SCUDDER CASH INVESTMENT TRUST
A Pure No-load(TM) (No Sales Charges) Mutual Fund Seeking the
Stability of Capital while Maintaining the Liquidity of
Capital and Providing Current Income
from Money Market Securities
and
SCUDDER U.S. TREASURY MONEY FUND
A Pure No-load(TM) (No Sales Charges) Money Market Fund Seeking Safety,
Liquidity and Stability of Capital and, consistent therewith, Current
Income from Short-Term U.S. Government Securities
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STATEMENT OF ADDITIONAL INFORMATION
November 1, 1994
As Revised
June 26, 1995
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This combined Statement of Additional Information is not a prospectus
and should be read in conjunction with the prospectuses of Scudder Cash
Investment Trust and Scudder U.S. Treasury Money Fund each dated November 1,
1994, as may be amended from time to time, copies of which may be obtained
without charge by writing to Scudder Investor Services, Inc., Two International
Place, Boston, Massachusetts 02110-4103.
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TABLE OF CONTENTS
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THE FUNDS AND THEIR OBJECTIVES........................................................................................1
General Investment Objectives and Policies of Scudder Cash Investment Trust..................................1
General Investment Objectives and Policies of Scudder U.S. Treasury Money Fund...............................3
Specialized Investment Techniques of the Funds...............................................................4
Investment Restrictions......................................................................................6
PURCHASES............................................................................................................10
Additional Information About Opening an Account.............................................................10
Checks......................................................................................................10
Wire Transfer of Federal Funds..............................................................................11
Share Price.................................................................................................11
Share Certificates..........................................................................................11
Other Information...........................................................................................11
EXCHANGES AND REDEMPTIONS............................................................................................12
Exchanges...................................................................................................12
Redemption by Telephone.....................................................................................12
Redemption by Mail or Fax...................................................................................13
Redemption by Write-a-Check.................................................................................14
Other Information...........................................................................................14
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................14
The Pure No-Load(TM) Concept................................................................................14
Distribution Plans..........................................................................................15
Scudder Funds Centers.......................................................................................16
Diversification.............................................................................................16
Reports to Shareholders.....................................................................................16
Transaction Summaries.......................................................................................16
THE SCUDDER FAMILY OF FUNDS..........................................................................................16
SPECIAL PLAN ACCOUNTS................................................................................................19
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals.............................................................20
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals..............................................................................20
Scudder IRA: Individual Retirement Account.................................................................20
Scudder 403(b) Plan.........................................................................................21
Automatic Withdrawal Plan...................................................................................21
Group or Salary Deduction Plan..............................................................................22
Automatic Investment Plan...................................................................................22
Uniform Transfers/Gifts to Minors Act.......................................................................22
Scudder Trust Company.......................................................................................22
DIVIDENDS............................................................................................................22
PERFORMANCE INFORMATION..............................................................................................23
Yield.......................................................................................................23
Effective Yield.............................................................................................24
Average Annual Total Return.................................................................................24
Cumulative Total Return.....................................................................................24
Total Return................................................................................................25
Comparison of Portfolio Performance.........................................................................25
ORGANIZATION OF THE FUNDS............................................................................................28
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TABLE OF CONTENTS (continued)
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INVESTMENT ADVISER...................................................................................................29
Scudder Cash Investment Trust...............................................................................30
Scudder U.S. Treasury Money Fund............................................................................31
SCIT and Treasury Fund......................................................................................32
TRUSTEES AND OFFICERS................................................................................................33
Scudder Cash Investment Trust...............................................................................33
Scudder U.S. Treasury Money Fund............................................................................34
REMUNERATION.........................................................................................................36
DISTRIBUTOR..........................................................................................................36
Scudder Cash Investment Trust...............................................................................36
Scudder U.S. Treasury Money Fund............................................................................36
TAXES................................................................................................................37
PORTFOLIO TRANSACTIONS...............................................................................................39
NET ASSET VALUE......................................................................................................40
ADDITIONAL INFORMATION...............................................................................................40
Experts.....................................................................................................40
Shareholder Indemnification.................................................................................40
Other Information...........................................................................................40
FINANCIAL STATEMENTS.................................................................................................41
Scudder Cash Investment Trust...............................................................................41
Scudder U.S. Treasury Money Fund............................................................................41
APPENDIX
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THE FUNDS AND THEIR OBJECTIVES
(See "Investment objectives and policies" and
"Additional information about policies and
investments" in each Fund's prospectus.)
Scudder Cash Investment Trust sometimes is referred to herein as
"SCIT." Scudder U.S. Treasury Money Fund sometimes is referred to herein as
"Treasury Fund." SCIT and Treasury Fund sometimes are jointly referred to herein
as "the Funds" or "Scudder Money Market Funds."
General Investment Objectives and Policies of Scudder Cash Investment Trust
Scudder Cash Investment Trust is a pure no-load(TM), open-end,
diversified management investment company. SCIT's investment objectives are to
maintain the stability of capital and, consistent therewith, to maintain the
liquidity of capital and to provide current income. SCIT seeks to maintain a
constant net asset value of $1.00 per share, although in certain circumstances
this may not be possible. SCIT's management seeks to improve investment income
by keeping money at work in what it considers to be the most attractive
short-term debt investments consistent with the objectives of maintaining the
stability and liquidity of capital. There is no assurance that SCIT's investment
objectives will be achieved. The investment objectives and policies of SCIT
stated under this caption may be changed by the Trustees without a vote of a
majority of the outstanding voting securities of the Fund, as that term is
defined below in "Investment Restrictions." All of the securities in which SCIT
may invest are U.S. dollar-denominated. Shares of the Fund are not insured or
guaranteed by an agency of the U.S. Government.
SCIT may invest in short-term obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities; obligations of supranational
organizations such as those listed below; obligations of domestic banks and
foreign branches of domestic banks, including bankers' acceptances, certificates
of deposit, deposit notes and time deposits; and obligations of savings and loan
institutions.
SCIT may also invest in: instruments whose credit has been enhanced by
banks (letters of credit), insurance companies (surety bonds) or other corporate
entities (corporate guarantees); corporate obligations and obligations of
trusts, finance companies and other entities, including commercial paper, notes,
bonds, loans and loan participations; securities with variable or floating
interest rates; asset-backed securities, including certificates, participations
and notes; and municipal securities, including notes, bonds and participation
interests, either taxable or tax free. Securities and instruments in which the
Fund may invest may be issued by the U.S. Government, its agencies and
instrumentalities, corporations, trusts, banks, finance companies and other
business entities.
In addition, SCIT may invest in repurchase agreements and securities
with put features. Obligations which are subject to repurchase agreements will
be limited to those of the type and quality described below. The Fund may also
hold cash.
Investments in corporate and finance company commercial paper and other
corporate obligations will be limited to securities which, in the opinion of
Scudder, Stevens & Clark, Inc. (the "Adviser"), are of high quality and present
minimal credit risk. Commercial paper and finance company paper, at the time of
purchase, will be rated or judged by the Adviser to be the equivalent of paper
rated A-1 by Standard & Poors ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's") or F-1 by Fitch Investors Service, Inc. ("Fitch"). (See
Appendix A for a more complete description of commercial paper ratings.)
Investments in other corporate obligations such as bonds and notes will be
limited to issues rated or judged by the Adviser to be the equivalent of
securities rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch.
Investments in municipal securities will be limited to those which are
rated at the time of purchase by Moody's within its two highest rating
categories for municipal obligations--Aaa and Aa, or within Moody's short-term
municipal obligations top rating categories of MIG 1 and MIG 2, are rated at the
time of purchase by S&P within S&P's two highest rating categories for municipal
obligations--AAA/AA and SP-1+/SP-1--or are rated at the time of purchase by
Fitch within Fitch's two highest rating categories for municipal
obligations-AAA/AA or within Fitch's highest short term rating categories of F-1
and F-2, all in such proportions as management will determine. SCIT also may
invest in securities rated within the two highest rating categories by only one
of those rating agencies if no other rating agency has rated the security. In
some cases, short-term municipal obligations are rated using the same categories
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as are used for corporate obligations. In addition, unrated municipal securities
will be considered as being within the foregoing quality ratings if the issuer,
or other equal or junior municipal securities of the same issuer, has a rating
within the foregoing ratings of Moody's, S&P or Fitch. SCIT may also invest in
municipal securities which are unrated if, in the opinion of the Adviser, such
securities possess creditworthiness comparable to those rated securities in
which the Fund may invest.
Foreign Securities. Supranational entities are international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, The Asian Development Bank and the InterAmerican Development Bank.
Obligations of supranational entities are backed by the guarantee of one or more
foreign governmental parties which sponsor the entity.
Municipal Securities. Municipal Securities are issued by or on behalf
of states, territories and possessions of the U.S. and their political
subdivisions, agencies and instrumentalities to obtain funds for various public
purposes. The interest on these obligations is generally exempt from federal
income tax in the hands of most investors, except for the possible applicability
of the alternative minimum tax. The two principal classifications of municipal
securities are "Notes" and "Bonds." Municipal Notes are generally used to
provide for short-term capital needs and generally have maturities of one year
or less. Municipal Notes include: Tax Anticipation Notes; Revenue Anticipation
Notes; Bond Anticipation Notes; and Construction Loan Notes. Municipal Bonds,
which meet longer term capital needs and generally have maturities of more than
one year when issued, have two principal classifications: "General Obligation"
Bonds and "Revenue" Bonds.
Industrial Development and Pollution Control Bonds (which are types of
private activity bonds), although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but are secured by
the revenues of the authority derived from payments by the industrial user.
Under Federal tax legislation, certain types of Industrial Development Bonds and
Pollution Control Bonds may no longer be issued on a tax-exempt basis, although
previously-issued bonds of these types and certain refundings of such bonds are
not affected.
Bank and Savings and Loan Obligations. These obligations include
negotiable certificates of deposit, bankers' acceptances, deposit notes, fixed
time deposits or other short-term bank obligations. Certificates of deposit are
negotiable certificates evidencing the obligations of a bank to repay funds
deposited with it for a specified period of time. SCIT may invest in
certificates of deposit of large domestic banks (i.e., banks which at the time
of their most recent annual financial statements show total assets in excess of
$1 billion), and of smaller banks as described below. The Fund does not invest
in certificates of deposit of foreign banks. Although the Fund recognizes that
the size of a bank is important, this fact alone is not necessarily indicative
of its creditworthiness. Investment in certificates of deposit issued by foreign
branches of domestic banks involves investment risks that are different in some
respects from those associated with investment in certificates of deposit issued
by domestic branches of domestic banks, including the possible imposition of
withholding taxes on interest income, the possible adoption of foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such certificates of deposit, or other adverse political or
economic developments. In addition, it might be more difficult to obtain and
enforce a judgment against a foreign branch of a domestic bank.
SCIT may also invest in certificates of deposit issued by banks and
savings and loan institutions which had, at the time of their most recent annual
financial statements, total assets of less than $1 billion, provided that (i)
the principal amounts of such certificates of deposit are insured by an agency
of the U.S. Government, (ii) at no time will the Fund hold more than $100,000
principal amount of certificates of deposit of any one such bank, and (iii) at
the time of acquisition, no more than 10% of the Fund's assets (taken at current
value) are invested in certificates of deposit of such banks having total assets
not in excess of $1 billion.
Banker's acceptances are credit instruments evidencing the obligations
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
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deposits which may be held by SCIT will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund administered by the
Federal Deposit Insurance Corporation. 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 obligation. Fixed
time deposits subject to withdrawal penalties maturing in more than seven
calendar days are subject to the Fund's limitation on investments in illiquid
securities.
Eurodollar Obligations. Eurodollar bank obligations are
dollar-denominated certificates of deposit and time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and U.S. branches of
foreign banks. Eurodollar obligations are subject to the same risks that pertain
to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar obligations are subject to certain sovereign risks.
Commercial Paper. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial paper
purchased by SCIT will consist only of direct obligations issued by domestic and
foreign entities. The other corporate obligations in which the Fund may invest
consist of high quality short term bonds and notes (including variable amount
master demand notes) issued by domestic and foreign corporations, including
banks.
Participation Interests. SCIT may purchase from financial institutions
participation interests in securities in which the Fund may invest. A
participation interest gives the Fund an undivided interest in the security in
the proportion that the Fund's participation interest bears to the principal
amount of the security. These instruments may have fixed, floating or variable
interest rates, with remaining maturities of 397 days or less. If the
participation interest is unrated, or has been given a rating below that which
is permissible for purchase by the Fund, the participation interest will be
backed by an irrevocable letter of credit or guarantee of a bank, or the payment
obligation otherwise will be collateralized by U.S. Government securities, or,
in the case of unrated participation interest, determined by the Adviser to be
of comparable quality to those instruments in which the Fund may invest. For
certain participation interests, the Fund will have the right to demand payment,
on not more than seven days' notice, for all or any part of the Fund's
participation interests in the security, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand payment only upon
a default under the terms of the security.
Asset-backed securities. Asset backed securities may include pools of
mortgages, loans, receivables or other assets. Payment of principal and interest
may be largely dependent upon the cash flows generated by the assets backing the
securities.
Illiquid or Restricted Securities. SCIT may occasionally purchase
securities other than in the open market. While such purchases may often offer
attractive opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted securities", i.e.,
securities which cannot be sold to the public without registration under the
Securities Act of 1933 or the availability of an exemption from registration
(such as Rules 144 or 144A), or which are "not readily marketable" because they
are subject to other legal or contractual delays in or restrictions on resale.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the Securities Act of 1933. SCIT may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933 when selling restricted
securities to the public, and in such event the Fund may be liable to purchasers
of such securities if the registration statement prepared by the issuer, or the
prospectus forming a part of it, is materially inaccurate or misleading.
SCIT will not invest more than 10% of its net assets in securities
which are not readily marketable, the disposition of which is restricted under
Federal securities laws or in repurchase agreements not terminable within seven
days, and the Fund will not invest more than 5% of its total assets in
restricted securities.
General Investment Objectives and Policies of Scudder U.S. Treasury Money Fund
Scudder U.S. Treasury Money Fund is a pure no-load(TM), open-end,
diversified management investment company. Treasury Fund's investment objectives
3
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are to provide safety, liquidity and stability of capital, and consistent
therewith, to provide current income. Treasury Fund seeks to achieve its
objectives through a portfolio consisting primarily of short-term U.S. Treasury
obligations and similar investments. Treasury Fund will limit its investments to
securities issued or guaranteed by the U.S. Government and repurchase agreements
with respect to such obligations. At least 80% of Treasury Fund's assets will be
invested in either U.S. Treasury securities or in repurchase agreements
collateralized by U.S. Treasury securities. All of the securities in which the
Fund may invest are U.S. dollar-denominated.
Treasury Fund provides convenience, liquidity, and professional
management. Treasury Fund's investment adviser, Scudder, Stevens & Clark, Inc.
(the "Adviser"), seeks to improve income by keeping money at work in what it
considers to be the most attractive short-term debt instruments consistent with
the Fund's objectives of safety, liquidity and stability of capital. There is no
assurance that these objectives will be achieved. Treasury Fund seeks to
maintain a constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible.
Specialized Investment Techniques of the Funds
Maintenance of $1.00 Net Asset Value and Credit Quality. Pursuant to a
Rule of the Securities and Exchange Commission (the "SEC"), each Fund effects
sales, redemptions and repurchases at the net asset value per share, normally
$1.00, rounded to the nearest whole cent. In fulfillment of their
responsibilities under that Rule, the Trustees of each Fund have approved
policies established by the Funds' Adviser reasonably calculated to prevent each
Fund's net asset value per share, as so rounded, from deviating from $1.00
except under unusual or extraordinary circumstances and the Trustees of each
Fund will periodically review the Adviser's operations under such policies at
regularly scheduled Trustees' meetings. Those policies include a daily
monitoring by the Adviser of unrealized gains and losses in each Fund's
portfolio, and when necessary, in an effort to avoid deviation, taking
corrective action, such as adjusting the maturity of the portfolio, or, if
possible, realizing gains or losses to offset in part unrealized losses or
gains. The result of those policies may be that the yield on shares of each Fund
will be lower than would be the case if the policies were not in effect. Such
policies also provide for certain action to be taken with respect to portfolio
securities which experience a downgrade in rating or suffer a default.
Securities eligible for investment by the Funds are those securities
which are generally rated (or issued by an issuer with comparable securities
rated) in the highest rating category by at least two rating services (or by one
rating service, if no other rating agency has issued a rating with respect to
that security). These securities are known as "first tier securities."
Securities generally rated (or issued by an issuer with comparable securities
rated) in the top two categories by at least two rating agencies (or one, if
only one rating agency has rated the security) which do not qualify as first
tier securities are known as "second tier securities." To ensure diversity of a
Fund's investments, as a matter of non-fundamental policy, each Fund will not
invest more than 5% of its total assets in the securities of a single issuer,
other than the U.S. Government. Each Fund may, however, invest more than 5% of
its total assets in the first tier securities of a single issuer for a period of
up to three business days after purchase, although a Fund may not make more than
one such investment at any time. Each Fund may not invest more than 5% of its
total assets in securities which were second tier securities when acquired by
the Fund. Further, each Fund may not invest more than the greater of (1) 1% of
its total assets, or (2) one million dollars, in the securities of a single
issuer which were second tier securities when acquired by the Fund.
