Subcustodian with respect to the Fund, in each case in accordance with the
termination provisions of the applicable subcustodian agreement.
4.4. Agents. The Custodian may at any time or times in its discretion
appoint (and may at any time remove) any other bank, trust company, securities
depository or clearing agency that is itself qualified to act as a custodian
under the 1940 Act and the rules and regulations thereunder, as its agent (an
"Agent") to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct, provided that the appointment of one or more
Agents (other than an agent appointed to the second paragraph of section 4.2(b))
shall not relieve the Custodian of its responsibilities under this Agreement.
Without limiting the foregoing, the Custodian shall be responsible for any
notices, documents or other information, or any securities, cash or other assets
of the Fund, received by any Agent on behalf of the Custodian or the Fund as if
the Custodian had received such items itself.
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ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
5.1 Standard of Care
(a) General Standard of Care. The Custodian shall exercise reasonable care
and diligence in carrying out all of its duties and obligations under this
Agreement, and shall be liable to the Fund for all Losses suffered or incurred
by the Fund resulting from the failure of the Custodian to exercise such
reasonable care and diligence. For purposes of this Agreement, "Losses" means
any losses, damages, and expenses.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, securities depository or securities
system utilized by any such Subcustodian or the Custodian, or any nominee of the
Custodian or any Subcustodian, is prevented, forbidden or delayed from
performing, or omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (i) any provision
of any present or future law or regulation or order of the United States of
America, or any state thereof, or of any foreign country, or political
subdivision thereof or of any court of competent jurisdiction; or (ii) any act
of God or war or action of any de facto or de jure government or other similar
circumstance beyond the control of the Custodian, unless, in each case, such
delay or nonperformance is caused by the negligence, misfeasance or misconduct
of such person.
(c) Mitigation by Custodian. Upon the occurrence of any event which causes
or may cause any Losses to the Fund (i) the Custodian shall, and shall cause any
applicable Domestic Subcustodian or Foreign Subcustodian to, and (ii) the
Custodian shall use its best efforts to cause any applicable Interim
Subcustodian to, use all commercially reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effects of such event and to avoid
continuing harm to the Fund.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act
upon advice of counsel on all matters. The Custodian shall be without liability
for any action reasonably taken or omitted in good faith pursuant to the advice
of (i) counsel for the Fund, or (ii) at the expense of the Custodian, such other
counsel as the Fund may agree to, such agreement not to be unreasonably withheld
or delayed; provided that with respect to the performance of any action or
omission of any action upon such advice, the Custodian shall be required to
conform to the standard of care set forth in section 5.1(a).
(e) Expenses. In addition to the liability of the Custodian under this
Article V, the Custodian shall be liable to the Fund for all reasonable costs
and expenses incurred by the Fund in connection with any claim by the Fund
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<PAGE>
against the Custodian arising from the obligations of the Custodian hereunder
including, without limitation, all reasonable attorneys' fees and expenses
incurred by the Fund in asserting any such claim, and all reasonable expenses
incurred by the Fund in connection with any investigations, lawsuits or
proceedings relating to such claim, provided that the Fund has recovered from
the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any Losses suffered by the Fund, insofar as such Losses arise from
the performance of the Custodian's duties hereunder by reason of the Custodian's
reliance upon records that were maintained for the Fund by entities other than
the Custodian prior to the Custodian's employment hereunder.
(g) Reliance on Certifications. The Secretary or an Assistant Secretary of
the Fund shall certify to the Custodian the names and signatures of the officers
of the Fund, the name and address of the Shareholder Servicing Agent, and any
instructions or directions to the Custodian by the Fund's Board of Directors or
shareholders. Any such certificate may be accepted and relied upon by the
Custodian as conclusive evidence of the facts set forth therein and may be
considered in full force and effect until receipt of a similar certificate to
the contrary.
5.2. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians, Foreign Subcustodians and Agents. The Custodian
shall be liable for the actions or omissions of any Domestic Subcustodian,
Foreign Subcustodian or Agent (other than an agent appointed pursuant to section
4.2(b)) to the same extent as if such action or omission were performed by the
Custodian itself pursuant to this Agreement. In the event of any Losses suffered
or incurred by the Fund caused by or resulting from the actions or omissions of
any Domestic Subcustodian, Foreign Subcustodian or Agent (other than an agent
appointed pursuant to section 4.2(b)) for which the Custodian would be directly
liable if such actions or omissions were those of the Custodian, the Custodian
shall promptly reimburse the Fund in the amount of any such Losses.
(b) Interim Subcustodians. Notwithstanding the provisions of section 5.1 to
the contrary, the Custodian shall not be liable to the Fund for any Losses
suffered or incurred by the Fund resulting from the actions or omissions of an
Interim Subcustodian or an agent appointed pursuant to section 4.2(b) unless
such Losses are caused by, or result from, the negligence, misfeasance or
misconduct of the Custodian; provided that in the event of any Losses (whether
or not caused by or resulting from the negligence, misfeasance or misconduct of
the Custodian), the Custodian shall take all reasonable steps to enforce such
rights as it may have against such Interim Subcustodian or agent to protect the
interests of the Fund.
