UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM N-CSR Investment Company Act file number 811-04760 SCUDDER ADVISOR FUNDS ---------------------------------- (Exact Name of Registrant as Specified in Charter) One South Street, Baltimore, Maryland 21202 ------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (617) 295-2663 -------------- Salvatore Schiavone Two International Place Boston, Massachusetts 02110 --------------------------------------- (Name and Address of Agent for Service) Date of fiscal year end: 12/31 Date of reporting period: 12/31/03ITEM 1. REPORT TO STOCKHOLDERS
NY Tax Free Money Fund Investment
Tax Free Money Fund Investment
Annual Report to
Shareholders
December 31, 2003
Contents |
<Click Here> Portfolio Management Review <Click Here> Investment Portfolio <Click Here> Financial Statements <Click Here> Financial Highlights <Click Here> Notes to Financial Statements <Click Here> Report of Independent Auditors <Click Here> Tax Information <Click Here> Trustees and Officers <Click Here> Account Management Resources | ||
Investment Funds | Nasdaq Symbol | CUSIP Number |
NY Tax Free Money Fund Investment | BNYXX | 81111R 304 |
Tax Free Money Fund Investment | BTXXX | 81111R 205 |
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. Please read this fund's prospectus for specific details regarding its risk profile.
Deutsche Asset Management 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.
Investment Funds: A Team Approach to Investing
Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for NY Tax Free Money Fund Investment and Tax Free Money Fund Investment, each a series of Scudder Advisor Funds (the "Trust"). DeAM, Inc. provides a full range of investment advisory services to institutional and retail clients. DeAM, Inc. 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.
DeAM, Inc. 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.
A group of investment professionals is responsible for the day-to-day management of each fund.
In the following interview, Portfolio Manager Joe Benevento discusses the market environment and his team's approach to managing the funds during the 12-month period ended December 31, 2003.
Q: How did the funds perform over the annual period?
A: Over the 12 months ended December 31, 2003, Tax Free Money Fund Investment's seven-day annualized yield declined from 0.76% to 0.44% (0.68% taxable-equivalent yield). NY Tax Free Money Fund Investment's seven-day annualized yield declined from 0.72% to 0.44% (0.73% taxable-equivalent yield). In both cases, the yield changes primarily reflect the ripple effect of the Federal Reserve Board's 50-basis-point (i.e., one-half of a percentage point) interest rate cut on November 6, 2002, and its 25-basis-point (i.e., one-quarter of a percentage point) cut on June 25, 2003. For the 12-month period ended December 31, 2003, Tax Free Money Fund Investment posted an annual total return of 0.33%, compared with the 0.46% average total return of the iMoneyNet National Retail Tax Free Money Funds Average. NY Tax Free Money Fund Investment returned 0.32%, compared with the 0.44% average total return of the iMoneyNet State Specific Retail Money Funds Average.1
1 Money Fund Report Averages, a service of iMoneyNet, Inc., are averages for categories of similar money market funds.Performance is historical and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Performance includes reinvestment of all distribution. Returns during part or all of the periods shown reflect a fee and/or expense waiver. Without this waiver, returns would have been lower. The yield quotation more closely reflects the current earnings of the fund than the total return quotation. Please call the Service Center at 1-800-730-1313 for the product's most recent month-end performance.
Q: What were the major factors affecting money market activity during the year?
A: Federal Reserve Board policy and the US economy continued to have a major effect on the backdrop to money market activity. As 2003 began, investors demonstrated enthusiasm for President Bush's new economic growth initiative. However, as concerns about the war with Iraq heightened and company managements reported a subdued outlook for first-quarter corporate earnings, volatility remained high in the financial markets.
Economic and political conditions improved during the second quarter. Corporate earnings generally exceeded expectations. The government's tax cut was widely perceived to offer stimulus to the economy. The conclusion of active military operations in Iraq provided a welcome sigh of relief. On May 6, the Federal Reserve Board kept the targeted federal funds rate2 unchanged at 1.25% but indicated it would maintain its accommodative monetary policy, as it believed the probability of deflation exceeded that of inflation over the next few quarters. Thus, money market yields continued to fall.
2 The federal funds rate is the interest rate banks charge each other for overnight loans and is a closely watched indicator of US Federal Reserve Board monetary policy.In the run-up to the June Federal Reserve Board meeting, the tax-free money market yield curve inverted, with short-term variable rates exceeding those of one-year fixed rates. Then, on June 25, the Federal Reserve Board cut the targeted federal funds rate by 25 basis points to 1.00% in an effort to further support the economy and stimulate more growth over a longer period. Immediately after the decision, short-term variable rates fell and one-year municipal note yields rose. The municipal money market yield curve shifted from an inverted position to a positive slope, signaling investor preference for securities with shorter maturities.
After peaking in late August to early September, one-year municipal note yields declined somewhat by the end of September. Even as economic news continued to improve during the fourth quarter, the municipal money market yield curve remained rather flat. Such positive economic news included rebounding industrial production, continued strength in the housing market, a slowly improving labor market and an uptick in capital spending. The Federal Reserve Board meeting in December proved uneventful, leading the market to speculate that the Federal Reserve Board would likely wait to see above-trend economic growth before actually reversing course. At the end of the year, most investors believed that there would be no official increase in interest rates until well into 2004.
Q: What factors specific to the municipal markets had the most significant effect?
A: Municipal market yields declined, in spite of an increase in municipal issuance. Indeed, as a result of widespread budget shortfalls, we saw a sharp increase in the need for short-term cash flow issuance. The state of California topped the list with the issuance of $12 billion in revenue anticipation warrants, with the expectation of additional note issuance during the first quarter of 2004 to further fund cash flow needs. The state of Texas issued $7.4 billion in tax and revenue anticipation notes. Low interest rates also supported the increase in supply. The increased issuance of short-term notes did not result in significant upward pressure on one-year rates, however, as this rise in supply was offset by the Federal Reserve Board rate cut and ongoing strong demand. Investors continued their flight to quality, seeking the perceived haven of municipal securities. In fact, municipal money market assets increased by nearly 2% over the annual period. While the yield on one-year municipal notes declined by just nine basis points over the annual period, one-year note yields went as low as 0.83% in mid-June in the run-up to the Federal Reserve Board cut and then rose to 1.18% in early September as the market sold off following the interest rate cut. On December 31, 2003, the yield on the one-year note stood at 1.16%.
Municipal credit quality was negatively affected during the annual period, as municipalities across the country experienced declining revenue sources and an increase in their "fixed" costs, such as Medicaid, education and prisons. However, the income potential of tax-exempt money market securities remained quite attractive relative to comparable taxable securities. Indeed, as absolute money market yields fell over the annual period, the attractiveness of tax-exempt money market securities compared with comparable taxable securities increased. It is also worth noting that tax-exempt money market yields exceeded those of taxable money market securities for an extended period during 2003, particularly in April and again during much of the fourth quarter.
Q: In light of recent market conditions, what was your strategy in Tax Free Money Fund Investment?
A: We adjusted Tax Free Money Fund Investment's weighted average maturity to prepare for seasonal events and supply/demand phenomena. The fund began 2003 with a weighted average maturity of 44 days and ended the annual period on December 31 with a weighted average maturity of 36 days. We tried to keep the fund's weighted average maturity in a neutral to shorter-than- the-benchmark range, which helped us navigate through a volatile period for both interest rates and unfolding state and local government budget troubles. This was especially so in April and May, when the municipal yield curve inverted, and again during the fourth quarter, when heightened terrorist threats, mixed economic indicators and supply/demand imbalances added uncertainty to the markets. We continued to focus on the highest-quality investments throughout the period while seeking competitive yields across the municipal investment spectrum. 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 insurance company. Given our credit concerns regarding California's downgrade in December 2002 and its subsequent placement on negative watch in June 2003, we chose not to approve or participate in California's June issuance sale. Having sold a significant portion of the fund's state of California holdings by the end of the last fiscal year, we avoided unenhanced exposure to the state and related credits. The fund was able to take advantage of increased issuance in the market during the annual period by participating in high-quality, liquid municipal notes sales, such as the state of Texas' tax and revenue anticipation notes, making purchases at attractive yield levels.