Portfolio Maturity. The assets of each Fund consist entirely of cash
items and investments having a stated maturity date of 397 calendar days or less
(except in the case of Government securities, 762 calendar days) from date of
purchase (including investment in repurchase agreements, in which case maturity
is measured by the repurchase date, without respect to the maturity of the
obligation). The term "Government securities," as used herein, means securities
issued or guaranteed as to principal or interest by the U.S. Government, its
agencies or instrumentalities. The portfolio of each Fund will be managed so
that the average maturity of all instruments (on a dollar-weighted basis) will
be 90 days or less. The average maturity of the two portfolios will vary
according to the management's appraisal of money market conditions. Each Fund
will invest only in securities determined by or under the direction of the
Trustees to be of high quality with minimal credit risks.
Portfolio Turnover. The Funds may sell portfolio securities to take
advantage of investment opportunities arising from changing market levels or
yield relationships. Although such transactions involve additional costs in the
form of spreads, they will be undertaken in an effort to improve a Fund's
overall investment return, consistent with its objectives.
4
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U.S. Government Securities. U.S. Government Securities are securities
issued or guaranteed by the U.S. Treasury, by federal agencies, or by
instrumentalities established or sponsored by the U.S. Government. Obligations
issued by the U.S. Treasury are backed by the full faith and credit of the U.S.
Government. They include Treasury bills, notes and bonds, which differ in their
interest rates, maturities and times of issuance. Obligations guaranteed by the
U.S. Treasury include Government National Mortgage Association participation
certificates. Obligations of a federal agency or U.S. Government instrumentality
may be supported in various ways, including the limited authority of the issuer
to borrow from the U.S. Treasury, such as securities of the Federal Home Loan
Bank; the discretionary authority of the U.S. Government to purchase obligations
of the agency or instrumentality, such as Federal National Mortgage Association
bonds; or the credit only of the issuing agency or instrumentality, such as
Student Loan Marketing Association. In the case of obligations not backed by the
full faith and credit of the U.S. Government, the Fund must look principally to
the agency issuing or guaranteeing the obligations for ultimate repayment, which
agency may be privately owned. These securities may bear fixed, floating or
variable rates of interest. Interest may fluctuate based on generally recognized
reference rates or the relationship of rates.
When-issued and Forward Delivery Securities. Government securities are
frequently offered on a "when-issued" or "forward delivery" basis. When so
offered, the price, which is generally expressed in yield terms, is fixed at the
time the commitment to purchase is made, but delivery and payment for the
when-issued or forward delivery securities take place at a later date. During
the period between purchase and settlement, no payment is made by the Funds to
the issuer and no interest accrues to the Funds. To the extent that assets of
the Funds are not invested prior to the settlement of a purchase of securities,
the Funds will earn no income; however, it is intended that both Funds will be
fully invested to the extent practicable and subject to the policies stated
herein. When-issued or forward delivery purchases are negotiated directly with
the other party and are not traded on an exchange. While when-issued or forward
delivery securities may be sold prior to the settlement date, it is intended
that both Funds will purchase such securities with the purpose of actually
acquiring them unless a sale appears desirable for investment reasons. At the
time SCIT and Treasury Fund make the commitment to purchase securities on a
when-issued or forward delivery basis, they will record the transaction and
reflect the value of the security in determining their respective net asset
values. Neither Fund believes that its net asset value or income will be
adversely affected by its purchase of securities on a when-issued or forward
delivery basis. SCIT and Treasury Fund will establish a segregated account in
which to maintain cash, U.S. Government securities or other high-grade debt
obligations equal in value to commitments for when-issued or forward delivery
securities. Such segregated securities either will mature or, if necessary, be
sold on or before the settlement date. Neither SCIT nor Treasury Fund will enter
into such transactions for leverage purposes.
Repurchase Agreements. Each Fund may enter into repurchase agreements
with any member bank of the Federal Reserve System or any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other obligations the Funds may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest
ratings categories assigned by Moody's, S&P or Fitch.
A repurchase agreement provides a means for a Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., a Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and, as described in more detail below, the value of such securities is
kept at least equal to the repurchase price on a daily basis. The repurchase
price may be higher than the purchase price, the difference being income to a
Fund, or the purchase and repurchase prices may be the same, with interest at a
stated rate due to a Fund together with the repurchase price upon repurchase. In
either case, the income to a Fund is unrelated to the interest rate on the
Obligation itself. Obligations will be held by the custodian or in the Federal
Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), a repurchase agreement is deemed to be a loan from a Fund to the
seller of the Obligation subject to the repurchase agreement and is therefore
subject to each Fund's investment restriction applicable to loans. It is not
clear whether a court would consider the Obligation purchased by a Fund subject
to a repurchase agreement as being owned by that Fund or as being collateral for
a loan by that Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
Obligation before repurchase of the Obligation under a repurchase agreement, a
Fund may encounter delay and incur costs before being able to sell the security.
Delays may involve loss of interest or decline in price of the Obligation. If
5
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the court characterizes the transaction as a loan and a Fund has not perfected a
security interest in the Obligation, that Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, a Fund would be at risk of losing some or all
of the principal and income involved in the transaction. As with any unsecured
debt Obligation purchased for a Fund, the Adviser seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligor, in this case the seller of the Obligation. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the seller may
fail to repurchase the Obligation, in which case a Fund may incur a loss if the
proceeds to that Fund of the sale to a third party are less than the repurchase
price. However, if the market value (including interest) of the Obligation
subject to the repurchase agreement becomes less than the repurchase price
(including interest), a Fund will direct the seller of the Obligation to deliver
additional securities so that the market value (including interest) of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price.
The conclusions and investment decisions of the Adviser with respect to
each Fund are based primarily on the analyses of its own research specialists.
While these specialists have the major responsibility for doing research on debt
securities, they receive the support of the Adviser's general economics
department for studies on interest rate trends and of the Adviser's stock
research analysts for consultation on the qualitative aspects of credit analysis
which enable the Adviser to establish its own credit ratings for issuers of
senior securities. The Adviser believes it is important to have this combination
of specialized skills available for developing the proper investment strategies
for the Funds. The Adviser subscribes to leading bond information services and
receives directly published reports and statistical compilations of the issuers
themselves, as well as analyses from brokers and dealers who may execute
portfolio transactions for the Adviser's clients. However, the Adviser regards
this information and material as an adjunct to its own research activities.
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information, means the lesser of (1) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of a Fund.
Any investment restrictions herein which involve a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, a Fund.
As a matter of fundamental policy, SCIT may not:
1. borrow money except from banks as a temporary measure for
extraordinary or emergency purposes (a Fund is required to
maintain asset coverage (including borrowings) of 300% for all
borrowings) and no purchases of securities will be made while
such borrowings exceed 5% of the value of the Fund's assets;
2. act as underwriter of the securities issued by others, except
to the extent that the purchase of securities in accordance
with its investment objective and policies directly from the
issuer thereof and the later disposition thereof may be deemed
to be underwriting;
3. make loans to other persons, except loans of portfolio
securities and except to the extent that the purchase of debt
obligations in accordance with its investment objective and
policies and the entry into repurchase agreements may be
deemed to be loans;
4. enter into repurchase agreements or purchase any securities
if, as a result thereof, more than 10% of the total assets of
a Fund (taken at market value) would be, in the aggregate,
subject to repurchase agreements maturing in more than seven
days and invested in restricted securities or securities which
are not readily marketable;
5. participate on a joint or a joint and several basis in any
trading account in securities, but may for the purpose of
possibly achieving better net results on portfolio
6
<PAGE>
transactions or lower brokerage commission rates join with
other investment company and client accounts managed by
Scudder, Stevens & Clark, Inc. in the purchase or sale of
portfolio securities;
6. purchase or retain securities of an issuer any of whose
officers, directors, trustees or security holders is an
officer, director or Trustee of a Fund or a member, officer,
director or trustee of the investment adviser of a Fund if one
or more of such individuals owns beneficially more than
one-half of one percent (1/2 of 1%) of the shares or
securities or both (taken at market value) of such issuer and
such individuals owning more than one-half of one percent (1/2
of 1%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
7. purchase securities on margin or make short sales unless, by
virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is
made upon the same conditions;
8. issue senior securities, except as appropriate to evidence
indebtedness which a Fund is permitted to incur pursuant to
Investment Restriction (1) and except for shares of any
additional series which may be established by the Trustees;
9. with respect to 75% of the value of the total assets of the
Fund, invest more than 5% of the value of total assets of the
Fund in the securities of any one issuer, except U.S.
Government securities;
10. purchase and sell real estate (though it may invest in
short-term securities of companies which deal in real estate
and in other permitted investments secured by real estate) or
commodities or commodities contracts;
11. purchase securities of any issuer with a record of less than
three years continuous operation, including predecessors,
except obligations issued or guaranteed by the U.S. Government
or its agencies, if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the Fund's
total assets taken at market value;
12. purchase common stocks or other voting securities;
13. purchase securities if such purchase would cause more than 25%
in the aggregate of the market value of the total assets of
the Fund at the time of such purchase to be invested in the
securities of one or more issuers having their principal
business activities in the same industry, provided that there
is no limitation in respect to investments in obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or in certificates of deposit or bankers'
acceptances (for the purposes of this restriction telephone
companies are considered to be a separate industry from gas
and electric public utilities, and wholly-owned finance
companies are considered to be in the industry of their
parents if their activities are primarily related to financing
the activities of the parents); or
14. invest for the purpose of controlling or managing any other
company.
In addition, although not a matter of fundamental policy, SCIT may not:
(a) purchase or sell interests in oil, gas or other mineral
leases, or exploration or development programs (although they
may invest in securities of issuers which own or invest in
such interests);
(b) pledge, mortgage or hypothecate its assets, except that, to
secure borrowings permitted by Investment Restriction (1), it
may pledge securities having a market value at the time of
pledge not exceeding 15% of the cost of the Fund's total
assets;
(c) purchase or sell any put or call options or any combination
thereof, not including warrants;
(d) purchase restricted securities (for these purposes restricted
security means a security with a legal or contractual
restriction on resale in the principal market in which the
7
<PAGE>
security is traded), including repurchase agreements maturing
in more than seven days and securities which are not readily
marketable if as a result more than 10% of SCIT's net assets
(valued at market at purchase) would be invested in such
securities;
(e) purchase securities if, as a result thereof, more than 5% of
the value of SCIT's net assets would be invested in restricted
securities;
(f) invest in the securities of other investment companies, except
by purchase in the open market when no commission or profit to
a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made on the open market, is part of a plan of
merger or consolidation;
(g) purchase or sell real estate limited partnership interests;
(h) invest more than 5% of its total assets in the securities of
any one issuer or subject to puts from any one issuer, except
U.S. Government securities, provided that the Fund may invest
more than 5% of its total assets in first tier securities of
any one issuer for a period of up to three business days or,
in unrated securities that have been determined to be of
comparable quality by the Fund's Adviser;
(i) invest more than 5% of its total assets in second tier
securities, or in unrated securities determined by the Adviser
to be of comparable quality;
(j) invest more than the greater of $1,000,000 or 1% of total
assets in second tier securities of any one issuer;
(k) invest more than 10% of its total assets in securities subject
to an unconditional put issued by any one institution;
(l) borrow money, including reverse repurchase agreements, in
excess of 5% of its total assets (taken at market value)
except for temporary or emergency purposes, or borrow other
than from banks; or
(m) make loans unless all loans of portfolio securities are fully
collateralized and marked to market daily.
As a matter of fundamental policy, unless and to the extent permitted
by an exemptive order of the SEC, Treasury Fund may not:
1. borrow money, except as a temporary measure for extraordinary
or emergency purposes or except in connection with reverse
repurchase agreements, provided that the Fund maintains asset
coverage of 300% for all borrowings;
2. purchase or sell real estate (except that the Fund may invest
in (i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of
the Fund's ownership of securities); or purchase or sell
physical commodities or contracts relating to physical
commodities;
3. act as an underwriter of securities issued by others, except
to the extent that it may be deemed an underwriter in
connection with the disposition of portfolio securities of the
Fund;
4. make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance
with its investment objective and investment policies may be
deemed to be loans; or
5. issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for
shares of the separate classes or series of the Trust,
provided that collateral arrangements with respect to
8
<PAGE>
currency-related contracts, futures contracts, options or
other permitted investments, including deposits of initial and
variation margin, are not considered to be the issuance of
senior securities for purposes of this restriction.
Treasury Fund has undertaken that if the Fund obtains an exemptive
order of the SEC which would permit the taking of action in contravention of any
policy which may not be changed without a shareholder vote, the Fund will not
take such action unless either (i) the applicable exemptive order permits the
taking of such action without a shareholder vote or (ii) the staff of the SEC
has issued to the Fund a "no action" or interpretive letter to the effect that
the Fund may proceed without a shareholder vote.
Although not a matter of fundamental policy Treasury Fund may not:
(a) purchase or retain securities of any open-end investment
company, or securities of closed-end investment companies
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchases, or
except when such purchase, though not made in the open market,
is part of a plan of merger, consolidation, reorganization or
acquisition of assets; in any event the Fund may not purchase
more than 3% of the outstanding voting securities of another
investment company, may not invest more than 5% of its assets
in another investment company, and may not invest more than
10% of its assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose
officers, directors, trustees or security holders is an
officer, director or trustee of the Fund or a member, officer,
director or trustee of the investment adviser of the Fund if
one or more of such individuals owns beneficially more than
one-half of one percent (1/2%) of the outstanding shares or
securities or both (taken at market value) of such issuer and
such individuals owning more than one-half of one percent
(1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
(d) purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is
made upon the same conditions, except that the Fund may obtain
such short-term credits as may be necessary for the clearance
of purchases and sales of securities;
(e) invest more than 10% of its net assets in securities which are
not readily marketable, the disposition of which is restricted
under Federal securities laws, or in repurchase agreements not
terminable within 7 days, and the Fund will not invest more
than 5% of its total assets in restricted securities;
(f) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors,
except U.S. Government securities and obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities, if such purchase would cause the
investments of the Fund in all such issuers to exceed 5% of
the total assets of the Fund taken at market value;
(g) purchase more than 10% of the voting securities of any one
issuer, except securities issued by the U.S. Government, its
agencies or instrumentalities;
(h) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which
own or invest in such interests);
(i) borrow money, including reverse repurchase agreements, in
excess of 5% of its total assets (taken at market value)
except for temporary or emergency purposes, or borrow other
than from banks;
(j) purchase or sell any put or call options or any combination
thereof;
(k) purchase or sell real estate limited partnership interests;
9
<PAGE>
(l) invest more than 5% of its total assets in the securities of
any one issuer or subject to puts from any one issuer, except
U.S. Government securities, provided that the Fund may invest
more than 5% of its total assets in first tier securities of
any one issuer for a period of up to three business days or,
in unrated securities that have been determined to be of
comparable quality by the Fund's Adviser;
(m) invest more than 5% of its total assets in second tier
securities, or in unrated securities determined by the Adviser
to be of comparable quality;
(n) invest more than the greater of $1,000,000 or 1% of total
assets in second tier securities of any one issuer;
(o) invest more than 10% of its total assets in securities subject
to an unconditional put issued by any one institution; or
(p) make loans unless all loans of portfolio securities are fully
collateralized and marked to market daily.
PURCHASES
(See "Purchases" and "Transaction information" in each Fund's
prospectus.)
Additional Information About Opening an Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $1,000 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified tax identification number, clients having a
regular investment counsel account with Scudder or its affiliates and members of
their immediate families, officers and employees of the Adviser or of any
affiliated organization and their immediate families, members of the NASD and
banks may open an account by wire. These investors must call 1-800-225-5163 to
get an account number. During the call the investor will be asked to indicate
the Fund name, amount to be wired ($1,000 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the tax identification number or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02110, ABA Number 011000028, Account Number: 9903-5552. The investor must give
the Scudder fund name, account name and the new account number. Finally, the
investor must send the completed and signed application to the Fund promptly.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn on or
payable through a United States bank.
If shares of a Fund are purchased with a check which proves to be
uncollectible, that Fund reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by that Fund or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, such Fund will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from or restricted in placing future orders in any of the Scudder
funds.
10
<PAGE>
Wire Transfer of Federal Funds
To obtain the net asset value determined as of twelve o'clock noon and
the same day dividend you must have your bank forward federal funds by wire
transfer and provide the required account information so as to be available to a
Fund prior to twelve o'clock noon eastern time on that day. If either the
federal funds or the account information is received after twelve o'clock noon
eastern time, but both the funds and the information are made available before
the close of regular trading on the New York Stock Exchange (the "Exchange")
(normally 4 p.m. eastern time) on any business day, shares will be purchased at
net asset value determined on that day but will not receive the dividend; in
such cases, dividends commence on the next business day.
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, each Fund pays a fee for receipt by State Street
Bank and Trust Company (the "Custodian") of "wired funds," but the right to
charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Martin Luther King Jr., Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans' Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of either Fund.
Share Price
Purchases made by check will be filled without sales charge at the
close of regular trading on the Exchange on the day the check is received by the
Transfer Agent in good order. Net asset value of each Fund normally is computed
twice a day, as of twelve o'clock noon and the close of regular trading on the
Exchange on each day when the Exchange is open for trading.