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(c) Securities Systems and Foreign Depositories. Notwithstanding the
provisions of section 5.1 to the contrary, the Custodian shall not be liable to
the Fund for any Losses suffered or incurred by the Fund resulting from the use
by the Custodian or any Subcustodian of a Securities System or Foreign
Depository, unless such Losses are caused by, or result from, the negligence,
misfeasance or misconduct of the Custodian; provided that in the event of any
such Losses, the Custodian shall take all reasonable steps to enforce such
rights as it may have against the Securities System or Foreign Depository, as
the case may be, to protect the interests of the Fund.
(d) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian
for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under this section 5.2,
provided that such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Custodian.
5.3. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, the Fund agrees to indemnify and hold harmless the Custodian and
its nominees for all Losses suffered or incurred by the Custodian or its nominee
(including Losses suffered under the Custodian's indemnity obligations to
Subcustodians) caused by or arising from actions taken by the Custodian in the
performance of its duties and obligations under this Agreement, provided that
such indemnity shall not apply to Losses occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian or any Subcustodian,
Securities System, Foreign Depository or their respective nominees. In addition,
the Fund agrees to indemnify the Custodian against any liability incurred by
reason of taxes assessed to the Custodian, any Subcustodian, any Securities
System, any Foreign Depository, and their respective nominees, or other Losses
incurred by such persons, resulting from the fact that securities and other
property of the Fund are registered in the name of such persons, provided that
in no event shall such indemnification be applicable to income, franchise or
similar taxes which may be imposed or assessed against such persons.
(b) Notice of Litigation, Right to Prosecute, etc. The Fund shall not be
liable for indemnification under this section 5.3 unless the person seeking
indemnification shall have notified the Fund in writing (i) within such time
after the assertion of any claim as is sufficient for such person to determine
that it will seek indemnification from the Fund in respect of such claim or (ii)
promptly after the commencement of any litigation or proceeding brought against
such person, in respect of which indemnity may be sought; provided that in the
case of clause (i) of this section 5.3(b) the Fund shall not be liable for such
indemnification to the extent the Fund is disadvantaged by any such delay in
notification. With respect to claims in such litigation or proceedings for which
indemnity by the Fund may be sought and subject to applicable law and the ruling
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of any court of competent jurisdiction, the Fund shall be entitled to
participate in any such litigation or proceeding and, after written notice from
the Fund to the person seeking indemnification, the Fund may assume the defense
of such litigation or proceeding with counsel of its choice at its own expense
in respect of that portion of the litigation for which the Fund may be subject
to an indemnification obligation, provided that such person shall be entitled to
participate in (but not control) at its own cost and expense, the defense of any
such litigation or proceeding if the Fund has not acknowledged in writing its
obligation to indemnify such person with respect to such litigation or
proceeding. If the Fund is not permitted to participate in or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, such person shall reasonably prosecute such litigation
or proceeding. A person seeking indemnification hereunder shall not consent to
the entry of any judgment or enter into any settlement of any such litigation or
proceeding without providing the Fund with adequate notice of any such
settlement or judgment and without the Fund's prior written consent, which
consent shall not be unreasonably withheld or delayed. All persons seeking
indemnification hereunder shall submit written evidence to the Fund with respect
to any cost or expense for which they are seeking indemnification in such form
and detail as the Fund may reasonably request.
5.4. Investment Limitations. If the Custodian has otherwise complied with
the terms and conditions of this Agreement in performing its duties generally,
and more particularly in connection with the purchase, sale or exchange of
securities made by or for the Fund, the Custodian shall not be liable to the
Fund, and the Fund agrees to indemnify the Custodian and its nominees, for any
Losses suffered or incurred by the Custodian and its nominees arising out of any
violation of any investment or other limitation to which the Fund is subject.
5.5. Fund's Right to Proceed. Notwithstanding anything to the contrary
contained herein, the Fund shall have, at its election upon reasonable notice to
the Custodian, the right to enforce, to the extent permitted by any applicable
agreement and applicable law, the Custodian's rights against any Subcustodian,
Securities System, Foreign Depository or other person for Losses caused the Fund
by such Subcustodian, Securities System, Foreign Depository or other person, and
shall be entitled to enforce the rights of the Custodian with respect to any
claim against such Subcustodian, Securities System, Foreign Depository or other
person which the Custodian may have as a consequence of any such Losses, if and
to the extent that the Fund has not been made whole for such Losses. If the
Custodian makes the Fund whole for such Losses, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian, Securities
System, Foreign Depository or other person. Upon the Fund's election to enforce
any rights of the Custodian under this section 5.5, the Fund shall reasonably
prosecute all actions and proceedings directly relating to the rights of the
Custodian in respect of the Losses incurred by the Fund; provided that, so long
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as the Fund has acknowledged in writing its obligation to indemnify the
Custodian under section 5.3 hereof with respect to such claim, the Fund shall
retain the right to settle, compromise and/or terminate any action or proceeding
in respect of the Losses incurred by the Fund without the Custodian's consent;
and provided further that if the Fund has not made an acknowledgement of its
obligation to indemnify the Custodian, the Fund shall not settle, compromise or
terminate any such action or proceeding without the written consent of the
Custodian, which consent shall not be unreasonably withheld or delayed. The
Custodian agrees to cooperate with the Fund and take all actions reasonably
requested by the Fund in connection with the Fund's enforcement of any rights of
the Custodian. The Fund agrees to reimburse the Custodian for all reasonable
out-of-pocket expenses incurred by the Custodian in connection with the
fulfillment of its obligations under this section 5.5, provided that such
reimbursement shall not apply to expenses occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian.
