Scudder
High Yield
Tax Free Fund
Annual Report
May 31, 1999
No-Load Funds
A fund that seeks to provide a high level of income, exempt from regular federal
income tax, from an actively managed portfolio consisting primarily of
investment-grade municipal securities.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder High Yield Tax Free Fund
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Date of Inception: 1/22/87 Total Net Assets as of Ticker Symbol: SHYTX
5/31/99: $450.1 million
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o Scudder High Yield Tax Free Fund's fiscal year end has changed from December
31 to May 31. For its abbreviated fiscal year beginning January 1, 1999, through
May 31, 1999, Scudder High Yield Tax Free Fund posted a total return of 0.18%.
Over the 12 months ended May 31, the Fund returned 4.17%, outpacing the 3.57%
average performance of the Fund's peers over the same period, according to
Lipper Analytical Services, Inc.
o For the one-, three-, five-, and ten-year periods, the Fund's total returns
placed it in the top one-third of municipal bond funds as tracked by Lipper.
Please see page 6 for additional Lipper performance information.
o As of May 31, 1999, Scudder High Yield Tax Free Fund's 30-day net annualized
SEC yield was 4.46%, equivalent to a 7.38% taxable yield for investors subject
to the 39.6% maximum federal income tax rate.
o Scudder High Yield Tax Free Fund received an overall Morningstar Rating(TM) of
five stars out of 1,586 tax free funds as of May 31, 1999.*
Table of Contents
3 Letter from the Fund's President 22 Financial Highlights
4 Performance Update 23 Notes to Financial Statements
5 Portfolio Summary 26 Report of Independent Accountants
6 Portfolio Management Discussion 27 Tax Information
10 Glossary of Investment Terms 28 Officers and Trustees
11 Investment Portfolio 29 Investment Products and Services
19 Financial Statements 30 Scudder Solutions
* Morningstar proprietary rankings reflect historical risk-adjusted performance
as of May 31, 1999. Ratings are subject to change monthly, and past
performance does not guarantee future results. Morningstar ratings are
calculated from the Fund's three-, five-, and ten-year average annual returns
in excess of 90-day Treasury bills with appropriate fee adjustments, and a
risk factor that reflects fund performance below 90-day T-bill returns. The
Fund received five stars for the three-year period, five stars for the
five-year period, and four stars for the ten-year period. The top 10% of funds
in a broad asset class receive 5 stars and the next 22.5% receive 4 stars. The
Fund was rated among 1586, 1184, and 368 funds in its broad asset class for
the three-, five-, and ten-year periods, respectively.
2 - Scudder High Yield Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder High Yield Tax Free Fund's
abbreviated fiscal year ended May 31, 1999. We have changed the Fund's fiscal
year end from December 31 to May 31 as part of a larger effort to create
efficiencies and reduce the costs of producing Scudder fund regulatory materials
such as fund reports and prospectuses. Going forward, you will receive regular
reports following the Fund's annual and semiannual periods ending in May and
November. For its abbreviated fiscal year that began January 1, 1999, and ended
May 31, 1999, the Fund posted a total return of 0.18%. Over the 12 months ended
May 31, the Fund returned 4.17%, outpacing the 3.57% average performance of the
Fund's peers over the same period, according to Lipper.
Investors concerned about the increased volatility of the financial markets
during the past 12 months should find the chart on page 7 of interest. The chart
shows that over the 12-month period ended May 31, 30-year municipal bonds
displayed measurably less price volatility than comparable Treasury securities.
For more information concerning Scudder High Yield Tax Free Fund's market
performance, strategy, and outlook, please see the Portfolio Management
Discussion that begins on page 6.