Share Certificates
Due to the desire of each Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in either of
the Funds. Share certificates now in a shareholder's possession may be sent to
Scudder Service Corporation (the "Transfer Agent") for cancellation and credit
to such shareholder's account. Shareholders who prefer may hold the certificates
in their possession until they wish to exchange or redeem such shares.
Other Information
If purchases and redemptions of shares of either Fund are arranged and
settlement is made at the investor's election through a member of the NASD,
other than Scudder Investor Services, Inc., that member may, at its discretion,
charge a fee for that service. The Trustees of each Fund and Scudder Investor
Services, Inc., the Funds' principal underwriter, each has the right to limit
the amount of purchases and to refuse to sell to any person. The Board of
Trustees of each Fund and Scudder Investor Services, Inc. may suspend or
terminate the offering of shares of their respective Fund at any time.
The "Tax Identification Number" section of the application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g. from exempt investors a certification of exempt status) will be returned
to the investor.
The minimum initial purchase amount is less than $1,000 under special
plan accounts.
The Funds may issue shares at net asset value in connection with any
merger or consolidation with, or acquisition of the assets of, any investment
company or personal holding company, subject to the requirements of the 1940
Act.
11
<PAGE>
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction
information" in each Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL(TM)) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $1,000. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain an original signature guarantee as described
under "Transaction Information--Redeeming shares--Signature Guarantees" in each
Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder Fund to an
existing account in another Scudder Fund through Scudder's Automatic Exchange
Program. Exchanges must be for a minimum of $50. Shareholders may add this free
feature over the phone or in writing. Automatic Exchanges will continue until
the shareholder requests by phone or in writing to have the feature removed, or
until the originating account is depleted. The Trusts and the Transfer Agent
each reserve the right to suspend or terminate the privilege of the Automatic
Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Trusts employ
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trusts do not follow such
procedures, they may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trusts will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine. The Trusts and the Transfer Agent each reserve the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a prospectus of
the Scudder fund into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
Shareholders currently receive the right to redeem up to $50,000 to their
12
<PAGE>
address of record automatically, without having to elect it. Shareholders may
also request to have the proceeds mailed or wired to their pre-designated bank
account.
(a) NEW INVESTORS wishing to establish telephone redemption to a
pre-designated bank account must complete the appropriate
section on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder Pension and Profit-Sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a pre-designated bank account or who want to change the
bank account previously designated to receive redemption
payments should either return a Telephone Redemption Option
Form (available upon request) or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. An original signature and an original
signature guarantee are required for each person in whose name
the account is registered.
Telephone redemption is not available with respect to shares
represented by share certificates or shares held in certain retirement accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
The Funds employ procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Funds do not follow such procedures, they may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Funds will not be
liable for acting upon instructions communicated by telephone that they
reasonably believe to be genuine.
Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with a signature guarantee.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
any redemptions to ensure that all necessary documents accompany the request.
When shares are held in the name of a corporation, trust, fiduciary, agent,
attorney or partnership, the Transfer Agent requires, in addition to the stock
power, certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within seven days after
receipt by the Transfer Agent of a request for redemption that complies with the
above requirements.
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<PAGE>
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.
Redemption by Write-a-Check
All new investors and existing shareholders who apply to State Street
Bank and Trust Company for checks may use them to pay any person, provided that
each check is for at least $100 and not more than $5 million. By using the
checks, the shareholder will receive daily dividend credit on his or her shares
until the check has cleared the banking system. Investors who purchased shares
by check may write checks against those shares only after they have been on a
Fund's book for 15 days. Shareholders who use this service may also use other
redemption procedures. No shareholder may write checks against certificated
shares. The Funds pay the bank charges for this service. However, each Fund will
review the cost of operation periodically and reserve the right to determine if
direct charges to the persons who avail themselves of this service would be
appropriate. Each Fund, Scudder Service Corporation and State Street Bank and
Trust Company reserve the right at any time to suspend or terminate the
"Write-a-Check" procedure.
Other Information
If a shareholder redeems all shares in the account, the shareholder
will receive, in addition to the net asset value thereof, all declared but
unpaid dividends thereon. Neither Fund imposes a redemption or repurchase
charge, although a wire charge may be applicable for redemption proceeds wired
to an investor's bank account. Redemptions of shares, including redemptions
undertaken to effect an exchange for shares of another Scudder fund or
portfolio, and including exchanges and redemptions by Write-a-Check, may result
in tax consequences (gain or loss) to the shareholder and the proceeds of such
redemptions may be subject to backup withholding (see "TAXES").
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment therefor may be
suspended at times (a) during which the Exchange is closed, other than customary
weekend and holiday closings, (b) during which trading on the Exchange is
restricted for any reason, (c) during which an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practicable
or it is not reasonably practicable for a Fund to determine fairly the value of
its net assets, or (d) during which the SEC by order permits a suspension of the
right of redemption or a postponement of the date of payment or redemption;
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether the conditions prescribed in
(b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance to
below $1,000 in value, the Fund involved may notify the shareholder that, unless
the account balance is brought up to at least $1,000, that Fund will redeem all
shares and close the account sending redemption proceeds to the shareholder. The
shareholder has sixty days to bring the account balance up to $1,000 before any
action will be taken by that Fund. (This policy applies to accounts of new
shareholders, but does not apply to certain Special Plan Accounts.) The Trustees
of Treasury Fund have the authority to change the minimum account size.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in each Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
14
<PAGE>
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
===================================================================================================================
Scudder Load Fund with 0.75% No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund 12b-1 Fee 0.25% 12b-1 Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
- -------------------------------------------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- -------------------------------------------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
===================================================================================================================
</TABLE>
Investors are encouraged to review the fee tables on page 2 of each
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Distribution Plans
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of a Fund. A change of instructions for the method of
payment must be given to the Transfer Agent at least five days prior to a
dividend record date. Shareholders may change their dividend option either by
calling 1-800-225-5163 or by sending written instructions to the Transfer Agent.
See "How to contact Scudder" in each Fund's prospectus for the address. Please
include your account number with your written request.
Reinvestment is usually made on the day following the record date.
Investors may leave standing instructions with the Transfer Agent designating
their option for either reinvestment or cash distribution of any income
dividends or capital gains distributions. If no election is made, dividends and
distributions will be invested in additional shares of the relevant Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
15
<PAGE>
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gains distributions automatically deposited to their personal
bank account usually within three business days after a Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.
Scudder Funds Centers
Investors may visit any of the Centers maintained by Scudder Investor
Services, Inc. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or obtain assistance
with opening an account, adding monies or special options to existing accounts,
making exchanges within the Scudder Family of Funds, redeeming shares or opening
retirement plans. Checks should not be mailed to the Centers but should be
mailed to "The Scudder Funds" at the address listed under "How to contact
Scudder" in each Fund's prospectus.
Diversification
Your investment represents an interest in a large, diversified
portfolio of carefully selected securities. Diversification helps protect you
against the risks associated with concentrating in fewer securities or in a
specific market sector.
Reports to Shareholders
Both Funds issue to their respective shareholders semiannual financial
statements (audited annually by independent accountants), including a list of
investments held and statements of assets and liabilities, operations, changes
in net assets, and financial highlights.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in each Scudder fund must be at least $1,000 or $500 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.
16
<PAGE>
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
of principal value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate- and
long-term bonds.
Scudder Short Term Global Income Fund seeks to provide high current
income from a portfolio of high-grade money market instruments and
short-term bonds denominated in foreign currencies and the U.S. dollar.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in investment-grade
municipal securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
- --------------------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
17
<PAGE>
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
long-term municipal securities with an emphasis on high quality.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Capital Growth Fund seeks to maximize long-term growth of
capital through a broad and flexible investment program emphasizing
common stocks.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S. and
foreign issuers. Income is an incidental consideration.
- -------------------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
18
<PAGE>
Scudder Global Small Company Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
Scudder Service Representative; easy telephone exchanges into Scudder money
market, tax free, income, and growth funds; shares redeemable at net asset value
at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic Withdrawal Plan"
in each Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
19
<PAGE>
Shares of each Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of either Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code (the "Code") will be greatly facilitated if it is in such approved
form. Under certain circumstances, the IRS will assume that a plan, adopted in
this form, after special notice to any employees, meets the requirements of
Section 401(a) of the Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of either Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of either Fund may be purchased as the underlying investment for
an Individual Retirement Account which meets the requirements of Section 408(a)
of the Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,250 for married couples if one spouse has earned income of no
more than $250). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
20
<PAGE>
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
<S> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
<TABLE>
<CAPTION>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
<S> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of each Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the Code (such as hospitals, churches, religious, scientific, or
literary organizations and educational institutions) or a public school system
are eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders who currently own or purchase $10,000
or more of shares of a Fund may establish an Automatic Withdrawal Plan. The
investor can then receive monthly, quarterly or periodic redemptions from his or
her account for any designated amount of $50 or more. Payments are mailed at the
end of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in each Fund's prospectus. Any such requests must
be received by each Fund's transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Funds or their agents on written notice, and will
be terminated when all shares of a Fund under the Plan have been liquidated or
upon receipt by the Funds of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
21
<PAGE>
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Trusts and their agents reserve the right to establish a
maintenance charge in the future depending on the services required by the
investor.
The Trusts each reserve the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Trusts reserve the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
Scudder Trust Company
Annual service fees are paid by the Funds to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts and are included
in the fees paid to the Transfer Agent.
DIVIDENDS
(See "Distribution and performance information--Dividends and
capital gains distributions" in each Fund's prospectus.)
The net income of each Fund is determined as of the close of regular
trading on the Exchange, usually 4 p.m. eastern time on each day the Exchange is
open for trading.
All the net investment income and all net realized short-term capital
gains and net realized short and long-term capital losses of SCIT so determined
normally will be declared as a dividend to shareholders of record as of
determination of the net asset value at 12:00 noon after the purchase and
redemption of shares. All the net investment income and all net realized
short-term capital gains of Treasury Fund so determined normally will be
declared as a dividend to shareholders of record as of determination of the net
asset value at twelve o'clock noon after the purchase and redemption of shares.
Shares purchased as of the determination of net asset value made as of the
regular close of the Exchange will not participate in that day's dividend; in
such cases dividends commence on the next business day. Checks will be mailed to
shareholders electing to take dividends in cash, and confirmations will be
mailed to shareholders electing to invest dividends in additional shares for the
22
<PAGE>
month's dividends within four business days after the dividend is calculated.
Dividends will be invested at the net asset value per share, normally $l.00,
determined as of the close of regular trading on the Exchange on the last
business day of each month.
Dividends are declared daily on each day on which the Exchange is open
for business. The dividends for a business day immediately preceding a weekend
or holiday will normally include an amount equal to the net income for the
subsequent days on which dividends are not declared. However, no daily dividend
will include any amount of net investment income in respect of a subsequent
semiannual accounting period.
Net investment income (from the time of the immediately preceding
determination thereof) consists of all interest income accrued on the portfolio
assets of a Fund, less all actual and accrued expenses. Interest income included
in the daily computation of net investment income is comprised of original issue
discount earned on discount paper accrued to the date of maturity as well as
accrued interest. Expenses of each Fund, including the management fee payable to
the Adviser, are accrued each day.
Normally, each Fund will have a positive net investment income at the
time of each determination thereof. Net investment income may be negative if an
unexpected liability must be accrued or a loss realized. If the net investment
income of a Fund determined at any time is a negative amount, the net asset
value per share will be reduced below $l.00 unless one or more of the following
steps are taken: the Trustees have the authority (1) to reduce the number of
shares in each shareholder's account, (2) to offset each shareholder's pro rata
portion of negative net investment income from the shareholder's accrued
dividend account or from future dividends, or (3) to combine these methods in
order to seek to maintain the net asset value per share at $1.00. Each Fund may
endeavor to restore the net asset value per share to $l.00 by not declaring
dividends from net investment income on subsequent days until restoration, with
the result that the net asset value per share will increase to the extent of
positive net investment income which is not declared as a dividend.
Because the net investment income of each Fund is declared as a
dividend each time the net investment income of the Fund is determined, the net
asset value per share of each Fund (i.e., the fair value of the net assets of
the Fund divided by the number of shares of the Fund outstanding) will remain at
$l.00 per share immediately after each such determination and dividend
declaration, unless (i) there are unusual or extended fluctuations in short-term
interest rates or other factors, such as unfavorable changes in the
creditworthiness of issuers affecting the value of securities in the Fund's
portfolio, or (ii) net income is a negative amount.
Should a Fund incur or anticipate any unusual or unexpected significant
expense or loss which would affect disproportionately that Fund's income for a
particular period, the Trustees would at that time consider whether to adhere to
the dividend policy described above or to revise it in the light of the then
prevailing circumstances in order to ameliorate to the extent possible the
disproportionate effect of such expense, loss or depreciation on then existing
shareholders. Such expenses or losses may nevertheless result in a shareholder's
receiving no dividends for the period during which the shares are held and in
receiving upon redemption a price per share lower than that which was paid.
Neither Fund anticipates realizing any long-term capital gains.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance
information" in each Fund's prospectus.)
From time to time, quotations of each Fund'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
Yield is the net annualized yield based on a specified 7 calendar days
calculated at simple interest rates. Yield is calculated 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
period, and dividing the difference by the value of the account at the beginning
23
<PAGE>
of the base period to obtain the base period return. The yield is annualized by
multiplying the base period return by 365/7. The yield figure is stated to the
nearest hundredth of one percent. The yield for the seven-day period ended June
30, 1994 was 3.57% for SCIT and 3.37% for Treasury Fund.
Effective Yield
Effective yield is the net annualized yield for a specified 7 calendar
days assuming a reinvestment of the income or compounding. Effective yield is
calculated by the same method as yield except the effective yield figure is
compounded by adding 1, raising the sum to a power equal to 365 divided by 7,
and subtracting 1 from the result, according to the following formula:
Effective yield = [(Base Period Return + 1)^(365/7)] - 1.
The effective yield for the seven-day period ended June 30, 1994 was
3.63% for SCIT and 3.43% for Treasury Fund.
Quotations of each Fund's performance are based on historical earnings
and are not intended to indicate future performance. An investor's shares when
redeemed may be worth more or less than their original cost. Performance of the
Fund will vary based on changes in market conditions and the level of each
Fund's expenses.
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for the periods of one year, five years, ten years and the life of a
Fund, 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 Fund's
shares, if any, and assume that all dividends and capital gains distributions
during the respective periods were reinvested in Fund shares. Average annual
total return is calculated by finding the average annual compound rates of
return of a hypothetical investment over such periods, according to the
following formula (average annual total return is then expressed as a
percentage):
T = (ERV/P)^1/n - 1
Where:
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 June 30, 1994
-----------------------------------------------------------
One Five Ten
Year Years Years
---- ----- -----
SCIT 2.77% 5.11% 6.27%
Treasury Fund 2.74% 4.86% 5.81%
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 the change in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated 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):
24
<PAGE>
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.
Cumulative Total Return for periods ended June 30, 1994
-------------------------------------------------------
One Five Ten
Year Years Years
---- ----- -----
SCIT 2.77% 28.27% 83.75%
Treasury Fund 2.74% 26.80% 75.96%
Total Return
Total return is the rate of return on an investment for a specified
period of time calculated in the manner as cumulative total return.
Quotations of the Funds' performance are historical, show the
performance of a hypothetical investment and are not intended to indicate future
performance. Average annual total return, cumulative total return and yield for
a Fund will vary based on changes in market conditions and the level of each
Fund's expenses. An investor's shares when redeemed may be worth more or less
than their original cost.
Investors should be aware that the principal of each Fund is not
insured.
Comparison of Portfolio Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of a Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Funds also may compare their performance to
unmanaged indices or averages of comparable securities, such as 90-day T-bills
and bank money market accounts. These indices may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
From time to time, in marketing pieces and other fund literature, each
Fund's yield and performance over time may be compared to the performance of
broad groups of comparable mutual funds, 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 90-day Treasury bills, bankers' acceptances and negotiable order of
withdrawal accounts. Any indices that are compared to the Funds may assume
reinvestment of dividends. 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 FDIC.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
25
<PAGE>
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature, Trustees and
officers of the Funds, the Funds' portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Funds. In addition, the assets that the Adviser has under management in various
geographical areas may be quoted in advertising and marketing materials.
The Funds may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of projected
future college costs based on assumed rates of inflation and examples of
hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Funds. The
description may include a "risk/return spectrum" which compares the Funds to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Funds to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance made by independent sources may also be
used in advertisements concerning the Funds, including reprints of, or
selections from, editorials or articles about these Funds. Sources for Fund
performance information and articles about the Funds may include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
26
<PAGE>
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
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 Average," and "Donoghue's Government Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
27
<PAGE>
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in each Fund's prospectus.)
Scudder Cash Investment Trust is a Massachusetts business trust
established under a Declaration of Trust dated December 12, 1975. Treasury Fund
is a Massachusetts business trust established under a Declaration of Trust dated
April 4, 1980. On February 12, 1991, the Board of Trustees of Treasury Fund
approved the change in name from Scudder Government Money Fund to Scudder U.S.
Treasury Money Fund. Each Fund's authorized capital consists of an unlimited
number of shares of beneficial interest, par value $.01 per share, all of which
are one class and have equal rights as to voting, dividends and liquidation.
