UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number 811-2959
SCUDDER TAX FREE MONEY FUND
--------------------------------
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 454-7190
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Paul Schubert
345 Park Avenue
New York, NY 10154
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(Name and Address of Agent for Service)
Date of fiscal year end: 05/31
Date of reporting period: 05/31/05
ITEM 1. REPORT TO STOCKHOLDERS
Scudder Tax-Free
Money Fund
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| Annual Report to Shareholders |
| May 31, 2005 |
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This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.
An investment in this fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. A portion of the fund's distributions may be subject to federal, state, local, and the alternative minimum tax. Please read this fund's prospectus for specific details regarding its risk profile.
Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company.
Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal.
Portfolio Management Review |
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Scudder Tax-Free Money Fund: A Team Approach to Investing
Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for Scudder Tax-Free Money Fund. DeIM and its predecessors have more than 80 years of experience managing mutual funds and DeIM provides a full range of investment advisory services to institutional and retail clients. DeIM is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Portfolio Management Team
A group of investment professionals is responsible for the day-to-day management of the fund. These investment professionals have a broad range of experience in managing money market funds.
In the following interview, Portfolio Manager Joseph Benevento discusses Scudder Tax-Free Money Fund's performance and the market environment for the 12-month period ended May 31, 2005.
Q: Will you discuss the market environment for the fund during the 12-month period?
A: Short-term interest rates rose steadily during the fund's reporting period due to the series of interest rate increases by the US Federal Reserve (the Fed). In June 2004, following a substantial improvement in job creation and sharply higher market interest rates, the Fed began to enact what became known as its "measured pace" interest rate policy, moving away from an accommodative stance of low short-term interest rates to try to prevent inflation from accelerating to the point where it would hurt the economy. Under the policy, the Fed increased the federal funds rate by 25 basis points (0.25%) at each of its eight policy meetings over the 12 months ended May 2005. At the close of the fund's fiscal year on May 31, the fed funds rate stood at 3.00%, up from 1.00% at the start of 2004.
In the second half of 2004, the US economy maintained a 4.00% growth rate in the face of rising petroleum prices. As we moved into the fourth quarter of 2004 and the first quarter of 2005, corporate pricing power (the ability of companies to raise prices to boost profits while retaining market share) began to strengthen as inflationary pressures took hold. Monthly job growth remained an economic indicator for the market, but the market's focus gradually shifted to a careful watch for signs of increased inflation. The one-year LIBOR rate, an industry standard for measuring one-year money market rates, closed 2004 at 3.10%, its highest level since March 2002.1 In February 2005, oil prices, which had moderated toward the end of 2004, started to rise once again.
1 LIBOR, the London Interbank Offered Rate, is the most widely used benchmark or reference rate for short-term interest rates. LIBOR is the rate of interest at which banks borrow funds from other banks, in large volume, in the international market.
At the end of May 2005, LIBOR stood at 3.78%. The premium level of LIBOR (which is set by the market) over the fed funds rate (which is fixed by the Federal Reserve) of 3.00% represented the market's concern that the Fed may have to continue raising short-term interest rates to keep inflation under control. It also meant that many market participants had reevaluated their portfolios and sold some riskier issues following announcements of credit problems in the automobile and airline industries. These actions tended to boost yields and depress prices in the credit markets overall.
Another market trend during the second quarter was the split between (1) the Fed's seeming intention to keep raising short-term interest rates and keep consumer prices stable until it achieved what it deemed to be a "neutral" stance (neither specifically encouraging economic growth nor directly fighting inflation) and (2) market disruptions that caused market participants to believe that the Fed would stop raising rates much sooner than previously believed. These events included concerns during April that hedge funds with significant unrealized losses stemming from holdings in automobile bonds had the potential to create enough market instability to alter Fed policy.2,3 Such short-term worries caused the LIBOR rate to dip during mid-April, but the Fed proceeded with its measured policy and raised the fed funds rate at its May 2005 meeting to 3.00%.
2 A hedge fund is a private investment partnership limited to high net worth or institutional investors, often very large, and typically employing high-risk investment strategies.
3 An unrealized loss occurs when the price of a security declines after an investor buys it, but has yet to sell it.
Performance is historical and does not guarantee future results. Current performance may be lower or higher than the performance data quoted.
Fund's Class S Shares Yields |
| 7-day current yield |
May 31, 2005 | 2.19% |
May 31, 2004 | 0.41% |
Yields are historical, will fluctuate and do not guarantee future performance. The 7-day current yield refers to the income paid by the fund over a 7-day period expressed as an annual percentage rate of the fund's shares outstanding. For the most current yield information, please visit our web sites: myScudder.com or aarp.scudder.com.
Q: How did the fund perform over its most recent fiscal year, and what has been the strategy for the fund?
A: For the period, the fund registered favorable performance and achieved its stated objective of providing maximum current income free from federal taxes while maintaining stability of capital. (All performance is historical and does not guarantee future results. Yields fluctuate and are not guaranteed.) As of May 31, 2005, the weighted average maturity of the Tax-Free Money Fund's portfolio was 16 days. During the reporting period, we maintained a cautious stance by shifting the Tax-Free Portfolio's weighted average maturity to a target range of 25 to 30 days. The portfolio also has a targeted allocation of 75% of assets in floating-rate securities and 25% in fixed-rate instruments. In a rising interest rate environment, our strategy — rather than to extend maturity — was to maintain a substantial floating-rate position to provide the fund with flexibility and attractive floating-rate yields. Our decision to maintain a significant floating-rate position generally helped performance during the period. The interest rate of floating-rate securities adjusts
Money market yield curve 5/31/04 versus 5/31/05 |
 |
Length of Maturity (in months) |
This chart is not intended to represent the yield of any Scudder fund. Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
periodically based on indices such as the Bond Market Association Index of Variable Rate Demand Notes.4 Because the interest rates of these instruments can adjust as market conditions change, the instruments can provide flexibility in an uncertain interest rate environment.
4 The Bond Market Association Index of Variable Rate Demand Notes is a weekly high-grade market index produced by Municipal Market Data Group comprising 7-day tax-exempt variable rate demand notes. Actual issues are selected from Municipal Market Data's database of more than 10,000 active issues.