For those interested in new Scudder products, we are pleased to introduce
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both funds are
managed with the goal of providing long-term outperformance compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Please call a Scudder Investor Information representative at 1-800-225-2470
if you have questions about your Fund. Page 31 provides more information on how
to contact Scudder. Thank you for choosing Scudder High Yield Tax Free Fund to
help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder High Yield Tax Free Fund
3 - Scudder High Yield Tax Free Fund
<PAGE>
Performance Update as of May 31, 1999
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Fund Index Comparisons
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Total Return
----------------------------------------------------
Period Growth of Average
Ended 5/31/1999 $10,000 Cumulative Annual
----------------------------------------------------
Scudder High Yield Tax Free Fund
----------------------------------------------------
1 Year $ 10,417 4.17% 4.17%
5 Year $ 14,392 43.92% 7.55%
10 Year $ 21,564 115.64% 7.99%
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Lehman Brothers Municipal Bond Index
----------------------------------------------------
1 Year $ 10,467 4.67% 4.67%
5 Year $ 14,147 41.47% 7.18%
10 Year $ 21,062 110.62% 7.73%
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Growth of a $10,000 Investment
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THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Yearly periods ended May 31
Scudder High Lehman Brothers
Yield Tax Municipal
Free Fund Bond Index
'89 10000 10000
'90 10550 10733
'91 11614 11814
'92 12968 12976
'93 14757 14529
'94 14984 14888
'95 16274 16243
'96 16935 16986
'97 18555 18395
'98 20701 20121
'99 21564 21062
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.
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
Yearly Periods Ended May 31
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 11.13 $ 11.38 $ 11.72 $ 12.33 $ 11.61 $ 11.86 $ 11.66 $ 12.09 $ 12.80 $ 12.69
- ------------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .75 $ .77 $ .74 $ .70 $ .67 $ .70 $ .68 $ .66 $ .66 $ .64
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Capital Gains Distributions $ .10 $ .06 $ .19 $ .25 $ .27 $ -- $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 5.50 10.08 11.66 13.79 1.54 8.61 4.06 9.57 11.57 4.17
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Index Total Return (%) 7.33 10.08 9.83 11.97 2.47 9.11 4.57 8.29 9.39 4.67
- ------------------------------------------------------------------------------------------------------------------------------
</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 temporarily capped expenses,
the average annual total return for the Fund for the five year and ten year
periods would have been lower.
4 - Scudder High Yield Tax Free Fund
<PAGE>
Portfolio Summary as of May 31, 1999
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Diversification
- --------------------------------------------------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Hospital/Health 21%
Toll Revenue/Transportation 12%
Electric Utility Revenue 12%
Project Revenue/Special Assessment 9%
Port/Airport Revenue 8%
State General Obligation/Lease 7%
Sales/Special Tax 6%
Core Cities/Lease 4%
Housing Finance Authority 4%
Miscellaneous Municipal 17%
----------------------------------------------
100%
----------------------------------------------
Diversification remains an important strategy for the Fund, allowing us to
spread risk over a large number of sectors, maturities, and geographic areas.
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Quality
- --------------------------------------------------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
AAA 32%
AA 9%
A 9%
BBB 22%
Not Rated 28%
--------------------------------------
100%
--------------------------------------
Weighted Average Quality: AA
We continue to de-emphasize lower quality bonds at present, because differences
in yield between higher and lower quality municipal bonds are sufficiently
narrow that investors in lower-quality bonds are not sufficiently compensated
for taking on additional credit risk.
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Effective Maturity
- --------------------------------------------------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Less than 1 2%
1 through 13%
5 through 8 17%
8 through 15 52%
Greater than 15 16%
--------------------------------------
100%
--------------------------------------
Weighted Average Effective Maturity: 10.70 years
The Fund continues its cautious stance on the market with respect to interest
rate risk, maintaining an average effective maturity similar to that of its
competitive universe.
For more complete details about the Fund's investment portfolio, see page 11.
A quarterly Fund Summary and Portfolio Holdings are availabe upon request.
5 - Scudder High Yield Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Following a series of overseas and domestic financial crises that prompted
uncertainty, volatility, and a "flight to quality," bond yields plummeted, then
returned to July 1998 levels by the close of Scudder High Yield Tax Free Fund's
most recent fiscal year. During its abbreviated fiscal year beginning January 1,
1999, through May 31, 1999, the Fund returned 0.18%. Over the 12 months ended
May 31, the Fund returned 4.17%, outpacing the 3.57% average performance of the
Fund's peers over the same period as tracked by Lipper Analytical Services,
Inc., an independent analyst of investment performance. As of May 31, 1999,
Scudder High Yield Tax Free Fund's 30-day net annualized SEC yield was 4.46%,
equivalent to a 7.38% taxable yield for investors subject to the 39.6% maximum
federal income tax rate.
Scudder High Yield Tax Free Fund's long-term performance record remains highly
competitive: As shown in the accompanying table, the Fund's average annual total
returns placed it in the top one-third of its peers over one-, three-, five-,
and ten-year periods. 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.
