Scudder
High Yield
Tax Free Fund
Semiannual Report
June 30, 1995
o Offers convenient access to high tax-free yields by investing primarily in
investment-grade municipal securities.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
SCUDDER HIGH YIELD TAX FREE FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
25 Officers and Trustees
26 Investment Products
and Services
27 How to Contact
Scudder
IN BRIEF
o Scudder High Yield Tax Free Fund posted a six-month total return of 11.35%
for the period ended June 30, 1995, as the municipal bond market recovered
from 1994's downturn.
o The Fund's 30-day net annualized SEC yield was 5.70% on June 30, 1995. For
investors in the top federal tax brackets of 36% and 39.6%, the Fund's
yield was equivalent to taxable yields of 8.91% and 9.44%, respectively.
(bar chart title)
The Fund's 30-Day Net Annualized SEC Yield
and Taxable Equivalent Yields
as of June 30, 1995
(bar chart data)
-----------------------------------------------------
The Fund's Taxable-Equivalent Taxable-Equivalent
30-Day Net Yield at 36% Tax Yield at 39.6%
Annualized Bracket Tax Bracket
SEC Yield
----------------------------------------------------
----------------------------------------------------
5.70 8.91 9.44
----------------------------------------------------
o The Fund outpaced the average performance of similar funds over numerous
time periods, according to Lipper Analytical Services, Inc. Please see page
6 for additional Lipper performance information.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
SCUDDER HIGH YIELD TAX FREE FUND
Dear Shareholders,
Bonds rallied strongly during the first half of 1995, producing returns
that more than erased last year's price declines. While municipal bonds enjoyed
solid price appreciation, they lagged overall fixed-income performance.
Statistics from the Investment Company Institute, a mutual fund trade
association, tell us that nationwide sales of long-term municipal bond funds
from January through May 1995 are just over half of what they were for the same
period a year ago. Events in Orange County, California, among other factors,
played a part in softening the demand for tax-exempt investments relative to
Treasuries. Nevertheless, the municipal bond market continues to play a critical
role in the development and maintenance of infrastructure and social services in
the United States, and as such remains an important component of the overall
bond market. The benefits of tax-free investing, moreover, provide perennial
appeal for investors in higher tax brackets.
We believe the recent overperformance of the Treasury market spells
opportunity for the municipal market. In the first few months of 1995,
Treasuries rallied strongly as U.S. and foreign investors pursued a "flight to
quality" in U.S. bonds following the financial crisis in Mexico. Meanwhile, the
U.S. dollar declined and the Japanese yen soared, prompting the Bank of Japan to
make large purchases of U.S. Treasury securities in an effort to bring the two
currencies into equilibrium. In the wake of this year's huge Treasury rally, we
are optimistic that the now small spread between Treasury and municipal yields
will result in heightened demand for municipal bonds.
Our philosophy in managing Scudder's tax-free funds remains unchanged as we
strive for attractive tax-free income and total returns with a strong
orientation toward value. If you have any questions about Scudder High Yield Tax
Free Fund, please call Scudder Investor Relations at 1-800-225-2470. Thank you
for choosing Scudder High Yield Tax Free Fund to help meet your investment
needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder High Yield Tax Free Fund
3
<PAGE>
Scudder High Yield Tax Free Fund
Performance Update as of June 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder High Yield Tax Free Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,807 8.07% 8.07%
5 Year $15,147 51.47% 8.66%
Life of
Fund* $18,268 82.68% 7.42%
Lehman Brothers Municipal Bond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,882 8.82% 8.82%
5 Year $14,870 48.70% 8.25%
Life of
Fund* $18,383 83.83% 7.51%
* The Fund commenced operations on January 22, 1987.
Index comparisons begin January 31, 1987.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
Scudder High Yield Tax Free Fund
Year Amount
- ----------------------
1/31/87 10000
87 9363
88 10030
89 11450
90 12060
91 13179
92 14998
93 17016
94 16904
95 18268
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
1/31/87 10000
87 9673
88 10390
89 11574
90 12362
91 13476
92 15063
93 16864
94 16892
95 18383
The unmanaged Lehman Brothers Municipal Bond Index is a market
value-weighted measure of municipal bonds issued across the
United States. Index issues have a credit rating of at least
Baa and a maturity of at least two years. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses.
- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended June 30
- ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1987* 1988 1989 1990 1991 1992 1993 1994 1995
-----------------------------------------------------------------------
Net Asset Value... $10.90 $10.77 $11.45 $11.18 $11.35 $11.92 $12.51 $11.52 $11.71
Income Dividends.. $ .34 $ .86 $ .79 $ .76 $ .77 $ .74 $ .70 $ .66 $ .70
Capital Gains
Distributions..... $ -- $ -- $ -- $ .11 $ .06 $ .19 $ .25 $ .26 $ --
Fund Total
Return (%)........ -6.37 7.13 14.15 5.33 9.28 13.80 13.46 -.66 8.07
Index Total
Return (%)........ -3.27 7.41 11.40 6.81 9.01 11.78 11.96 .20 8.82
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year, five year and life of Fund periods would have
been lower.