In addition, we continued to focus on the highest-quality investments for the Tax-Free Money Fund's portfolio while seeking competitive yields across the municipal investment spectrum. During the period, the tax-free money markets were forced to adjust to dramatic changes in supply, due to (1) the $15 billion of supply from California's revenue anticipation notes and revenue anticipation warrants that had entered the market back in October 2003, followed by (2) the sudden withdrawal of this supply from the market in June 2004 as California refunded the $15 billion of short-term debt, issuing longer-term debt in its place. It took more than a month for the markets, and tax-exempt interest rates, to adjust after this significant withdrawal of supply. (A severe short-term squeeze on supply tends to push prices of tax-exempt money market securities higher, and their yields significantly lower.) Though we were invested in essential-services bonds (such as those related to water resource/power supply) from California agencies and counties over the period, we avoided adding new state of California issues because of the state's unsettled financial situation.
Another event that created a temporary imbalance in the tax-free money markets was Microsoft's $30 billion dividend paid in December 2004. Because of automated exchanges of some of this money from brokerage accounts into tax-free money market funds, this event created a surge in demand for floating-rate securities and put significant downward pressure on their yields. Eventually, year-end redemptions and new issuance brought supply and demand within the tax-exempt money market back into balance.
In addition, we continued to focus on the highest-quality investments while seeking competitive yields. In particular, we emphasized essential-services revenue issues and what is known as enhanced paper, i.e., securities guaranteed by a third party such as a bank or an insurance company. Finally, as a holder of insured municipal credits, we are carefully monitoring the recent investigations of municipal credit insurer MBIA by securities regulators. MBIA, the largest municipal securities insurance firm, has been the subject of inquiries regarding certain types of derivative securities trading in which it engaged during 2002.
Q: What detracted from performance during the period?
A: In December, we kept additional cash on hand — as we do each year — to meet any tax-related redemptions as well as investors' year-end liquidity needs. This detracted somewhat from yield and total return.
Q: Will you describe your management philosophy?
A: We continue our insistence on the highest credit quality within the fund. We also plan to maintain our conservative investment strategies and standards. We continue to apply a careful approach to investing on behalf of the fund and to seek competitive tax-free yield for our shareholders.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Information About Your Fund's Expenses |
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As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses for Class AARP; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended May 31, 2005.
The tables illustrate your Fund's expenses in two ways:
Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended May 31, 2005 |
Actual Fund Return | Class AARP | Class S |
Beginning Account Value 12/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/05 | $ 1,007.00 | $ 1,007.20 |
Expenses Paid per $1,000* | $ 3.50 | $ 3.30 |
Hypothetical 5% Fund Return | Class AARP | Class S |
Beginning Account Value 12/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/05 | $ 1,021.44 | $ 1021.64 |
Expenses Paid per $1,000* | $ 3.53 | $ 3.33 |
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class AARP | Class S |
Scudder Tax-Free Money Fund | .70% | .66% |
For more information, please refer to the Fund's prospectus.
Portfolio Summary May 31, 2005 |
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Asset Allocation | 5/31/05 | 5/31/04 |
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Municipal Investments | 100% | 100% |
Weighted Average Maturity | | |
Tax-Free Money Fund | 16 days | 27 days |
National Tax-Free Retail Money Fund Average* | 22 days | 32 days |
* The Fund is compared to its respective iMoneyNet Category: National Tax-Free Retail Money Fund Average — Category consists of all national tax-free and municipal retail funds. Portfolio Holdings of tax-free funds include Rated and Unrated Demand Notes, Rated and Unrated General Market Notes, Commercial Paper, Put Bonds — 6 months & less, Put Bonds — over 6 months, AMT Paper, and Other Tax-Free holdings. Source: iMoneyNet
Asset Allocation is subject to change.
For more complete details about the Fund's holdings, see page 12. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to scudder.com on the 15th of the following month. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio as of May 31, 2005 |  |  |
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| Principal Amount ($) | Value ($) |
| |
Municipal Bonds and Notes 98.6% |
Arizona 0.8% |
Phoenix, AZ, Industrial Development Authority, Multi-Family Housing Revenue, Centertree Apartments Project, Series A, AMT, 3.02%*, 10/15/2030 | 1,780,000 | 1,780,000 |
Arkansas 1.2% |
Pocahontas, AR, Industrial Development Revenue, MacLean Esna LP Project, AMT, 3.1%*, 5/1/2015, Northern Trust Co. (c) | 2,500,000 | 2,500,000 |