ARTICLE VI
RECORDS
6.1. Preparation of Reports. The Custodian shall, as reasonably requested
by the Fund, assist generally in the preparation of reports to Fund
shareholders, regulatory authorities and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall render statements,
including interim monthly and complete quarterly financial statements, or copies
thereof, from time to time as reasonably requested by Proper Instructions.
6.2. Custodian's Books and Records. The Custodian shall maintain complete
and accurate records with respect to securities and other assets held for the
account of the Fund as required by the rules and regulations of the SEC
applicable to investment companies registered under the 1940 Act, including: (a)
journals or other records of original entry containing a detailed and itemized
daily record of all receipts and deliveries of securities (including certificate
and transaction identification numbers, if any), and all receipts and
disbursements of cash; (b) ledgers or other records reflecting (i) securities in
physical possession, (ii) securities in transfer, (iii) securities borrowed,
loaned or collateralizing obligations of the Fund, (iv) monies borrowed and
monies loaned (together with a record of the collateral therefor and
substitutions of collateral), and (v) dividends and interest received; and (c)
cancelled checks and bank records related thereto. The Custodian shall keep such
other books and records of the Fund as the Fund shall reasonably request. All
such books and records maintained by the Custodian shall be maintained in a form
acceptable to the Fund and in compliance with the rules and regulations of the
SEC (including, but not limited to, books and records required to be maintained
under Section 31(a) of the 1940 Act and the rules and regulations from time to
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time adopted thereunder), and any other applicable Federal, State and foreign
tax laws and administrative regulations. All such records will be the property
of the Fund and in the event of termination of this Agreement shall be delivered
to the successor custodian.
All books and records maintained by the Custodian pursuant to this
Agreement and any insurance policies and fidelity or similar bonds maintained by
the Custodian shall be made available for inspection and audit at reasonable
times by officers of, attorneys for, and auditors employed by, the Fund and the
Custodian shall promptly provide the Fund with copies of all reports of its
independent auditors regarding the Custodian's controls and procedures.
6.3. Opinion of Fund's Independent Certified Public Accountants. The
Custodian shall take all reasonable action as the Fund may request to obtain
from year to year favorable opinions from the Fund's independent certified
public accountants with respect to the Custodian's activities hereunder in
connection with the preparation of any periodic reports to or filings with the
SEC and with respect to any other requirements of the SEC.
6.4. Reports of Custodian's Independent Certified Public Accountants. At
the request of the Fund, the Custodian shall deliver to the Fund a written
report prepared by the Custodian's independent certified public accountants with
respect to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system, internal
accounting control and procedures for safeguarding cash, securities and other
assets, including cash, securities and other assets deposited and/or maintained
in a Securities System or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund and as may reasonably be obtained by the Custodian.
6.5. Calculation of Net Asset Value. The Custodian shall compute and
determine the net asset value per share of capital stock of the Fund as of the
close of regular business on the New York Stock Exchange on each day on which
such Exchange is open, unless otherwise directed by Proper Instructions. Such
computation and determination shall be made in accordance with (a) the
provisions of the By-Laws of the Fund and Articles of Incorporation, as they may
from time to time be amended and delivered to the Custodian, (b) the votes of
the Board of Directors of the Fund at the time in force and applicable, as they
may from time to time be delivered to the Custodian, and (c) Proper
Instructions. On each day that the Custodian shall compute the net asset value
per share of the Fund, the Custodian shall provide the Fund with written reports
which permit the Fund to verify that portfolio transactions have been recorded
in accordance with the Fund's instructions.
24
<PAGE>
In computing the net asset value, the Custodian may rely upon any
information furnished by Proper Instructions, including without limitation any
information (i) as to accrual of liabilities of the Fund and as to liabilities
of the Fund not appearing on the books of account kept by the Custodian, (ii) as
to the existence, status and proper treatment of reserves, if any, authorized by
the Fund, (iii) as to the sources of quotations to be used in computing the net
asset value, including those listed in Appendix C hereto, (iv) as to the fair
value to be assigned to any securities or other assets for which price
quotations are not readily available, and (v) as to the sources of information
with respect to "corporate actions" affecting portfolio securities of the Fund,
including those listed in Appendix C. (Information as to "corporate actions"
shall include information as to dividends, distributions, stock splits, stock
dividends, rights offerings, conversions, exchanges, recapitalizations, mergers,
redemptions, calls, maturity dates and similar transactions, including the ex-
and record dates and the amounts or other terms thereof.)