4
<PAGE>
Portfolio Summary as of June 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Hospital/Health 24%
Port/Airport Revenue 15% Diversification among our holdings
Toll Revenue 12% remains an important strategy for
Electric Utility Revenue 11% the Fund, allowing us to spread
General Obligation 8% portfolio risk among a large number
Housing Finance Authority 6% of geographic areas, bond sectors,
Pollution Control Revenue 6% and maturities.
Lease Rentals 5%
Resource Recovery 3%
Miscellaneous Municipal 10%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 19%
AA 12% Although the Fund is composed mainly
A 6% of investment-grade securities, we
BBB 45% are also currently maintaining
BB 1% holdings of select higher-yielding
B 1% securities to generate high income
Not Rated 16% and potential share-price appreciation.
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 2%
1 < 5 years 4% Bonds with effective maturities
5 < 10 years 28% between 10 and 20 years --
10 < 20 years 52% approximately 52% of the Fund's
Greater than 20 years 14% portfolio -- continue to offer
---- attractive value.
100%
====
Weighted average effective maturity: 14 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's investment portfolio,
see page 10.
5
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
SCUDDER HIGH YIELD TAX FREE FUND
Dear Shareholders,
Municipal bond performance took a turn for the better during the first half
of 1995 as inflation fears eased among market participants. Scudder High Yield
Tax Free Fund fully participated in this price recovery, posting a total return
of 11.35% during the semiannual period ended June 30. The Fund's net asset value
rose 7.83% from $10.86 per share on December 31, 1994, to $11.71 on June 30,
1995. The Fund's total return also included reinvestment of distributions to
shareholders consisting of $0.37 per share in income. Scudder High Yield Tax
Free Fund provided a 30-day net annualized SEC yield of 5.70% as of June 30,
1995, equivalent to an 8.91% taxable yield for investors in the 36% federal
income tax bracket.
With its resurgent performance, Scudder High Yield Tax Free Fund's total
return outpaced the average of similar funds over numerous time periods, as
shown in the chart below. Please turn to the Performance Update on page 4 for
more information on the Fund's long-term progress, including comparisons with
the unmanaged Lehman Brothers Municipal Bond Index.
Scudder High Yield Tax Free Fund Has Provided
Consistently Above-Average Performance
(Average annual returns for periods ended June 30, 1995)
------------------------------------------------------------------------
Period Scudder High Lipper Number of Funds
Yield Tax Free Average Tracked Fund
------------------------------------------------------------------------
------------------------------------------------------------------------
6 Months 11.35% 8.73% 39
------------------------------------------------------------------------
------------------------------------------------------------------------
1 year 8.07 7.70 34
2 years 3.61 4.11 27
3 years 6.79 6.32 23
4 years 8.51 7.65 21
5 years 8.66 7.63 21
Life of Fund 7.42 7.19 16
------------------------------------------------------------------------
Performance statistics compiled by Lipper Analytical Services, Inc.
Past performance is no guarantee of future results.
6
<PAGE>
Staging a Comeback
Following one of the worst years in history for fixed-income securities,
municipal money managers and other institutional investors put cash to work
during the first quarter of the year buying bonds they felt were significantly
oversold. The municipal bond market strengthened as interest rates declined from
their 1994 highs. The rally continued in April, May, and June, but at a slower
pace. Discount bonds performed particularly well, favored by investors because
of their greater upside potential versus par or premium bonds of equivalent
maturity.
As encouraging as the performance of tax-free bonds was, it did not match
the return of Treasuries. Long-term Treasury bonds rose 10.25% in price during
the second quarter of 1995, while municipal bonds of similar maturity rose only
1.40%. Demand for municipals was held back by several factors, including the
outstanding performance of the stock market, continued reluctance to invest in
bonds due to the negative impact of 1994's interest rate increases, and concerns
over the Orange County, California, bankruptcy. An additional restraint on
municipal bond performance has been Congressional discussion of a low-rate flat
tax.
While lessened demand for municipals has been a hindrance, the decrease in
the supply of bonds offset last year's negative performance. New issue volume
for the first six months of 1995 was $70 billion, down 25% from the $93 billion
of new issues sold during the first half of 1994. With refinancing activity so
diminished, we expect the supply of tax-exempt bonds to remain relatively low in
the near term.
(bar chart title)
Supply of New Municipal Issues
(in billions)
(bar chart data)
---------------------------------
1993 1994 1995
---------------------------------
---------------------------------
$292 $163 $138*
---------------------------------
* Estimated
7
<PAGE>
Portfolio Review
With the aid of several bonds that recovered significantly from depressed
prices, Scudder High Yield Tax Free Fund in the past six months more than
surpassed 1994's negative return. Strong performers included Denver airport
bonds, which benefited from the opening of the airport last February; and San
Joaquin, California, toll road bonds, which appreciated after investors regained
confidence in the bonds' secured status.
Throughout the period, we remained committed to our long-term strategy,
which emphasizes investment-grade, long-term municipal bonds providing high
relative yields. Although the Fund is composed primarily of investment-grade
securities (45% rated BBB and 37% rated A or higher), we also maintained
holdings of select higher-yielding, non-rated and below-investment-grade
securities to generate high income and potential share-price appreciation.