Q: What has been the strategy for NY Tax Free Money Fund Investment?
A: As with Tax Free Money Fund Investment, we also adjusted this fund's weighted average maturity to prepare for seasonal events and supply/demand phenomena, such as tax time in April, high issuance in June, and the January and July reinvestment periods. Redemptions from tax-exempt money markets during the 2003 tax season totaled approximately 2%, the same percentage as in 2002. Given the flight to greater levels of safety benefiting US municipal markets and the relatively light season of tax redemptions, there was only a brief intramonth increase in yields during April. In December, we began preparing for what is known as "the January effect." We increased the fund's allocation to fixed-rate securities in order to lock in the higher yields available and thereby avoid some of the volatility that the variable-rate demand market usually experiences when cash inflows increase during the first weeks of the new year.
The fund began the year with a weighted average maturity of 36 days and ended the annual period with a weighted average maturity of 31 days.
Q: Do you anticipate any change in your management strategies?
A: At the end of the annual period, approximately 70% of each fund's assets was invested in municipal variable-rate demand notes and approximately 30% in municipal fixed-rate notes, bonds and commercial paper. We will continue to concentrate the portfolios in high-quality credits and intend to maintain our conservative investment strategies as we seek to provide high current income consistent with liquidity and capital preservation.
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 management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
NY Tax Free Money Fund Investment | Principal Amount ($) | Value ($) |
Municipal Investments 99.9% | ||
New York 92.9% | ||
Brookhaven & Smithtown, NY, Three Village Century School District, 1.5%, 6/30/2004 | 1,000,000 | 1,002,204 |
Chemung County, New York, Industrial Development Agency, Civic Facilities Revenue, Arnot Ogden Medical Center, Series A, 1.22%*, 3/1/2019 (c) | 740,000 | 740,000 |
Erie County, New York, Industrial Development Agency, Civic Facilities Revenue, Subordinate Adult Services, Revenue Bonds, 1.35%*, 6/1/2022 (c) | 5,395,000 | 5,395,000 |
Long Island, Power Authority, New York, Electric System Revenue: | ||
Sub-series 2A, 1.1%*, 5/1/2033 (c) | 800,000 | 800,000 |
1.1%*, 5/1/2033 (c) | 1,100,000 | 1,100,000 |
1.27%*, 5/1/2033 (c) | 200,000 | 200,000 |
Series 3B, 1.3%, 5/1/2033 (c) | 300,000 | 300,000 |
1.31%*, 12/1/2024 | 3,480,000 | 3,480,000 |
Nassau County, State GO: | ||
Series A, 2.0%, 4/15/2004 | 2,200,000 | 2,205,977 |
Series S, 5.0%, 3/1/2004 (b) | 1,200,000 | 1,207,783 |
New York, Metropolitan Transportation Authority, New York Dedicated Tax Fund, Series B, 1.18%*, 11/1/2022 (b) | 2,500,000 | 2,500,000 |
New York, Metropolitan Transportation Authority, New York Revenue: | ||
1.27%*, 5/15/2010 (b) | 100,000 | 100,000 |
1.28%*, 11/15/2021 (b) | 1,600,000 | 1,600,000 |
New York, Metropolitan Transportation Authority, New York Transportation Facilities Revenue, Series O, 6.375%, 7/1/2004 (b) | 3,000,000 | 3,126,414 |
New York, State Dormitory Authority Revenue: | ||
Series 1997, 0.85%, 1/9/2004 | 1,000,000 | 1,000,000 |
Series 651, 1.26%*, 7/1/2024 (b) | 400,000 | 400,000 |
New York, State Dormitory Authority Revenue, Cornell University, Series B, 1.18%*, 7/1/2030 | 1,305,000 | 1,305,000 |
New York, State Dormitory Authority Revenue, Mental Health Services, Series D-2B, 1.18%*, 2/15/2031 (b) | 3,000,000 | 3,000,000 |
New York, State Dormitory Authority Revenue, Rockefeller University, Series A-2, 1.18%*, 7/1/2032 | 1,500,000 | 1,500,000 |
New York, State Environmental Facilities Corp., Clean Drinking Water, Series F, 1.5%, 1/15/2004 | 1,600,000 | 1,600,424 |
New York, State GO, Environmental Quality, Series G, 1.03%*, 11/30/2018 (c) | 2,400,000 | 2,400,000 |
New York, State Housing Finance Agency Revenue, Historic Front Street, Series A, 1.18%*, 11/1/2036 (c) | 3,250,000 | 3,250,000 |
New York, State Housing Finance Agency Service Contract Revenue, Series D, 1.1%*, 3/15/2026 (c) | 1,800,000 | 1,800,000 |
New York, Tobacco Settlement Financing Corp., Revenue Bonds: | ||
Series R-2003, 1.28%*, 6/1/2021 (b) | 2,000,000 | 2,000,000 |
1.31%*, 12/1/2007 | 3,125,000 | 3,125,000 |
Series 1894, 1.31%*, 6/1/2012 | 2,300,000 | 2,300,000 |
New York City, New York, Housing Development Corp., Mortgage Revenue, Columbus Apartments, Series A, 1.1%*, 3/15/2025 (b) | 1,300,000 | 1,300,000 |
New York City, New York, Transitional Finance Authority Revenue, Series A-40, 1.17%*, 11/1/2026 (b) | 990,000 | 990,000 |
New York City, New York, Transitional Finance Authority Revenue, Future Tax Secured, Series A, 1.25%*, 2/15/2030 | 45,000 | 45,000 |
New York City, NY, Sales & Special Tax Revenue, Transitional Finance Authority: | ||
Series 2, 2.0%, 2/19/2004 | 1,000,000 | 1,001,194 |
Series 3, 1.12%*, 11/1/2022 | 1,350,000 | 1,350,000 |
New York City, NY, State GO, Series C-5, 1.08%*, 8/1/2020 (c) | 300,000 | 300,000 |
New York State, Jay Street Development Corp., Center Facilities Lease Revenue: | ||
Series A-3, 1.18%*, 5/1/2022 (c) | 1,250,000 | 1,250,000 |
Series A-3, 1.27%*, 5/1/2022 (c) | 560,000 | 560,000 |
New York State, Power Authority, Commercial Paper: | ||
1.04%, 1/21/2004 | 2,489,000 | 2,489,000 |
1.05%, 1/26/2004 | 1,500,000 | 1,500,000 |
New York, NY, State GO: | ||
Series A-3, 1.1%*, 8/1/2031 (c) | 1,400,000 | 1,400,000 |
Series B-6, 1.27%, 8/15/2005 (b) | 800,000 | 800,000 |
New York, NY, State GO, Revenue Anticipation Notes, Series A, 2.0%, 4/15/2004 | 1,000,000 | 1,003,023 |
New York, NY, Thruway Authority General Revenue, Bond Anticipation Notes, Series A, 1.125%, 3/25/2004 | 2,400,000 | 2,400,040 |
New York, NY, Transitional Finance Authority, 1.34%*, 11/1/2022 | 450,000 | 450,000 |
New York, NY, Transitional Finance Authority, Star Certificate, Series 2003-7, 1.27%*, 2/1/2009 | 545,000 | 545,000 |
New York, NY, Triborough Building & Tunnel Authority: | ||
Series A, 1.1%*, 1/1/2031 (b) | 765,000 | 765,000 |
Series B-13, 1.17%*, 11/15/2021 (b) | 500,000 | 500,000 |
Series 810, 1.26%*, 1/1/2017 | 400,000 | 400,000 |
Series R-2013, 1.26%*, 11/15/2021 (b) | 300,000 | 300,000 |