Competitive Long-Term Returns
(Average annual returns for periods ended May 31, 1999)
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Scudder
High Lipper Number
Yield Tax average of
Free Fund annual Funds Percentile
Period return return Rank tracked Ranking
- ------------------------------------------------------------------------
1 year 4.17% 3.57% 16 of 53 Top 30%
3 years 8.39% 7.28% 5 of 36 Top 14%
5 years 7.55% 6.85% 6 of 27 Top 22%
10 years 7.99% 7.11% 3 of 15 Top 20%
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Past performance does not guarantee future results.
Lipper Analytical Services, Inc., is an independent analyst of investment
performance. Performance includes reinvestment of dividends and capital gains.
- ----------
A Market Roller Coaster
Market turmoil hit a peak in the wake of the Russian currency devaluation late
last summer, followed by the near collapse of the Long Term Capital Management
hedge fund. Volatility in the U.S. stock market increased greatly while a
massive reallocation to U.S. Treasury bonds led to substantially lower yields.
The Federal Reserve's three interest rate cuts during the third and fourth
quarters of 1998 helped to gradually restore market stability. During this
period, the U.S. economy continued to grow beyond all expectations, with a
dramatic 6% annualized increase in GDP for the fourth quarter of 1998 and a
strong start in 1999 that seemed to assure at least 4% GDP growth this year.
This show of strength, in turn, worried bond investors, who responded by sending
30-year Treasury bond yields back up to July 1998 levels. Over the twelve months
ended May 31, yields of 30-year Treasury bonds ended slightly higher, beginning
at 5.60% and ending at 5.84%. Over the same time frame, yields of 30-year AAA
insured municipal bonds also rose slightly, from 5.10% to 5.22%.
6 - Scudder High Yield Tax Free Fund
<PAGE>
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Municipals Provided Greater Stability
Monthly prices of 30-year AAA-rated municipal bonds
compared with prices of 30-year U.S. Treasury bonds,
5/31/98-5/31/99.
- ---------------------------------------
30-year 30-year
U.S. AAA-rated
Treasury municipal
bonds bonds
- ---------------------------------------
5/31/98 100.14 100.77
103.47 100
7/31/98 101.57 100
107.12 102.33
9/30/98 114.87 105.57
111.47 102.33
11/30/98 109.83 102.33
111.47 102.33
1/31/99 111.14 103.13
103.32 101.55
3/31/99 102.11 100.77
104.665 100.31
5/31/99 100 98.19
Past performance is not indicative of future results.
Source: Scudder Kemper Investments, Inc.
In addition to high tax free yields, municipal bonds have historically offered
greater price stability over time than Treasury bonds of comparable maturity.
The accompanying chart demonstrates the record over the past 12 months, when
most financial markets were at a peak of volatility.
A Two-Part Strategy
Scudder High Yield Tax Free Fund's goal is to provide a high level of tax-free
income from an actively managed portfolio consisting primarily of
investment-grade municipal bonds. During the Fund's abbreviated fiscal year, we
maintained a two-part strategy: First, we focused on premium "cushion" bonds --
bonds with high coupons that compensate investors for the fact that they can be
redeemed by their issuer in a relatively short period of time. Second, we
continued the Fund's strong emphasis on call protection. (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 for
the Fund than would exist if the portfolio held a significant proportion of
bonds that could be called in before their stated maturities. In terms of
maturity, we focused on 10- to 13-year bonds, because we believe they offer the
best total return potential, based on our outlook for interest rates and the
yield differentials among bonds across the maturity spectrum.
We are continuing to de-emphasize lower quality bonds at present, because
differences in yield between higher and lower quality municipal bonds are
sufficiently narrow that investors in lower-quality bonds are, in our view, not
sufficiently compensated for taking on additional credit risk. As of May 31,
1999. AAA bonds represented 32% of Fund assets while lower-rated BBB bonds
comprised only 22% of the Fund's portfolio.
The Fund continues its cautious stance on the market with respect to
interest rate risk, maintaining an average duration similar to that of its
competitive universe. As of May 31, 1999, the Fund's average duration was 7.7
years. (Duration gives relative weight to both principal and interest payments
through the life of a bond and has replaced average maturity as the standard
measure of interest rate sensitivity among professional investors. Generally,
the shorter the duration, the less sensitive a portfolio will be to changes in
interest rates.)