California 1.8% |
California, State Department of Water Resources, Power Supply Revenue, Series M5J-D, 144A, 3.07%*, 5/1/2012 (b) | 500,000 | 500,000 |
California, State Economic Recovery Program, Series C-15, 2.94%*, 7/1/2023 (b) | 500,000 | 500,000 |
Los Angeles County, CA, Tax & Revenue Anticipation Notes, Series A, 3.0%, 6/30/2005 | 2,900,000 | 2,903,175 |
| 3,903,175 |
Colorado 2.9% |
Adams & Weld Counties, CO, Brighton School District No. 27J, Series RR-II-R-6514, 144A, 3.0%*, 12/1/2024 (b) | 2,990,000 | 2,990,000 |
Colorado, University Hospital Authority Revenue, Series B, 2.96%*, 11/15/2035, Citibank NA (c) | 1,100,000 | 1,100,000 |
Summit County, CO, School District No. RE1, Series RR-II-R-6513, 144A, 3.0%*, 12/1/2023 (b) | 2,100,000 | 2,100,000 |
| 6,190,000 |
Delaware 0.5% |
Delaware, State Economic Development Authority Revenue, Winterthur Museum Project, 3.02%*, 9/1/2012, Wachovia Bank NA (c) | 1,000,000 | 1,000,000 |
District of Columbia 0.9% |
District of Columbia, General Obligation, Series PT-2440, 144A, 2.99%*, 6/1/2024 (b) | 1,880,000 | 1,880,000 |
Florida 9.1% |
Broward County, FL, Educational Facilities Authority Revenue, Nova Southeastern, Series C, 2.99%*, 4/1/2024, Bank of America NA (c) | 2,600,000 | 2,600,000 |
Florida, Board of Education, Lottery Revenue, Series PT-1952, 144A, 1.7%*, 1/1/2009 (b) | 2,545,000 | 2,545,000 |
Florida, University Athletic Association, Inc., Capital Improvement Revenue, University of Florida Stadium Project, 3.05%*, 2/1/2020, SunTrust Bank (c) | 1,000,000 | 1,000,000 |
Miami-Dade County, FL, Industrial Development Authority Revenue, Gulliver Schools Project, 3.01%*, 9/1/2029, Bank of America NA (c) | 2,090,000 | 2,090,000 |
Orange County, FL, Health Facilities Authority Revenue, Presbyterian Retirement Project, 3.01%*, 11/1/2028, Bank of America NA (c) | 5,425,000 | 5,425,000 |
Palm Beach County, FL, Health Facilities Authority Revenue, Bethesta Healthcare System Project, 2.99%*, 12/1/2031, SunTrust Bank (c) | 500,000 | 500,000 |
Pinellas County, FL, Health Facilities Authority Revenue, Hospital Facilities, Bayfront Projects, 2.99%*, 7/1/2034, SunTrust Bank (c) | 900,000 | 900,000 |
Sarasota County, FL, Utility System Revenue, Series 852, 144A, 3.0%*, 4/1/2013 (b) | 4,375,000 | 4,375,000 |
| 19,435,000 |
Georgia 0.9% |
Greene County, GA, Development Authority Sewage Facilities Revenue, Carey Station WRF LLC Project, AMT, 3.02%*, 9/1/2024, Wachovia Bank NA (c) | 2,000,000 | 2,000,000 |
Idaho 1.4% |
Power County, ID, Industrial Development Authority, FMC Corp. Project, AMT, 3.02%*, 4/1/2014, Wachovia Bank NA (c) | 3,000,000 | 3,000,000 |
Illinois 9.8% |
Chicago, IL, De La Salle Institution Project, 3.07%*, 4/1/2027, Fifth Third Bank (c) | 1,810,000 | 1,810,000 |
Illinois, Development Finance Authority Revenue, Museum of Contemporary Art Project, 2.98%*, 2/1/2029, Bank One NA (c) | 1,725,000 | 1,725,000 |
Illinois, Development Finance Authority, Industrial Development Revenue, Katlaw Tretam & Co. Project, AMT, 3.04%*, 8/1/2027, LaSalle Bank NA (c) | 1,700,000 | 1,700,000 |
Illinois, Development Finance Authority, Regional Organization Bank Project, 3.06%*, 12/1/2020, Bank One NA (c) | 1,600,000 | 1,600,000 |
Illinois, Finance Authority Revenue, Series PA-1286, 144A, 2.99%*, 11/15/2023 (b) | 3,515,000 | 3,515,000 |
Illinois, Sales Tax Revenue, Series R-4516, 144A, 3.0%*, 6/15/2023 | 4,495,000 | 4,495,000 |
Illinois, State General Obligation, 3.0%, 6/3/2005 | 4,500,000 | 4,500,236 |
Vernon Hills, IL, Industrial Development Revenue, Northwestern Tool & Die Project, AMT, 3.08%*, 4/1/2025, Harris Trust & Savings Bank (c) | 940,000 | 940,000 |
Will & Kendall Counties, IL, Community Consolidated School District No. 202, Series RR-II-R 4031, 144A, 3.0%*, 1/1/2023 (b) | 650,000 | 650,000 |
| 20,935,236 |
Indiana 1.1% |
Indiana, Transportation/Tolls Revenue, Series R-4528, 144A, 3.0%*, 6/1/2018 (b) | 2,285,000 | 2,285,000 |
Kentucky 7.6% |
Kentucky, Economic Development Finance Authority, Health Facilities Revenue, Easter Seal Society Project, 3.06%*, 11/1/2030, Bank One Kentucky NA (c) | 1,180,000 | 1,180,000 |
Lexington-Fayette County, KY, Industrial Development Revenue, YMCA Central Kentucky, Inc. Project, 3.08%*, 7/1/2019, Bank One Kentucky NA (c) | 2,090,000 | 2,090,000 |
Pendleton, KY, County Lease: | | |
2.85%, 8/5/2005 | 5,200,000 | 5,200,000 |
2.9%, 9/7/2005 | 7,700,000 | 7,700,000 |
| 16,170,000 |
Louisiana 0.1% |
East Baton Rouge Parish, LA, Pollution Control Revenue, Exxon Project, 2.89%*, 3/1/2022 | 200,000 | 200,000 |
Maryland 2.0% |
Gaithersburg, MD, Economic Development Revenue, Asbury Methodist Village, 2.99%*, 1/1/2034, KBC Bank NV (c) | 4,200,000 | 4,200,000 |
Michigan 6.0% |
Detroit, MI, Water Supply, ABN AMRO Munitops Certificates Trust, Series 2003-3, 144A, 2.99%*, 1/1/2011 (b) | 4,175,000 | 4,175,000 |
Michigan, General Obligation, 2.2%, 10/5/2005 | 2,900,000 | 2,900,000 |
Michigan, Municipal Securities Trust Certificates, Series 9054, 144A, 3.0%*, 4/20/2011 | 3,700,000 | 3,700,000 |
Michigan, State Strategic Fund, Limited Obligation Revenue, Merchants LLC Project, AMT, 3.1%*, 3/1/2030, National City Bank (c) | 2,000,000 | 2,000,000 |
| 12,775,000 |
Minnesota 1.9% |
Elk River, MN, Independent School District No. 728, Series II-R 204, 144A, 3.06%*, 2/1/2015 (b) | 200,000 | 200,000 |