Oneida Indian Nation, New York, County GO, Revenue Bond, 1.1%*, 10/1/2032 (c) | 4,800,000 | 4,800,000 |
Onondaga County, Industrial Development Agency Civic Facilities Revenue, YMCA of Greater Syracuse, Series A, 1.35%*, 11/1/2025 (c) | 2,500,000 | 2,500,000 |
Rockland County, New York, Revenue Anticipation Bonds, 2.0%, 2/26/2004 | 3,000,000 | 3,004,075 |
Schenectady County, New York, Industrial Development Agency, Civic Facilities Revenue, Sunnyview, Series B, 1.45%*, 8/1/2033 (c) | 1,600,000 | 1,600,000 |
Suffolk County, County GO, 2.0%, 9/8/2004 | 500,000 | 503,152 |
Yates County, New York, Industrial Development Agency, Civic Facilities Revenue, Series B, 1.3%*, 9/1/2015 (c) | 2,300,000 | 2,300,000 |
Yonkers, New York, Industrial Development Agency, Civic Facilities Revenue, 1.12%*, 7/1/2021 (c) | 1,000,000 | 1,000,000 |
82,493,286 | ||
Puerto Rico 7.0% | ||
ABN AMRO Munitops, Certificate Trust, Series 2000-17, 1.06%*, 10/1/2008 | 3,600,000 | 3,600,000 |
Puerto Rico, State GO: | ||
Series EE, 1.15%*, 7/1/2029 (b) | 1,795,000 | 1,795,000 |
Series 813-D, 1.28%*, 7/1/2020 (b) | 750,000 | 750,000 |
6,145,000 | ||
Total Municipal Investments (Cost $88,638,286) | 88,638,286 |
| Value ($) | |
Money Market Funds 0.1% | ||
BlackRock Provident Institutional New York Money Fund Portfolio, 0.95%** | 18,878 | 18,878 |
Dreyfus New York Municipal Cash Management, 0.98%** | 91,100 | 91,100 |
Total Mutual Funds (Cost $109,978) | 109,978 | |
Total Investment Portfolio - 100.0% (Cost $88,748,264) (a) | 88,748,264 |
* 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 December 31, 2003.
** Rate shown is annualized seven-day yield at period end.
(a) The cost for federal income tax purposes was $88,748,609. At December 31, 2003, net unrealized depreciation for all securities based on tax cost was $345. This consisted of aggregated gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $345.
(b) Bond is insured by one of these companies:
As a % of Total Investment Portfolio | ||
MBIA | Municipal Bond Investors Assurance | 9.4 |
FSA | Financial Security Assurance | 7.2 |
AMBAC | AMBAC Assurance Corp. | 3.9 |
FGIC | Financial Guaranty Insurance Company | 1.8 |
FNMA | Federal National Mortgage Association | 1.5 |
(c) Security incorporates a letter of credit or line of credit from a major bank.
The accompanying notes are an integral part of the financial statements.
Tax Free Money Fund Investment | Principal Amount ($) | Value ($) |
Municipal Investments 99.9% | ||
California 3.9% | ||
California, Community Finance Authority, Tax & Revenue Anticipation Notes, Series A, 2.0%, 6/30/2004 | 1,200,000 | 1,207,081 |
California, Department of Water Resources and Power Supply Revenue, Series B-5, 1.26%*, 5/1/2022 (b) | 800,000 | 800,000 |
California, State GO, 2.0%, 6/23/2004 (b) | 4,500,000 | 4,519,821 |
6,526,902 | ||
Colorado 0.2% | ||
Colorado, Educational & Cultural Facilities Authority Revenue, National Jewish Federal Bond Program, Series A1, 1.3%*, 9/1/2033 (b) | 300,000 | 300,000 |
District of Columbia 1.2% | ||
District of Columbia, GO, Core City, 1.3%*, 3/1/2028 (b) | 1,730,000 | 1,730,000 |
Washington D.C., State GO, Series B, 1.25%*, 6/1/2030 (c) | 315,000 | 315,000 |
2,045,000 | ||
Florida 4.8% | ||
Capital Trust Agency, Florida Revenue, Seminole Tribe Resort, Series B, 1.25%*, 10/1/2033 (b) | 695,000 | 695,000 |
Gulf Breeze, Florida, Florida Municipal Bond Fund, Series A, 1.15%*, 3/31/2021 (b) | 760,000 | 760,000 |
Indian River County, Florida, Hospital & Healthcare Revenue, Hospital District, 1.33%*, 10/1/2015 (b) | 1,200,000 | 1,200,000 |
Jacksonville, Electric Authority Revenue, Series C-1, 0.95%, 1/13/2004 | 3,680,000 | 3,680,000 |
St. Luci County, GO, School District, 2.0%, 7/1/2004 (c) | 1,730,000 | 1,738,965 |
8,073,965 | ||
Georgia 5.3% | ||
Burke County, Development Authority Pollution Control Revenue, Oglethorpe Power Corp. Project, Series C, 1.31%*, 1/1/2018 (c) | 2,800,000 | 2,800,000 |
Fayette County, Georgia, Development Authority Educational Facilities Revenue, Catholic School Properties, Inc., Revenue Bond, 1.25%*, 4/1/2024 (b) | 100,000 | 100,000 |
Macon-Bibb County, Georgia, Hospital Authority Revenue, Medical Center Control, 1.2%*, 12/1/2018 (b) | 6,000,000 | 6,000,000 |
8,900,000 | ||
Hawaii 2.7% | ||
Hawaii, Department of Budget and Finance, Kahala Nui Project, Series D, 1.25%*, 11/15/2033 (b) | 1,800,000 | 1,800,000 |
Honolulu Hawaii City, 0.95%, 1/8/2004 | 2,800,000 | 2,800,000 |
4,600,000 | ||
Illinois 11.7% | ||
Chicago, Illinois, GO, Core City, 1.28%*, 1/1/2027 (c) | 4,425,000 | 4,425,000 |
Illinois, Educational Facilities Authority, 1.2%*, 3/1/2033 (b) | 1,300,000 | 1,300,000 |
Illinois, Industrial Development Revenue, Goodman Theatre Project, 1.2%*, 12/1/2033 (b) | 675,000 | 675,000 |
Illinois, Project Revenue, Development Finance Authority, Jewish Federation Projects, 1.15%*, 9/1/2024 (c) | 1,000,000 | 1,000,000 |
Illinois, State GO: | ||
Series B, 1.28%*, 10/1/2033 | 5,000,000 | 5,000,000 |
2.0%, 1/15/2004 | 5,000,000 | 5,001,985 |
Kankakee, Illinois, Unipair Foundation, Inc. Project, 1.35%*, 11/1/2031 (b) | 2,325,000 | 2,325,000 |
19,726,985 | ||
Indiana 3.6% | ||
ABN Amro Munitops, Certificate Trust, Series 2003-32, 1.21%, 1/15/2012 (c) | 3,000,000 | 3,000,000 |
Indiana, Special Assessment Revenue, Series A, 2.0%, 1/27/2004 (c) | 1,800,000 | 1,801,140 |
Indianapolis, Indiana, Industrial Economic Development Revenue, Jewish Federation Campus, 1.15%*, 4/1/2005 (b) | 1,220,000 | 1,220,000 |
6,021,140 | ||
Iowa 2.1% | ||
Iowa, Finance Authority Hospital Facility Revenue, Iowa Health Systems, Revenue Bond: | ||
Series B, 1.15%*, 7/1/2015 (c) | 100,000 | 100,000 |
Series B, 1.15%*, 1/1/2028 (c) | 1,930,000 | 1,930,000 |
Iowa, Finance Authority Revenue, Miss VY Regional Blood Center, 1.3%*, 2/1/2023 (b) | 1,440,000 | 1,440,000 |
3,470,000 | ||
Kentucky 5.3% | ||
Boone County, Kentucky, Pollution Control Revenue, Cincinnati Gas & Electric Co., Series A, 1.1%*, 8/1/2013 (b) | 1,800,000 | 1,800,000 |
Breckinridge County, County (GO) Lease, Series A, 1.3%*, 2/1/2032 (b) | 500,000 | 500,000 |
Pendleton County, Multi-County Lease Revenue, Associate County Leasing Program, 1.0%*, 1/9/2004 (b) | 3,500,000 | 3,500,000 |
Somerset, Kentucky, Blakley Family YMCA, Inc., Project, 1.3%*, 4/1/2015 (b) | 3,170,000 | 3,170,000 |