Non-rated bonds and issues rated below investment grade accounted for
approximately 18% of the Fund's portfolio on June 30, 1995.
Diversification among our holdings remains an important investment strategy
for Scudder High Yield Tax Free Fund, allowing us to spread the portfolio's risk
over a large number of geographic areas, bond sectors, and maturities. The Fund
held securities issued in 26 states plus the District of Columbia and the Virgin
Islands as of June 30, 1995. In addition, Fund assets were distributed among
hospital/healthcare bonds, general obligation bonds, and other sectors.
Lastly, call protection remains a fundamental part of our investment
strategy. When long-term interest rates on municipal bonds are declining, as
they have been so far in 1995, we believe it is important to protect a
significant portion of the Fund's holdings from being called in by their issuers
before maturity. (Generally, a bond is called in by its issuer so that it can be
refinanced at a lower prevailing rate.) Our call-protection strategy provides a
more reliable income stream than would exist if the portfolio held significant
amounts of high-yielding bonds that could be called in before their stated
maturities.
8
<PAGE>
Our Outlook
We are optimistic about the municipal bond market's near-term prospects. If
the Federal Reserve continues to cut short-term interest rates, demand for
intermediate- and longer-term municipals should increase as investors search for
higher yields. Moreover, municipal bond yields are at historical highs relative
to Treasuries, underscoring the fact that municipals have not rallied to the
extent of their taxable counterparts. At these levels, even nontraditional
buyers have been purchasing municipal bonds to take advantage of their price
appreciation potential. As always, Scudder High Yield Tax Free Fund's strategy
reflects our ongoing commitment to seek high relative tax-free income and a
competitive total return.
Sincerely,
Your Portfolio Management Team
/s/Philip G. Condon /s/Donald C. Carleton
Philip G. Condon Donald C. Carleton
9
<PAGE>
<TABLE>
SCUDDER HIGH YIELD TAX FREE FUND
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (d) Value ($)
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------
1.6% MONEY MARKET MUNICIPAL INVESTMENTS
---------------------------------------------------------------------------------------------
ARIZONA Maricopa County, AZ, Pollution Control Revenue
Refunding, Arizona Public Services, Palo Verde
Project, Series C, Daily Demand Note,
4.5%, 5/1/29*...................................... 2,000,000 A1+ 2,000,000
LOUISIANA West Baton Rouge Parish, LA, Dow Chemical
Company Project, Series B, Daily Demand Note,
4.25%, 12/1/16* ................................... 300,000 P1 300,000
TEXAS Angelina & Neches River Authority, TX, Solid Waste
Disposal, Daily Demand Note:
Series 1984-C, 4.65%, 5/1/14* .................... 200,000 MIG1 200,000
Series 1984-D, 4.65%, 5/1/14* .................... 100,000 MIG1 100,000
State of Texas, Tax and Revenue Anticipation Notes,
Series 1994, 5%, 8/31/95 ......................... 2,000,000 SP1+ 2,004,380
---------
TOTAL MONEY MARKET MUNICIPAL INVESTMENTS
(Cost $4,602,983) ................................ 4,604,380
---------
---------------------------------------------------------------------------------------------
98.4% MUNICIPAL INVESTMENTS
---------------------------------------------------------------------------------------------
ALASKA North Slope Borough, AK, Capital Appreciation,
Series B, Zero Coupon, 6/30/05 (c) ............... 7,600,000 AAA 4,307,148
ARIZONA McDowell Mountain Ranch, AZ, Community Facilities
District, 8.25%, 7/15/19 ......................... 3,000,000 NR 3,121,050
Salt River Project, AZ, Agricultural Improvement and
Power District, Electric Systems, 6%, 1/1/09 ..... 5,000,000 AA 5,163,750
CALIFORNIA California General Obligation, 5.75%, 3/1/15 (c) ... 3,000,000 AAA 2,890,290
Foothill Eastern Transportation Corridor Agency, CA,
Toll Road Revenue, Senior Lien, Series A:
6%, 1/1/34 ...................................... 4,000,000 BBB 3,650,000
5%, 1/1/35 ...................................... 2,150,000 BBB 1,644,814
Zero Coupon, 1/1/12 ............................. 6,000,000 BBB 3,186,600
Zero Coupon, 1/1/14 ............................. 2,875,000 BBB 1,531,052
Los Angeles County, CA, Certificate of Participation,
Marina Del Ray, Series A, 6.25%, 7/1/03 .......... 3,000,000 NR 3,011,190
Sacramento, CA, Cogeneration Project Revenue,
Proctor & Gamble Project, 6.55%, 7/1/14 .......... 2,500,000 BBB 2,475,775