Minnesota, General Obligation, Public Highway Improvements, Series R-4065, 144A, 3.0%*, 8/1/2023 | 3,870,000 | 3,870,000 |
| 4,070,000 |
Missouri 0.9% |
Missouri, Development Finance Board, Air Cargo Facility Revenue, St. Louis Airport, AMT, 3.04%*, 3/1/2030, American National Bank & Trust (c) | 2,000,000 | 2,000,000 |
Nebraska 3.5% |
Nebraska, Investment Finance Authority, Single Family Housing Revenue, AMT: | | |
Series D, 3.08%*, 9/1/2034 | 2,497,500 | 2,497,500 |
Series E, 3.08%*, 9/1/2034 | 4,990,000 | 4,990,000 |
| 7,487,500 |
New Hampshire 1.9% |
New Hampshire, Business Finance Authority, Exempt Facilities Revenue, Waste Management of NH, Inc. Project, AMT, 3.02%*, 9/1/2012, Wachovia Bank NA (c) | 4,000,000 | 4,000,000 |
New Jersey 7.4% |
Florham Park, NJ, General Obligation, Board of Education, 3.0%, 7/14/2005 | 1,898,734 | 1,901,948 |
New Jersey, State Tax Anticipation Notes, Series A, 3.0%, 6/24/2005 | 3,000,000 | 3,001,952 |
New Jersey, State Transportation Trust Fund Authority Revenue, Series PT-2494, 144A, 2.99%*, 12/15/2023 (b) | 6,200,000 | 6,200,000 |
Salem County, NJ, Industrial Pollution Control, Financing Authority Revenue, E.I. Du Pont de Nemours and Co., 2.6%*, 3/1/2012 | 4,600,000 | 4,600,000 |
| 15,703,900 |
New Mexico 0.9% |
New Mexico, State Tax & Revenue Anticipation Notes, Series 2004-A, 3.0%, 6/30/2005 | 2,000,000 | 2,001,735 |
New York 0.7% |
New York, State Housing Finance Agency Revenue, 521 West 42nd St. Apartments, AMT, Series A, 2.98%*, 11/1/2034, KeyBank NA (c) | 1,574,000 | 1,574,000 |
Ohio 0.9% |
Ohio, Higher Educational Facilities Community Revenue, Pooled Program: | | |
Series A, 3.01%*, 9/1/2020, Fifth Third Bank (c) | 730,000 | 730,000 |
Series B, 3.01%*, 9/1/2020, Fifth Third Bank (c) | 1,165,000 | 1,165,000 |
| 1,895,000 |
Pennsylvania 5.7% |
Dauphin County, PA, General Authority, Education & Health Loan Program, 3.01%*, 11/1/2017 (b) | 4,340,000 | 4,340,000 |
Delaware Valley, PA, Regional Finance Authority, Local Government Revenue, Mode 1, 2.96%*, 8/1/2016, Toronto-Dominion Bank (c) | 800,000 | 800,000 |
Pennsylvania, General Obligation, Series A-15, 144A, 3.0%*, 1/1/2017 (b) | 1,645,000 | 1,645,000 |
Pennsylvania, State Higher Educational Facilities Authority Revenue, University Properties, Student Housing, Series A, 2.98%*, 8/1/2035, Citizens Bank of PA (c) | 5,300,000 | 5,300,000 |
| 12,085,000 |
Puerto Rico 1.4% |
ABN AMRO, Munitops, Certificates Trust, Series 2000-17, 144A, 2.96%*, 10/1/2008 | 3,000,000 | 3,000,000 |
South Carolina 0.8% |
Marlboro County, SC, Industrial Development Revenue, Reliance Trading Corp. Project, AMT, 3.04%*, 5/1/2017, LaSalle National Bank (c) | 1,675,000 | 1,675,000 |
Tennessee 0.6% |
Montgomery County, TN, Public Building Authority, Pooled Financing Revenue, 2.98%*, 4/1/2032, Bank of America NA (c) | 1,180,000 | 1,180,000 |
Texas 15.6% |
Brazos River, TX, Pollution Control Revenue, Series D-1, AMT, 3.01%*, 5/1/2033, Wachovia Bank NA (c) | 2,470,000 | 2,470,000 |
Gulf Coast, TX, Waste Disposal Authority, Environmental Facilities Revenue, Waste Corp. Texas Project, AMT, 3.02%*, 9/1/2022, Wells Fargo Bank of Texas NA (c) | 960,000 | 960,000 |
Harris County, TX, Health Facilities Development Corp. Revenue, The Methodist System, Series B, 2.98%*, 12/1/2032 | 1,300,000 | 1,300,000 |
Plano, TX, Independent School District, Series PT-2428, 144A, 2.99%*, 2/15/2024 | 5,420,000 | 5,420,000 |
San Antonio, TX, Electric & Gas Revenue, Series PT-1706, 144A, 3.0%*, 8/1/2012 | 1,305,000 | 1,305,000 |
Texas, Lower Colorado River Authority, 2.78%, 8/4/2005 | 3,700,000 | 3,700,000 |
Texas, Municipal Power Agency Revenue, Series L36J-D, 144A, 3.07%*, 9/1/2011 (b) | 2,000,000 | 2,000,000 |
Texas, State Tax & Revenue Anticipation Notes, 3.0%, 8/31/2005 | 9,850,000 | 9,876,860 |
Texas, University of Texas, 2.85%*, 6/3/2005 | 3,000,000 | 3,000,000 |
Waco, TX, Industrial Development Corp., Economic Development Revenue, Patriots Home of Texas Project, AMT, 3.13%*, 6/1/2014, US Bank NA (c) | 3,200,000 | 3,200,000 |
| 33,231,860 |
Utah 0.8% |
Murray City, UT, Hospital Revenue, IHC Health Services, Inc., Series C, 2.98%*, 5/15/2036 | 1,700,000 | 1,700,000 |
Washington 6.4% |
Central Puget Sound, WA, Regional Transit Authority, Sales & Use Tax Revenue, Series 781, 144A, 3.0%*, 11/1/2012 (b) | 2,000,000 | 2,000,000 |
Washington, General Obligation, Series C-12, 144A, 3.0%*, 1/1/2027 (b) | 8,870,000 | 8,870,000 |
Washington, State Housing Finance Commission, Multi-Family Revenue, Park Vista Retirement Project, Series A, AMT, 2.96%*, 3/1/2041, Bank of America NA (c) | 2,800,000 | 2,800,000 |
| 13,670,000 |
West Virginia 0.1% |
Randolph County, WV, Industrial Development Revenue, Allegheny Wood Products Project, AMT, 3.11%*, 12/1/2007, Bank One West Virginia (c) | 275,000 | 275,000 |
Wyoming 0.2% |
Platte County, WY, Pollution Control Revenue, Series B, 3.05%*, 7/1/2014, National Rural Utility Finance (c) | 500,000 | 500,000 |
Multi-State 2.8% |
ABN AMRO, Munitops, Certificates Trust, Series 2003-32, 144A, 3.0%*, 1/15/2012 (b) | 5,900,000 | 5,900,000 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $210,202,406) (a) | 98.6 | 210,202,406 |
Other Assets and Liabilities, Net | 1.4 | 2,936,040 |
Net Assets | 100.0 | 213,138,446 |
* Variable rate demand notes are securities whose interest rates are reset periodically at market levels. These securities are often payable on demand and are shown at their current rates as of May 31, 2005.