Shareholders have one vote for each share held. All shares issued and
outstanding will be fully paid and non-assessable by the Funds, and redeemable
as described in this combined Statement of Additional Information and in each
Fund's prospectus. The Trustees of both Funds have the authority to issue more
than one series of shares, but have no present intention to do so.
28
<PAGE>
The Trustees of Treasury Fund, in their discretion, may authorize the
division of shares of the Fund (or shares of a series) into different classes,
permitting shares of different classes to be distributed by different methods.
Although shareholders of different classes would have an interest in the same
portfolio of assets, shareholders of different classes may bear different
expenses in connection with different methods of distribution. The Trustees have
no present intention of taking the action necessary to effect the division of
shares into separate classes (which under present regulations would require
Treasury Fund first to obtain an exemptive order of the SEC), nor of changing
the method of distribution of shares of Treasury Fund.
Each Fund has a Declaration of Trust which provides that obligations of
the Fund involved are not binding upon the Trustees individually but only upon
the property of that Fund, that the Trustees and officers will not be liable for
errors of judgment or mistakes of fact or law, and that the Fund involved will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Fund involved except if it is determined in the manner provided
in the Declarations of Trust that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Fund
involved. However, nothing in the Declarations of Trust protects or indemnifies
a Trustee or officer against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her office.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in each Fund's
prospectus.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to the Funds. This organization is one of the most
experienced investment management firms in the United States. It was established
as a partnership in 1919 and pioneered the practice of providing investment
counsel to individual clients on a fee basis. In 1928, it introduced the first
no-load mutual fund to the public. In 1953, the Adviser introduced Scudder
International Fund, Inc., the first mutual fund registered with the SEC in the
United States investing internationally in securities of issuers in several
foreign countries.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives no
income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations. In addition, it manages Montgomery Street Income Securities,
Inc., Scudder California Tax Free Trust, Scudder Cash Investment Trust, Scudder
Development Fund, Scudder Equity Trust, Scudder Fund, Inc., Scudder Funds Trust,
Scudder Global Fund, Inc., Scudder GNMA Fund, Scudder Portfolio Trust, Scudder
Institutional Fund, Inc., Scudder International Fund, Inc., Scudder Investment
Trust, Scudder Municipal Trust, Scudder Mutual Funds, Inc., Scudder New Asia
Fund, Inc., Scudder New Europe Fund, Inc., 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, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund,
Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The Latin America Dollar
Income Fund, Inc. Some of the foregoing companies or trusts have two or more
series.
The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets of approximately $12 billion and
includes the AARP Growth Trust, AARP Income Trust, AARP Tax Free Income Trust
and AARP Cash Investment Funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Adviser receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. In selecting the securities in which
the Fund may invest, the conclusions and investment decisions of the Adviser
with respect to the Fund are based primarily on the analyses of its own research
department.
29
<PAGE>
Certain investments may be appropriate for both SCIT and Treasury Fund
as well as other clients advised by the Adviser. Investment decisions for the
Funds and other clients are made with a view to achieving their respective
investment objectives and after consideration of such factors as their current
holdings, availability of cash for investment and the size of their investments
generally. Frequently, a particular security may be bought or sold for only one
client or in different amounts and at different times for more than one but less
than all clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security. In addition,
purchases or sales of the same security may be made for two or more clients on
the same day. In such event, such transactions will be allocated among the
clients in a manner believed by the Adviser to be equitable to each. In some
cases, this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by the Funds. Purchase and sales orders for each
Fund may be combined with those of other clients of the Adviser in the interest
of achieving the most favorable net results to the Funds.
Scudder Cash Investment Trust
The Investment Advisory Agreement between SCIT and the Adviser (the
"Agreement"), dated November 12, 1985, will remain in effect until September 30,
1995 and will continue in effect from year to year thereafter only if its
continuance is approved annually by the vote of a majority of those Trustees who
are not parties to such Agreement or "interested persons" of the Adviser or SCIT
cast in person at a meeting called for the purpose of voting on such approval
and either by vote of a majority of the Trustees or a majority of the
outstanding voting securities of SCIT. The Agreement was last approved by the
Trustees (including a majority of the Trustees who are not such "interested
persons") on August 9, 1994 and by the shareholders of the Fund on November 3,
1987. The Agreement may be terminated at any time without payment of penalty by
either party on sixty days' written notice, and automatically terminates in the
event of its assignment.
Under the Agreement, the Adviser regularly provides SCIT with
investment research, advice and supervision and furnishes continuously an
investment program consistent with SCIT's investment objectives and policies and
determines what securities shall be purchased for SCIT, what securities shall be
held or sold by SCIT, and what portion of SCIT's assets shall be held
uninvested, subject always to the provisions of SCIT's Declaration of Trust and
By-Laws, and of the 1940 Act and to SCIT's investment objectives, policies and
restrictions, and subject further to such policies and instructions as the
Trustees of SCIT may from time to time establish. The Adviser also advises and
assists the officers of SCIT in taking such steps as are necessary or
appropriate to carry out the decisions of its Trustees and the appropriate
committees of the Trustees regarding the conduct of the business of SCIT.
The Adviser pays the compensation and expenses of all affiliated
Trustees and executive employees of SCIT and makes available, without expense to
the Fund, the services of such Trustees, officers and employees as may duly be
elected Trustees, officers or employees of the Fund, subject to their individual
consent to serve and to any limitations imposed by law, and pays the Fund's
office rent and provides investment advisory, research and statistical
facilities and all clerical services relating to research, statistical and
investment work. For these services SCIT pays a monthly fee at an annual rate of
0.5 of 1% of the first $250 million of the Fund's average daily net assets, 0.45
of 1% on the next $250 million of such net assets, 0.4 of 1% of the next $500
million of such net assets and 0.35 of 1% on such net assets in excess of $1
billion.
For the fiscal year ended June 30, 1992, the net advisory fee was
$6,462,176, which reflected a net reduction of $42,745 as a result of such
Stipulation of Settlement in an action entitled Gloria Kamen v. Scudder, Stevens
& Clark and Scudder Cash Investment Trust (D. Mass. Civ. Action No. 81-2356 MA),
which required the Adviser, for a period of eight years commencing September 1,
1983, to rebate SCIT a portion of the Adviser's preceding monthly fee, provided
that the average daily net asset value of the Fund was at least $500 million
during the preceding month. For the fiscal year ended June 30, 1993 and 1994,
the investment advisory fee was $5,404,781 and $5,150,393, respectively.
Under the Agreement, SCIT is responsible for all its other expenses,
including clerical salaries; fees and expenses incurred in connection with
membership in investment company organizations; brokers' commissions; legal,
auditing and accounting expenses; taxes and governmental fees; the fees and
expenses of custodians, transfer agents and other agents; any other expenses,
including clerical expenses, of issue, sale, underwriting, distribution,
redemption or repurchase of shares of beneficial interest; the expenses of and
fees for registering or qualifying securities for sale; the fees and expenses of
the Trustees of the Fund who are not affiliated with the Adviser; and the cost
of preparing and distributing reports and notices to shareholders. SCIT may
30
<PAGE>
arrange to have third parties assume all or part of the expense of sale,
underwriting and distribution of shares of the Fund. (See "DISTRIBUTOR" for
expenses paid by Scudder Investor Services, Inc.) SCIT is also responsible for
its expenses incurred in connection with litigation, proceeding and claims and
the legal obligation it may have to indemnify its officers and Trustees with
respect thereto.
Scudder U.S. Treasury Money Fund
The Investment Management Agreement between Treasury Fund and the
Adviser (the "Agreement") was last approved by the Trustees on August 9, 1994
and by the shareholders on November 13, 1990. The Agreement is dated November
14, 1990 and will continue in effect until September 30, 1995 and from year to
year thereafter only if its continuance is approved annually by the vote of a
majority of those Trustees who are not parties to such Agreement or interested
persons of the Adviser or the Fund, cast in person at a meeting called for the
purpose of voting on such approval, and either by vote of a majority of the
Trustees or of the outstanding voting securities of the Fund. The Agreement may
be terminated at any time without payment of penalty by either party on sixty
days' written notice, and automatically terminates in the event of its
assignment.
Under the Agreement, the Adviser regularly provides Treasury Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objectives, policies and restrictions and determines what
securities shall be purchased for the portfolio of the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the provisions of the Fund's
Declaration of Trust and By-Laws, of the 1940 Act and the Code and to the Fund's
investment objectives, policies and restrictions, and subject, further, to such
policies and instructions as the Trustees of the Fund may from time to time
establish. The Adviser also advises and assists the officers of the Fund in
taking such steps as are necessary or appropriate to carry out the decisions of
its Trustees and the appropriate committees of the Trustees regarding the
conduct of the business of the Fund.
Under the Agreement, the Adviser also renders significant
administrative services (not otherwise provided by third parties) necessary for
Treasury Fund's operations as an open-end investment company including, but not
limited to, preparing reports and notices to the Trustees and shareholders;
supervising, negotiating contractual arrangements with, and monitoring various
third-party service providers to the Fund (such as the Fund's transfer agent,
pricing agents, custodian, accountants and others); preparing and making filings
with the SEC and other regulatory agencies; assisting in the preparation and
filing the Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public relations
matters; monitoring the valuation of securities and the calculation of net asset
value; monitoring the registration of shares of the Fund under applicable
federal and state securities laws; maintaining the Fund's books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting and
legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and otherwise
arranging for, the payment of distributions and dividends and otherwise
assisting the Fund in the conduct of its business, subject to the direction and
control of the Trustees.
The Adviser pays the compensation and expenses of all Trustees,
officers and executive employees of Treasury Fund (except those of attending
Board and committee meetings outside New York, New York or Boston,
Massachusetts) who are affiliated persons of the Adviser and makes available,
without expense to Treasury Fund, the services of the directors, officers and
employees of the Adviser as may duly be elected officers of Treasury Fund,
subject to their individual consent to serve and to any limitations imposed by
law and provides the Fund's office space and facilities.
For these services, Treasury Fund pays the Adviser a fee equal to 0.5
of 1% of the Fund's average daily net assets. The fee is payable monthly,
provided the Fund will make such interim payments as may be requested by the
Adviser not to exceed 75% of the amount of the fee then accrued on the books of
the Fund and unpaid. For the fiscal years ended June 30, 1992, 1993 and 1994 the
investment advisory fee was $859,891, $971,439 and $793,617, respectively.
The Adviser has agreed until April 30, 1995, not to impose all or a
portion of its investment management fee and take other action, to the extent
necessary, to maintain the annualized expenses of Treasury Fund at not more than
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<PAGE>
0.65% of average daily net assets. The Adviser did not impose a portion of its
fee amounting to $813,560 for the fiscal year ended June 30, 1994.
Under the Agreement, Treasury Fund is responsible for all its other
expenses, including fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payments for portfolio
pricing services to a pricing agent, if any; legal, auditing and accounting
expenses; taxes and governmental fees; the fees and expenses of the Transfer
Agent; the cost of preparing share certificates or any other expenses, including
expenses of issuance, sale, redemption or repurchase of shares of beneficial
interest; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of Trustees, officers and employees of the Fund who
are not affiliated with the Adviser; the cost of printing and distributing
reports and notices to shareholders; and the fees and disbursements of
custodians. Treasury Fund may arrange to have third parties assume all or part
of the expense of sale, underwriting and distribution of shares of the Fund.
(See "DISTRIBUTOR" for expenses paid by Scudder Investor Services, Inc.)
Treasury Fund is also responsible for expenses of shareholder meetings and
expenses incurred in connection with litigation, proceedings and claims and the
legal obligation it may have to indemnify its officers and Trustees with respect
thereto.
SCIT and Treasury Fund
The Agreements require the Adviser to reimburse a Fund up to, but not
exceeding, the management fee or annual expenses of a Fund which exceed the
lowest expense limitation prescribed by any state in which a Fund's shares are
offered for sale. The management of both Funds have been advised that, while
most states have eliminated expense limitations, the lowest such limitation is
currently 2 1/2% of such net assets up to $30 million, 2% of the next $70
million of such net assets and 1 1/2% of such net assets in excess of that
amount. Certain expenses such as brokerage commissions, taxes, extraordinary
expenses and interest are excluded from such limitations, and other expenses may
be excluded from time to time. The expense ratios for SCIT for the fiscal years
ended June 30, 1992, 1993 and 1994 were 0.70%, 0.78% and 0.82%, respectively.
The ratios of expenses to annual investment income for SCIT for the same years
were 12.98%, 22.28% and 22.82%, respectively. The expense ratios for Treasury
Fund for the fiscal years ended June 30, 1992, 1993 and 1994 were 0.65%, 0.65%
and 0.65%, respectively. The ratios of expenses to annual investment income for
the same periods were 13.11%, 19.45% and 19.13%, respectively. If reimbursement
is required, it will be made as promptly as practicable after the end of a
Fund's fiscal year. However, no fee payment will be made to the Adviser during
any fiscal year which will cause year-to-date expenses to exceed the cumulative
pro rata expense limitation at the time of such payment.
Each Agreement also provides a Fund may use any name derived from the
name "Scudder, Stevens & Clark" only as long as the Agreement or any extension,
renewal or amendment thereof remains in effect.
In reviewing the terms of the Agreements and in discussions with the
Adviser concerning the Agreements, Trustees of each Fund who are not "interested
persons" of the Fund or the Adviser are represented by independent counsel at
that Fund's expense. Dechert Price & Rhoads acts as general counsel for each
Fund.
Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which the Agreements relate, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions were not
influenced by existing or potential custodial or other Fund relationships.
None of the Trustees or officers of a Fund may have dealings with that
Fund as principals in the purchase or sale of securities, except as individual
subscribers to or holders of shares of the Fund.
32
<PAGE>
TRUSTEES AND OFFICERS
Scudder Cash Investment Trust
<TABLE>
<CAPTION>
Principal Occupation** Position with Underwriter,
Name and Address Position with Fund and Affiliations Scudder Investor Services, Inc.
- ---------------- ------------------ ---------------- -------------------------------
<S> <C> <C> <C>
David S. Lee*#@ President and Trustee Managing Director of President, Assistant Treasurer
Scudder, Stevens & Clark, and Director
Inc.
Henry P. Becton, Jr.# Trustee President and General --
WGBH Manager, WGBH Educational
125 Western Avenue Foundation
Boston, MA 02134
Dawn-Marie Driscoll Trustee Attorney and Corporate --
5760 Flamingo Drive Director; former Partner,
Cape Coral, FL 33904 Palmer & Dodge (law firm)
from 1988-1990
Cuyler W. Findlay*#+ Vice President and Managing Director of Senior Vice President and
Trustee Scudder, Stevens & Clark, Director
Inc.
Peter B. Freeman Trustee Corporate Director and --
100 Alumni Avenue Trustee
Providence, RI 02906
Dudley H. Ladd*@ Vice President and Managing Director of Senior Vice President and
Trustee Scudder, Stevens & Clark, Director
Inc.
George M. Lovejoy, Jr.# Trustee Chairman Emeritus of --
160 Federal Street Meredith & Grew,
Boston, MA 02110 Incorporated (a real
estate service company)
Jerard K. Hartman+ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Thomas W. Joseph@ Vice President Principal of Scudder, Vice President, Director,
Stevens & Clark, Inc. Treasurer & Assistant Clerk
Robert T. Neff+ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Robert E. Pruyne@ Vice President Managing Director of Assistant Treasurer
Scudder, Stevens & Clark,
Inc.
Thomas F. McDonough@ Vice President and Principal of Scudder, Clerk
Secretary Stevens & Clark, Inc.
Pamela A. McGrath@ Vice President and Principal of Scudder, --
Treasurer Stevens & Clark, Inc.
Principal Occupation** Position with Underwriter,
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation** Position with Underwriter,
Name and Address Position with Fund and Affiliations Scudder Investor Services, Inc.
- ---------------- ------------------ ---------------- -------------------------------
<S> <C> <C> <C>
Edward J. O'Connell+ Vice President and Principal of Scudder, Assistant Treasurer
Assistant Treasurer Stevens and Clark, Inc.
Coleen Downs Dinneen@ Assistant Secretary Vice President of Scudder, Assistant Clerk
Stevens & Clark, Inc.
</TABLE>
* Messrs. Findlay, Ladd and Lee are considered by the Fund and its
counsel to be trustees who are "interested persons" of the Adviser of
the Fund, within the meaning of the 1940 Act, as amended.
** Unless otherwise stated, all officers and Trustees have been associated
with their respective companies for more than five years, but not
necessarily in the same capacity.
# Messrs. Becton, Findlay, Lee and Lovejoy are members of the Executive
Committee, which has the power to declare dividends from ordinary
income and distributions of realized capital gains to the same extent
as the Board is so empowered.
@ Address: Two International Place, Boston, Massachusetts 02110
+ Address: 345 Park Avenue, New York, New York 10154
As of September 30, 1994, all Trustees and officers of SCIT as a group
owned beneficially (as that term is defined under Section 13(d) of the
Securities Exchange Act of 1934) less than 1% of the shares of the Fund
outstanding on such date.
To the best of SCIT's knowledge, no person owned beneficially more than
5% of SCIT's outstanding shares.
The Trustees and officers of the Fund also serve in similar capacities
with other Scudder Funds.
Scudder U.S. Treasury Money Fund
<TABLE>
<CAPTION>
Principal Occupation** Position with Underwriter,
Name and Address Position with Fund and Affiliations Scudder Investor Services, Inc.