7 - Scudder High Yield Tax Free Fund
<PAGE>
Diversification remains an important strategy for the Fund,
allowing us to spread risk over a large number of sectors, maturities, and
geographic areas. As of May 31, 1999, the Fund held securities issued in 30
states plus the District of Columbia and the Virgin Islands. The Portfolio
Summary on page 5 provides more information about the Fund's holdings, including
quality, maturity, and sector representation.
Outlook
In light of recent increases in short-term interest rates -- including an
increase in the Federal Funds target rate following the close of the period -- a
long-predicted slowdown in U.S. economic activity seems more likely to occur in
1999. At the same time, we expect that inflation will remain restrained, which
should place an upper limit on interest rate increases. Though as a general rule
we maintain an average maturity in line with our market, we will take a cautious
approach during the coming months. We will also monitor the level of worldwide
economic activity closely over the remainder of the year: The United States has
been the only significant engine of economic growth for some time. If the
incipient economic recovery in Asia and other parts of the world gathers steam,
we will watch for additional upward pressure on inflation and short-term
interest rates and adjust our strategy accordingly.
In terms of the Fund's day-to-day strategy, we will maintain our current
conservative risk profile until yields of lower-quality bonds become more
attractive. The Fund will also continue to seek competitive returns by
purchasing 10- to 13-year premium cushion bonds and noncallable bonds over the
8 - Scudder High Yield Tax Free Fund
<PAGE>
coming months. And rather than attempting to make investment decisions based on
short-term market movements, we will search for the most attractively valued
bonds as we seek a high level of tax-free income for our shareholders.
Sincerely,
Your Portfolio Management Team
/s/Philip G. Condon /s/Rebecca L. Wilson
Philip G. Condon Rebecca L. Wilson
Scudder High Yield
Tax Free Fund:
A Team Approach to Investing
Scudder High Yield Tax Free Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an
important role in the Fund's management process. Team members work together to
develop investment strategies and select securities for the Fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders, and other investment specialists who work in our offices
across the United States and abroad. We believe our team approach benefits
Fund investors by bringing together many disciplines and leveraging our
extensive resources.
Lead Portfolio Manager Philip G. Condon has had responsibility for the Fund's
day-to-day operations since its inception in 1987, having joined the Adviser
in 1983. Mr. Condon has over 17 years of experience in the investment
industry.
Portfolio Manager Rebecca L. Wilson joined the Adviser in 1986 and the Fund as
a Portfolio Manager in 1998. Ms. Wilson contributes over 12 years of
experience in municipal investing and research.
9 - Scudder High Yield Tax Free Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the federal,
state, or local government or a corporation that
obligates the issuer to pay the bondholder a
specified amount of interest for a stated period --
usually a number of years -- and to repay the face
amount of the bond at its maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith and
credit" (including the taxing and further
borrowing power) of the city, state, or agency that
issues the bond. A general obligation bond is repaid
with the issuer's general revenue and borrowings.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace -- in other words, when
too much money is chasing too few goods. High
inflation has a negative impact on the prices of
fixed-income securities.
MUNICIPAL BOND An interest-bearing debt security issued by a
state or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund is based on
the sum of the market value of all the securities
owned by the fund, plus assets less liabilities,
divided by the number of outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument would
have to provide to equal that of a tax-free
municipal bond on an after-tax basis.