8,970,000 | ||
Maine 0.8% | ||
Maine, State GO, Tax Anticipation Notes, 1.75%, 6/30/2004 | 1,425,000 | 1,431,636 |
Massachusetts 3.6% | ||
Massachusetts State, Development Finance Agency, North Shore YMCA Project, Revenue Bond, 1.35%*, 11/1/2022 (b) | 6,000,000 | 6,000,000 |
Michigan 6.8% | ||
Detroit, Michigan, School District GO, Series 1805, 1.3%*, 11/1/2010 (c) | 570,000 | 570,000 |
Green Lake, Michigan, Economic Development Revenue, Interlochen Center Apartments Project, 1.15%*, 6/1/2027 (b) | 100,000 | 100,000 |
Kentwood, Michigan, Public Schools, Series A, 1.3%*, 5/1/2020 (c) | 3,195,000 | 3,195,000 |
Michigan, Hospital & Healthcare Revenue, University of Michigan, Series A, 1.12%*, 12/1/2027 | 100,000 | 100,000 |
Michigan, Municipal Bond Authority Revenue, Series B-2, 2.0%, 8/23/2004 (b) | 4,900,000 | 4,930,207 |
Michigan State, 1.03%, 5/4/2004 | 1,630,000 | 1,630,000 |
Oakland University, Michigan Revenue Bond, 1.25%*, 3/1/2031 (c) | 875,000 | 875,000 |
11,400,207 | ||
New Jersey 1.4% | ||
New Jersey, Economic Development Authority, Water Facilities Revenue, United Water NJ, Inc. Project, Series A, 1.26%*, 11/1/2026 (c) | 1,000,000 | 1,000,000 |
New Jersey, Transportation/Tolls Revenue, Series A10, 1.15%*, 1/1/2016 (c) | 790,000 | 790,000 |
Salem County, Industrial Pollution Control Financing Authority, E.I. du Pont de Nemours and Co., 1.0%*, 3/1/2012 | 500,000 | 500,000 |
2,290,000 | ||
New York 4.9% | ||
New York, Tobacco Settlement Financing Corp., Series 1894, 1.31%*, 6/1/2012 | 1,220,000 | 1,220,000 |
New York, Transportation/Tolls Revenue, Thruway Authority, Series 2003-4, 1.25%*, 4/1/2017 (c) | 1,220,000 | 1,220,000 |
New York City, NY, Sales & Special Tax Revenue, Transitional Finance Authority: | ||
Series 2, 2.0%, 2/19/2004 | 1,000,000 | 1,001,194 |
Series 3, 1.27%*, 11/1/2022 | 600,000 | 600,000 |
New York State, Jay Street Development Corp., Center Facilities Lease Revenue, Series A-3, 1.18%*, 5/1/2022 (b) | 3,250,000 | 3,250,000 |
Oneida Indian Nation, New York, County GO, Revenue Bond, 1.1%*, 10/1/2032 (b) | 900,000 | 900,000 |
8,191,194 | ||
North Carolina 4.1% | ||
North Carolina, Medical Care Community Health Care Facilities Revenue, Grace Hospital, Inc. Project, Revenue Bond, 1.25%*, 10/1/2025 (b) | 1,955,000 | 1,955,000 |
North Carolina, Municipal Power Agency No.1, Catawba Electric Revenue, Revenue Bond, 1.27%*, 1/1/2011 (c) | 4,995,000 | 4,995,000 |
6,950,000 | ||
Ohio 4.9% | ||
Akron Bath Copley, Ohio, Hospital Revenue District, Health Care Facilities Summer Project, 1.3%*, 12/1/2032 (b) | 2,500,000 | 2,500,000 |
Huron County, Ohio, Hospital Facilities Revenue, Fisher-Titus Medical Center, Series A, 1.22%*, 12/1/2027 (b) | 5,700,000 | 5,700,000 |
8,200,000 | ||
Oklahoma 0.9% | ||
Oklahoma, Industrial Authority Revenue, Integris Baptist Project, Series B, 1.3%*, 8/15/2029 (c) | 300,000 | 300,000 |
Tulsa, Oklahoma, Industrial Authority Revenue, First Mortgage Montercau, Series A, 1.3%*, 7/1/2032 (b) | 1,155,000 | 1,155,000 |
1,455,000 | ||
Pennsylvania 9.0% | ||
Allegheny County, Pennsylvania, Hospital Development Revenue, Presbyterian Healthcare Center, Series D, 1.27%*, 3/1/2020 (c) | 2,300,000 | 2,300,000 |
Dallastown, Pennsylvania, State GO, Area School District, 1.3%*, 2/1/2018 (c) | 3,800,000 | 3,800,000 |
Delaware Valley, Regional Finance Authority Local Government Revenue, Series 784, 1.15%*, 1/1/2026 (c) | 1,500,000 | 1,500,000 |
Latrobe, Pennsylvania, Industrial Development Authority Revenue, 1.4%*, 6/1/2033 (b) | 1,800,000 | 1,800,000 |
Lehigh County, Pennsylvania, Industrial Development Authority, Pollution Control Revenue, Allegheny Electric Corp., 1.0%*, 6/1/2014 (b) | 280,000 | 280,000 |
Pennsylvania, Hospital & Healthcare Revenue, Higher Educational Facilities Authority, Series 1807, 1.33%*, 1/1/2005 | 4,780,000 | 4,780,000 |
Pennsylvania, State Public School Building Authority, College Revenue, Northhampton County Area, 1.75%, 4/1/2004 (c) | 500,000 | 501,047 |
Pennsylvania, State Public School Building Authority, School Revenue, Series A-42, 1.21%*, 6/1/2028 (c) | 300,000 | 300,000 |
15,261,047 | ||
South Carolina 1.7% | ||
South Carolina, Jobs Economic Development Authority, Baptist Ministries, Inc., Revenue Bond, 1.25%*, 7/1/2020 (b) | 1,455,000 | 1,455,000 |
South Carolina, Jobs Economic Development Authority, Heathwood Hall Episcopal, Revenue Bond, 1.25%*, 8/1/2029 (b) | 1,500,000 | 1,500,000 |
2,955,000 | ||
Tennessee 0.6% | ||
Shelby County, State GO, Tax Anticipation Note, 2.0%, 6/30/2004 | 1,100,000 | 1,105,653 |
Texas 18.2% | ||
City of Houston, Texas, 0.95%, 1/20/2004 | 2,000,000 | 2,000,000 |
Corpus Christi, Texas, Electric Revenue, Utility System, 1.3%*, 7/15/2010 (c) | 2,330,000 | 2,330,000 |
Houston, Texas, Water & Sewer Revenue, Water & Sewer Systems Revenue, Series 2003-14, 1.28%*, 6/1/2026 (c) | 395,000 | 395,000 |
Houston, Texas, 0.93%, 1/14/2004 | 5,000,000 | 5,000,000 |
Houston, Texas, Water & Sewer Systems, Series A, 0.95%, 1/15/2004 | 3,000,000 | 3,000,000 |
Texas, Higher Education Revenue, Higher Education Authority, Inc., Series B, 1.12%*, 10/1/2029 (b) | 400,000 | 400,000 |
Texas, Securities Trust Certificates, Series 9056, 1.18%*, 7/21/2010 (c) | 5,900,000 | 5,900,000 |
Texas, State GO, 2.0%, 8/31/2004 | 8,500,000 | 8,549,622 |
Texas, State (REV) Lease, Trust Certificates, Series 9056, 1.28%*, 5/15/2010 (c) | 3,155,000 | 3,155,000 |
30,729,622 | ||
Virginia 0.6% | ||
Chesapeake Bay, Virginia, Transportation/Tolls Revenue, Bridge and Tunnel Commission, Series A 39, 1.21%*, 7/1/2025 (c) | 1,000,000 | 1,000,000 |
Washington 1.1% | ||
Port Tacoma, Washington, State GO, Core City, Series R-4036, 1.3%*, 12/1/2025 (c) | 1,900,000 | 1,900,000 |
West Virginia 0.5% | ||
Monongalia County, West Virginia, Building Commission Hospital Revenue, Monongalia General Hospital, Series A, 1.28%*, 7/1/2017 (b) | 940,000 | 940,000 |
Total Municipal Investments (Cost $168,443,351) | 168,443,351 | |
Money Market Funds 0.1% | ||
BlackRock Provident Institutional MuniFund Portfolio, 1.03%** | 10,609 | 10,609 |
Dreyfus Tax Exempt Cash Management, 1.02%** | 101,197 | 101,197 |
Total Money Market Funds (Cost $111,806) | 111,806 | |
Total Investment Portfolio - 100.0% (Cost $168,555,157) (a) | 168,555,157 |
* 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 December 31, 2003.