(a) The cost for federal income tax purposes was $210,202,406.
(b) Bond is insured by one of these companies:
| As a % of Total Investment Portfolio |
Ambac Financial Group. | 7.7 |
Financial Guaranty Insurance Company | 8.8 |
Financial Security Assurance, Inc. | 7.5 |
MBIA Corp. | 3.0 |
(c) The security incorporates a letter of credit from a major bank.
AMT: Subject to alternative minimum tax
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of May 31, 2005 |
Assets |
Investments in securities, at amortized cost | $ 210,202,406 |
Cash | 911,817 |
Receivable for investments sold | 600,046 |
Interest receivable | 1,360,923 |
Receivable for Fund shares sold | 573,300 |
Other assets | 24,382 |
Total assets | 213,672,874 |
Liabilities |
Dividends payable | 30,583 |
Payable for Fund shares redeemed | 274,658 |
Accrued management fee | 88,130 |
Other accrued expenses and payables | 141,057 |
Total liabilities | 534,428 |
Net assets, at value | $ 213,138,446 |
Net Assets |
Net assets consist of: Undistributed net investment income | 83,924 |
Accumulated net realized gain (loss) | (106,932) |
Paid-in capital | 213,161,454 |
Net assets, at value | $ 213,138,446 |
Net Asset Value |
Class AARP Net Asset Value, offering and redemption price per share ($53,895,305 ÷ 53,952,488 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 1.00 |
Class S Net Asset Value, offering and redemption price per share ($159,243,141 ÷ 159,039,357 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 1.00 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the year ended May 31, 2005 |
Investment Income |
Income: Interest | $ 3,701,475 |
Expenses: Management fee | 1,080,528 |
Services to shareholders | 235,333 |
Custodian and accounting fees | 56,858 |
Auditing | 54,156 |
Legal | 11,499 |
Trustees' fees and expenses | 5,092 |
Reports to shareholders | 29,965 |
Registration fees | 20,291 |
Other | 30,456 |
Total expenses, before expense reductions | 1,524,178 |
Expense reductions | (62,364) |
Total expenses, after expense reductions | 1,461,814 |
Net investment income | 2,239,661 |
Net realized gain from investments | 22,888 |
Net increase (decrease) in net assets resulting from operations | $ 2,262,549 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets |
Increase (Decrease) in Net Assets | Years Ended May 31, |
2005 | 2004 |
Operations: Net investment income | $ 2,239,661 | $ 919,435 |
Net realized gain (loss) on investment transactions | 22,888 | 1,367 |
Net increase (decrease) in net assets resulting from operations | 2,262,549 | 920,802 |
Distributions to shareholders from: Net investment income: Class AARP | (581,907) | (239,162) |
Class S | (1,658,187) | (679,877) |
Fund share transactions: Proceeds from shares sold | 95,356,243 | 93,209,536 |
Reinvestment of distributions | 2,048,856 | 813,187 |
Cost of shares redeemed | (107,987,115) | (149,349,029) |
Net increase (decrease) in net assets from Fund share transactions | (10,582,016) | (55,326,306) |
Increase (decrease) in net assets | (10,559,561) | (55,324,543) |
Net assets at beginning of period | 223,698,007 | 279,022,550 |
Net assets at end of period (including undistributed net investment income of $83,924 and $84,357, respectively) | $ 213,138,446 | $ 223,698,007 |
The accompanying notes are an integral part of the financial statements.
Class AARP |
Years Ended May 31, | 2005 | 2004 | 2003 | 2002 | 2001a |
Selected Per Share Data |
Net asset value, beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income from investment operations: Net investment income | .010 | .004 | .007 | .014 | .024 |
Less distributions from: Net investment income | (.010) | (.004) | (.007) | (.014) | (.024) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%) | 1.03b | .37b | .74 | 1.39 | 2.50** |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 54 | 62 | 69 | 76 | 83 |
Ratio of expenses before expense reductions (%) | .81 | .69 | .65 | .65 | .65* |
Ratio of expenses after expense reductions (%) | .70 | .67 | .65 | .65 | .65* |
Ratio of net investment income (%) | 1.01 | .36 | .74 | 1.39 | 3.28* |
aFor the period from September 11, 2000 (commencement of operations of Class AARP shares) to May 31, 2001. bTotal returns would have been lower had certain expenses not been reduced. * Annualized ** Not annualized |
Class S |
Years Ended May 31, | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per Share Data |
Net asset value, beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income from investment operations: Net investment income | .011 | .004 | .007 | .014 | .034 |
Less distributions from: Net investment income | (.011) | (.004) | (.007) | (.014) | (.034) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%) | 1.07 | .37 | .74 | 1.39 | 3.43a |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 159 | 162 | 210 | 259 | 262 |
Ratio of expenses before expense reductions (%) | .67 | .67 | .65 | .65 | .67 |
Ratio of expenses after expense reductions (%) | .67 | .67 | .65 | .65 | .65 |
Ratio of net investment income (%) | 1.04 | .36 | .74 | 1.39 | 3.39 |
a Total returns would have been lower had certain expenses not been reduced. |
Notes to Financial Statements |
|
A. Significant Accounting Policies
Scudder Tax-Free Money Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified management investment company organized as a Massachusetts business trust.
The Fund offers Class AARP and Class S shares. Shares of Class AARP are designed for members of AARP. Class S shares of the Fund are generally not available to new investors. (Please refer to the Fund's Statement of Additional Information.)
Investment income, realized and unrealized gains and losses and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of both classes of shares, except that both classes bear certain expenses unique to that share class such as shareholder services fees. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities are valued utilizing the amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act and certain conditions therein. Under this method, which does not take into account unrealized capital gains or losses on securities, an instrument is initially valued at its cost and thereafter assumes a constant accretion/amortization to maturity of any discount or premium.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable and tax-exempt income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
During the year ended May 31, 2005, the Fund utilized approximately $23,000 and lost through expiration, $197,000 of prior year capital loss carryforward. At May 31, 2005, the Fund had a net tax basis capital loss carryforward of approximately $107,000, which may be applied against any realized net taxable gains of each succeeding year until fully utilized or until May 31, 2009.
Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and is distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period. There were no significant book-to-tax differences for the Fund.
At May 31, 2005, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed tax-exempt income* | $ 114,507 |
Capital loss carryforwards | $ 107,000 |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| Years Ended May 31, |
2005 | 2004 |
Distributions from tax-exempt income* | $ 2,240,094 | $ 919,039 |
* For tax purposes short-term capital gains distributions are considered ordinary income distributions.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for both tax and financial reporting purposes.
B. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor 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 Advisor provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 0.50% of the first $500,000,000 of the Fund's average daily net assets and 0.48% of such net assets in excess of $500,000,000, computed and accrued daily and payable monthly. Accordingly, for the year ended May 31, 2005, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.50% of the Fund's average daily net assets.
Effective April 1, 2004 through September 30, 2005, the Advisor has contractually agreed to waive a portion of its fees in Class AARP and Class S of the Fund to the extent necessary to maintain operating expenses of each class at 0.70% of average daily net assets (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and trustee and trustee counsel fees).
Service Provider Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Advisor, is the transfer, dividend-paying agent and shareholder service agent for Class AARP and S shares of the Fund. Pursuant to a sub-transfer agency agreement between SSC and DST Systems, Inc. ("DST"), SSC has delegated certain transfer agent and dividend paying agent functions to DST. SSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended May 31, 2005, the amounts charged to the Fund by SSC were as follows:
Services to Shareholders | Total Aggregated |
Waived
| Unpaid at May 31, 2005 |
Class AARP | $ 115,817 | $ 59,530 | $ 18,132 |
Class S | 96,698 | — | 23,793 |
| $ 212,515 | $ 59,530 | $ 41,925 |
Scudder Fund Accounting Corporation ("SFAC"), an affiliate of the Advisor, is responsible for computing the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. SFAC has retained State Street Bank and Trust Company to provide certain administrative, fund accounting and record-keeping services to the Fund. For the year ended May 31, 2005, the amount charged to the Fund by SFAC for accounting services aggregated $43,756, of which $4,367 is unpaid at May 31, 2005.
Typesetting and Filing Fees. Under an agreement with Deutsche Investment Management Americas Inc. ("DeIM"), an indirect, wholly owned subsidiary of Deutsche Bank AG, DeIM is compensated for providing typesetting and regulatory filing services to the Fund. For the year ended May 31, 2005, the amount charged to the Fund by DeIM included in the reports to shareholders aggregated $8,640, of which $4,320 is unpaid at May 31, 2005.
Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the Advisor retainer fees plus specified amounts for attended board and committee meetings.
Other Related Parties. AARP through its affiliate, AARP Services, Inc., monitors and oversees the AARP Investment Program from Scudder Investments, but does not act as an investment advisor or recommend specific mutual funds. DeIM has agreed to pay a fee to AARP and/or its affiliates in return for the use of the AARP trademark and services relating to investments by AARP members in AARP Class shares of the Fund. This fee is calculated on a daily basis as a percentage of the combined net assets of the AARP classes of all funds managed by DeIM. The fee rates, which decrease as the aggregate net assets of the AARP classes become larger, are as follows: 0.07% for the first $6 billion of net assets, 0.06% for the next $10 billion and 0.05% thereafter. These amounts are used for the general purposes of AARP and its members.
Insurance Brokerage Commissions. The Fund paid insurance premiums to an unaffiliated insurance broker in 2002 and 2003. This broker in turn paid a portion of its commissions to an affiliate of the Advisor, which performed certain insurance brokerage services for the broker. The Advisor has reimbursed the Fund for the portion of commissions (plus interest) paid to the affiliate of the Advisor attributable to the premiums paid by the Fund. The amounts for 2002 and 2003 were $111 and $82, respectively.
C. Expense Reductions
For the year ended May 31, 2005, the Advisor agreed to reimburse the Fund $2,622, which represents a portion of the fee savings expected to be realized by the Advisor related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider.
In addition, the Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's custodian expenses. During the year ended May 31, 2005, the custodian fee was reduced by $212 for custodian credits earned.
D. Line of Credit
The Fund and several other affiliated funds (the "Participants") share in a $1.1 billion revolving credit facility administered by J.P. Morgan Chase Bank for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Share Transactions
The following table summarizes shares and dollar activity in the Fund:
| Year Ended
May 31, 2005 | Year Ended
May 31, 2004 |
| Shares | Dollars | Shares | Dollars |
Shares sold |
Class AARP | 9,803,912 | $ 9,803,912 | 11,564,339 | $ 11,564,363 |
Class S | 85,552,331 | 85,552,331 | 81,645,173 | 81,645,173 |
| | $ 95,356,243 | | $ 93,209,536 |
Shares issued to shareholders in reinvestment of distributions |
Class AARP | 505,267 | $ 505,267 | 203,146 | $ 203,146 |
Class S | 1,543,589 | 1,543,589 | 610,041 | 610,041 |
| | $ 2,048,856 | | $ 813,187 |
Shares redeemed |
Class AARP | (18,302,272) | $ (18,302,272) | (19,179,602) | $ (19,179,602) |
Class S | (89,684,843) | (89,684,843) | (130,169,427) | (130,169,427) |
| | $ (107,987,115) | | $ (149,349,029) |
Net increase (decrease) |
Class AARP | (7,993,093) | $ (7,993,093) | (7,412,117) | $ (7,412,093) |
Class S | (2,588,923) | (2,588,923) | (47,914,213) | (47,914,213) |
| | $ (10,582,016) | | $ (55,326,306) |
F. Regulatory Matters and Litigation
Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. It is not possible to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the Scudder funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, the funds' investment advisors and their affiliates, certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each Scudder fund's investment advisor has agreed to indemnify the applicable Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. Based on currently available information, the funds' investment advisors believe the likelihood that the pending lawsuits will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the Scudder funds.
Report of Independent Registered Public Accounting Firm |
|
To the Trustees and Shareholders of Scudder Tax-Free Money Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights, present fairly, in all material respects, the financial position of Scudder Tax-Free Money Fund (the "Fund") at May 31, 2005, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 2005 by correspondence with the custodian, provide a reasonable basis for our opinion.