In like manner, the Custodian shall compute and determine the net asset
value as of such other times as the Board of Directors of the Fund, or any
valuation committee thereof, from time to time may reasonably request.
The Custodian shall be held to the standard of care set forth in Article V
with respect to the performance of its responsibilities under this Article VI.
The parties hereto acknowledge, however, that the Custodian's causing an error
or delay in the determination of net asset value may, but does not in and of
itself, constitute negligence, gross negligence or reckless or willful
misconduct. The Custodian's liability for any such negligence, gross negligence
or reckless or willful misconduct which results in an error in determination of
such net asset value shall be limited to the direct, out-of-pocket loss the
Fund, shareholder or former shareholder shall actually incur, measured by the
difference between the actual and the erroneously computed net asset value, and
any expenses incurred by the Fund in connection with correcting the records of
the Fund affected by such error (including charges made by the Fund's registrar
and transfer agent for making such corrections), communicating with shareholders
or former shareholders of the Fund affected by such error or responding to or
defending against any inquiry or proceeding with respect to such error made or
initiated by the SEC or other regulatory or self-regulatory body.
Without limiting the foregoing, the Custodian shall not be held accountable
or liable to the Fund, any shareholder or former shareholder thereof or any
other person for any delays or Losses any of them may suffer or incur resulting
from (A) the Custodian's failure to receive timely and suitable notification
concerning quotations or corporate actions relating to or affecting securities
of the Fund or (B) any errors in the computation of the net asset value based
upon or arising out of quotations or information as to corporate actions if
25
<PAGE>
received by the Custodian either (1) from a source which the Custodian was
authorized pursuant to the second paragraph of this section 6.5 to rely upon, or
(2) from a source which in the Custodian's reasonable judgment was as reliable a
source for such quotations or information as the sources authorized pursuant to
that paragraph. Nevertheless, the Custodian will use its best judgment in
determining whether to verify through other sources any information it has
received as to quotations or corporate actions if the Custodian has reason to
believe that any such information might be incorrect.
In the event of any error or delay in the determination of such net asset
value for which the Custodian may be liable, the Fund and the Custodian will
consult and make good faith efforts to reach agreement on what actions should be
taken in order to mitigate any Losses suffered by the Fund or its present or
former shareholders, in order that the Custodian's exposure to liability shall
be reduced to the extent possible after taking into account all relevant factors
and alternatives. Such actions might include the Fund or the Custodian taking
reasonable steps to collect from any shareholder or former shareholder who has
received any overpayment upon redemption of shares such overpaid amount or to
collect from any shareholder who has underpaid upon a purchase of shares the
amount of such underpayment or to reduce the number of shares issued to such
shareholder. It is understood that in attempting to reach agreement on the
actions to be taken or the amount of the loss which should appropriately be
borne by the Custodian, the Fund and the Custodian will consider such relevant
factors as the amount of the loss involved, the Fund's desire to avoid loss of
shareholder good will, the fact that other persons or entities could have
reasonably expected to have detected the error sooner than the time it was
actually discovered, the appropriateness of limiting or eliminating the benefit
which shareholders or former shareholders might have obtained by reason of the
error, and the possibility that other parties providing services to the Fund
might be induced to absorb a portion of the loss incurred.
Upon written notice from the Fund to the Custodian, the Custodian's
responsibilities under this Section 6.5 shall terminate, but this Agreement
shall otherwise continue in full force and effect. Upon such termination, the
fee schedule provided for under Article VII hereof shall be adjusted by the
parties in such manner as they may agree, and the Custodian will transfer such
of the Fund's books and records, and provide such other reasonable cooperation,
as the Fund may request in connection with the transfer of such
responsibilities.
6.6. Information Regarding Foreign Subcustodians and Foreign Depositories.
(a) The Custodian shall use reasonable efforts to assist the Fund in obtaining
the following with respect to any country in which any assets of the Fund are
held or proposed to be held:
(1) information concerning whether, and to what extent, applicable
foreign law would restrict the access afforded the Fund's independent
26
<PAGE>
public accountants to books and records kept by a foreign custodian or
foreign securities depository used, or proposed to be used, in that
country;
(2) information concerning whether, and to what extent, applicable
foreign law would restrict the Fund's ability to recover its assets in the
event of the bankruptcy of a foreign custodian or foreign securities
depository used, or proposed to be used, in that country;
(3) information concerning whether, and to what extent, applicable
foreign law would restrict the Fund's ability to recover assets that are
lost while under the control of a foreign custodian or foreign securities
depository used, or proposed to be used, in that country;
(4) information concerning the likelihood of expropriation,
nationalization, freezes or confiscation of the Fund's assets in that
country;
(5) information concerning whether difficulties in converting the
Fund's cash and cash equivalents held in that country into U.S. Dollars are
reasonably foreseeable, including without limitation as a result of
applicable foreign currency exchange regulations;
(6) information concerning the financial strength, general reputation
and standing and ability to perform custodial services of each foreign
custodian or foreign securities depository used, or proposed to be used, in
that country;
(7) information concerning whether each foreign custodian or foreign
securities depository used, or proposed to be used, in that country would
provide a level of safeguards for maintaining the Fund's assets not
materially different from that provided by the Custodian in maintaining the
Fund's securities in the United States;
(8) information concerning whether each foreign custodian or foreign
securities depository used, or proposed to be used, in that country has
offices in the United States in order to facilitate the assertion of
jurisdiction over and enforcement of judgments against such custodian or
depository;
(9) as to each foreign securities depository used, or proposed to be
used, in that country information concerning the number of participants in,
and operating history of, such depository; and
(10) such other information as may be requested by the Fund to ensure
compliance with Rule 17f-5 under the 1940 Act.