30-DAY SEC YIELD The standard yield reference for bond funds, based on
a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings of every holding in a given fund's
portfolio, net of expenses, assuming each is held to
maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return -- annualized or
compound -- is based on a combination of share price
changes plus income and capital gain distributions,
if any, expressed as a percentage gain or loss in
value.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
10 - Scudder High Yield Tax Free Fund
<PAGE>
Investment Portfolio as of May 31, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
District of Columbia
District of Columbia, General Obligation, Series 1992 A1, Daily Demand Note, 3.45%,
10/1/2007* ............................................................................................ 1,000,000 1,000,000
Illinois
Chicago, IL, O'Hare International Airport, American Airlines Project, 3.4%, Daily Demand Note,
12/1/2017* ............................................................................................ 1,000,000 1,000,000
New York
Long Island Power Authority, NY, Electric System Revenue, Series 6, Daily Demand Note,
3.2%, 5/1/2033* ....................................................................................... 1,000,000 1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $3,000,000) 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 99.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Alaska
North Slope Borough, AK, General Obligation:
Series 1994 B, Zero Coupon, 6/30/2005 (b) ............................................................. 7,600,000 5,820,308
Series 1998 A, Zero Coupon, 6/30/2009 (b) ............................................................. 3,000,000 1,857,210
Arizona
Maricopa County, AZ, Industrial Development Agency, Resource Recovery, AMT, Series 1995,
9.25%, 5/1/2015 ....................................................................................... 3,720,000 3,734,322
McDowell Mountain Ranch, AZ, General Obligation, Series 1994, 8.25%, 7/15/2019 .......................... 3,000,000 3,573,510
California
California Community Development Authority, Irvine Airport, Series 1998, 5.25%, 5/15/2025 ............... 3,750,000 3,738,900
California Pollution Control Finance Authority, Solid Waste Disposal Revenue, Canadian Fibre
of Riverside PJ, AMT, Series 1997 A, 9%, 7/1/2019 ..................................................... 6,000,000 6,163,380
Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Revenue:
Series 1995 A, Step-up Coupon, 0% to 1/1/2005, 7.05% to 1/1/2010 ...................................... 7,000,000 5,708,990
Series 1995 A, Step-up Coupon, 0% to 1/1/2005, 7.1% to 1/1/2011 ....................................... 4,415,000 3,662,816
Series 1995 A, Step-up Coupon, 0% to 1/1/2005, 7.1% to 1/1/2012 ....................................... 6,000,000 4,981,380
Series 1995 A, Step-up Coupon, 0% to 1/1/2005, 7.15% to 1/1/2014 ...................................... 2,875,000 2,384,726
Long Beach, CA:
Aquarium of the Pacific Project, 6.1%, 7/1/2010 ....................................................... 4,500,000 4,764,465
Harbor Revenue, AMT, Series 1998 A, 6%, 5/15/2009 (b) ................................................. 2,770,000 3,058,468
Los Angeles County, CA, Certificate of Participation, Marina Del Ray, Series 1993 A, 6.25%,
7/1/2003 .............................................................................................. 5,500,000 5,771,975
Millbrae, CA, Residential Facilities, AMT, Series 1997 A, 7.375%, 9/1/2027 .............................. 1,000,000 1,065,660
Sacramento, CA, City Financing Authority, Convention Center Hotel, Series 1999 A, 6.25%,
1/1/2030 .............................................................................................. 4,000,000 3,965,200
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
San Francisco, CA, City and County Redevelopment Finance Agency, Residential Facilities, AMT,
Series 1996 A, 8.5%, 12/1/2026 .................................................................. 2,000,000 2,276,940
San Joaquin Hills, CA, Transportation Corridor Agency, Prerefunded 1/1/2008:
Series 1993, Step-up Coupon, 0% to 1/1/2002, 7.6% to 1/1/2011 (c) ............................... 5,000,000 5,263,650
Series 1993, Step-up Coupon, 0% to 1/1/2002, 7.65% to 1/1/2012 (c) .............................. 15,000,000 15,825,900
Series 1993, Step-up Coupon, 0% to 1/1/2002, 7.65% to 1/1/2013 (c) .............................. 4,000,000 4,220,240
Colorado
Denver, CO, Airport System Revenue, AMT:
Series 1990 A, Zero Coupon, 11/15/2003 .......................................................... 3,050,000 2,472,300
Series 1990 A, Zero Coupon, 11/15/2004 .......................................................... 3,130,000 2,403,840
Series 1990 A, Zero Coupon, 11/15/2005 .......................................................... 1,855,000 1,348,066
Series 1991 A, Zero Coupon, 11/15/2001 .......................................................... 5,120,000 4,586,547
Series 1991 D, 7.75%, 11/15/2013 ................................................................ 9,775,000 12,093,044
Denver, CO, Urban Renewal Authority, Tax Increment Revenue, Pavilions Convention, AMT,
Series 1989, 7.75%, 9/1/2016 .................................................................... 2,500,000 2,850,800
Connecticut
Connecticut State Development Authority, Aquarium Project Revenue, Mystic Marinelife
Aquarium, Series 1997 A, 6.875%, 12/1/2017 ...................................................... 1,000,000 1,051,470
Connecticut State Health Finance Authority, Edgehill Project, Series 1997 A, 6.875%, 7/1/2017 ..... 3,000,000 3,188,970
Mashantucket Western Pequot Tribe, CT:
Series 1996 A, 6.4%, 9/1/2011 ................................................................... 1,510,000 1,639,996
Series 1996 A, 6.4%, Prerefunded 9/1/2007, 9/1/2011 (c) ......................................... 1,490,000 1,710,341
Series 1997 B, 5.7%, 9/1/2012 ................................................................... 1,000,000 1,016,210
Series 1999 B, Zero Coupon, 9/1/2010 ............................................................ 2,000,000 1,071,600
Series 1999 B, Zero Coupon, 9/1/2011 ............................................................ 2,000,000 1,004,200
Series 1999 B, Zero Coupon, 9/1/2012 ............................................................ 2,000,000 942,000
Series 1999 B, Zero Coupon, 9/1/2013 ............................................................ 2,000,000 885,080
Series 1999 B, Zero Coupon, 9/1/2014 ............................................................ 2,000,000 829,720
District of Columbia
District of Columbia, American College of Obstetricians, Series 1999, 4.75%, 8/15/2018 (b) ........ 500,000 464,785
District of Columbia, Convention Center Authority, Series 1998, 5.25%, 10/1/2014 (b) .............. 3,000,000 3,038,190
District of Columbia, General Obligation, Certificate of Participation, Series 1993, 7.3%, 1/1/2013 4,650,000 5,022,512
District of Columbia, General Obligation, Series 1993 A, 5.875%, 6/1/2005 (b) ..................... 4,300,000 4,626,972
District of Columbia, Hospital Revenue, Metlantic Washington Hospital Center, Series 1992 A,
7.125%, Prerefunded 8/15/2002, 8/15/2019 (c) .................................................... 3,000,000 3,325,950
District of Columbia, Water and Sewer Authority, Public Utility Revenue, Series 1998, 6%,
10/1/2014 (b) ................................................................................... 8,445,000 9,351,149
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
Florida
<S> <C> <C>
Bayside, FL, Community Development District, Capital Improvement Revenue, 6.3%, 5/1/2018 ... 980,000 983,009
Broward County, FL, Housing Finance Authority, Single Family Mortgage Revenue, Zero Coupon,
Series 1983 A, 4/1/2014 .................................................................. 1,635,000 371,913
Indian Trace, FL:
Community Development Authority, Water Management District Bonds, Series 1995, 6.875%,
4/1/2010 ................................................................................. 2,155,000 2,246,911
Special Tax Revenue, Water Management, Series 1995, 8.25%, 5/1/2005 ...................... 1,580,000 1,718,503
Orlando, FL, Special Assessment Revenue, Conroy Road Interchange Project, Series 1998 A,
5.8%, 5/1/2026 ........................................................................... 1,500,000 1,462,050
Georgia
Athens-Clarke County, GA, Wesley Woods, Series 1997, 6.35%, 10/1/2017 ...................... 1,575,000 1,594,467
Coweta County, GA, Residential Care Facilities for the Elderly, Wesley Woods, Series 1996 A,
8.25%, 10/1/2026 ......................................................................... 1,000,000 1,141,010
Fulton County, GA, School District, General Obligation, Series 1998, 5.375%, 1/1/2017 ...... 1,500,000 1,561,665
Georgia Municipal Electric Authority, Power Revenue, Series 1993 Z, 5.5%, 1/1/2012 ......... 1,375,000 1,439,914
Rockdale County, GA, Development Authority, Solid Waste Disposal Revenue, Visy Paper Inc. ..