Boston, Massachusetts
July 22, 2005 | PricewaterhouseCoopers LLP |
Tax Information (Unaudited) |
|
Of the dividends paid from net investment income for the taxable year ended May 31, 2005, 100% are designated as exempt interest dividends for federal income tax purposes.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call 1-800-SCUDDER.
The following table presents certain information regarding the Trustees and Officers of the fund as of May 31, 2005. Each individual's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each Trustee is c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. Unless otherwise indicated, the address of each Officer is Two International Place, Boston, Massachusetts 02110. The term of office for each Trustee is until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of a successor, or until such Trustee sooner dies, resigns, retires or is removed as provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Trustee will hold office for an indeterminate period. The Trustees of the Fund may also serve in similar capacities with other funds in the fund complex.
Independent Trustees |
Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and
Other Directorships Held | Number of Funds in Fund Complex Overseen |
Dawn-Marie Driscoll (1946) Chairman, 2004-present Trustee, 1987-present | President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley College; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: CRS Technology (technology service company); Advisory Board, Center for Business Ethics, Bentley College; Board of Governors, Investment Company Institute; former Chairman, ICI Directors Services Committee | 42 |
Henry P. Becton, Jr. (1943) Trustee, 1990-present | President, WGBH Educational Foundation. Directorships: Becton Dickinson and Company (medical technology company); The A.H. Belo Company (media company); Concord Academy; Boston Museum of Science; Public Radio International. Former Directorships: American Public Television; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service | 42 |
Keith R. Fox (1954) Trustee, 1996-present | Managing Partner, Exeter Capital Partners (private equity funds). Directorships: Facts on File (school and library publisher); Progressive Holding Corporation (kitchen importer and distributor); Cloverleaf Transportation Inc. (trucking); K-Media, Inc. (broadcasting); Natural History, Inc. (magazine publisher); National Association of Small Business Investment Companies (trade association) | 42 |
Jean Gleason Stromberg (1943) Trustee, 1999-present | Retired. Formerly, Consultant (1997-2001); Director, US General Accounting Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; Service Source, Inc. | 42 |
Carl W. Vogt (1936) Trustee, 2002-present | Senior Partner, Fulbright & Jaworski, L.L.P. (law firm); formerly, President (interim) of Williams College (1999-2000); President, certain funds in the Deutsche Asset Management Family of Funds (formerly, Flag Investors Family of Funds) (registered investment companies) (1999-2000). Directorships: Yellow Corporation (trucking); American Science & Engineering (x-ray detection equipment); ISI Family of Funds (registered investment companies, 4 funds overseen); National Railroad Passenger Corporation (Amtrak); formerly, Chairman and Member, National Transportation Safety Board | 42 |
Officers2 |
Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and
Other Directorships Held |
Julian F. Sluyters4 (1960) President and Chief Executive Officer, 2004-present | Managing Director3, Deutsche Asset Management (since May 2004); President and Chief Executive Officer of The Germany Fund, Inc., The New Germany Fund, Inc., The Central Europe and Russia Fund, Inc., The Brazil Fund, Inc., The Korea Fund, Inc., Scudder Global High Income Fund, Inc. and Scudder New Asia Fund, Inc. (since May 2004); President and Chief Executive Officer, UBS Fund Services (2001-2003); Chief Administrative Officer (1998-2001) and Senior Vice President and Director of Mutual Fund Operations (1991-1998) UBS Global Asset Management |
John Millette (1962) Vice President and Secretary, 1999-present | Director3, Deutsche Asset Management |
Kenneth Murphy (1963) Vice President, 2002-present | Vice President, Deutsche Asset Management (2000-present); formerly, Director, John Hancock Signature Services (1992-2000) |
Paul H. Schubert4 (1963) Chief Financial Officer, 2004-present | Managing Director3, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds at UBS Global Asset Management (1994-2004) |
Charles A. Rizzo (1957) Treasurer, 2002-present | Managing Director3, Deutsche Asset Management (since April 2004); formerly, Director, Deutsche Asset Management (April 2000-March 2004); Vice President and Department Head, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP) (1993-1998) |
Lisa Hertz4 (1970) Assistant Secretary, 2003-present | Vice President3, Deutsche Asset Management |
Daniel O. Hirsch5 (1954) Assistant Secretary, 2002-present | Consultant. Formerly, Managing Director, Deutsche Asset Management (2002-2005); Director, Deutsche Asset Management (1999-2002), Principal, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Assistant General Counsel, United States Securities and Exchange Commission (1993-1998); Director, Deutsche Global Funds Ltd. (2002-2004) |
Caroline Pearson (1962) Assistant Secretary, 1997-present | Managing Director3, Deutsche Asset Management |
Scott M. McHugh (1971) Assistant Treasurer, 2005-present | Director3, Deutsche Asset Management |
Kathleen Sullivan D'Eramo (1957) Assistant Treasurer, 2003-present | Director3, Deutsche Asset Management |
Philip Gallo4 (1962) Chief Compliance Officer, 2004-present | Managing Director3, Deutsche Asset Management (2003-present); formerly, Co-Head of Goldman Sachs Asset Management Legal (1994-2003) |
1 Length of time served represents the date that each Trustee was first elected to the common board of Trustees which oversees a number of investment companies, including the fund, managed by the Advisor. For the Officers of the fund, the length of time served represents the date that each Officer was first elected to serve as an Officer of any fund overseen by the aforementioned common board of Trustees.
2 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the funds.
3 Executive title, not a board directorship.
4 Address: 345 Park Avenue, New York, New York 10154.
5 Address: One South Street, Baltimore, Maryland 21202.
The fund's Statement of Additional Information ("SAI") includes additional information about the Trustees. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: 1-800-SCUDDER.