27
<PAGE>
(b) During the term of this Agreement, the Custodian shall use reasonable
efforts to provide the Fund with prompt notice of any material changes in the
facts or circumstances upon which any of the foregoing information or statements
were based.
(c) Upon request of the Fund, the Custodian shall deliver to the Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; and (ii) the countries in which and the Foreign
Depositories through which each such Foreign Subcustodian or the Custodian is
then holding cash, securities and other assets of the Fund.
ARTICLE VII
CUSTODIAN FEES
The Fund shall pay the Custodian a custody fee based on such fee schedule
as may from time to time be agreed upon in writing by the Custodian and the
Fund. Such fee, together with all amounts for which the Custodian is to be
reimbursed in accordance with the following sentence, shall be billed to the
Fund in such a manner as to permit payment either by a direct cash payment to
the Custodian or by placing Fund portfolio transactions with the Custodian
resulting in an agreed-upon amount of commissions being paid to the Custodian
within an agreed-upon period of time. The Custodian shall be entitled to receive
reimbursement from the Fund on demand for its cash disbursements and expenses
(including cash disbursements and expenses of any Subcustodian or Agent for
which the Custodian has reimbursed such Subcustodian or Agent) permitted by this
Agreement, but excluding salaries and usual overhead expenses, upon receipt by
the Fund of reasonable evidence thereof.
ARTICLE VIII
TERMINATION
This Agreement shall continue in full force and effect until terminated by
either party by an instrument in writing delivered or mailed, postage prepaid,
to the other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing. In the event of termination,
the Custodian shall be entitled to receive prior to delivery of the securities,
cash and other assets held by it all accrued fees and unreimbursed expenses the
payment of which is contemplated by Article VII, upon receipt by the Fund of a
statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed that
the cash, securities and other assets owned by the Fund and held by the
Custodian or any Subcustodian or Agent shall be delivered to the successor
custodian, and the Custodian agrees to cooperate with the Fund in execution of
documents and performance of other actions necessary or desirable in order to
28
<PAGE>
substitute the successor custodian for the Custodian under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1. Execution of Documents. Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other instruments as may be
reasonable and necessary or desirable in connection with the performance by the
Custodian or any Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement.
9.2. Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject matter hereof.
9.3. Waivers and Amendments. No provision of this Agreement may be amended
or terminated except by a statement in writing signed by the party against which
enforcement of the amendment or termination is sought, provided that Appendix B
listing the Foreign Subcustodians and Foreign Depositories approved by the Fund
and Appendix C listing quotation and information sources may be amended from
time to time to add or delete one or more of such entities or sources by
delivery to the Custodian of a revised Appendix B or C executed by an Authorized
Person, such amendment to take effect immediately upon execution of the revised
Appendix B or C by the Custodian.
In connection with the operation of this Agreement, the Custodian and the
Fund may agree in writing from time to time on such provisions interpretative of
or in addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
9.4. Captions. The section headings in this Agreement are for the
convenience of the parties and in no way alter, amend, limit or restrict the
contractual obligations of the parties set forth in this Agreement.
9.5. Governing Law. This instrument shall be governed by and construed in
accordance with the laws of the State of New York.
9.6. Notices. Notices and other writings delivered or mailed postage
prepaid to the Fund addressed to the Fund at 345 Park Avenue, New York, NY 10154
or to such other address as the Fund may have designated to the Custodian in
writing, or to the Custodian at 40 Water Street, Boston, Massachusetts 02109,
Attention: Manager, Securities Department, or to such other address as the
29
<PAGE>
Custodian may have designated to the Fund in writing, shall be deemed to have
been properly delivered or given hereunder to the respective addressee.
9.7. Successors and Assigns. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither party hereto may assign this
Agreement or any of its rights hereunder without the prior written consent of
the other party.
9.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties.
9.9. Representative Capacity; Nonrecourse Obligations. The Custodian agrees
that any claims by it against the Fund under this Agreement may be satisfied
only from the assets of the Fund; that the person executing this Agreement has
executed it on behalf of the Fund and not individually, and that the obligations
of the Fund arising out of this Agreement are not binding upon such person or
the Fund's shareholders individually but are binding only upon the assets and
property of the Fund; and that no shareholders, directors or officers of the
Fund may be held personally liable or responsible for any obligations of the
Fund arising out of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
BROWN BROTHERS HARRIMAN & CO.
per pro /s/Douglas Donahue
---------------------------
Name: Douglas Donahue
Title: Partner
SCUDDER INSTITUTIONAL FUND, INC.