- ---------------- ------------------ ---------------- -------------------------------
<S> <C> <C> <C>
David S. Lee*#@ President and Trustee Managing Director of President, Assistant Treasurer
Scudder, Stevens & Clark, and Director
Inc.
Karl A. Deavers*#+ Trustee Managing Director of --
Scudder, Stevens & Clark,
Inc.
Amey A. DeFriez# Trustee Corporate Director and --
649 South Street Trustee
Needham, MA 02192
Dawn-Marie Driscoll Trustee Attorney and Corporate --
5760 Flamingo Drive Director; former Partner,
Cape Coral, FL 33904 Palmer & Dodge (law firm)
from 1988-1990
George M. Lovejoy, Jr.# Trustee Chairman Emeritus of
160 Federal Street Meredith & Grew,
Boston, MA 02110 Incorporated (a real
estate service company)
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation** Position with Underwriter,
Name and Address Position with Fund and Affiliations Scudder Investor Services, Inc.
- ---------------- ------------------ ---------------- -------------------------------
<S> <C> <C> <C>
Cuyler W. Findlay+ Vice President Managing Director of Senior Vice President and
Scudder, Stevens & Clark, Director
Inc.
Jerard K. Hartman+ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Thomas W. Joseph@ Vice President Principal of Scudder, Vice President, Director,
Stevens & Clark, Inc. Treasurer & Assistant Clerk
Dudley H. Ladd@ Vice President Managing Director of Senior Vice President and
Scudder, Stevens & Clark, Director
Inc.
Robert T. Neff+ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Robert E. Pruyne@ Vice President Managing Director of Assistant Treasurer
Scudder, Stevens & Clark,
Inc.
Thomas F. McDonough@ Vice President and Principal of Scudder, Clerk
Secretary Stevens & Clark, Inc.
Pamela A. McGrath@ Vice President and Principal of Scudder, --
Treasurer Stevens & Clark, Inc.
Edward J. O'Connell+ Vice President and Principal of Scudder, Assistant Treasurer
Assistant Treasurer Stevens & Clark, Inc.
Coleen Downs Dinneen@ Assistant Secretary Vice President of Scudder, Assistant Clerk
Stevens & Clark, Inc.
</TABLE>
* Messrs. Deavers and Lee are considered by the Fund and its counsel to
be Trustees who are "interested persons" of the Adviser of the Fund,
within the meaning of the 1940 Act.
** Unless otherwise stated, all officers and Trustees have been associated
with their respective companies for more than five years but not
necessarily in the same capacity.
# Messrs. Deavers, Lee and Lovejoy and Ms. DeFriez are members of the
Executive Committee, which has the power to declare dividends from
ordinary income and distributions of realized capital gains to the same
extent as the Board is so empowered.
@ Address: Two International Place, Boston, Massachusetts 02110
+ Address: 345 Park Avenue, New York, New York 10154
As of September 30, 1994, all Trustees and officers of the Treasury
Fund as a group owned beneficially (as that term is defined under Section 13(d)
of the Securities Exchange Act of 1934) less than 1% of the shares of the Fund
outstanding on such date.
To the best of Treasury Fund's knowledge, no person owned beneficially
more than 5% of the Fund's outstanding shares except as stated above.
The Trustees and officers of Treasury Fund also serve in similar
capacities with other Scudder Funds.
35
<PAGE>
REMUNERATION
Several of the officers and Trustees of each Fund may also 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 fees paid by each Fund. The Funds pay no direct remuneration to
any officer of a Fund. However, each Trustee of the Funds who is not affiliated
with the Adviser will be paid by the Fund. Each of these unaffiliated Trustees
receives an annual Trustee's fee of $4,000 and a fee of $300 for each Trustees'
meeting, audit committee meeting or meeting held for the purpose of considering
arrangements between a Fund and the Adviser or any of its affiliates. Each
unaffiliated Trustee also receives $100 per committee meeting attended, other
than those set forth above. For the fiscal year ended June 30, 1994, such fees
totaled $37,446 for SCIT and $29,220 for Treasury Fund.
DISTRIBUTOR
Both Funds have an underwriting agreement with Scudder Investor
Services, Inc. (the "Distributor"), a Massachusetts corporation, which is a
wholly-owned subsidiary of the Adviser, a Delaware corporation.
As agent, the Distributor currently offers shares of both Funds on a
continual basis to investors in all states in which the Funds may from time to
time be registered or where permitted by applicable law. The underwriting
agreement provides that the Distributor accept orders for shares at net asset
value as no sales commission or load is charged the investor. The Distributor
has made no firm commitment to acquire shares of either Fund.
Scudder Cash Investment Trust
SCIT's underwriting agreement dated July 20, 1976 will remain in effect
until September 30, 1995 and from year to year only if its continuance is
approved annually by a majority of the Board of Trustees who are not parties to
such agreement or "interested persons" of any such party and either by vote of a
majority of the Trustees or a majority of the outstanding voting securities of
the Fund. SCIT has agreed to pay all expenses in connection with registration of
its shares with the SEC and auditing and filing fees in connection with
registration of its shares under the various state "blue-sky" laws and to assume
the cost of preparation of prospectuses and other expenses. The Distributor pays
all expenses of printing prospectuses used in offering shares (other than
prospectuses used by SCIT for transmission to shareholders, for which the Fund
pays printing expenses), expenses, other than filing fees, of qualification of
SCIT's shares in various states, including registering SCIT as a dealer, and all
other expenses in connection with the offer and sale of shares which are not
specifically allocated to the Funds. The underwriting agreement was last
approved by the Trustees August 9, 1994.
Scudder U.S. Treasury Money Fund
Treasury Fund's underwriting agreement dated September 10, 1985 will
remain in effect until September 30, 1995 and from year to year thereafter only
if its continuance is approved annually by a majority of the members of the
Board of Trustees who are not parties to such agreement or "interested persons"
of any such party and either by vote of a majority of the Board of Trustees or a
majority of the outstanding voting securities of Treasury Fund. The underwriting
agreement was last approved by the Trustees on August 9, 1994.
Under the principal underwriting agreement, Treasury Fund is
responsible for: the payment of all fees and expenses in connection with the
preparation and filing with the SEC of its registration statement and prospectus
and any amendments and supplements thereto; the registration and qualification
of shares for sale in the various states, including registering Treasury Fund as
a broker or dealer; the fees and expenses of preparing, printing and mailing
prospectuses, notices, proxy statements, reports or other communications
(including newsletters) to shareholders of Treasury Fund; the cost of printing
and mailing confirmations of purchases of shares and the prospectuses
accompanying such confirmations; any issuance taxes or any initial transfer
taxes; a portion of shareholder toll-free telephone charges and expenses of
customer service representatives; the cost of wiring funds for share purchases
and redemptions (unless paid by the shareholder who initiates the transaction);
the cost of printing and postage of business reply envelopes; and a portion of
the cost of computer terminals used by both Treasury Fund and the Distributor.
36
<PAGE>
Although Treasury Fund does not currently have a 12b-1 Plan and shareholder
approval would be required in order to adopt one, Treasury Fund will also pay
those fees and expenses permitted to be paid or assumed by Treasury Fund
pursuant to a 12b-1 Plan, if any, adopted by Treasury Fund, notwithstanding any
other provision to the contrary in the underwriting agreement and Treasury Fund
or a third party will pay those fees and expenses not specifically allocated to
the Distributor in the underwriting agreement.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the shares to
the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of Treasury Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
customer service representatives, a portion of the cost of computer terminals,
and of any activity which is primarily intended to result in the sale of shares
issued by the Fund, unless a 12b-1 Plan is in effect which provides that the
Fund shall bear some or all of such expenses.
TAXES
(See "Transaction information--Tax identification
number" and "Distribution and performance information--Dividends
and capital gains distributions" in each Fund's prospectus.)
Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), or a predecessor statute and has qualified as such since its inception.
Each Fund intends to continue to qualify for such treatment. Such qualification
does not involve governmental supervision or management of investment practices
or policy.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code. Each Fund intends to distribute, at least
annually, all of its investment company taxable income and net realized capital
gains.
The Funds are subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of a Fund's ordinary income for the calendar year, at
least 98% of the excess of its capital gains over capital losses (adjusted for
certain ordinary losses) realized during the one-year period ending October 31
during such year (although investment companies with taxable years ending on
November 30 or December 31 may make an irrevocable election to measure the
required capital gain distribution using their actual taxable year), and all
ordinary income and capital gains for prior years that were not previously
distributed.
Investment company taxable income generally includes interest and net
short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Funds.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Since no portion of the Funds' income is comprised of dividends from
domestic corporations, none of the income distributions of the Funds is eligible
for the deduction for dividends received by corporations.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders as long-term capital gain,
regardless of the length of time the shares of the Fund involved have been held
by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gains during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
37
<PAGE>
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date in such a month are deemed to
have been received by shareholders on December 31 if paid in January of the
following year. Redemptions of shares, including exchanges for shares of another
Scudder fund, may result in tax consequences (gain or loss) to the shareholder
and are also subject to these reporting requirements.
A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered to be
income to a Fund each year, even though a Fund will not receive cash interest
payments from these securities. This original issue discount imputed income will
comprise a part of the investment company taxable income of the Funds which must
be distributed to shareholders in order to maintain the qualification of the
Funds as regulated investment companies and to avoid federal income tax at the
level of the Funds. In the event that a Fund acquires a debt instrument at a
market discount, it is possible that a portion of any gain recognized on the
disposition of such instrument may be treated as ordinary income.
A qualifying individual may make a deductible IRA contribution of up to
$2,000 or, if less, the amount of the individual's earned income for any taxable
year only if (i) neither the individual nor a spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and a spouse, if applicable) has an adjusted gross income below a
certain level ($40,050 for married individuals filing a joint return, with a
phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,250 to IRAs for an individual and a nonearning spouse) for that year. There
are special rules for determining how withdrawals are to be taxed if an IRA
contains both deductible and nondeductible amounts. In general, a proportionate
amount of each withdrawal will be deemed to be made from nondeductible
contributions; amounts treated as a return of nondeductible contributions will
not be taxable. Also, annual contributions may be made to a spousal IRA even if
the spouse has earnings in a given year if the spouse elects to be treated as
having no earnings (for IRA contribution purposes) for the year.
The Funds will be required to report to the IRS all distributions of
taxable income and capital gains as well as gross proceeds from the redemption
or exchange of Fund shares, except in the case of certain exempt shareholders.
Under the backup withholding provisions of Section 3406 of the Code,
distributions of taxable income and capital gains (and proceeds from the
redemption or exchange of the shares of a regulated investment company if the
funds fail to maintain a constant $1.00 NAV per share) may be subject to
withholding of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. Withholding may also be required if a Fund is
notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the Funds may be subject to state and local taxes on
distributions received from the Funds and on redemptions of the Funds' shares.
Under the laws of certain states, distributions of investment company taxable
income are taxable to shareholders as dividends, even though a portion of such
distributions may be derived from interest on U.S. Government obligations which,
if received directly by such shareholders, would be exempt from state income
tax.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year, the Funds issue to each
shareholder a statement of the federal income tax status of all distributions.
38
<PAGE>
Each Fund is organized as a Massachusetts business trust and, provided
that it qualifies as a regulated investment company for federal income tax
purposes, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of a Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by the shareholder, where such amounts are treated as
income from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this combined Statement of Additional
Information in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
To the maximum extent feasible, the Adviser places orders for portfolio
transactions for the Funds through the Distributor, which in turn places orders
on behalf of the Funds with other brokers and dealers. The Distributor will
receive no commissions, fees or other remuneration for this service. Allocation
of brokerage is supervised by the Adviser.
A Fund'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 commission being paid by the
Funds. Trading does, however, involve transaction 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 if a
Fund would obtain the most favorable net results, including such fee, on a
particular transaction. Purchases of underwritten issues may be made which will
include an underwriting fee paid to the underwriter. To date, no brokerage
commissions have been paid.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Funds' portfolios is to obtain the most favorable
net results taking into account such factors as price, commission (negotiable in
the case of national securities exchange transactions), if any, size of order,
difficulty of execution and skill required of the executing broker/dealer. The
Adviser seeks to evaluate the overall reasonableness of brokerage commissions
paid (to the extent applicable) through the familiarity of the Distributor with
commissions charged on comparable transactions, as well as by comparing
commissions paid by the Funds to reported commissions paid by others. The
Adviser reviews on a routine basis commission rates, execution and settlement
services performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers and dealers who supply market quotations to the custodian of the Funds
for appraisal purposes, or who supply research, market and statistical
information to the Adviser. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability of
investing in, purchasing or selling securities; and the availability of
securities or purchasers or sellers of securities; and furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. The Adviser is not
authorized when placing portfolio transactions for the Funds to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might have charged for effecting the same transaction solely on account of the
receipt of research, market or statistical information. The Adviser will not
place orders with brokers or dealers on the basis that a broker or dealer has or
has not sold shares of the Funds. Except for implementing the policy stated
above, there is no intention to place portfolio transactions with particular
brokers or dealers or groups thereof. In effecting transactions in
over-the-counter securities, orders are placed with the principal market-makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Funds and to the Adviser, it is the
opinion of the management of the Funds that such information is only
supplementary to the Adviser's own research effort, since the information must
still be analyzed, weighed, and reviewed by the Adviser's staff. Such
39
<PAGE>
information may be useful to the Adviser in providing services to clients other
than the Funds, and not all such information is used by the Adviser in
connection with the Funds. Conversely, such information provided to the Adviser
by brokers and dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to
the Funds.
The Trustees of each Fund review from time to time whether the
recapture for the benefit of each Fund of some portion of the brokerage
commissions or similar fees paid by each Fund on portfolio transactions is
legally permissible and advisable. To date, no such recapture has been effected.
NET ASSET VALUE
The net asset value per share of each Fund is computed twice daily as
of twelve o'clock noon and the close of regular trading on the Exchange,
normally 4 p.m. eastern time, on each day when the Exchange is open for trading.
The Exchange is normally closed on the following national holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas. Net asset value is determined by dividing the total
assets of a Fund, less all of its liabilities, by the total number of shares of
that Fund outstanding. The Funds use the penny-rounding method of security
valuation as permitted under Rule 2a-7 under the 1940 Act. Under this method,
portfolio securities for which market quotations are readily available and which
have remaining maturities of more than 60 days from the date of valuation are
valued at the mean between the over-the-counter bid and asked prices. Securities
which have remaining maturities of 60 days or less are valued by the amortized
cost method; if acquired with remaining maturities of 61 days or more, the cost
thereof for purposes of valuation is deemed to be the value on the 61st day
prior to maturity. Other securities are appraised at fair value as determined in
good faith by or on behalf of the Trustees of each Fund. For example, securities
with remaining maturities of more than 60 days for which market quotations are
not readily available are valued on the basis of market quotations for
securities of comparable maturity, quality and type. Determinations of net asset
value per share for each Fund made other than as of the close of the Exchange
may employ adjustments for changes in interest rates and other market factors.
ADDITIONAL INFORMATION
Experts
The Financial Highlights of each Fund included in each Fund's
Prospectus and the Financial Statements incorporated by reference in this
combined Statement of Additional Information have been so included or
incorporated by reference in reliance on the report of Coopers & Lybrand L.L.P.,
One Post Office Square, Boston, Massachusetts 02109, independent accountants,
and given on the authority of that firm as experts in accounting and auditing.
Shareholder Indemnification
The Funds are organizations of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of that trust. The Declarations of Trust of each Fund
contain an express disclaimer of shareholder liability in connection with the
Funds' property or the acts, obligations or affairs of the Funds. The
Declarations of Trust also provide for indemnification out of the Funds'
property of any shareholder held personally liable for the claims and
liabilities to which a shareholder may become subject by reason of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which a
Fund itself would be unable to meet its obligations.
Other Information
Both Funds have a fiscal year ending on June 30.
Portfolio securities of each Fund are held separately, pursuant to
separate custodian agreements, by State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02101 as custodian.
The CUSIP number of Scudder Cash Investment Trust is 811118-10-8.
40
<PAGE>
The CUSIP number of Scudder U.S. Treasury Money Fund is 81123P-10-6.
"Scudder Cash Investment Trust" is the designation of the Trustees for
the time being under a Declaration of Trust dated December 12, 1975, and the
name "Scudder U.S. Treasury Money Fund" is the designation of the Trustees for
the time being under a Declaration of Trust dated April 4, 1980, each as amended
from time to time, and all persons dealing with a Fund must look solely to the
property of that Fund for the enforcement of any claims against that Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of a Fund. Upon the initial
purchase of shares, the shareholder agrees to be bound by a Fund's Declaration
of Trust, as amended from time to time. No series is liable for the obligations
of any other series. The Declaration of Trust of each Fund is on file at the
Massachusetts Secretary of State's Office in Boston, Massachusetts.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts, 02110-4103, a wholly-owned subsidiary of the Adviser, computes
the Funds' net asset value. Each Fund pays Scudder Fund Accounting Corporation
an annual fee equal to 0.02% of the first $150 million of average daily net
assets, 0.006% of such assets in excess of $150 million, 0.0035% of such assets
in excess of $1 billion, plus holding and transaction charges for this service.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the Adviser, is
the transfer and dividend disbursing agent for both funds. Service Corporation
also serves as shareholder service agent for the Funds and provides
subaccounting and recordkeeping services for shareholder accounts in certain
retirement and employee benefit plans. The Funds each pay Service Corporation an
annual fee of $28.90 for each account maintained for a participant. For the
fiscal year ended June 30, 1994, Service Corporation charged SCIT aggregate fees
of $3,573,710 and charged Treasury Fund aggregate fees of $816,050.