** Rate shown is annualized seven-day yield at period end.
(a) The cost for federal income tax purposes was $168,555,157.
(b) Security incorporates a letter of credit or line of credit from a major bank.
(c) Bond is insured by one of these companies:
As a % of Total Investment Portfolio | ||
MBIA | Municipal Bond Investors Assurance | 10.9 |
FGIC | Financial Guaranty Insurance Company | 8.4 |
FSA | Financial Security Assurance | 7.3 |
AMBAC | AMBAC Assurance Corp. | 4.9 |
The accompanying notes are an integral part of the financial statements.
Statements of Assets and Liabilities as of December 31, 2003 | ||
Assets | NY Tax Free Money Fund Investment | Tax Free Money Fund Investment |
Investments in securities, at amortized cost | $ 88,748,264 | $ 168,555,157 |
Receivable for investments sold | 35,000 | 370,000 |
Interest receivable | 357,274 | 560,879 |
Reimbursement due from Advisor | 3,927 | - |
Other assets | 6,766 | 6,302 |
Total assets | 89,151,231 | 169,492,338 |
Liabilities | ||
Due to custodian | 398,696 | 1,088,509 |
Dividends payable | 24,644 | 45,122 |
Advisory fee payable | - | 7,393 |
Administration and service fees payable | 46,121 | 91,085 |
Other accrued expenses and payables | 40,260 | 40,125 |
Total liabilities | 509,721 | 1,272,234 |
Net assets, at value | $ 88,641,510 | $ 168,220,104 |
Net Assets | ||
Net assets consist of: Undistributed net investment income | 16,206 | - |
Accumulated net realized gain (loss) | (345) | (21,975) |
Paid-in capital | 88,625,649 | 168,242,079 |
Net assets, at value | $ 88,641,510 | $ 168,220,104 |
Net Asset Value | ||
Net assets applicable to shares outstanding | $ 88,641,510 | $ 168,220,104 |
Shares outstanding, ($.001 par value per share, unlimited number of shares authorized) | 88,648,139 | 168,241,303 |
Net Asset Value, offering and redemption price per share (net assets divided by shares outstanding) | $ 1.00 | $ 1.00 |
The accompanying notes are an integral part of the financial statements.
Statements of Operations for the year ended December 31, 2003 | ||
Investment Income | NY Tax Free Money Fund Investment | Tax Free Money Fund Investment |
Income: Interest | $ 1,050,053 | $ 1,978,337 |
Expenses: Administration and service fees | 583,720 | 1,104,703 |
Advisory fee | 145,929 | 276,176 |
Auditing | 37,589 | 37,082 |
Legal | 10,004 | 16,391 |
Trustees' fees and expenses | 4,549 | 5,279 |
Reports to shareholders | - | 9,712 |
Registration fees | 21,201 | 11,097 |
Other | 1,964 | 2,892 |
Total expenses, before expense reductions | 804,956 | 1,463,332 |
Expense reductions | (74,838) | (82,219) |
Total expenses, after expense reductions | 730,118 | 1,381,113 |
Net investment income | 319,935 | 597,224 |
Net realized gain (loss) on investment transactions | 3,139 | 8,716 |
Net increase (decrease) in net assets resulting from operations | $ 323,074 | $ 605,940 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets - NY Tax Free Money Fund Investment | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2003 | 2002 | |
Operations: Net investment income | $ 319,935 | $ 719,666 |
Net realized gain (loss) on investment transactions | 3,139 | 23,104 |
Net increase (decrease) in net assets resulting from operations | 323,074 | 742,770 |
Distributions to shareholders from: Net investment income | (319,859) | (719,439) |
Fund share transactions: Proceeds from shares sold | 404,711,653 | 426,152,132 |
Reinvestment of distributions | 97,070 | 180,618 |
Cost of shares redeemed | (428,707,919) | (423,557,497) |
Net increase (decrease) in net assets from Fund share transactions | (23,899,196) | 2,775,253 |
Increase (decrease) in net assets | (23,895,981) | 2,798,584 |
Net assets at beginning of period | 112,537,491 | 109,738,907 |
Net assets at end of period (including undistributed net investment income of $16,206 at December 31, 2003) | $ 88,641,510 | $ 112,537,491 |
Other Information | ||
Shares outstanding at beginning of period | 112,548,831 | 109,773,578 |
Shares sold | 404,710,078 | 426,152,132 |
Shares issued to shareholders in reinvestment of distributions | 97,070 | 180,618 |
Shares redeemed | (428,707,840) | (423,557,497) |
Net increase (decrease) in Fund shares | (23,900,692) | 2,775,253 |
Shares outstanding at end of period | 88,648,139 | 112,548,831 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets - Tax Free Money Fund Investment | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2003 | 2002 | |
Operations: Net investment income | $ 597,224 | $ 1,220,186 |
Net realized gain (loss) on investment transactions | 8,716 | (828) |
Net increase (decrease) in net assets resulting from operations | 605,940 | 1,219,358 |
Distributions to shareholders from: Net investment income | (597,326) | (1,219,936) |
Fund share transactions: Proceeds from shares sold | 1,114,369,894 | 1,059,169,617 |
Reinvestment of distributions | 149,823 | 143,725 |
Cost of shares redeemed | (1,112,173,053) | (1,057,070,961) |
Net increase (decrease) in net assets from Fund share transactions | 2,346,664 | 2,242,381 |
Increase (decrease) in net assets | 2,355,278 | 2,241,803 |
Net assets at beginning of period | 165,864,826 | 163,623,023 |
Net assets at end of period | $ 168,220,104 | $ 165,864,826 |
Other Information | ||
Shares outstanding at beginning of period | 165,898,285 | 163,655,904 |
Shares sold | 1,114,366,248 | 1,059,169,617 |
Shares issued to shareholders in reinvestment of distributions | 149,823 | 143,725 |
Shares redeemed | (1,112,173,053) | (1,057,070,961) |
Net increase (decrease) in Fund shares | 2,343,018 | 2,242,381 |
Shares outstanding at end of period | 168,241,303 | 165,898,285 |
The accompanying notes are an integral part of the financial statements.