By: /s/Daniel Pierce
---------------------------
Name: Daniel Pierce
Title: President
By: /s/David S. Lee
---------------------------
Name: David S. Lee
Title: Chairman of the Board
30
<PAGE>
APPENDIX A TO THE
CUSTODIAN AGREEMENT BETWEEN
SCUDDER INSTITUTIONAL FUND, INC. AND
BROWN BROTHERS HARRIMAN & CO.
DATED AS OF April __, 1996
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
----------------------------------------------------
As security for any Advances (as defined in the Custodian Agreement) of the
Fund, the Fund shall pledge, assign and grant to the Custodian a security
interest in Collateral (as hereinafter defined), under the terms, circumstances
and conditions set forth in this Appendix A.
Section 1. Defined Terms. As used in this Appendix A the following terms
shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which the Custodian is closed for business.
(b) "Collateral" shall mean those securities having a fair market value (as
determined in accordance with the procedures set forth in the prospectus for the
Fund) equal to the aggregate of all Advance Obligations of the Fund that are (i)
identified in any Pledge Certificate executed on behalf of the Fund or (ii)
designated by the Custodian for the Fund pursuant to Section 3 of this Appendix
A. Such securities shall consist of marketable securities held by the Custodian
on behalf of the Fund or, if no such marketable securities are held by the
Custodian on behalf of the Fund, such other securities designated by the Fund in
the applicable Pledge Certificate or by the Custodian pursuant to Section 3 of
this Appendix A.
(c) "Advance Obligations" shall mean the amount of any outstanding
Advance(s) provided by the Custodian to the Fund together with all accrued
interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached as Exhibit 1 to this Appendix A, executed by a duly authorized officer
of the Fund and delivered by the Fund to the Custodian by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form
attached as Exhibit 2 to this Appendix A, executed by a duly authorized officer
of the Custodian and delivered by the Custodian to the Fund by facsimile
transmission or in such other manner as the Fund and the Custodian may agree in
writing.
31
<PAGE>
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by facsimile
transmission or in such other manner as the Fund and the Custodian shall agree
in writing.
Section 2. Pledge of Collateral. To the extent that any Advance Obligations
of the Fund are not satisfied by the close of business on the first Business Day
following the Business Day on which the Fund receives a Written Notice
requesting security for such Advance Obligation and stating the amount of such
Advance Obligation, the Fund shall pledge, assign and grant to the Custodian a
first priority security interest in Collateral specified by the Fund by
delivering to the Custodian a Pledge Certificate executed by the Fund describing
such Collateral. Such Written Notice may, in the discretion of the Custodian, be
included within or accompany the Notice of Advance (as defined in the Custodian
Agreement) relating to the applicable Advance Obligation.
Section 3. Failure to Pledge Collateral. In the event that the Fund shall
fail (a) to pay the Advance Obligation described in such Written Notice, (b) to
deliver to the Custodian a Pledge Certificate pursuant to Section 2, or (c) to
identify substitute securities pursuant to Section 6 upon the sale or maturity
of any securities identified as Collateral, the Custodian may, by Written Notice
to the Fund, specify Collateral which shall secure the applicable Advance
Obligation. The Fund hereby pledges, assigns and grants to the Custodian a first
priority security interest in any and all Collateral specified in such Written
Notice; provided that such pledge, assignment and grant of security shall be
deemed to be effective only upon receipt by the Fund of such Written Notice, and
provided further that if the Custodian specifies Collateral in which a first
priority security interest has already been granted, the security interest
pledged, assigned and granted hereunder shall be a security interest that is not
a first priority security interest.
Section 4. Delivery of Additional Collateral. If at any time the Custodian
shall notify the Fund by Written Notice that the fair market value of the
Collateral securing any Advance Obligation is less than the amount of such
Advance Obligation, the Fund shall deliver to the Custodian, within one Business
Day following the Fund's receipt of such Written Notice, an additional Pledge
Certificate describing additional Collateral. If the Fund shall fail to deliver
such additional Pledge Certificate, the Custodian may specify Collateral which
shall secure the unsecured amount of the applicable Advance Obligation in
accordance with Section 3 of this Appendix A.
Section 5. Release of Collateral. Upon payment by the Fund of any Advance
Obligation secured by the pledge of Collateral, the Custodian shall promptly
deliver to the Fund a Release Certificate pursuant to which the Custodian shall
32
<PAGE>
release Collateral from the lien under the applicable Pledge Certificate or
Written Notice pursuant to Section 3 having a fair market value equal to the
amount paid by the Fund on account of such Advance Obligation. In addition, if
at any time the Fund shall notify the Custodian by Written Notice that the Fund
desires that specified Collateral be released and (a) that the fair market value
of the Collateral securing any Advance Obligation exceeds the amount of such
Advance Obligation, or (b) that the Fund has delivered a Pledge Certificate
pursuant to Section 6 substituting Collateral in respect of such Advance
Obligation, the Custodian shall deliver to the Fund, within one Business Day
following the Custodian's receipt of such Written Notice, a Release Certificate
relating to the Collateral specified in such Written Notice.