San Joaquin Hills, CA, Transportation Corridor
Agency, Orange County, Senior Lien Toll Road
Revenue:
Zero Coupon to 1/1/02, 7.6% to 1/1/11 (b) ....... 5,000,000 BBB 3,335,900
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (d) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Zero Coupon to 1/1/02, 7.65% to 1/1/12 .......... 15,000,000 BBB 9,975,600
Zero Coupon to 1/1/02, 7.65% to 1/1/13 .......... 4,000,000 BBB 2,643,960
San Jose, CA, Redevelopment Agency, Tax Allocation
Revenue, 6%, 8/1/08 (c) .......................... 3,000,000 AAA 3,141,300
COLORADO Colorado Health Facilities Authority Revenue,
Rocky Mountain Adventist Healthcare Project,
Series 1993, 6.625%, 2/1/13 ...................... 3,500,000 BBB 3,409,420
Denver, CO, Airport System Revenue:
Series A, Zero Coupon, 11/15/00 .................. 1,140,000 BBB 819,204
Series A, Zero Coupon, 11/15/01 .................. 5,120,000 BBB 3,449,293
Series A, Zero Coupon, 11/15/03 .................. 3,050,000 BBB 1,800,690
Series A, Zero Coupon, 11/15/04 .................. 3,130,000 BBB 1,727,384
Series A, Zero Coupon, 11/15/05 .................. 1,855,000 BBB 955,251
6.75%, 11/15/13 .................................. 8,650,000 BBB 8,604,069
Series 1991-D, 7.75%, 11/15/13 (b) ............... 9,775,000 BBB 11,304,005
Series 1992-C, 6.125%, 11/15/25 .................. 3,000,000 BBB 2,758,890
DISTRICT OF
COLUMBIA District of Columbia, Hospital Refunding Revenue:
Medlantic Healthcare Group, Inc., Series 1993A,
5.5%, 8/15/06 (c) ............................... 1,305,000 AAA 1,307,049
Metlantic Washington Hospital Center, 1992 Series A,
7.125%, 8/15/19 ................................. 3,000,000 BBB 2,915,640
District of Columbia, General Obligation:
Series A-3, 5.6%, 6/1/07 ......................... 3,300,000 AAA 3,243,570
Series A, 5.875%, 6/1/05 (c) ..................... 4,300,000 AAA 4,392,106
District of Columbia, Certificate of Participation,
Series 1993, 7.3%, 1/1/13 ........................ 4,500,000 B 4,482,360
FLORIDA Broward County, FL, Housing Finance Authority,
Single Family Mortgage Revenue,
Zero Coupon, 4/1/14 .............................. 5,565,000 AA 847,494
Indian Trace, FL, Special Tax Revenue, Water
Management, 8.25%, 5/1/05 ........................ 2,785,000 NR 2,879,161
ILLINOIS Chicago, IL, General Obligation Lease, Board of
Education, Series A, 6%, 1/1/16 (c) .............. 5,000,000 AAA 5,023,400
Illinois Development Finance Authority:
Commonwealth Edison, 5.7%, 1/15/09 ............... 3,000,000 BBB 2,919,900
Solid Waste Revenue, Ford Heights Waste
Tire Project, 7.875%, 4/1/11 .................... 3,000,000 NR 2,998,080
Illinois Health Facilities Authority:
Community Living, 7%, 3/1/07 ..................... 2,000,000 BBB 2,034,280
Edward Hospital, Series A, 5.75%, 2/15/09 ........ 1,000,000 A 950,090
Winnebago County, IL, School District #122,
6.45%, 6/1/08 (c) ................................ 1,500,000 AAA 1,617,480
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER HIGH YIELD TAX FREE FUND
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (d) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
INDIANA Fishers, IN, Economic Development Revenue,
First Mortgage/United Student Aid Inc. Project,
Series 1989, 8.25%, 9/1/09 ....................... 2,000,000 NR 2,098,940
Indiana Health Facilities Finance Authority, Hospital
Refunding Revenue, Floyd Memorial Hospital,
6.625%, 2/15/13 .................................. 3,000,000 A 3,059,820
Indiana Municipal Power Agency, Power Supply
System Refunding Revenue, Series 1983B,
5.875%, 1/1/09 (c) ............................... 2,300,000 AAA 2,357,155
Indianapolis, IN, Economic Development, Refunding
and Improvement Revenue, Robin Run Village
Project, Series 1992, 7.625%, 10/1/22 ............ 1,500,000 BBB 1,553,535
MARYLAND Northeast Maryland, Waste Disposal Authority,
Southwest Resource Recovery System:
7.15%, 1/1/04 (c) ................................ 2,400,000 AAA 2,678,184
7.2%, 1/1/05 (c) ................................ 1,000,000 AAA 1,140,440
Prince George's County, MD, Greater Southeast
Health Care, 6.2%, 1/1/08 ......................... 1,000,000 BBB 907,720
MASSACHUSETTS Lowell, MA, General Obligation, 8.3%, 2/15/05 ...... 365,000 BBB 431,262
Massachusetts Health & Educational Facilities
Authority, Cooley Dickson Hospital Inc.,
7.125%, 11/15/18 .................................. 1,955,000 BBB 1,878,618
Massachusetts Housing Finance Agency, Multi#Family
Housing Project, Series 1988A, 8.8%, 8/1/21 ....... 665,000 A 711,783
Massachusetts Industrial Finance Agency:
Solid Waste Disposal, Peabody Monofil Project,
9%, 9/1/05 ....................................... 3,000,000 NR 3,067,380
Resource Recovery, North Andover Solid Waste,
Series A, 6.3%, 7/1/05 ........................... 2,750,000 BBB 2,774,310
Massachusetts Municipal Wholesale Electric
Company, Power Supply System Revenue, Series A,
5.1%, 7/1/07 (c) .................................. 3,840,000 AAA 3,703,066
MICHIGAN Detroit, MI, Unlimited Tax, General Obligation,
Distributable State Aid, Refunding, 5.25%, 5/1/09 (c) 2,450,000 AAA 2,340,730
Michigan Hospital Finance Authority Revenue:
Genesys Health System, Series A, 7.5%, 10/1/27 .... 2,000,000 BBB 2,028,160
Gratiot Community Hospital, Series 1988A,
8.75%, 10/1/07 .................................. 2,000,000 BB 2,081,700
Michigan Strategic Fund, Limited Obligation,
Revenue Refunding, Ford Motor Company Project,
Series A, 7.1%, 2/1/06 ........................... 1,000,000 A 1,085,220
MINNESOTA St. Paul, MN, Housing & Redevelopment Authority,
Healtheast Hospital Project, Series 1993A,
6.625%, 11/1/17 ................................... 3,500,000 BBB 3,379,110
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (d) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEVADA Las Vegas, NV, Downtown Redevelopment Agency,
Tax Increment Revenue, Subordinate Lien,
6.1%, 6/15/14 .................................... 1,500,000 BBB 1,431,930
Nevada Housing Single Family Mortgage, Series R,
5.95%, 10/1/11 ................................... 2,340,000 AA 2,425,597
NEW HAMPSHIRE New Hampshire Health & Educational Authority,
New Hampshire Catholic Charity, 8.4%, 8/1/11 ..... 600,000 BBB 638,304
New Hampshire Higher Education and Health
Facilities Authority:
Exeter Hospital, Series 1993, 6%, 10/1/13 ...... 1,100,000 A 1,055,725
Frisbie Memorial Hospital, Hospital Revenue,
Series 1993, 6.125%, 10/1/13 ................. 2,750,000 BBB 2,543,695
Monadnok Community Hospital, Series 1990,
9.125%, 10/1/20 ............................. 1,470,000 NR 1,690,500
St. Joseph's Hospital, 7.5%, 1/1/07 ............ 1,490,000 BBB 1,551,403
St. Joseph's Hospital, 7.5%, 1/1/16 ............ 2,600,000 BBB 2,655,874
NEW JERSEY New Jersey Economic Development Authority,
Methodist Homes, 7.5%, 7/1/25 .................... 1,000,000 NR 977,850
New Jersey Turnpike Authority, Series C:
6.5%, 1/1/08 ..................................... 1,000,000 A 1,077,810
6.5%, 1/1/16 ..................................... 5,000,000 A 5,335,500
NEW YORK Metropolitan Transportation Authority of New York,
Transit Facilities Revenue, 7%, 7/1/09 ........... 1,000,000 BBB 1,062,180
OHIO Gateway Economic Development Corporation of
Cleveland, OH, Stadium Revenue, 6.5%, 9/15/14 .... 4,000,000 NR 3,943,400
Hamilton County, OH, Health System Revenue,
Franciscan Sisters of the Poor Health System,
Providence Hospital, Series 1992, 6.8%, 7/1/08 ... 5,485,000 BBB 5,517,910
PENNSYLVANIA Clearfield, PA, Hospital Authority Revenue,
Clearfield Hospital, 6.875%, 6/1/16 .............. 4,375,000 NR 4,286,844
Montgomery County, PA, Redevelopment Authority,
Multi-Family Housing Revenue Refunding,
6.375%, 7/1/12 ................................... 5,500,000 BBB 5,330,985
Pennsylvania Higher Education Authority, Medical
College of Pennsylvania, Series B, 7.25%, 3/1/05 . 1,000,000 BBB 1,079,040
Philadelphia, PA, Health and Higher Education
Authority, Hospital Revenue, Graduate Health
System Obligated Group, 6.25%, 7/1/13 ........... 5,000,000 BBB 4,653,150
Philadelphia, PA, Hospital and Higher Education
Facilities Authority, Hospital Revenue, Albert
Einstein Medical Center, 7.625%, 4/1/11 .......... 2,500,000 A 2,671,875
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER HIGH YIELD TAX FREE FUND
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (d) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Pottsville Pennsylvania Hospital Authority, Warne Clinic,
7.25%, 7/1/24 .................................... 2,000,000 BBB 1,905,020
SOUTH CAROLINA South Carolina Jobs Economic Development
Authority, Hospital Facilities Revenue, South
Carolina Baptist Hospital, 5.3%, 8/1/09 (c) ...... 8,000,000 AAA 7,692,800
SOUTH DAKOTA South Dakota Health & Educational Facilities Authority
Revenue, Prairie Lakes Health Care System:
7.125%, 4/1/10 .................................. 1,000,000 BBB 1,024,900
7.25%, 4/1/22 ................................... 1,000,000 BBB 1,006,770
South Dakota Housing Development Authority,
Home Ownership Mortgage, Series A, 6.4%, 5/1/12 .. 3,500,000 AA 3,563,385
TEXAS Dallas-Fort Worth, TX, International Airport,
American Airlines Inc.:
7.5%, 11/1/25 ................................... 3,910,000 BBB 4,065,501
7.25%, 11/1/30 .................................. 5,000,000 BBB 5,152,950
Midland County, TX, Hospital District, Midland
Memorial Hospital, 7.5%, 6/1/16 .................. 1,500,000 BBB 1,563,990
Retama Development Corporation, Special Facilities
Revenue, Retama Park Racetrack Project,
Series 1993, 8.75%, 12/15/18 .................... 5,000,000 NR 4,200,000
Rio Grande Valley, TX, Health Facilities Development
Corp., Retirement Facility Revenue,
6.2%, 8/1/06 (c).................................. 1,600,000 AAA 1,682,672
UTAH Salt Lake City, UT, Hospital Revenue, Intermountain
Healthcare Systems, 6.65%, 2/15/12 ............... 2,000,000 AA 2,015,080
VERMONT Swanton, VT, Electric System Revenue, Series 1993,
6.7%, 12/1/23 .................................... 1,155,000 BBB 1,157,472
Vermont Housing Finance Agency, Multi-Family
Housing Revenue, Northgate Housing Project,
8.25%, 6/15/20 ................................... 1,065,000 NR 1,098,015
VIRGIN ISLANDS Virgin Islands Public Finance Authority, General
Obligation, Matching Fund Loan Note, Series A,
7.25%, 10/1/18 ................................... 6,500,000 NR 6,697,405
VIRGINIA Pittsylvania County, VA, Industrial Development
Authority, Multitrade of Pittsylvania County,
L.P. Project:
7.45%, 1/1/09 .................................. 1,500,000 NR 1,555,095
7.5%, 1/1/14 .................................. 3,500,000 NR 3,601,850
WASHINGTON King County, WA, Public Hospital District,
Hospital Revenue, Valley Medical Center,
6.25%, 9/1/09 (c) ................................ 530,000 AAA 554,343
Washington Public Power Supply System,
Refunding Revenue:
Nuclear Project #2, Series B, 5.65%, 7/1/08 .... 3,030,000 AA 2,961,855
Nuclear Project #2, Inverse Floater,
5.12%, 7/1/12**................................ 3,000,000 AA 2,347,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (d) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Nuclear Project #3, Series B, 5.65%, 7/1/08 .... 3,640,000 AA 3,516,531
Nuclear Project #3, Series B, 7.125%, 7/1/16 ... 2,500,000 AA 2,719,950
Nuclear Project #3, Series C, 5.1%, 7/1/07 .... 5,500,000 AA 5,111,865
WYOMING Wyoming Community Development Authority, Single
Family Mortgage Revenue, Series A, 5.85%, 6/1/13 .. 2,750,000 AA 2,663,842
-----------
TOTAL MUNICIPAL INVESTMENTS
(Cost $268,557,929) .............................. 275,582,741
-----------
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $273,160,912) (a) .......................... 280,187,121
===========
<FN>
(a) The cost for federal income tax purposes was $273,160,912. At June 30, 1995, net unrealized appreciation for all securities
was $7,026,209. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess
of market value over tax cost of $10,754,610 and aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $3,728,401.
(b) At June 30, 1995 these securities, in part, have been pledged to cover initial margin requirements for open futures contracts.
</FN>
</TABLE>
<TABLE>
AT JUNE 30, 1995, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond Index Sept. 1995 25 2,854,437 2,838,281
== ========= =========
Total net unrealized appreciation on open futures contracts sold short............ 16,156
=========
(c) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC, FSA or MBIA.
(d) All of the securities held have been determined to be of the appropriate credit quality as required by the Fund's
investment objectives. Credit ratings are either Standard & Poor's Ratings Group, Moody's Investors Service, Inc.
or Fitch Investors Service, Inc. Unrated securities (NR) have been determined to be of comparable quality to rated
eligible securities.
* Floating rate and monthly, weekly, or daily demand notes are securities whose yields vary with a designated market index or
market rate, such as the coupon-equivalent of the Treasury bill rate. Variable rate demand notes are securities whos
yields are periodically reset at levels that are generally comparable to tax#exempt commercial paper. These securities are
payable on demand within seven calendar days and normally incorporate an irrevocable letter of credit or line of credit
from a major bank. These notes are carried, for purposes of calculating average weighted maturity, at the longer of the period
remaining until the next rate change or to the extent of the demand period.
** Inverse floating rate notes are instruments whose yields have an inverse relationship
to benchmark interest rates. These securities are shown at their rate as of June 30, 1995.