NY Tax Free Money Fund Investment
Years Ended December 31, | 2003 | 2002 | 2001a | 2000a | 1999a |
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 | .003 | .006 | .02 | .03 | .02 |
Net realized and unrealized gain (loss) on investment transactionsb | - | - | - | - | - |
Total from investment operations | .003 | .006 | .02 | .03 | .02 |
Less distributions from: Net investment income | (.003) | (.006) | (.02) | (.03) | (.02) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%)c | .32 | .65 | 1.89 | 3.23 | 2.41 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 89 | 113 | 110 | 86 | 74 |
Ratio of expenses before expense reductions (%) | .83 | .82 | .80d | .86d | .84d |
Ratio of expenses after expense reductions (%) | .75 | .75 | .75d | .75d | .75d |
Ratio of net investment income (%) | .33 | .65 | 1.86 | 3.19 | 2.37 |
a The Financial Highlights prior to April 27, 2001 include the Fund's information as a feeder fund to the NY Tax Free Money Portfolio for the respective periods. b Amount is less than $.0005 per share. c Total return would have ben lower had certain expenses not been reduced. d Includes expenses of the NY Tax Free Money Portfolio. |
Tax Free Money Fund Investment
Years Ended December 31, | 2003 | 2002 | 2001a | 2000a | 1999a |
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 | .003 | .007 | .02 | .03 | .02 |
Net realized and unrealized gain (loss) on investment transactionsb | - | - | - | - | - |
Total from investment operations | .003 | .007 | .02 | .03 | .02 |
Less distributions from: Net investment income | (.003) | (.007) | (.02) | (.03) | (.02) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%)c | .33 | .72 | 2.08 | 3.35 | 2.54 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 168 | 166 | 164 | 222 | 128 |
Ratio of expenses before expense reductions (%) | .80 | .80 | .79d | .82d | .80d |
Ratio of expenses after expense reductions (%) | .75 | .75 | .75d | .75d | .75d |
Ratio of net investment income (loss) (%) | .32 | .72 | 2.11 | 3.30 | 2.50 |
a The Financial Highlights prior to April 27, 2001 include the Fund's information as a feeder fund to the Tax Free Money Portfolio for the respective periods. b Amount is less than $.005 per share. c Total return would have been lower had certain expenses not been reduced. d Includes expenses of the Tax Free Money Portfolio. |
Note 1-Organization and Significant Accounting Policies
A. Organization
Scudder Advisor Funds (the "Trust") 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. NY Tax Free Money Fund Investment and Tax Free Money Fund Investment (each a "Fund," and collectively, the "Funds") are two of the funds the Trust offers to investors.
Each 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 Funds in the preparation of their financial statements.
B. 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.
C. Federal Income Taxes
Each Fund's policy is to comply with the requirements of the Internal Revenue Code of 1986, 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 Funds paid no federal income taxes and no federal income tax provisions were required.
At December 31, 2003 the Tax Free Money Fund Investment had a net tax basis capital loss carryforward of approximately $22,000 which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2005 ($3,800), December 31, 2007 ($5,500) and December 31, 2008 ($12,700), the respective expiration dates, whichever occurs first.
D. Distributions of Income
The net investment income of each Fund is declared as a daily dividend and is distributed to shareholders monthly.
Permanent book and tax differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax differences will reverse in a subsequent period. There were no significant book to tax differences for the Funds.
At December 31, 2003, the Funds' components of distributable earnings (accumulated losses) on a tax-basis are as follows:
NY Tax Free Money Fund Investment | Tax Free Money Fund Investment | |
Undistributed tax-exempt income | $ 16,206 | $ - |
Capital loss carryforwards | $ - | $ (22,000) |
Net unrealized appreciation (depreciation) on investments | $ (345) | $ - |
In addition, the tax character of distributions paid to shareholders by the Funds is summarized as follows:
For the Years Ended December 31, | 2003 | 2002 |
NY Tax Free Money Fund Investment Distributions from tax-exempt income | $ 316,374 | $ 719,439 |
Distributions from ordinary income | $ 3,485 | $ - |
Tax Free Money Fund Investment Distributions from tax-exempt income | $ 597,326 | $ 1,219,936 |
For tax purposes short-term capital gains distributions are considered ordinary income distributions.
E. Other
Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported 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 discounts and premiums are accreted/amortized for both tax and financial reporting purposes. Expenses directly attributed to a fund are charged to that fund, while expenses which are attributed to the Trust are allocated among the funds in the Trust on the basis of relative net assets.
Note 2-Fees and Transactions with Affiliates
Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor") is the Advisor for each Fund and Investment Company Capital Corp. ("ICCC" or the "Administrator") is the Administrator for each Fund, both an indirect, wholly owned subsidiary of Deutsche Bank AG. Under the Advisory Agreement, each Fund pays the Advisor an annual fee based on its average daily net assets which is calculated daily and paid monthly at the annual rate of 0.15%.
For the year ended December 31, 2003, the Advisor and Administrator contractually agreed to waive their fees and/or reimburse expenses of each Fund, to the extent necessary, to limit expenses to 0.75% of the average daily net assets of each Fund. Accordingly, for the year ended December 31, 2003 each Fund did not impose a portion of its Advisory fee as follows:
Advisory Fee | Amount Waived | Effective Rate | |
NY Tax Free Money Fund Investment | $ 145,929 | $ 74,838 | .07% |
Tax Free Money Fund Investment | $ 276,176 | $ 82,219 | .11% |
ICCC serves as Administrator and receives a fee based on each Fund's average daily net assets which is calculated daily and paid monthly at the annual rate of 0.60%.
Effective April 11, 2003, State Street Bank and Trust Company is each Fund's custodian. Prior to April 11, 2003, Deutsche Bank Trust Company Americas, an affiliate of the Advisor and Administrator, served as the Funds' custodian.
As compensation for his or her services, each Independent Trustee receives an aggregate annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each Fund in the Fund Complex for which he or she serves. In addition, the Chairman of the Fund Complex's Audit Committee receives an annual fee for their services. Payment of such fees and expenses is allocated among all such Funds described above in direct proportion to their relative net assets.
Note 3-Line of Credit Agreement
Prior to April 11, 2003, the Funds and several other affiliated funds (the "Participants") shared in a $200 million revolving credit facility administered by a syndicate of banks for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants were charged an annual commitment fee which was allocated, pro rata based upon net assets, among each of the Participants. Interest was calculated at the Federal Funds Rate plus 0.625 percent.
Effective April 11, 2003, the Funds entered into a new revolving credit facility administered by J.P. Morgan Chase Bank that provides $1.25 billion of credit coverage. The new revolving credit facility covers the funds and portfolios advised or administered by DeAM, Inc. or its affiliates. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Funds may borrow up to a maximum of 5 percent of their net assets under the agreement.
To the Trustees of Scudder Advisor Funds and Shareholders of NY Tax Free Money Fund Investment and Tax Free Money Fund Investment:
In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, 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 NY Tax Free Money Fund Investment and Tax Free Money Fund Investment (the "Funds") at December 31, 2003, 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 Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion.