Section 6. Substitution of Collateral. The Fund may substitute securities
for any securities identified as Collateral by delivery to the Custodian of a
Pledge Certificate executed by the Fund, indicating the securities pledged as
Collateral.
Section 7. Security for Fund Advance Obligations. The pledge of Collateral
by the Fund shall secure only Advance Obligations of the Fund. In no event shall
the pledge of Collateral by the Fund be deemed or considered to be security for
any other types of obligations of the Fund to the Custodian or for the Advance
Obligations or other types of obligations of any other fund.
Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any
Advance Obligation of the Fund within thirty days after receipt by the Fund of a
Written Notice demanding security therefor, and (b) one Business Day's prior
Written Notice to the Fund, the Custodian may elect to enforce its security
interest in the Collateral securing such Advance Obligation, by taking title to
(at the then prevailing fair market value), or selling in a commercially
reasonable manner, so much of the Collateral as shall be required to pay such
Advance Obligation in full. Notwithstanding the provisions of any applicable
law, including, without limitation, the Uniform Commercial Code, the remedy set
forth in the preceding sentence shall be the only right or remedy to which the
Custodian is entitled with respect to the pledge and security interest granted
pursuant to any Pledge Certificate or Section 3. Without limiting the foregoing,
the Custodian hereby waives and relinquishes all contractual and common law
rights of set-off to which it may now or hereafter be or become entitled with
respect to any obligations of the Fund to the Custodian arising under this
Appendix A to the Custodian Agreement.
33
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Appendix A to be
executed in its name and behalf on the day and year first above written.
BROWN BROTHERS HARRIMAN & CO.
per pro /s/Douglas Donahue
---------------------------
Name: Douglas Donahue
Title: Partner
SCUDDER INSTITUTIONAL FUND, INC.
By: /s/Daniel Pierce
---------------------------
Name: Daniel Pierce
Title: President
By: /s/David S. Lee
---------------------------
Name: David S. Lee
Title: Chairman of the Board
34
<PAGE>
EXHIBIT 1
TO
Appendix A
PLEDGE CERTIFICATE
------------------
This Pledge Certificate is delivered pursuant to the Custodian Agreement
dated as of _____________________ (the "Agreement"), between
_____________________ (the "Fund") and Brown Brothers Harriman & Co. (the
"Custodian"). Capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Agreement. Pursuant to [Section 2 or
Section 4] of Appendix A attached to the Agreement, the Fund hereby pledges,
assigns and grants to the Custodian a first priority security interest in the
securities listed on Schedule A attached to this Pledge Certificate
(collectively, the "Pledged Securities"). Upon delivery of this Pledge
Certificate, the Pledged Securities shall constitute Collateral, and shall
secure all Advance Obligations of the Fund described in that certain Written
Notice dated , 19 , delivered by the Custodian to the Fund. The pledge,
assignment and grant of security in the Pledged Securities hereunder shall be
subject in all respects to the terms and conditions of the Agreement, including,
without limitation, Sections 7 and 8 of Appendix A attached hereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be
executed in its name, on behalf of the Fund this _____ day of ______, 19 __.
By: _____________________
Name: _____________________
Title: _____________________
35
<PAGE>
SCHEDULE A
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
- - ------ -------- ----------------- ------
36
<PAGE>
EXHIBIT 2
TO
Appendix A
RELEASE CERTIFICATE
-------------------
This Release Certificate is delivered pursuant to the Custodian Agreement
dated as of _________, 199_ (the "Agreement"), between _______________________
(the "Fund") and Brown Brothers Harriman & Co. (the "Custodian"). Capitalized
terms used herein without definition shall have the respective meanings ascribed
to them in the Agreement. Pursuant to Section 5 of Appendix A attached to the
Agreement, the Custodian hereby releases the securities listed on Schedule A
attached to this Release Certificate from the lien under the [Pledge Certificate
dated __________, 19 or the Written Notice delivered pursuant to Section 3 of
Appendix A dated ___________, 19 ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to be
executed in its name and on its behalf this ____ day of ______ 19__.
Brown Brothers Harriman & Co.
By: _____________________
Name: _____________________
Title: _____________________
37
<PAGE>
SCHEDULE A
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
- - ------ -------- ----------------- ------
38
Exhibit 10
Sullivan & Cromwell
125 Broad Street, New York 10004-2498
April 24, 1996
Scudder Institutional Fund, Inc.,
345 Park Avenue,
New York, New York 10154.
Dear Sirs:
You have requested our opinion in connection with Post-Effective Amendment
No. 16 under the Securities Act of 1933 to the Registration Statement on Form
N-1A that you propose to file pursuant to Rule 24e-2 under the Investment
Company Act of 1940 with respect to 149,200,513 shares of your Common Stock,
$.001 par value (the "Shares"), comprised of 21,866,671 shares in respect of the
Institutional Cash Portfolio, 38,235,759 shares in respect of the Institutional
Government Portfolio and 89,098,083 shares in respect of the Institutional
Tax-Free Portfolio.