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCUDDER HIGH YIELD TAX FREE FUND
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $273,160,912) (Note A) . . . . . $ 280,187,121
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,025,371
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 34,206
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,246,698
LIABILITIES
Payables:
Due to custodian bank . . . . . . . . . . . . . . . . . . . . . . . . $ 21,390
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483,054
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . 91,380
Daily variation margin on open futures contracts (Note A). . . . . . . 11,719
Accrued management fee (Note C) . . . . . . . . . . . . . . . . . . . 118,464
Other accrued expenses (Note C) . . . . . . . . . . . . . . . . . . . 86,567
--------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 812,574
-------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . $ 284,434,124
=============
NET ASSETS
Net assets consist of:
Net unrealized appreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,026,209
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,156
Accumulated net realized loss . . . . . . . . . . . . . . . . . . . . (5,786,907)
Shares of beneficial interest . . . . . . . . . . . . . . . . . . . . 243,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 282,935,666
-------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . $ 284,434,124
-------------
NET ASSET VALUE, offering and redemption price per share . . . . . . . . $(284,434,124)
=============
24,299,955 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) . . . . . . . . . . . . . . . $11.71
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<CAPTION>
Six Months Ended June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.......................................... $ 9,128,687
Expenses:
Management fee (Note C)........................... $ 701,204
Services to shareholders (Note C)................. 212,559
Custodian and accounting fees (Note C)............ 53,989
Trustees' fees (Note C)........................... 25,651
Reports to shareholders........................... 39,471
Auditing.......................................... 25,642
Legal............................................. 17,838
State registration................................ 9,994
Other............................................. 15,170 1,101,518
----------------------------
Net investment income............................. 8,027,169
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on:
Investments............................... (68,248)
Futures (2,803,156) (2,871,404)
----------
Net unrealized appreciation during the period on:
Investments............................... 22,245,036
Futures................................... 1,624,906 23,869,942
------------------------
Net gain on investments........................... 20,998,538
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $29,025,707
===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
17
<PAGE>
SCUDDER HIGH YIELD TAX FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income. . . . . . . . . . . . . . . . $ 8,027,169 $ 17,780,175
Net realized loss from investment transactions . . . (2,871,404) (1,023,858)
Net unrealized appreciation (depreciation)
on investments during the period . . . . . . . . . 23,869,942 (43,029,825)
------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . . . . 29,025,707 (26,273,508)
------------ ------------
Distributions to shareholders from net investment
income ($.37 and $.66 per share, respectively) . . (8,996,465) (16,810,879)
------------ ------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . 44,468,471 126,895,781
Net asset value of shares issued to shareholders
in reinvestment of distributions . . . . . . . . . 5,991,177 10,306,439
Cost of shares redeemed . . . . . . . . . . . . . . (45,831,996) (151,370,479)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . . . . 4,627,652 (14,168,259)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . 24,656,894 (57,252,646)
Net assets at beginning of period . . . . . . . . . 259,777,230 317,029,876
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed
net investment income of $969,296 at
December 31, 1994) . . . . . . . . . . . . . . . . $284,434,124 $259,777,230
============ ===========
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . . 23,910,066 25,261,001
------------ -----------
Shares sold . . . . . . . . . . . . . . . . . . . . . 3,858,392 10,881,281
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . . 517,915 974,025
Shares redeemed . . . . . . . . . . . . . . . . . . . (3,986,418) (13,206,241)
------------ -----------
Net increase (decrease) in Fund shares. . . . . . . . 389,889 (1,350,935)
------------ -----------
Shares outstanding at end of period . . . . . . . . . 24,299,955 23,910,066
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS JANUARY 22, 1987
ENDED (COMMENCEMENT
JUNE 30, YEARS ENDED DECEMBER 31, OF OPERATIONS TO
1995 --------------------------------------------------------------------- DECEMBER 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989 1988 1987
----------- --------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period . . . . . . . . . . . $10.86 $12.55 $11.90 $11.67 $11.19 $11.35 $11.06 $10.52 $12.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income (a) . . . .33 .70 .67 .72 .76 .77 .76 .83 .78
Net realized and unrealized
gain (loss) on investments . . .89 (1.73) .93 .50 .69 (.11) .35 .54 (1.48)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations . . . . . . . . . . 1.22 (1.03) 1.60 1.22 1.45 .66 1.11 1.37 (.70)
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment income . . (.37) (.66) (.67) (.72) (.76) (.77) (.76) (.83) (.78)
From net realized gains on
investment transactions . . . -- -- (.21) (.27) (.21) (.05) (.06) -- --
In excess of net realized gains
on investment transactions . . -- -- (.07) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions . . . . . . (.37) (.66) (.95) (.99) (.97) (.82) (.82) (.83) (.78)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period . $11.71 $10.86 $12.55 $11.90 $11.67 $11.19 $11.35 $11.06 $10.52
====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (%) 11.35** (8.38) 13.85 10.88 13.36 6.02 10.32 13.48 (5.81)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) . . . . . . 284 260 317 204 160 129 114 74 36
Ratio of operating expenses net,
to average daily net assets
(%) (a) . . . . . . . . . . . . .80* .80 .92 .98 1.00 1.00 1.00 .67 .40*
Ratio of net investment income
to average daily net assets (%) 5.83* 6.01 5.38 6.10 6.65 6.88 6.72 7.65 8.45*
Portfolio turnover rate (%). . . 20.4* 34.3 56.4 56.6 45.5 33.4 75.8 36.7 131.8*
(a) Reflects a per share
amount of expenses,
exclusive of management
fees, reimbursed by the
Adviser of . . . . . . . . $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ .010 $ .066
Reflects a per share amount
of management fee not
imposed by the Adviser of. $ .01 $ .02 $ .01 $ -- $ -- $ .01 $ .01 $ .05 $ .06
Operating expense ratio,
including expenses
reimbursed, management
fee and other expenses
not imposed (%). . . . . . 98* .97 .98 .99 1.04 1.09 1.15 1.25 1.80*
<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
19
<PAGE>
SCUDDER HIGH YIELD TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder High Yield Tax Free Fund (the "Fund") is organized as a diversified
series of Scudder Municipal Trust, a Massachusetts business trust, which is
registered under the Investment Company Act of 1940, as amended, as an open#end
management investment company. The policies described below are followed
consistently by the Fund in the preparation of its financial statements in
conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, which prices reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Trustees. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
FUTURES CONTRACTS. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period the
Fund sold securities index futures to hedge against declines in the value of
portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with
a financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract.