This Statement of Additional Information combines the information of
both Scudder Cash Investment Trust and Scudder U.S. Treasury Money Fund. Each
Fund, through its individual prospectus, offers only its own shares, yet it is
possible that one Fund might become liable for a misstatement regarding the
other Fund. The Trustees of each Fund have considered this, and have approved
the use of a combined Statement of Additional Information.
Each Fund's prospectus and this combined Statement of Additional
Information omit certain information contained in the Registration Statements
which the Funds have filed with the SEC under the Securities Act of 1933 and
reference is hereby made to the Registration Statements for further information
with respect to the Funds and the securities offered hereby. These Registration
Statements are available for inspection by the public at the offices of the SEC
in Washington, D.C.
FINANCIAL STATEMENTS
Scudder Cash Investment Trust
The financial statements, including the investment portfolio, of
Scudder Cash Investment Trust, together with the Report of Independent
Accountants, Financial Highlights and notes to financial statements are
incorporated by reference and attached hereto on pages 8 through 18, inclusive,
in the Annual Report to the Shareholders of the Fund dated June 30, 1994, and
are hereby deemed to be a part of this combined Statement of Additional
Information.
Scudder U.S. Treasury Money Fund
The financial statements, including the investment portfolio, of
Scudder U.S. Treasury Money Fund, together with the Report of Independent
Accountants, Financial Highlights and notes to financial statements are
incorporated by reference and attached hereto on pages 8 through 17, inclusive,
in the Annual Report to the Shareholders of the Fund dated June 30, 1994, and
are hereby deemed to be a part of this combined Statement of Additional
Information.
41
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
---------------------------------------
Moody's Investors Service, Inc.
P-1: Moody's Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an
original maturity in excess of nine months. The designation Prime-1 or
P-1 indicates the highest quality repayment capacity of the rated
issue.
Standard & Poor's
A-1: S&P's Commercial Paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no
more than 365 days. The A-1 designation indicates the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign designation.
Fitch Investors Service, Inc.
F-1: 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>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Cash Investment Trust
Annual Report
June 30, 1994
* A fixed-price money market fund for investors seeking stability and
liquidity of capital and current income.
* A pure no-load(TM) fund with no commissions to buy, sell or exchange
shares.
<PAGE>
SCUDDER CASH INVESTMENT TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
3 Letter from the Fund's President
4 Portfolio Management Discussion
Your Fund's portfolio management team reviews the period's
investing strategies, financial markets and economic conditions
8 Investment Portfolio
Itemized list of your Fund's portfolio holdings
11 Financial Statements
14 Financial Highlights
15 Notes to Financial Statements
18 Report of Independent Accountants
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
- --------------------------------------------------------------------------------
Dear Shareholders,
The world's financial markets have been a study in contrasts over the past
12 months. In 1993, long-term interest rates approached or hit lows not seen in
years in the United States, Japan and many European countries. Fueled by lower
rates, many stock markets around the world had hit record high levels by January
1994. Financial markets have cooled considerably since then. Early in the first
quarter of 1994, reports of accelerating U.S. economic growth prompted fears of
rising inflation and led to a series of short-term interest rate hikes by the
Federal Reserve this spring. As yields rose in the United States, bond prices
fell across the maturity spectrum. Yields also rose outside the United States,
leading to declines in most of the world's stock and bond markets.
What do these events mean for investors? On the positive side, we expect a
moderate overall pace of economic expansion and low relative inflation
worldwide. However, this year's investment returns, as we have stated
previously, are not likely to come close to matching the exceptional performance
of 1993.
In light of the current market environment, we encourage you periodically
to examine your portfolio to make sure your asset allocation and fund choices
remain appropriate for your investment time frame and financial goals. Money
market funds are an important component of any investment program as a means of
cash management and can also serve as a portfolio repository in the event of
potential market volatility. But for investors with long time horizons, those
who require current income will most likely need to rely on bonds and money
market funds and those who require growth to outpace inflation will most likely
need stocks to help them reach their objectives.
Please call Scudder Investor Information at 1-800-225-2470 if you have
questions about your Fund or if you would like help in evaluating your current
investment portfolio. Page 23 provides more information on how to contact
Scudder. Thank you for choosing Scudder Cash Investment Trust to help meet your
investment needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Cash Investment Trust
3
<PAGE>
SCUDDER CASH INVESTMENT TRUST
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
Yields for money market investments have been on the rise in recent months,
reflecting the trend toward rising interest rates across the board. On June 30,
1994, Scudder Cash Investment Trust's 7-day yield was 3.57%, while its effective
7-day yield, which includes the effect of compounding, was 3.63% compared to
2.50% a year ago. In keeping with its objective, the Fund also maintained a
constant share price of $1.00 per share. Your Fund's yield was roughly the same
as its peer group of "First Tier" money market funds, which posted an average
effective 7-day yield of 3.66%, as measured by IBC/Donoghue, Inc.?--?an
independent monitor of money market investments. "First Tier" money funds invest
only in the highest quality short-term securities. The average maturity for
First Tier funds as a group was 46 days on June 30, 1994, versus 35 days for
your Fund.
The Fund's total return, which reflects reinvested distributions of $0.027
per share, was 2.77% for the fiscal year ended June 30. By comparison, total
return for the average taxable money market fund was 2.79% for the same period,
as measured by Lipper Analytical Services, Inc., an independent firm that tracks
mutual fund performance.
Interest Rates Head Higher
Your Fund's fiscal year comprised two very distinct periods. While interest
rates reached historic lows during the second half of 1993, sending money market
yields lower, rates have been on the rise in the most recent six months. Between
February and May 1994, the Federal Reserve gradually but persistently raised the
federal funds rate (the rate charged on overnight loans) four times from 3% to
4.25%, the first time it raised rates in five years. In addition, the most
recent increase was accompanied by a rise in the discount rate (the rate the
Federal Reserve charges member banks on loans) by one half of a percentage
point. These rate hikes triggered declines in stock and bond markets worldwide
as investors interpreted Fed actions as a signal that inflation was on the rise.
Throughout this turbulent period, money market investors were among the few
groups to escape negative returns while enjoying rising yields.
4
<PAGE>
Short-Term Interest Rates Rise in 1994
(December 1990 through June 1994)
3-Month Commercial Federal
Treasury Bill Paper Funds
--------------------------------------------------
6.81 7.8 7.31
6.3 7.1 6.91
5.95 6.49 6.25
5.91 6.41 6.12
5.67 6.07 5.91
5.51 5.92 5.78
5.6 6.11 5.9
5.58 6.05 5.82
5.39 5.72 5.66
5.25 5.57 5.45
5.03 5.35 5.21
4.6 4.98 4.81
4.12 4.61 4.43
3.84 4.07 4.03
3.84 4.11 4.06
4.05 4.3 3.98
3.81 4.04 3.73
3.66 3.88 3.82
3.7 3.92 3.76
3.28 3.44 3.25
3.14 3.38 3.3
2.97 3.24 3.22
2.84 3.33 3.1
3.14 3.66 3.09
3.25 3.67 2.92
3.06 3.25 3.02
2.95 3.18 3.03
2.97 3.17 3.07
2.89 3.14 2.96
2.96 3.14 3
3.1 3.25 3.04
3.05 3.2 3.06
3.05 3.18 3.03
2.96 3.16 3.09
3.04 3.26 2.99
3.12 3.4 3.02
3.08 3.36 2.96
3.02 3.19 3.05
3.21 3.49 3.25
3.52 3.85 3.34
3.74 4.05 3.56
4.19 4.57 4.01
4.18 4.57 4.25
Falling interest rates reversed course in February, moving higher during
the first half of 1994.
Shorter Maturities Help Boost Income
During the first half of the Fund's fiscal year (the last six months of
1993), your Fund emphasized strategies to earn higher relative money market
yields in a low interest rate environment, namely by concentrating on
investments at both the long and short ends of the short-term maturity spectrum.
Focusing on longer-maturity securities enabled the Fund to secure higher
relative yields while prevailing short-term interest rates moved lower. At the
same time, shorter-maturity holdings ensured the Fund maintained ample liquidity
both to meet shareholders' cash needs and capture opportunities to purchase
higher-yielding instruments as they became available.
Entering 1994, while still varying the Fund's mix of maturities, we began
deliberate but gradual efforts to shorten the portfolio's average maturity by
paring back longer-term commitments, given our expectation that rates were
headed higher. As securities in the Fund matured, we reinvested the proceeds in
shorter-maturity instruments, enabling the Fund to pick up additional income as
rates indeed moved upward; thus shortening the Fund's average maturity from 46
days six months ago to 35 days at the end of the fiscal year.
5
<PAGE>
In addition to shortening the Fund's maturities, we continued to vary the
types of securities in the Fund to enhance overall money market diversification.
Corporate commercial paper maintained a prominent presence. These securities not
only offer more favorable relative yields, but the selection is attractive as
well, in part because commercial banks have not been particularly active in
raising money through certificates of deposit.
We again emphasized floating rate notes (FRNs) to help us manage average
portfolio maturity. These instruments currently enjoy higher yields than
three-month Treasury bills but have the stability characteristics of short-term
paper because their interest rates are adjusted at various intervals, (generally
on a weekly basis), "floating" slightly above the Treasury bill rate. In other
words, FRNs are actually longer-term money market investments that behave like
short-term money market investments.
The Fund continues to adhere to high standards of security selection,
securing an "AAAm" rating from Standard & Poor's. To maintain that rating, the
Fund is required to invest a minimum of 75% in securities with the highest A1+
rating, with the remaining 25% invested in at least A1-rated issues. We believe
safety of principal is paramount in money market investing.
6
<PAGE>
Outlook
We expect the current moderate rate of economic growth will continue with
slim prospects for renewed inflation. In this environment, we believe it is
unlikely that short-term interest rates will rise at the same pace as they did
in the first half of 1994. We would not be surprised, however, to see short-term
interest rates inch slightly higher during the remainder of this year. In view
of these expectations, we plan to keep the Fund's average maturity on the short
side. Short-maturity securities should enable us to move quickly to capture
higher yields if interest rates do indeed edge up.
As always, we continue to apply careful and conservative investment
strategies to preserve the $1.00 per share value of your investment while
delivering competitive money market yields.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Neff /s/Jeanette A. Kelly
Robert T. Neff Jeanette A. Kelly
/s/Robert E. Pruyne
Robert E. Pruyne
Scudder Cash Investment Trust:
A Team Approach to Investing
Scudder Cash Investment Trust is managed by a team of investment
professionals who each play an important role in the Fund's management process.
Team members work closely together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in our offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Robert T. Neff has had responsibility for the Fund's
day-to-day management since its inception. Bob, who joined Scudder in 1972, has
more than 20 years of experience managing short-term fixed-income assets and is
also Lead Portfolio Manager for Scudder U.S. Treasury Money Fund. Jeanette A.
Kelly, Portfolio Manager, has responsibility for trading the Fund's holdings, a
role she also fills for Scudder U.S. Treasury Money Fund. Jeanette came to
Scudder in 1987 and joined the Fund's team in 1990. Portfolio Manager Robert E.
Pruyne has filled many important roles in Scudder's fixed-income department
since he joined the firm in 1958. Bob also serves as a Portfolio Manager for
Scudder GNMA Fund and Scudder U.S. Treasury Money Fund.
7
<PAGE>
<TABLE>
SCUDDER CASH INVESTMENT TRUST
INVESTMENT PORTFOLIO as of June 30, 1994
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.5% REPURCHASE AGREEMENT
-----------------------------------------------------------------------------------
7,180,000 Repurchase Agreement with State Street Bank
and Trust Company dated 6/30/94 at 4.2%
to be repurchased at $7,180,838 on 7/1/94
collateralized by a $7,105,000 U.S. Treasury
Note, 8.5%, 9/30/94 (Cost $7,180,000). . . . . . . 7,180,000
-----------
45.8% COMMERCIAL PAPER
-----------------------------------------------------------------------------------
CONSUMER STAPLES 3.7%
Food & Beverage 36,000,000 Hershey Foods Corp., 4.3%, 7/18/94 . . . . . . . . 35,926,900
20,000,000 Seagram & Sons Inc., 4.4%, 8/22/94 . . . . . . . . 19,872,889
-----------
55,799,789
-----------
HEALTH 1.5%
Pharmaceuticals 23,000,000 Warner Lambert Co, 4.37%, 8/16/94 . . . . . . . . . 22,871,571
-----------
FINANCIAL 35.4%
Banks 13.7% 37,000,000 ABN-AMRO Bank NA, 4.48%, 9/23/94 . . . . . . . . . 36,590,780
21,000,000 Barclays U.S. Funding Corp., 4.23%, 7/14/94 . . . . 20,967,922
30,000,000 Barclays U.S. Funding Corp., 4.4%, 8/2/94 . . . . . 29,882,667
50,000,000 BNP U.S. Finance Corp., 4.33%, 8/1/94 . . . . . . . 49,813,569
35,000,000 Norwest Corp., 4.28%, 7/25/94 . . . . . . . . . . 34,900,133
35,000,000 SBC Finance Inc., 4.38%, 8/24/94 . . . . . . . . . 34,770,050
-----------
206,925,121
-----------
Business Finance 11.4% 25,000,000 Ciesco, 4.23%, 7/12/94 . . . . . . . . . . . . . . 24,967,687
28,000,000 Corporate Asset Funding Co., 4.35%, 7/29/94 . . . . 27,905,267
19,000,000 Corporate Asset Funding Co., 4.33%, 8/3/94 . . . . 18,924,586
50,000,000 Preferred Receivables Funding Corp., 4.3%,
7/7/94 . . . . . . . . . . . . . . . . . . . . . 49,964,167
50,000,000 Receivables Capital Corp., 4.45%, 7/27/94 . . . . 49,839,306
-----------
171,601,013
-----------
Consumer Finance 8.1% 45,000,000 American Express Credit Corp., 4.33%, 7/6/94 . . . 44,972,937
50,000,000 Ford Motor Credit Co., 4.35%, 7/11/94 . . . . . . . 49,939,583
27,000,000 General Electric Capital Services Inc.,
4.25%, 7/13/94 . . . . . . . . . . . . . . . . . 26,961,750
-----------
121,874,270
-----------
Other Financial Companies 2.2% 33,000,000 Associates Corp. of North America,
4.4%, 7/28/94 . . . . . . . . . . . . . . . . . . 32,891,100
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEDIA 1.3%
Print Media 20,000,000 Knight-Ridder Inc., 4.23%, 7/13/94 . . . . . . . . . 19,971,800
-----------
TECHNOLOGY 3.9%
Diverse Electronic Products 38,122,000 Motorola Inc., 4.3%, 7/8/94 . . . . . . . . . . . . 38,090,126
20,000,000 Motorola Inc., 4.24%, 7/22/94 . . . . . . . . . . . 19,950,533
-----------
58,040,659
-----------
TOTAL COMMERCIAL PAPER (Cost $689,997,770) . . . . . 689,975,323
-----------
1.7% U.S. TREASURY OBLIGATIONS
----------------------------------------------------------------------------------
25,000,000 U.S. Treasury Note, 8.5%, 5/15/95
(Cost $26,013,363) . . . . . . . . . . . . . . . . 25,629,000
-----------
24.0% U.S. GOVERNMENT AGENCY OBLIGATIONS
----------------------------------------------------------------------------------
65,000,000 Federal National Mortgage Association, TBA,
7/14/99* . . . . . . . . . . . . . . . . . . . . . 65,000,000
20,000,000 Student Loan Marketing Association, 4.81%,
8/22/94* . . . . . . . . . . . . . . . . . . . . . 20,009,630
50,000,000 Student Loan Marketing Association, 4.91%,
4/17/95* . . . . . . . . . . . . . . . . . . . . . 50,175,000
100,000,000 Student Loan Marketing Association, 4.53%,
4/16/96* . . . . . . . . . . . . . . . . . . . . . 100,041,000
50,000,000 Student Loan Marketing Association 4.685%,
11/27/96* . . . . . . . . . . . . . . . . . . . . . 50,225,000
25,000,000 Student Loan Marketing Association, 4.735%,
2/14/97* . . . . . . . . . . . . . . . . . . . . . 25,137,500
50,000,000 Student Loan Marketing Association, 4.66%,
10/30/97* . . . . . . . . . . . . . . . . . . . . . 50,027,000
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $360,009,630) . . . . . . . . . . . . . . . . 360,615,130
-----------
28.0% MEDIUM-TERM AND SHORT-TERM NOTES
----------------------------------------------------------------------------------
24,000,000 Advanta Credit Card, 4.5%, 4/30/95* . . . . . . . . 24,000,000
40,000,000 Anaheim, CA, Certificate of participation, 4.375%,
7/5/94 . . . . . . . . . . . . . . . . . . . . . . 40,000,000
35,000,000 Banc One Texas, Note, 4.3%, 6/2/95* . . . . . . . . 34,989,500
50,000,000 Citibank Money Market Credit Card, 4.42%,
6/10/96* . . . . . . . . . . . . . . . . . . . . . 49,984,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
SCUDDER CASH INVESTMENT TRUST
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
11,500,000 Colorado Student Obligation, Bond Authority,
3.9%, 7/1/94 . . . . . . . . . . . . . . . . . . . 11,500,000
15,000,000 Colorado Student Obligation, Bond Authority,
5.65%, 7/3/95 . . . . . . . . . . . . . . . . . . . 14,982,000
50,000,000 Fifth Third Bank, 4.33%, 7/21/94 . . . . . . . . . . 50,000,829
50,000,000 NBD, Bank note, 4.68%, 11/14/94 . . . . . . . . . . 49,910,935
50,000,000 PNC Bank, Ohio, Note, 4.41%, 6/15/95* . . . . . . . . 49,965,000
15,000,000 PNC Bank, Pittsburgh, Note, 4.41%, 4/21/95* . . . . 14,992,500
25,000,000 San Diego County, CA, Area Local Government,
Certificate of Participation, 4%, 12/14/94 . . . . 24,882,000
32,000,000 SMM Trust, 4.925%, 3/17/95* . . . . . . . . . . . . 31,984,000
25,000,000 Trust Company Bank of Georgia, 3.65%,
11/15/94 . . . . . . . . . . . . . . . . . . . . . 24,877,500
-------------
TOTAL MEDIUM-TERM AND SHORT-TERM NOTES
(Cost $422,443,998) . . . . . . . . . . . . . . . . 422,068,264
-------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $1,505,644,761) (a) . . . . . . . . . . . . . 1,505,467,717
=============
<FN>
(a) The cost for federal income tax purposes was $1,505,644,761. At June 30, 1994, net unrealized depreciation for all
securities based on tax cost was $177,044. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of $605,575 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over market value of $782,619.
* Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the
coupon-equivalent of the Treasury bill rate. These securities are shown at their rate as of June 30, 1994.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------
JUNE 30, 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (identified cost $1,505,644,761)
(Note A).............................................. $1,505,467,717
Cash................................................... 1,830,932
Receivables:
Fund shares sold...................................... 8,364,654
Interest.............................................. 4,352,124
Other assets........................................... 23,948
--------------
Total assets........................................ 1,520,039,375
LIABILITIES
Payables:
Investments purchased................................. $80,000,000
Fund shares redeemed ................................. 8,388,598
Dividends............................................. 284,503
Accrued management fee (Note B)....................... 491,896
Other accrued expenses (Note B)....................... 397,279
-----------
Total liabilities................................... 89,562,276
--------------
Net assets, at value................................... $1,430,477,099
==============
NET ASSETS
Net assets consist of:
Unrealized depreciation on investments................ $ (177,044)
Shares of beneficial interest......................... 14,304,004
Additional paid-in capital (Note C)................... 1,416,350,139
--------------
Net assets, at value.................................. $1,430,477,099
==============
NET ASSET VALUE, offering and redemption price per
share ($1,430,477,099 / 1,430,400,373
outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized)..... $1.00
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER CASH INVESTMENT TRUST
- -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest............................................... $43,987,851
Expenses:
Management fee (Note B)................................ $5,150,393
Services to shareholders (Note B)...................... 4,176,231
Trustees' fees (Note B)................................ 37,446
Custodian fees......................................... 228,101
Reports to shareholders................................ 204,024
Legal.................................................. 37,373
Auditing............................................... 38,975
State registration expense............................. 101,800
Other.................................................. 61,628 10,035,971
------------------------
Net investment income.................................. 33,951,880
-----------
NET UNREALIZED LOSS ON INVESTMENTS
Net unrealized depreciation on investments
during the period..................................... (930,801)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $33,021,079
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income............................. $ 33,951,880 $ 35,205,553
Net unrealized depreciation
on investments during the period................. (930,801) (365,841)
-------------- --------------
Net increase in net assets resulting from
operations....................................... 33,021,079 34,839,712
-------------- --------------
Distributions to shareholders from:
Net investment income ($.027 and $.027
per share, respectively)......................... (33,951,880) (35,205,553)
-------------- --------------
Fund share transactions at net asset value
of $1.00 per share:
Shares sold....................................... 3,575,327,981 2,944,156,601
Net asset value of shares issued to shareholders
in reinvestment of distributions................. 31,052,806 31,598,222
Shares redeemed................................... (3,293,515,684) (3,218,274,678)
-------------- --------------
Net increase (decrease) in net assets from
Fund share transactions.......................... 312,865,103 (242,519,855)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS................. 311,934,302 (242,885,696)
Net assets at beginning of period................. 1,118,542,797 1,361,428,493
-------------- --------------
NET ASSETS AT END OF PERIOD....................... $1,430,477,099 $1,118,542,797
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER CASH INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period........ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment
income................... .027 .027 .047 .069 .080 .082 .064 .056 .071 .089
Distributions from
net investment income
and net realized
capital gains.............. (.027) (.027) (.047) (.069) (.080) (.082) (.064) (.056) (.071) (.089)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)............ 2.77 2.75 4.76 7.13 8.23 8.49 6.59 5.71 7.25 9.26
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
year ($ millions).......... 1,430 1,119 1,361 1,736 1,644 1,563 1,370 1,144 1,104 1,028
Ratio of operating
expenses to average
daily net assets (%)....... .82 .78 .70 .66 .67 .66 .68 .68 .65 .66
Ratio of net investment income
to average net assets (%).. 2.78 2.72 4.58 6.91 7.93 8.21 6.44 5.55 7.01 8.87
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Cash Investment Trust (the "Fund") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
SECURITY VALUATION. Portfolio securities which have remaining maturities of
sixty days or less are valued by the amortized cost method permitted in
accordance with Rule 2a-7 under the Investment Company Act of 1940. Portfolio
securities for which market quotations are readily available and which have
remaining maturities of sixty-one days or more from the date of valuation are
valued at the calculated mean between the over-the-counter bid and asked
prices, using quotations supplied by independent registered broker/dealers. On
the sixtieth day prior to maturity and thereafter until maturity, securities
originally purchased with more than sixty days remaining to maturity are valued
at amortized cost calculated daily, based upon the market valuation of the
securities on the sixty-first day prior to maturity. Other securities are
appraised at fair value as determined in good faith by or on behalf of the
Trustees of the Fund. Repurchase agreements are valued at identified cost
which, when combined with accrued interest receivable, approximates market.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. The Fund
accordingly paid no federal income taxes and no provision for federal income
taxes was required.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of
15
<PAGE>
SCUDDER CASH INVESTMENT TRUST
- --------------------------------------------------------------------------------
twelve o'clock noon on each business day and is paid to shareholders monthly.
During any particular year, net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed and, therefore, will be distributed to the shareholders. An
additional distribution may be made to the extent necessary to avoid the
payment of a four percent federal excise tax.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment transactions are accounted for on a trade-date basis (which
in most instances is the same as the settlement date). Interest income is
accrued pro rata to maturity. All premiums and discounts are amortized/accreted
for both tax and financial reporting purposes.
B. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a fee
equal to an annual rate of 0.50% of the first $250,000,000 of the Fund's
average daily net assets, 0.45% of the next $250,000,000 of such net assets,
0.40% of the next $500,000,000 of such net assets and 0.35% of such net assets
in excess of $1,000,000,000, computed and accrued daily and payable monthly.
For the year ended June 30, 1994, the fee pursuant to the Agreement amounted to
$5,150,393 which was equivalent to an annual effective rate of .42% of the
Fund's average daily net assets. The Agreement also provides that if the
Fund's expenses, exclusive of taxes, interest and extraordinary expenses,
exceed specified limits, such excess, up to the amount of the management fee,
will be paid by the Adviser.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund. For
the year ended June 30, 1994, the amount charged to the Fund by SSC aggregated
$3,573,710, of which $327,778 is unpaid at June 30, 1994.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the year ended
June 30, 1994, Trustees' fees aggregated $37,446.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
C. RECLASSIFICATION OF CAPITAL ACCOUNTS
- --------------------------------------------------------------------------------
As required, effective July 1, 1993, the Fund has adopted the provisions of
Statement of Position 93-2 "Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies" (SOP). In implementing the SOP, the Fund has reclassified
$119,286 to decrease accumulated net realized gains and $119,286 to increase
additional paid-in capital. These reclassifications, which have no impact on
the net asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital gains under
federal tax regulations versus generally accepted accounting principles. The
statement of changes in net assets and financial highlights for prior periods
have not been restated to reflect this change in presentation.
17
<PAGE>
SCUDDER CASH INVESTMENT TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF SCUDDER CASH INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities of Scudder
Cash Investment Trust, including the investment portfolio, as of June 30, 1994,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Cash Investment Trust as of June 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the ten years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 4, 1994
18
<PAGE>
(This page intentionally left blank.)
19
(This page intentionally left blank.)
20
<PAGE>
OFFICERS AND TRUSTEES
- --------------------------------------------------------------------------------
David S. Lee*
President and Trustee
Cuyler W. Findlay*
Vice President and Trustee
Dudley H. Ladd*
Vice President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
Peter B. Freeman
Trustee; Corporate Director and Trustee
George M. Lovejoy, Jr.
Trustee; Chairman Emeritus of Meredith & Grew, Inc.
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Robert T. Neff*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Robert Pruyne*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Value Fund
Scudder Balanced Fund The Japan Fund
Scudder Growth and Income Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-end Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
</TABLE>
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax free funds may be subject to federal, state and local taxes. *Not
available in all states. #These funds, advised by Scudder, Stevens & Clark,
Inc., are traded on the New York Stock Exchange. Scudder Horizon Plan, a
no-load variable annuity contract provided by Charter National Life
Insurance Company of St. Louis, is offered by Scudder Insurance Agency, Inc.
1-800-225-2470. ++For information on Scudder Treasurers Trust(TM), an
institutional cash management service that utilizes certain portfolios of
Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
22
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
- --------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER SERVICE CORPORATION
1-800-225-5163
For account updates, prices, yields,
exchanges and redemptions SCUDDER
AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR INFORMATION
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
SCUDDER GROUP RETIREMENT SERVICES
1-800-323-6105
Please address all correspondence to
- --------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
- --------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the Scudder Funds
Centers. Check for a Funds Center near you--they can be found in the following
cities:
Boca Raton Los Angeles
Boston New York
Chicago Portland, OR
Cincinnati San Francisco
Scottsdale
- --------------------------------------------------------------------------------
For information on Scudder Treasurers Trust(TM), an institutional cash
management service for corporations, non-profit organizations and trusts which
utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other institutions,
call: 1-800-854-8525.
- --------------------------------------------------------------------------------
Scudder Investor Information and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
23
<PAGE>
Celebrating 75 Years of Serving Investors
- --------------------------------------------------------------------------------
This year marks the 75th anniversary of the founding of Scudder, Stevens &
Clark, investment adviser for the Scudder Funds. Established in 1919 by Theodore
Scudder, Sidney Stevens, and F. Haven Clark, Scudder was the first independent
investment counsel firm in the United States. Since its birth, Scudder's
pioneering spirit and commitment to professional long-term investment management
have helped shape the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 35 pure no load(TM) funds, including
the first international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped Scudder become one
of the largest and most respected investment managers in the world. Though times
have changed since our beginnings, we remain committed to our longstanding
principles: managing money with integrity and distinction, keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
U.S. Treasury
Money Fund
Annual Report
June 30, 1994
o A fixed-price money market fund investing in short-term U.S. government
securities. For investors seeking current income and safety, liquidity, and
stability of capital.
o A pure no-load(TM) fund with no commissions to buy, sell or exchange
shares.
<PAGE>
SCUDDER U.S. TREASURY MONEY FUND
TABLE OF CONTENTS
3 Letter from the Fund's President
4 Portfolio Management Discussion
Your Fund's portfolio management team reviews the
period's investing strategies, financial markets and
economic conditions
8 Investment Portfolio
Itemized list of your Fund's portfolio holdings
10 Financial Statements
13 Financial Highlights
14 Notes to Financial Statements
17 Report of Independent Accountants
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
SCUDDER U.S. TREASURY MONEY FUND
Dear Shareholders,
The world's financial markets have been a study in contrasts over the past
12 months. In 1993, long-term interest rates approached or hit lows not seen in
years in the United States, Japan and many European countries. Fueled by lower
rates, many stock markets around the world had hit record high levels by January
1994. Financial markets have cooled considerably since then. Early in the first
quarter of 1994, reports of accelerating U.S. economic growth prompted fears of
rising inflation and led to a series of short-term interest rate hikes by the
Federal Reserve this spring. As yields rose in the United States, bond prices
fell across the maturity spectrum. Yields also rose outside the United States,
leading to declines in most of the world's stock and bond markets.
What do these events mean for investors? On the positive side, we expect a
moderate overall pace of economic expansion and low relative inflation
worldwide. However, this year's investment returns, as we have stated
previously, are not likely to come close to matching the exceptional performance
of 1993.
In light of the current market environment, we encourage you periodically
to examine your portfolio to make sure your asset allocation and fund choices
remain appropriate for your investment time frame and financial goals. Money
market funds are an important component of any investment program as a means of
cash management and can also serve as a portfolio repository in the event of
potential market volatility. But for investors with long time horizons, those
who require current income will most likely need to rely on bonds and money
market funds and those who require growth to outpace inflation will most likely
need stocks to help them reach their objectives.
Please call Scudder Investor Information at 1-800-225-2470 if you have
questions about your Fund or if you would like help in evaluating your current
investment portfolio. Page 23 provides more information on how to contact
Scudder. Thank you for choosing Scudder U.S. Treasury Money Fund to help meet
your investment needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder U.S. Treasury Money Fund
3
<PAGE>
SCUDDER U.S. TREASURY MONEY FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Yields for money market investments have been on the rise in recent months,
reflecting the trend toward rising interest rates across the board. On June 30,
1994, Scudder U.S. Treasury Money Fund's 7-day yield was 3.37%, while its
effective 7-day yield, which includes the effect of compounding, was 3.43%,
compared to 2.54% a year ago. In keeping with its objective, the Fund also
maintained a constant share price of $1.00 per share. Reflecting the current
higher yields, your Fund's peer group of U.S. Treasury and repurchase agreement
money market funds posted an average effective 7-day yield of 3.54%, as measured
by IBC/Donoghue, Inc., an independent monitor of money market investments. On
June 30, 1994, the Fund's average maturity was 48 days, versus 40 days for this
group.
The Fund's total return, which reflects reinvested income distributions of
$0.027 per share, was 2.74% for the fiscal year ended June 30. By comparison,
the average U.S. Treasury money fund returned 2.77% for the same period,
according to Lipper Analytical Services, Inc., an independent firm that tracks
mutual fund performance.
Interest Rates Head Higher
Your Fund's fiscal year comprised two very distinct periods. While interest
rates reached historic lows during the second half of 1993, rates have been on
the rise in the most recent six months. Between February and May 1994, the
Federal Reserve gradually but persistently raised the federal funds rate (the
rate charged on overnight loans) four times between February and May, from 3% to
4.25% -- the first time it has raised rates in five years. In addition, the most
recent increase was accompanied by a rise in the discount rate (the rate the
Federal Reserve charges member banks on loans) by one half of a percentage
point. These rate hikes triggered declines in stock and bond markets worldwide
as investors interpreted Fed actions as a signal that inflation was on the rise.
Throughout this turbulent period, money market investors were among the few
groups to escape price declines while enjoying the rising yields.
4
<PAGE>
(LINE CHART TITLE) Short-Term Interest Rates Rise in 1994
(December 1990 through June 1994)
------------------------------------------------
3-Month Treasury
Bill Federal Funds
------------------------------------------------
12/90 6.81 7.31
------------------------------------------------
6.3 6.91
-----------------------------------------------
5.95 6.25
------------------------------------------------
5.91 6.12
------------------------------------------------
5.67 5.91
------------------------------------------------
5.51 5.78
------------------------------------------------
6/91 5.6 5.9
------------------------------------------------
5.58 5.82
------------------------------------------------
5.39 5.66
------------------------------------------------
5.25 5.45
------------------------------------------------
5.03 5.21
------------------------------------------------
4.6 4.81
------------------------------------------------
12/91 4.12 4.43
------------------------------------------------
3.84 4.03
------------------------------------------------
3.84 4.06
------------------------------------------------
4.05 3.98
------------------------------------------------
3.81 3.73
------------------------------------------------
3.66 3.82
------------------------------------------------
6/92 3.7 3.76
------------------------------------------------
3.28 3.25
------------------------------------------------
3.14 3.3
------------------------------------------------
2.97 3.22
------------------------------------------------
2.84 3.1
------------------------------------------------
3.14 3.09
------------------------------------------------
12/92 3.25 2.92
------------------------------------------------
3.06 3.02
------------------------------------------------
2.95 3.03
------------------------------------------------
2.97 3.07
------------------------------------------------
2.89 2.96
------------------------------------------------
2.96 3.00
------------------------------------------------
6/93 3.1 3.04
------------------------------------------------
3.05 3.06
------------------------------------------------
3.05 3.03
------------------------------------------------
2.96 3.09
------------------------------------------------
3.04 2.99
------------------------------------------------
3.12 3.02
------------------------------------------------
12/93 3.08 2.96
------------------------------------------------
3.02 3.05
------------------------------------------------
3.21 3.25
------------------------------------------------
3.52 3.34
------------------------------------------------
3.74 3.56
------------------------------------------------
4.19 4.01
------------------------------------------------
6/94 4.18 4.25
------------------------------------------------
(CALLOUT NEXT TO CHART) Falling interest rates reversed course in February,
moving higher during the first half of 1994.
