Scudder Plans to Shut Offices
                   To Focus on Internet Strategy

                   By PUI-WING TAM
                   Staff Reporter of THE WALL STREET JOURNAL

                   The Scudder group of no-load funds, in an effort to boost its recently
                   weak sales, is putting a heavy emphasis on the Internet.

                                          Monday, as part of a new focus on Internet
                                          distribution, Scudder Kemper Investments
                                          told employees in its Scudder no-load funds
                                          unit that the firm is shuttering its five retail
                   Scudder offices and two of the four centers where telephone
                   representatives field investor calls. Between 100 and 120 employees, or
                   around 2% of Scudder Kemper's 5,000 employees, are being laid off.

                   "Direct physical distribution" of mutual funds
                   no longer "has much of a future," explained
                   Mark Casady, mutual funds director of
                   Scudder Kemper, a unit of Swiss insurer
                   Zurich Group. Instead, "there's a magical new
                   world around e-commerce," he said.

                   Scudder Kemper's new Internet effort,
                   coming close on the heels of Merrill Lynch &
                   Co.'s decision to offer online trading of stocks and mutual funds, ratchets
                   up the pressure on other mutual-fund firms to develop an Internet strategy.
                   While many investors trade mutual funds online through their
                   discount-brokerage accounts, many mutual-fund firms themselves haven't
                   embraced the Internet as a selling medium.

                   The new Internet direction for the Scudder funds reflects the effort of Mr.
                   Casady and other Scudder Kemper officials to inject some magic into
                   Scudder's operations.

                   Over the past few years, Scudder Kemper has struggled to reconcile its
                   two very different fund operations: the Scudder funds sold directly to
                   consumers and the Kemper funds distributed through stockbrokers and
                   other intermediaries. Since the former Scudder, Stevens & Clark was
                   combined with Zurich Kemper Investments in late 1997, several
                   executives have left and the company has introduced employee-retention
                   programs in some units.

                   Meanwhile, many of the company's funds have performed poorly,
                   especially its "value"-oriented funds that seek to buy undervalued shares.
                   On average, the Scudder and Kemper stock funds produced a negative
                   0.28% return in the 12 months through March 31, compared with rival
                   Fidelity Investments' 17.92% gain, according to consultants Kanon Bloch
                   Carre in Boston. More recently, as the stock market has broadened away
                   from just large-company growth stocks, value funds have performed
                   better.

                   Investors have pulled more cash out of Scudder and Kemper funds this
                   year than they have pumped in. Scudder Kemper's mutual-fund
                   operations, with around $110 billion in assets, lost about $1 billion to
                   withdrawals through the end of April, according to fund research firm
                   Financial Research Corp. in Boston.

                   Over the next three to five years, Mr. Casady said Scudder Kemper
                   wants to offer a range of services, including transaction services, to
                   Scudder investors over the Internet. About one-third of customer inquiries
                   already arrive via Scudder's Web site, he says. Scudder Kemper is
                   searching for a partner to help it sell other firms' mutual funds and other
                   securities over the Scudder Web site, with an alliance likely to be
                   announced in about six months.

                   Mr. Casady said the e-commerce effort will be partly funded by cost
                   savings from shutting the retail offices (in Boston, New York, Boca Raton,
                   Fla., San Francisco and Chicago) and the phone centers in Salem, N.H.,
                   and Boston.

                   Scudder had more capacity in its phone centers than it needed, Mr.
                   Casady said.

                   Among mutual-fund companies making a big Internet push, "no-load"
                   direct sellers such as Vanguard Group and Fidelity Investments have
                   predominated. Meanwhile, load-fund firms, afraid to anger the brokers
                   who sell their funds, have been wary of using the Internet to directly
                   contact customers.

                   That is the way it is within dual-personality Scudder Kemper as well. The
                   Internet push is limited to the no-load Scudder funds. There is a Kemper
                   Web site, but it is geared to brokers and other intermediaries.

                   Scudder Kemper has reshuffled its businesses several times. Earlier this
                   year, for instance, Scudder's direct-funds business was folded into a group
                   whose primary mission is to sell funds to members of the American
                   Association of Retired Persons, or AARP. A branding campaign to
                   highlight the Scudder Kemper name last year also was quashed. Joan
                   Bloom, a former Scudder marketing executive who has since left the firm,
                   says, "There was no agreement on what the new Scudder Kemper identity
                   should be."

                   Mr. Casady says "it's always a challenge to bring any two companies
                   together," but he hopes the move toward an Internet-based model will
                   position Scudder for stronger growth.

                   In addition to the 100 to 120 layoffs, another 100 to 120 Scudder
                   Kemper employees are being moved to positions at another company,
                   Boston Financial Data Services. The lineup of 67 Scudder funds also will
                   be pruned, although a specific target number wasn't mentioned. A team
                   also will be set up to focus exclusively on coming up with new
                   e-commerce ideas.