Subsequent payments ("variation margin") are made or received by the Fund each
day, dependent on the daily fluctuations in the value of the underlying
security, and are recorded for financial reporting purposes as unrealized gains
or losses by the Fund. When entering into a closing transaction, the Fund will
realize a gain or loss equal to the difference between the value of the futures
contract to sell and the futures contract to buy. Futures contracts are valued
at the most recent settlement price.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Certain risks may arise upon entering into futures contracts including the
risk that an illiquid secondary market will limit the Fund's ability to close
out a futures contract prior to the settlement date and that a change in the
value of a futures contract may not correlate exactly with changes in the value
of the securities or currencies hedged. When utilizing futures contracts to
hedge the Fund gives up the opportunity to profit from favorable price
movements in the hedged positions during the term of the contract.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable and tax exempt income to its
shareholders. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
At December 31, 1994, the Fund had a net tax basis capital loss carryforward
of approximately $2,144,000 which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
December 31, 2002, the expiration date. In addition, from November 1, 1994
through December 31, 1994, the Fund incurred approximately $1,713,000 of net
realized capital losses. As permitted by tax regulations, the Fund intends to
elect to defer these losses and treat them as arising in the fiscal year ending
December 31, 1995.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital
loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in futures
21
<PAGE>
SCUDDER HIGH YIELD TAX FREE FUND
- --------------------------------------------------------------------------------
contracts. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment transactions are accounted for on a trade#date basis. Interest
income is accrued pro rata to the earlier of call or maturity.
B. Purchases and Sales of Securities
- --------------------------------------------------------------------------------
Purchases and sales of long-term municipal investments for the six
months ended June 30, 1995, were $30,685,218 and $26,418,113, respectively.
The aggregate face value of futures contracts opened and closed during the
six months ended June 30, 1995 was $12,332,406 and $40,389,563, respectively.
C. Related Parties
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objectives, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Agreement. The
management fee payable under the Agreement is equal to an annual rate of 0.70%
on the first $200,000,000 of average daily net assets, and 0.65% of such net
assets in excess of $200,000,000, computed and accrued daily and payable
monthly. The Agreement also provides that if the Fund's expenses exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the six months ended June 30, 1995, the fee pursuant to the Agreement
amounted to $701,204 which was equivalent to an annual effective rate of .51%
of the Fund's average daily net assets. The Adviser has agreed not to impose
all or a portion of its management fee until April 30, 1996, and during such
period to maintain the annualized expenses of the Fund at not more than .80% of
average daily net assets. For the six months ended June 30, 1995, the Adviser
did not impose a portion of its management fee amounting to $251,039.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the six months ended June 30, 1995, the amount charged to the Fund by SSC
aggregated $161,219 of which $26,401 is unpaid at June 30, 1995.
Effective January 23, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the six months ended June 30, 1995, the
amount charged to the Fund by SFAC aggregated $27,088, of which $4,971 is
unpaid at June 30, 1995.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1995, Trustees' fees aggregated $25,651.
23
<PAGE>
(This page intentionally left blank.)
24
<PAGE>
OFFICERS AND TRUSTEES
David S. Lee*
President and Trustee
Daniel Pierce*
Vice President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
Peter B. Freeman
Trustee; Corporate Director and Trustee
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
College of Business Administration
Juris Padegs*
Trustee
Donald C. Carleton*
Vice President
Cuyler W. Findlay*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including management fees and expenses, call or
write for a free prospectus. Read it carefully before you invest or send money. +A portion of the income
from the tax-free funds may be subject to federal, state, and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark,
Inc. are traded on various stock exchanges. ++For information on Scudder Treasurers Trust,(TM) an institutional
cash management service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000 minimum), call
1-800-541-7703.
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<CAPTION>
<S> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges, and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
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THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
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Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
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For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
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Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
27
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Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 36 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