Account Management Resources |
|
| AARP Investment Program Shareholders | Scudder Class S Shareholders |
Automated Information Lines | Easy-Access Line (800) 631-4636 | SAILTM (800) 343-2890 |
| Personalized account information, the ability to exchange or redeem shares, and information on other Scudder funds and services via touchtone telephone. |
Web Sites | aarp.scudder.com | myScudder.com |
| View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more. |
For More Information | (800) 253-2277 To speak with an AARP Investment Program service representative | (800) SCUDDER To speak with a Scudder service representative. |
Written Correspondence | AARP Investment Program from Scudder Investments PO Box 219735
Kansas City, MO 64121-9735 | Scudder Investments PO Box 219669
Kansas City, MO 64121-9669 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web sites — aarp.scudder.com or myScudder.com (type "proxy voting" in the search field) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call your service representative. |
Principal Underwriter | If you have questions, comments or complaints, contact: Scudder Distributors, Inc. 222 South Riverside Plaza
Chicago, IL 60606-5808 (800) 621-1148 |
| Class AARP | Class S |
Nasdaq Symbol | AFRXX | STFXX |
Fund Number | 171 | 071 |
ITEM 2. CODE OF ETHICS.
As of the end of the period, May 31, 2005, Scudder Tax Free Money Fund has
adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to
its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of
ethics during the period covered by this report that would require disclosure
under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Funds' audit committee is comprised solely of trustees who are "independent"
(as such term has been defined by the Securities and Exchange Commission ("SEC")
in regulations implementing Section 407 of the Sarbanes-Oxley Act (the
"Regulations")). The Funds' Board of Trustees has determined that there are
several "audit committee financial experts" serving on the Funds' audit
committee. The Board has determined that Keith R. Fox, the chair of the Funds'
audit committee, qualifies as an "audit committee financial expert" (as such
term has been defined by the Regulations) based on its review of Mr. Fox's
pertinent experience and education. The SEC has stated that the designation or
identification of a person as an audit committee financial expert pursuant to
this Item 3 of Form N-CSR does not impose on such person any duties, obligations
or liability that are greater than the duties, obligations and liability imposed
on such person as a member of the audit committee and board of directors in the
absence of such designation or identification. In accordance with New York Stock
Exchange requirements, the Board believes that all members of the Funds' audit
committee are financially literate, as such qualification is interpreted by the
Board in its business judgment, and that at least one member of the audit
committee has accounting or related financial management expertise.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
SCUDDER TAX FREE MONEY FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP
("PWC"), the Fund's independent registered public accounting firm, billed to the
Fund during the Fund's last two fiscal years. For engagements with PWC entered
into on or after May 6, 2003, the Audit Committee approved in advance all audit
services and non-audit services that PWC provided to the Fund.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
Services that the Fund's Independent Registered Public Accounting Firm Billed
to the Fund
- --------------------------------------------------------------------------------
Fiscal Year Audit Audit-Related Tax Fees All Other
Ended Fees Billed Fees Billed Billed to Fees Billed
May 31, to Fund to Fund Fund to Fund
- --------------------------------------------------------------------------------
2005 $50,500 $225 $3,500 $0
- --------------------------------------------------------------------------------
2004 $51,500 $185 $3,300 $0
- --------------------------------------------------------------------------------
The above "Audit- Related Fees" were billed for agreed upon procedures performed
and the above "Tax Fees" were billed for professional services rendered for tax
compliance and tax return preparation.
Services that the Fund's Independent Registered Public Accounting Firm Billed
to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche
Investment Management Americas, Inc. ("DeIM" or the "Adviser"), and any entity
controlling, controlled by or under common control with DeIM ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two fiscal years.
- --------------------------------------------------------------------------------
Audit-Related Tax Fees All Other
Fiscal Fees Billed to Billed to Fees Billed
Year Adviser and Adviser and to Adviser and
Ended Affiliated Fund Affiliated Fund Affiliated Fund
May 31, Service Providers Service Providers Service Providers
- --------------------------------------------------------------------------------
2005 $581,822 $0 $0
- --------------------------------------------------------------------------------
2004 $542,483 $0 $0
- --------------------------------------------------------------------------------
The "Audit-Related Fees" were billed for services in connection with the
assessment of internal controls, agreed-upon procedures and additional related
procedures.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund's
last two fiscal years for non-audit services. For engagements entered into on or
after May 6, 2003, the Audit Committee pre-approved all non-audit services that
PWC provided to the Adviser and any Affiliated Fund Service Provider that
related directly to the Fund's operations and financial reporting. The Audit
Committee requested and received information from PWC about any non-audit
services that PWC rendered during the Fund's last fiscal year to the Adviser and
any Affiliated Fund Service Provider. The Committee considered this information
in evaluating PWC's independence.
- --------------------------------------------------------------------------------
Total
Non-Audit
Fees billed
to Adviser
and
Affiliated
Fund Service Total
Providers Non-Audit
(engagements Fees billed
related to Adviser
Total directly to the and Affiliated
Non-Audit operations and Fund Service
Fiscal Fees financial Providers
Year Billed reporting (all other Total of
Ended to Fund of the Fund) engagements) (A), (B)
May 31, (A) (B) (C) and (C)
- --------------------------------------------------------------------------------
2005 $3,500 $0 $207,146 $210,646
- --------------------------------------------------------------------------------
2004 $3,300 $0 $1,681,369 $1,684,669
- --------------------------------------------------------------------------------
All other engagement fees were billed for services in connection with risk
management, tax services and process improvement/integration initiatives for
DeIM and other related entities that provide support for the operations of the
fund.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Committee on Independent Trustees/Directors selects and nominates
Independent Trustees/Directors. Fund shareholders may also submit nominees that
will be considered by the committee when a Board vacancy occurs. Submissions
should be mailed to: c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL
33910.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Chief Executive and Financial Officers concluded that the Registrant's
Disclosure Controls and Procedures are effective based on the evaluation of the
Disclosure Controls and Procedures as of a date within 90 days of the filing
date of this report.
(b) There have been no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last half-year (the
registrant's second fiscal half-year in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached
hereto as EX-99.CODE ETH.
(a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as
Exhibit 99.CERT.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as
Exhibit 99.906CERT.
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Scudder Tax Free Money Fund
By: /s/Julian Sluyters
------------------
Julian Sluyters
Chief Executive Officer
Date: August 2, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Registrant: Scudder Tax Free Money Fund
By: /s/Julian Sluyters
------------------
Julian Sluyters
Chief Executive Officer
Date: August 2, 2005
By: /s/Paul Schubert
----------------
Paul Schubert
Chief Financial Officer
Date: August 2, 2005