Shorter Maturities Help Boost Income
During the first half of the Fund's fiscal year (the last six months of
1993), your Fund emphasized strategies to earn higher relative money market
yields in a low interest rate environment, namely by maintaining its average
portfolio maturity in a relatively long range of about 73 days. The Fund
concentrated on investments at both the long and short ends of the money market
maturity spectrum. Focusing on the longer-maturity money market securities
enabled the Fund to secure higher relative yields while prevailing short-term
interest rates moved lower. At the same time, shorter-maturity money market
holdings ensured the Fund maintained ample liquidity both to meet shareholders'
cash needs and capture opportunities to purchase higher-yielding instruments as
they became available.
Because of the added measure of credit safety that U.S. Treasury money
market instruments afford over other types of money market instruments such as
commercial paper, a somewhat longer-than-average maturity is necessary in the
current environment to earn a comparable level of income. However, by extending
Treasury money market maturities slightly, investors can currently gain
significantly more income than by extending maturities of other money market
securities by a like amount.
5
<PAGE>
Entering 1994, while still varying the Fund's mix of maturities, we began
deliberate but gradual efforts to shorten the portfolio's average maturity,
given our expectation that rates were headed higher. We did so by maintaining a
focus on longer-term Treasury money market instruments to capture extra yield
while offsetting long holdings with very short-term securities. These measures
effectively enabled your Fund to pick up additional income as rates indeed moved
upward.
At the short end, overnight repurchase agreements were instrumental in
helping the Fund maximize liquidity to take advantage of rising interest rates.
These instruments are available with the yield advantage of longer-term money
market instruments, yet they mature overnight. And in keeping with the Fund's
attention to high quality, all repurchase agreements entered into by the Fund
are collateralized by U.S. Treasurys.
Outlook
We expect the current moderate rate of economic growth to continue with
slim prospects for significantly higher inflation. In this environment, we
believe it is unlikely that short-term interest rates will rise at the same pace
as they did in the first half of 1994. We would not be surprised, however, to
see short-term interest rates inch slightly higher during the remainder of this
year. In view of these expectations, we plan to keep the Fund's average maturity
on the shorter side.
6
<PAGE>
As a reminder, preservation of principal is essential to the Fund, which
confines its investments to U.S. Treasury securities which are backed by the
full faith and credit of the U.S. government, and repurchase agreements backed
by U.S. Treasury securities. Moreover, they pay income that can be exempt from
state and local taxes, though not from federal taxes. As always, we continue to
apply careful and conservative investment strategies to preserve the $1.00 per
share value of your investment while delivering competitive money market yields
from U.S. Treasury instruments.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Neff /s/Jeanette A. Kelly
Robert T. Neff Jeanette A. Kelly
/s/Robert E. Pruyne
Robert E. Pruyne
(CALLOUT NEXT TO THE PREVIOUS PARAGRAPH)
Scudder U.S. Treasury
Money Fund:
A Team Approach to Investing
Scudder U.S. Treasury Money Fund is managed by a team of investment
professionals who each play an important role in the Fund's management process.
Team members work closely together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in our offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Robert T. Neff has had responsibility for the Fund's
day-to-day management since its inception. Bob, who joined Scudder in 1972, has
more than 20 years of experience managing short-term fixed-income assets and is
also Lead Portfolio Manager for Scudder Cash Investment Trust. Jeanette A.
Kelly, Portfolio Manager, has responsibility for trading the Fund's holdings, a
role she also fills for Scudder Cash Investment Trust. Jeanette came to Scudder
in 1987 and joined the Fund's team in 1990. Portfolio Manager Robert E. Pruyne
has filled many important roles in Scudder's fixed-income department since he
joined the firm in 1958. Bob also serves as a Portfolio Manager for Scudder GNMA
Fund and Scudder Cash Investment Trust.
7
<PAGE>
<TABLE>
SCUDDER U.S. TREASURY MONEY FUND
INVESTMENT PORTFOLIO as of June 30, 1994
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
<S> <C> <C>
26.3% REPURCHASE AGREEMENTS
---------------------------------------------------------------------------------
35,000,000 Repurchase Agreement with Bear, Stearns
& Co., Inc., dated 6/22/94 at 4.25%, to be
repurchased at $35,123,958 on 7/22/94,
collateralized by a $35,500,000
U.S. Treasury Note, 3.875%, 2/28/95........... 35,000,000
50,000,000 Repurchase Agreement with Harris-Nesbitt
Thomson Securities Inc., dated 6/30/94
at 4.25%, to be repurchased at $50,005,903
on 7/1/94, collateralized by a $48,285,000
U.S. Treasury Bond, 7.875%, 2/15/21........... 50,000,000
15,499,000 Repurchase Agreement with State Street
Bank and Trust Company, dated 6/30/94 at
4.2%, to be repurchased at $15,500,808 on
7/1/94, collateralized by a $15,340,000
U.S. Treasury Note, 8.5%, 9/30/94............. 15,499,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $100,499,000).......................... 100,499,000
-----------
73.7% U.S. TREASURY OBLIGATIONS
---------------------------------------------------------------------------------
15,000,000 U.S. Treasury Bill 3.245%, 7/7/94.................. 14,991,887
50,000,000 U.S. Treasury Bill 3.58%, 7/7/94................... 49,970,167
30,000,000 U.S. Treasury Bill 3.585%, 7/14/94................. 29,961,162
35,000,000 U.S. Treasury Bill 3.745%, 7/21/94................. 34,927,181
12,000,000 U.S. Treasury Bill 3.71%, 8/4/94................... 11,957,953
40,000,000 U.S. Treasury Bill 4.21%, 8/18/94.................. 39,775,467
15,000,000 U.S. Treasury Bill 3.6725%, 9/1/94................. 14,897,958
30,000,000 U.S. Treasury Bill 4.11%, 9/8/94................... 29,767,125
30,000,000 U.S. Treasury Bill 4.245%, 10/6/94................. 29,656,458
8,000,000 U.S. Treasury Bill 3.485%, 11/17/94................ 7,861,000
5,000,000 U.S. Treasury Note 4.25%, 1/31/95.................. 4,975,000
5,000,000 U.S. Treasury Note 4.125%, 6/30/95................. 4,932,813
5,000,000 U.S. Treasury Note 4.25%, 7/31/95.................. 4,929,688
3,000,000 U.S. Treasury Note 3.875%, 10/31/95................ 2,928,750
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $281,828,619).............................. 281,532,609
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $382,327,619) (a)..................... 382,031,609
===========
</TABLE>
(a) The cost for federal income tax purposes was $382,327,619. At June 30,
1994, net unrealized depreciation for all securities based on tax cost was
$296,010. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,450 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $299,460.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
SCUDDER U.S. TREASURY MONEY FUND
FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------------------------
JUNE 30, 1994
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (including repurchase agreements
of $100,499,000) (identified cost $382,327,619)
(Note A)............................................. $382,031,609
Cash..................................................... 798,904
Receivables:
Interest............................................. 242,323
Fund shares sold..................................... 1,985,431
Other assets............................................. 2,792
------------
Total assets...................................... 385,061,059
LIABILITIES
Payables:
Fund shares redeemed................................. $2,093,595
Dividends............................................ 51,289
Accrued management fee (Note B)...................... 111,829
Other accrued expenses (Note B)...................... 137,981
----------
Total liabilities................................. 2,394,694
------------
Net assets, at value..................................... $382,666,365
============
NET ASSETS
Net assets consist of:
Unrealized depreciation on investments............... $ (296,010)
Shares of beneficial interest........................ 3,829,624
Additional paid-in capital........................... 379,132,751
------------
Net assets, at value..................................... $382,666,365
============
NET ASSET VALUE, offering and redemption price per
share ($382,666,365 -:- 382,962,375 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized)............... $1.00
=====
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended June 30, 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest............................................... $10,907,543
Expenses:
Management fee (Note B)................................ $793,617
Services to shareholders (Note B)...................... 961,463
Trustees' fees (Note B)................................ 29,220
Custodian fees......................................... 108,351
Reports to shareholders................................ 49,890
Legal.................................................. 21,555
Auditing............................................... 34,665
State registration..................................... 67,326
Other.................................................. 20,691 2,086,778
-------- -----------
Net investment income.................................. 8,820,765
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions......... 7,413
Net unrealized depreciation on investments
during the period.................................... (310,895)
-----------
Net loss on investments................................ (303,482)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 8,517,283
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
<TABLE>
SCUDDER U.S. TREASURY MONEY FUND
- -----------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
--------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income........................ $ 8,820,765 $ 8,638,394
Net realized gain from investment
transactions.............................. 7,413 38,158
Net unrealized depreciation
on investments during the period.......... (310,895) (61,746)
------------ -----------
Net increase in net assets resulting from
operations................................ 8,517,283 8,614,806
------------ -----------
Distributions to shareholders:
From net investment income ($.027 and $.027
per share, respectively).................. (8,820,765) (8,638,394)
------------ -----------
From net realized gains from investment
transactions.............................. (7,413) (38,158)
------------ -----------
Fund share transactions at net asset value of
$1.00 per share:
Shares sold.................................. 733,931,354 537,608,159
Shares issued to shareholders in
reinvestment of distributions............. 7,906,663 7,001,925
Shares redeemed.............................. (664,132,582) (538,076,247)
------------ -----------
Net increase in net assets from
Fund share transactions...................... 77,705,435 6,533,837
------------ -----------
Increase in net assets....................... 77,394,540 6,472,091
Net assets at beginning of period............ 305,271,825 298,799,734
------------ -----------
Net assets at end of period.................. $382,666,365 $305,271,825
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<CAPTION>
Years Ended June 30,
------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period...... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment
income.................. .027 .027 .044 .065 .075 .074 .055 .050 .064 .085
Less distributions from
net investment income
and net realized gains
on investment
transactions (a)......... (.027) (.027) (.044) (.065) (.075) (.074) (.055) (.050) (.064) (.085)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%).......... 2.74 2.74 4.48 6.71 7.74 7.66 5.69 5.13 6.63 8.81
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)...... 383 305 299 272 198 167 154 143 156 141
Ratio of operating
expenses,
to average daily
net assets (%) (b)....... .65 .65 .65 .82 .98 1.01 1.04 .92 .91 .86
Ratio of net investment
income to average
daily net assets (%)..... 2.75 2.69 4.31 6.37 7.46 7.41 5.54 4.95 6.39 8.46
</TABLE>
(a) Net realized capital gains were less than 6/10 of 1 cent per share.
(b) The annualized ratio of operating expenses, including management fee
not imposed by the adviser, to average daily net assets was .90% for
the year ended June 30, 1994, .85% for the year ended June 30, 1993,
.85% for the year ended June 30, 1992, and .91% for the year ended
June 30, 1991.
13
<PAGE>
SCUDDER U.S. TREASURY MONEY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder U.S. Treasury Money Fund (the "Fund") is organized as a
Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a diversified,
open-end manage ment investment company. The policies described
below are followed consistently by the Fund in the preparation of
its financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION. Portfolio securities which have remaining
maturities of sixty days or less are valued by the amortized cost
method permitted in accordance with Rule 2a-7 under the
Investment Company Act of 1940. Portfolio securities for which
market quotations are readily available and which have remaining
maturities of sixty-one days or more from the date of valuation
are valued at the calculated mean between the over-the-counter
bid and asked prices, using quotations supplied by independent
registered broker/dealers. On the sixtieth day prior to maturity
and thereafter until maturity, securities originally purchased
with more than sixty days remaining to maturity are valued at
amortized cost calculated daily, based upon the market valuation
of the securities on the sixty-first day prior to maturity. Other
securities are appraised at fair value as determined in good
faith by or on behalf of the Trustees of the Fund. Repurchase
agreements are valued at identified cost which, when combined
with accrued interest receivable, approximates market.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase
agreements with certain banks and broker/dealers whereby the
Fund, through its custodian, receives delivery of the underlying
securities, the amount of which at the time of purchase and each
subsequent business day is required to be maintained at such a
level that the market value, depending on the maturity of the
repurchase agreement and the underlying collateral, is equal to
at least 100.5% of the resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the
require ments of the Internal Revenue Code which are applicable
to regulated investment companies and to distribute all of its
taxable income to its shareholders. The Fund accordingly paid no
federal income taxes and no provision for federal income taxes
was required.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of twelve o'clock noon on
each business day and is paid to shareholders monthly. During any particular
year, net realized gains from investment transactions, in excess of available
capital loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
OTHER. Investment security transactions are accounted for on a trade-date basis
(which in most instances, is the same as the settlement date). Interest income
is accrued pro rata to maturity. All premiums and discounts are
amortized/accreted for both tax and financial reporting purposes.
B. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Management" Agreement ) with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the
Adviser a fee equal to an annual rate of 0.50% of its average daily net assets
computed and accrued daily and payable monthly. As manager of the assets of the
Fund, the Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Management Agreement. The Agreement also provides that if the Fund's
expenses, exclusive of taxes, interest and extraordinary expenses, exceed
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser. The Adviser has agreed not to impose all or a portion of
its management fee until October 31, 1994, and during such period to maintain
the annualized expenses of the Fund at not more than 0.65% of average daily net
assets. Accordingly, for the year ended June 30, 1994, the Adviser did not
impose a portion of its fees amounting to $813,560, and the portion imposed
amounted to $793,617, of which $111,829 is unpaid at June 30, 1994.
15
<PAGE>
SCUDDER U.S. TREASURY MONEY FUND
- --------------------------------------------------------------------------------
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of
the Adviser, is the transfer, dividend paying and shareholder
service agent for the Fund. For the year ended June 30, 1994, the
amount charged to the Fund by SSC aggregated $816,050, of which
$76,076 is unpaid at June 30, 1994.
The Fund pays each Trustee not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee
meetings. For the year ended June 30, 1994, Trustees' fees
aggregated $29,220.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF SCUDDER U.S. TREASURY MONEY
FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
U.S. Treasury Money Fund, including the investment portfolio, as of June 30,
1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the ten years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder U.S. Treasury Money Fund as of June 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the ten years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 3, 1994
17
<PAGE>
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18
<PAGE>
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19
<PAGE>
(This page intentionally left blank.)
20
<PAGE>
OFFICERS AND TRUSTEES
David S. Lee*
President and Trustee
Karl A. Deavers*
Trustee
Amey A. DeFriez
Trustee; Corporate Director and Trustee
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
George M. Lovejoy, Jr.
Trustee; Chairman Emeritus of Meredith & Grew, Inc.
Cuyler W. Findlay*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Dudley H. Ladd*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Robert T. Neff*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Robert E. Pruyne*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Value Fund
Scudder Balanced Fund The Japan Fund
Scudder Growth and Income Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-end Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax free funds may be subject to federal, state and local taxes. *Not
available in all states. #These funds, advised by Scudder, Stevens & Clark,
Inc., are traded on the New York Stock Exchange. Scudder Horizon Plan, a
no-load variable annuity contract provided by Charter National Life
Insurance Company of St. Louis, is offered by Scudder Insurance Agency, Inc.
1-800-225-2470. ++For information on Scudder Treasurers Trust(TM), an
institutional cash management service that utilizes certain portfolios of
Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
</TABLE>
22
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
-------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER SERVICE CORPORATION
1-800-225-5163
For account updates, prices, yields,
exchanges and redemptions SCUDDER
AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
------------------------------------------------------------------------------
To receive information about the Scudder funds,
for additional applications and prospectuses,
or for investment questions
SCUDDER INVESTOR INFORMATION
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
SCUDDER GROUP RETIREMENT SERVICES
1-800-323-6105
Please address all correspondence to
------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one
service of the Scudder Funds Centers. Check for a
Funds Center near you--they can be found in the
following cities:
Boca Raton Los Angeles
Boston New York
Chicago Portland, OR
Cincinnati San Francisco
Scottsdale
------------------------------------------------------------------------------
For information on Scudder Treasurers For information on Scudder
Trust(TM), an institutional cash Institutional Funds,* funds designed
management service for corporations, to meet the broad investment management
non-profit organizations and trusts and service needs of banks and other
which utilizes certain portfolios institutions, call: 1-800-854-8525.
of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
-------------------------------------------------------------------------------
Scudder Investor Information and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
23
<PAGE>
Celebrating 75 Years of Serving Investors
-------------------------------------------------------------------------------
This year marks the 75th anniversary of the founding of Scudder, Stevens &
Clark, investment adviser for the Scudder Funds. Established in 1919 by Theodore
Scudder, Sidney Stevens, and F. Haven Clark, Scudder was the first independent
investment counsel firm in the United States. Since its birth, Scudder's
pioneering spirit and commitment to professional long-term investment management
have helped shape the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 35 pure no load(TM) funds, including
the first international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped Scudder become one
of the largest and most respected investment managers in the world. Though times
have changed since our beginnings, we remain committed to our longstanding
principles: managing money with integrity and distinction, keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
<PAGE>