Boston, Massachusetts | PricewaterhouseCoopers LLP |
Of the dividends paid from net investment income for the NY Tax Free Money Fund Investment and Tax Free Money Fund Investment for the taxable year ended December 31, 2003, 100% are designated as exempt interest dividends for federal income tax purposes.
Please contact 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 1-800-621-1048.
Independent Trustees | ||
Name, Date of Birth, Position with the Fund and Length of Time Served1,2 | Business Experience and Directorships During the Past 5 Years | Number of Funds in the Fund Complex Overseen |
Richard R. Burt 2/3/47 Trustee since 2002 | Chairman, Diligence LLC (international information-collection and risk-management firm) (September 2002 to present); Chairman, IEP Advisors, Inc. (July 1998 to present); Chairman of the Board, Weirton Steel Corporation3 (April 1996 to present); Member of the Board, Hollinger International, Inc.3 (publishing) (September 1995 to present), HCL Technologies Limited (information technology) (April 1999 to present), UBS Mutual Funds (formerly known as Brinson and Mitchell Hutchins families of funds) (registered investment companies) (September 1995 to present); and Member, Textron Inc.3 International Advisory Council (July 1996 to present). Formerly, Partner, McKinsey & Company (consulting) (1991-1994) and US Chief Negotiator in Strategic Arms Reduction Talks (START) with former Soviet Union and US Ambassador to the Federal Republic of Germany (1985-1991); Member of the Board, Homestake Mining3 (mining and exploration) (1998-February 2001), Archer Daniels Midland Company3 (agribusiness operations) (October 1996-June 2001) and Anchor Gaming (gaming software and equipment) (March 1999-December 2001). | 68 |
S. Leland Dill 3/28/30 Trustee since 1986 | Trustee, Phoenix Zweig Series Trust (since September 1989), Phoenix Euclid Market Neutral Funds (since May 1998) (registered investment companies); Retired (since 1986). Formerly, Partner, KPMG Peat Marwick (June 1956-June 1986); Director, Vintners International Company Inc. (wine vintner) (June 1989-May 1992); Coutts (USA) International (January 1992-March 2000), Coutts Trust Holdings Ltd., Coutts Group (private bank) (March 1991-March 1999); General Partner, Pemco (investment company) (June 1979-June 1986). | 66 |
Martin J. Gruber 7/15/37 Trustee since 1999 | Nomura Professor of Finance, Leonard N. Stern School of Business, New York University (since September 1964); Trustee, CREF (pension fund) (since January 2000); Director, Japan Equity Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since January 2000) and Singapore Fund, Inc. (since January 2000) (registered investment companies). Formerly, Trustee, TIAA (pension fund) (January 1996-January 2000). | 66 |
Joseph R. Hardiman 5/27/37 Trustee since 2002 | Private Equity Investor (January 1997 to present); Director, Corvis Corporation3 (optical networking equipment) (July 2000 to present), Brown Investment Advisory & Trust Company (investment advisor) (February 2001 to present), The Nevis Fund (registered investment company) (July 1999 to present), and ISI Family of Funds (registered investment companies) (March 1998 to present). Formerly, Director, Circon Corp.3 (medical instruments) (November 1998-January 1999); President and Chief Executive Officer, The National Association of Securities Dealers, Inc. and The NASDAQ Stock Market, Inc. (1987-1997); Chief Operating Officer of Alex. Brown & Sons Incorporated (now Deutsche Bank Securities Inc.) (1985-1987); General Partner, Alex. Brown & Sons Incorporated (now Deutsche Bank Securities Inc.) (1976-1985). | 66 |
Richard J. Herring 2/18/46 Trustee since 1999 | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Director, Lauder Institute of International Management Studies (since July 2000); Co-Director, Wharton Financial Institutions Center (since July 2000). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000). | 66 |
Graham E. Jones 1/31/33 Trustee since 2002 | Senior Vice President, BGK Realty, Inc. (commercial real estate) (since 1995); Trustee, 8 open-end mutual funds managed by Weiss, Peck & Greer (since 1985) and Trustee of 18 open-end mutual funds managed by Sun Capital Advisers, Inc. (since 1998). | 66 |
Rebecca W. Rimel 4/10/51 Trustee since 2002 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable foundation) (1994 to present); Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983 to present). | 66 |
Philip Saunders, Jr. 10/11/35 Trustee since 1986 | Principal, Philip Saunders Associates (economic and financial consulting) (since November 1988). Formerly, Director, Financial Industry Consulting, Wolf & Company (consulting) (1987-1988); President, John Hancock Home Mortgage Corporation (1984-1986); Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. (1982-1986). | 66 |
William N. Searcy 9/03/46 Trustee since 2002 | Private investor (since October 2003); Trustee of 18 open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998). Formerly, Pension & Savings Trust Officer, Sprint Corporation3 (telecommunications) (November 1989 to October 2003). | 66 |
Robert H. Wadsworth 1/29/40 Trustee since 2002 | President, Robert H. Wadsworth Associates, Inc. (consulting firm) (May 1983 to present). Formerly, President and Trustee, Trust for Investment Managers (registered investment company) (April 1999-June 2002); President, Investment Company Administration, L.L.C. (January 1992*-July 2001); President, Treasurer and Director, First Fund Distributors, Inc. (June 1990-January 2002); Vice President, Professionally Managed Portfolios (May 1991-January 2002) and Advisors Series Trust (October 1996-January 2002) (registered investment companies). * Inception date of the corporation which was the predecessor to the L.L.C. | 69 |
Interested Trustee | ||
Name, Date of Birth, Position with the Fund and Length of Time Served1,2 | Business Experience and Directorships During the Past 5 Years | Number of Funds in the Fund Complex Overseen |
Richard T. Hale4 7/17/45 Chairman since 2002 and Trustee since 1999 | Managing Director, Deutsche Investment Management Americas Inc. (2003-present); Managing Director, Deutsche Bank Securities Inc. (formerly Deutsche Banc Alex. Brown Inc.) and Deutsche Asset Management (1999 to present); Director and President, Investment Company Capital Corp. (registered investment advisor) (1996 to present); Director, Deutsche Global Funds, Ltd. (2000 to present), CABEI Fund (2000 to present), North American Income Fund (2000 to present) (registered investment companies); Director, Scudder Global Opportunities Fund (since 2003); Director/Officer Deutsche/Scudder Mutual Funds (various dates); President, Montgomery Street Income Securities, Inc. (2002 to present) (registered investment companies); Vice President, Deutsche Asset Management, Inc. (2000 to present). Formerly, Director, ISI Family of Funds (registered investment companies; 4 funds overseen) (1992-1999). | 201 |
Officers | |
Name, Date of Birth, Position with the Fund and Length of Time Served1,2 | Business Experience and Directorships During the Past 5 Years |
Richard T. Hale4 7/17/45 Chief Executive Officer since 2003 | See information presented under Interested Trustee. |
Brenda Lyons5 2/21/63 President since 2003 | Managing Director, Deutsche Asset Management. |
Kenneth Murphy5 10/13/63 Vice President and Anti-Money Laundering Compliance Officer since 2002 | Vice President, Deutsche Asset Management (September 2000-present). Formerly, Director, John Hancock Signature Services (1992-2000). |
Bruce A. Rosenblum 9/14/60 Vice President since 2003 Assistant Secretary since 2002 | Director, Deutsche Asset Management. |
Charles A. Rizzo5 8/5/57 Treasurer and Chief Financial Officer since 2002 | Director, Deutsche Asset Management (April 2000 to present); Formerly, 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). |
Salvatore Schiavone5 11/03/65 Assistant Treasurer since 2003 | Director, Deutsche Asset Management. |
Lucinda H. Stebbins5 11/19/45 Assistant Treasurer since 2003 | Director, Deutsche Asset Management. |
Kathleen Sullivan D'Eramo5 1/25/57 Assistant Treasurer since 2003 | Director, Deutsche Asset Management. |
John Millette5 8/23/62 Secretary since 2003 | Director, Deutsche Asset Management. |
Daniel O. Hirsch 3/27/54 Assistant Secretary since 2003 | Managing Director, Deutsche Asset Management (2002-present) and Director, Deutsche Global Funds Ltd. (2002-present). Formerly, 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). |
Caroline Pearson5 4/01/62 Assistant Secretary since 2002 | Managing Director, Deutsche Asset Management. |
1 Unless otherwise indicated, the mailing address of each Trustee and Officer with respect to fund operations is One South Street, Baltimore, MD 21202.