Project, AMT, Series 1993, 7.4%, 1/1/2016 ................................................ 4,680,000 4,951,955
Illinois
Chicago, IL, O'Hare International Airport:
American Airlines, Project A, AMT, Series 1990, 7.875%, 11/1/2025 ........................ 1,000,000 1,066,240
United Airlines Project, Special Facilities Revenue, Series 1999 A, 5.35%, 9/1/2016 ...... 2,250,000 2,210,040
Hoffman Estates, IL, Tax Increment Revenue, Series 1991, Zero Coupon, 5/15/2006 ............ 4,000,000 2,890,480
Illinois Health Facilities Authority:
Carle Foundation, Series 1998 A, 5%, 7/1/2011 (b) ........................................ 1,410,000 1,404,868
Memorial Health System, Series 1997, 5.5%, 10/1/2008 (b) ................................. 1,325,000 1,401,227
Methodist Medical Center, Series 1998, 5.5%, 11/15/2013 (b) .............................. 3,165,000 3,269,192
Winnebago County, IL, School District #122, Series 1992, 6.45%, 6/1/2008 (b) ............... 1,500,000 1,709,895
Indiana
Indiana Health Facilities Finance Authority, Franciscan Eldercare Community Services,
Series 1998, 5.875%, 5/15/2029 ........................................................... 2,300,000 2,216,878
Indiana Municipal Power Agency, Power Supply System, Series 1983 B, 5.875%, 1/1/2009 (b) ... 2,300,000 2,512,198
Indianapolis, IN, Economic Development, Robin Run Village Project, Series 1992, 7.625%,
10/1/2022 ................................................................................ 1,500,000 1,631,760
Iowa
Dubuque County, IA, Private College Facilities Revenue, Clarke College Project, Series 1998,
5.375%, 9/1/2018 ......................................................................... 1,000,000 957,700
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maine
Maine Finance Authority, Huntington Common, Series 1997 A, 7.5%, 9/1/2027 .................... 1,000,000 1,022,060
Massachusetts
Boston, MA, Industrial Development Authority, Springhouse Project, Series 1995, 9.25%
Prerefunded 7/1/2005, 7/1/2025 (c) ......................................................... 1,350,000 1,712,583
Lowell, MA, General Obligation, Series 1991, 8.3%, 2/15/2005 ................................. 365,000 400,785
Massachusetts General Obligation, Series 1998 C, 5.25%, 8/1/2014 ............................. 7,000,000 7,147,910
Massachusetts Health & Educational Facilities Authority, Cooley Dickson Hospital Inc.,
Series 1993 A, 7.125%, Prerefunded 5/15/2003, 11/15/2018 (c) ............................... 1,810,000 2,034,730
Massachusetts Industrial Finance Agency:
Edgewood Retirement Community, Series 1995 A, 9%, 11/15/2025 ............................... 1,000,000 1,195,750
Solid Waste Disposal, Peabody Monofill Project, Series 1994, 9%, 9/1/2005 .................. 2,155,000 2,325,590
Massachusetts State Grant Anticipation Note, Series 1998 A, 5.25%, 12/15/2012 ................ 2,550,000 2,650,368
Massachusetts State Health and Educational Facilities Authority, Caritas Christi, Series 1999,
5.625%, 7/1/2020 ........................................................................... 2,000,000 1,964,760
Michigan
Detroit, MI, City School District, General Obligation, Series 1998 C, 5.25%, 5/1/2015 (b) .... 1,000,000 1,030,520
Detroit, MI, Downtown Development Authority:
Series 1996, Zero Coupon, 7/1/2011 ......................................................... 3,150,000 1,679,391
Series 1996, Zero Coupon, 7/1/2012 ......................................................... 3,150,000 1,582,088
Michigan State Hospital Finance Authority, Genesys Health System, Series 1995, 7.5%,
Prerefunded 10/1/2005, 10/1/2027 (c) ....................................................... 2,000,000 2,354,200
Michigan State Strategic Funding Ltd., Series 1998 A, 5.75%, 11/15/2018 ...................... 1,500,000 1,460,595
Mississippi
Mississippi Development Bank, Special Obligation, Diamond Lakes Utilities, Series 1997 A,
6.25%, 12/1/2017 ........................................................................... 2,000,000 2,043,400
Nevada
Nevada State Housing Division, Single Family Mortgage Revenue, Series 1993 R, 5.95%,
10/1/2011 .................................................................................. 930,000 969,906
New Hampshire
New Hampshire Higher Education & Health Facilities Authority:
Monadnok Community Hospital, Series 1990, 9.125%, Prerefunded 10/1/2000, 10/1/2020 (c) ..... 1,395,000 1,521,568
Catholic Charities:
Series 1991, 8.4%, Prerefunded 8/1/2001, 8/1/2011 (c) ..................................... 600,000 672,630
Series 1997, 5.8%, 8/1/2022 ............................................................... 2,760,000 2,759,752