As your counsel, we are familiar with your organization and corporate
status and the validity of your Shares.
We advise you that, in our opinion, you have taken proper corporate
proceedings so that the Shares have been validly authorized, and when any of the
Shares have been issued and sold, for not less than the par value thereof,
<PAGE>
Scudder Institutional Fund, Inc. -2-
the Shares will be legally and validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the General Corporation Law of the
State of Maryland, and we are expressing no opinion as to the effect of the laws
of any other jurisdiction.
We consent to the filing of this opinion with the Securities and Exchange
Commission in connection with the Post-Effective Amendment referred to above. In
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/Sullivan & Cromwell
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 16 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 12, 1996, relating to the financial
statements and financial highlights appearing in the December 31, 1995 Annual
Report to Shareholders of Institutional Government Portfolio, Institutional Cash
Portfolio, Institutional Federal Portfolio and Institutional Tax-Free Portfolio
(separately managed portfolios of Scudder Institutional Fund, Inc.), which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Experts" in the Statement of Additional
Information.
/s/Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
April 24, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Institutional Fund, Inc. Annual Report for the fiscal year ended December 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER>4
<NAME> Institutional Cash Portfolio
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 250,185,045
<INVESTMENTS-AT-VALUE> 250,185,045
<RECEIVABLES> 782,005
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 250,967,050
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,538,921
<TOTAL-LIABILITIES> 1,538,921
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 249,428,129
<SHARES-COMMON-STOCK> 249,428,129
<SHARES-COMMON-PRIOR> 271,004,800
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 249,428,129
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,021,209
<OTHER-INCOME> 0
<EXPENSES-NET> 803,190
<NET-INVESTMENT-INCOME> 18,218,019
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,218,019
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,218,019
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 924,578,236
<NUMBER-OF-SHARES-REDEEMED> 953,063,076
<SHARES-REINVESTED> 6,908,170
<NET-CHANGE-IN-ASSETS> (21,576,671)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 476,472
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 803,190
<AVERAGE-NET-ASSETS> 317,646,031
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.057
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.057
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Institutional Fund, Inc. Annual Report for the fiscal year ended December 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER>2
<NAME> Institutional Government Portfolio
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 80,080,398
<INVESTMENTS-AT-VALUE> 80,080,398
<RECEIVABLES> 361,328
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80,441,726
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 523,365
<TOTAL-LIABILITIES> 523,365
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,918,361
<SHARES-COMMON-STOCK> 79,918,361
<SHARES-COMMON-PRIOR> 117,864,120
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 79,918,361
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,067,528
<OTHER-INCOME> 0
<EXPENSES-NET> 270,598
<NET-INVESTMENT-INCOME> 3,796,930
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,796,930
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,796,930
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 432,240,116
<NUMBER-OF-SHARES-REDEEMED> 471,317,385
<SHARES-REINVESTED> 1,131,510
<NET-CHANGE-IN-ASSETS> (37,945,759)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104,332
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 270,598
<AVERAGE-NET-ASSETS> 69,547,760
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.055
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Institutional Fund, Inc. Annual Report for the fiscal year ended December 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER>1
<NAME> Institutional Federal Portfolio
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 16,295,995
<INVESTMENTS-AT-VALUE> 16,295,995
<RECEIVABLES> 0
<ASSETS-OTHER> 339,685
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,635,680
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215,397
<TOTAL-LIABILITIES> 215,397
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,420,283
<SHARES-COMMON-STOCK> 16,420,283
<SHARES-COMMON-PRIOR> 11,054,969
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 16,420,283
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 861,963
<OTHER-INCOME> 0
<EXPENSES-NET> 81,478
<NET-INVESTMENT-INCOME> 780,485
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 780,485
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 780,485
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 81,622,544
<NUMBER-OF-SHARES-REDEEMED> 76,948,070
<SHARES-REINVESTED> 690,840
<NET-CHANGE-IN-ASSETS> 5,365,314
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,561
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107,246
<AVERAGE-NET-ASSETS> 15,707,355
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.049
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.049
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Institutional Fund, Inc. Annual Report for the fiscal year ended December 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER>7
<NAME> Institutional Tax Free Portfolio
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 81,813,476
<INVESTMENTS-AT-VALUE> 81,813,476
<RECEIVABLES> 1,586,577
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83,400,053
<PAYABLE-FOR-SECURITIES> 1,022,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,327,840
<TOTAL-LIABILITIES> 4,350,740
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,049,313
<SHARES-COMMON-STOCK> 79,049,313
<SHARES-COMMON-PRIOR> 167,857,396
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 79,049,313
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,775,939
<OTHER-INCOME> 0
<EXPENSES-NET> 335,699
<NET-INVESTMENT-INCOME> 3,440,240
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,440,240
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,440,240
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 522,266,284
<NUMBER-OF-SHARES-REDEEMED> 611,981,728
<SHARES-REINVESTED> 907,361
<NET-CHANGE-IN-ASSETS> (88,808,083)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 143,025
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 335,699
<AVERAGE-NET-ASSETS> 95,272,154
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.036
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.036
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