2 Length of time served represents the date that each Trustee or Officer first began serving in that position with Scudder Advisor Funds of which these funds are each a series.
3 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
4 Mr. Hale is a Trustee who is an "interested person" within the meaning of Section 2(a)(19) of the 1940 Act. Mr. Hale is Vice President of Deutsche Asset Management, Inc. and a Managing Director of Deutsche Asset Management, the US asset management unit of Deutsche Bank AG and its affiliates.
5 Address: Two International Place, Boston, Massachusetts.
The funds' Statement of Additional Information includes additional information about the funds' Trustees. To receive your free copy of the Statement of Additional Information, call toll-free: 1-800-621-1048.
Legal Counsel | Willkie Farr & Gallagher787 Seventh Avenue |
Shareholder Service Agent and Transfer Agent | Scudder Investments Service Company811 Main Street |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities can be found on our Web site - scudder.com (type "proxy voting" in the search field) - or on the SEC's Web site - www.sec.gov. To obtain a written copy without charge, call us toll free at (800) 621-1048. |
Custodian | State Street Bank and Trust CompanyOne Heritage Drive |
Independent Auditors | PricewaterhouseCoopers LLP125 High Street |
Principal Underwriter | If you have questions, comments or complaints, contact: Scudder Distributors, Inc.222 South Riverside Plaza |
Notes |
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ITEM 2. CODE OF ETHICS. As of the end of the period, December 31, 2003, Scudder Advisor Funds has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Fund's Board of Directors/Trustees has determined that the Fund has at least one "audit committee financial expert" serving on its audit committee: Mr. S. Leland Dill. This audit committee member is "independent," meaning that he is not an "interested person" of the Fund (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940) and he does not accept any consulting, advisory, or other compensatory fee from the Fund (except in the capacity as a Board or committee member). An "audit committee financial expert" is not an "expert" for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an "audit committee financial expert." Further, the designation of a person as an "audit committee financial expert" does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the "audit committee financial expert" designation. Similarly, the designation of a person as an "audit committee financial expert" does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. NY TAX FREE MONEY FUND INVESTMENT FORM N-CSR DISCLOSURE RE: AUDIT FEES The following table shows the amount of fees that PricewaterhouseCoopers, LLP ("PWC"), the Fund's auditor, 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 Auditor Billed to the Fund - -------------------------------------------------------------------------------- Fiscal Year Audit Fees Audit-Related Tax Fees All Other Ended Billed Fees Billed Billed Fees Billed December 31 to Fund to Fund to Fund to Fund - -------------------------------------------------------------------------------- 2003 $33,600 $1,237 $3,100 $0 - -------------------------------------------------------------------------------- 2002 $19,000 $0 $5,000 $0 - -------------------------------------------------------------------------------- The above "Tax Fees" were billed for professional services rendered for tax compliance. Services that the Fund's Auditor 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 All Fees Billed to Tax Fees Billed to Other Fees Billed Fiscal Year Adviser and Adviser and to Adviser and Ended Affiliated Fund Affiliated Fund Affiliated Fund December 31 Service Providers Service Providers Service Providers - -------------------------------------------------------------------------------- 2003 $538,457 $0 $0 - -------------------------------------------------------------------------------- 2002 $399,300 $69,500 $92,400 - -------------------------------------------------------------------------------- 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 Total Non-Audit Affiliated Fund Fees billed Service Providers to Adviser Total (engagements related and Affiliated Non-Audit directly to the Fund Service Fees operations and Providers Billed financial reporting (all other Total of Fiscal Year to Fund of the Fund) engagements) (A), (B) Ended December 31 (A) (B) (C) and (C) - -------------------------------------------------------------------------------- 2003 $3,100 $0 $3,967,000 $3,970,100 - -------------------------------------------------------------------------------- 2002 $5,000 $161,900 $17,092,950 $17,259,850 - -------------------------------------------------------------------------------- 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. TAX FREE MONEY FUND INVESTMENT FORM N-CSR DISCLOSURE RE: AUDIT FEES The following table shows the amount of fees that PricewaterhouseCoopers, LLP ("PWC"), the Fund's auditor, 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 Auditor Billed to the Fund - -------------------------------------------------------------------------------- Fiscal Year Audit Fees Audit-Related Tax Fees All Other Ended Billed Fees Billed Billed Fees Billed December 31 to Fund to Fund to Fund to Fund - -------------------------------------------------------------------------------- 2003 $33,600 $1,237 $5,200 $0 - -------------------------------------------------------------------------------- 2002 $19,000 $0 $2,900 $0 - -------------------------------------------------------------------------------- The above "Tax Fees" were billed for professional services rendered for tax compliance. Services that the Fund's Auditor 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 All Fees Billed to Tax Fees Billed to Other Fees Billed Fiscal Year Adviser and Adviser and to Adviser and Ended Affiliated Fund Affiliated Fund Affiliated Fund December 31 Service Providers Service Providers Service Providers - -------------------------------------------------------------------------------- 2003 $538,457 $0 $0 - -------------------------------------------------------------------------------- 2002 $399,300 $69,500 $92,400 - -------------------------------------------------------------------------------- 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 Total Non-Audit Affiliated Fund Fees billed Service Providers to Adviser Total (engagements related and Affiliated Non-Audit directly to the Fund Service Fees operations and Providers Billed financial reporting (all other Total of Fiscal Year to Fund of the Fund) engagements) (A), (B) Ended December 31 (A) (B) (C) and (C) - -------------------------------------------------------------------------------- 2003 $5,200 $0 $3,967,000 $3,972,200 - -------------------------------------------------------------------------------- 2002 $2,900 $161,900 $17,092,950 $17,257,750 - -------------------------------------------------------------------------------- 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. [RESERVED] ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. ITEM 8. [RESERVED] ITEM 9. 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) During the filing period of the report, management identified issues relating to the overall fund expense payment and accrual process. Management discussed these matters with the Registrant's Audit Committee and auditors, instituted additional procedures to enhance its internal controls and will continue to develop additional controls and redesign work flow to strengthen the overall control environment associated with the processing and recording of fund expenses. ITEM 10. 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: Deutsche New York Tax Free Money Fund By: /s/Richard T. Hale --------------------------- Richard T. Hale Chief Executive Officer Date: February 27, 2004 --------------------------- 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: Deutsche New York Tax Free Money Fund By: /s/Richard T. Hale --------------------------- Richard T. Hale Chief Executive Officer Date: February 27, 2004 --------------------------- By: /s/Charles A. Rizzo --------------------------- Charles A. Rizzo Chief Financial Officer Date: February 27, 2004 --------------------------- 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: Deutsche Tax Free Money Fund By: /s/Richard T. Hale --------------------------- Richard T. Hale Chief Executive Officer Date: February 27, 2004 --------------------------- 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: Deutsche Tax Free Money Fund By: /s/Richard T. Hale --------------------------- Richard T. Hale Chief Executive Officer Date: February 27, 2004 --------------------------- By: /s/Charles A. Rizzo --------------------------- Charles A. Rizzo Chief Financial Officer Date: February 27, 2004 ---------------------------