Rivermead at Peterborough:
Series 1998, 5.5%, 7/1/2013 ............................................................... 2,635,000 2,616,739
Series 1998, 5.625%, 7/1/2018 ............................................................. 500,000 480,530
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Riverwoods Company:
Series 1997 A, 6.375%, 3/1/2013 ......................................................... 725,000 767,840
Series 1997 A, 6.5%, 3/1/2023 ........................................................... 1,000,000 1,053,780
New Jersey
New Jersey Economic Development Authority, United Methodist Homes, Series 1995, 7.5%,
Prerefunded 7/1/2005, 7/1/2025 (c) ....................................................... 1,000,000 1,180,540
New York
Glen Cove, NY, Housing Authority Revenue, Senior Living Facility, AMT, Series 1996, 8.25%,
10/1/2026 ................................................................................ 1,500,000 1,683,030
Islip, NY, Community Development Agency, New York Institute of Technology,
Series 1996, 7.5%, 3/1/2026 .............................................................. 2,500,000 2,725,475
Long Island Power Authority, NY, Electrical Systems Revenue:
Series 1998A, 5%, 12/1/2018 (b) .......................................................... 2,000,000 1,941,780
Series A, 5.5%, 12/1/2013 (b) ............................................................ 4,000,000 4,247,120
New York, NY, General Obligation:
Series 1996 A, 7%, 8/1/2007 .............................................................. 5,000,000 5,760,100
Series 1995 B, 6.1%, 8/15/2005 ........................................................... 3,500,000 3,815,385
New York Metropolitan Transportation Authority:
Series 1991, 7%, Prerefunded 7/1/2001, 7/1/2009 (c) ...................................... 1,000,000 1,083,260
Series 1993 O, 5.75%, 7/1/2013 ........................................................... 2,750,000 2,942,225
Series 1998 C, 5.125%, 7/1/2013 (b) ...................................................... 3,500,000 3,544,380
New York State Dormitory Authority, Mental Health Services, Facilities Improvement:
Series 1996 B, 6.5%, 2/15/2010 ........................................................... 1,500,000 1,691,385
Series 1996 B, 6.5%, 2/15/2011 ........................................................... 1,000,000 1,130,730
Series 1996 B, 6%, 8/15/2012 ............................................................. 2,500,000 2,726,750
Series 1996 B, 6%, 8/15/2016 ............................................................. 6,000,000 6,584,280
New York Triborough Bridge and Tunnel Authority, Special Obligation, Series 1998 A, 5.125%,
1/1/2014 (b) ............................................................................. 7,690,000 7,774,129
Onondaga County, NY, Industrial Development Agency, Solid Waste Disposal Facility, Solvay
Paperboard LLC, AMT, Series 1998, 7%, 11/1/2030 .......................................... 3,500,000 3,632,475
Ohio
Hamilton County, OH, Health System Revenue, Franciscan Sisters of the Poor Health System,
Providence Hospital, Series 1992, 6.8%, 7/1/2008 ......................................... 5,485,000 6,007,446
Lorain County, OH, Health Care Facilities Revenue, Kendal at Oberlin, Series 1998 A, 5.375%,
2/1/2012 ................................................................................. 2,075,000 2,094,941
Parma, OH, Hospital Improvement Revenue, Parma Community General Hospital, Series 1998,
5.25%, 11/1/2013 ......................................................................... 2,000,000 1,993,900
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oklahoma
Oklahoma Development Finance Authority, Hillcrest Healthcare Center, Series 1999 A, 5.625%,
8/15/2029 ................................................................................. 3,000,000 2,942,460
Oregon
Chemeketa, OR, Community College District, General Obligation:
Series 1998, 5.5%, 6/1/2014 (b) ........................................................... 2,385,000 2,541,051
Series 1998, 5.5%, 6/1/2015 (b) ........................................................... 2,600,000 2,759,770
Pennsylvania
Blair County, PA, Hospital Authority, Altoona Hospital Project, Series 1998 A, 5.5%,
7/1/2012 (b) .............................................................................. 1,755,000 1,824,375
Delaware County, PA, White Horse Village Inc.:
Series 1996 A, 6.7%, 7/1/2007 ............................................................. 1,000,000 1,036,770
Series 1996 A, 7.5%, 7/1/2018 ............................................................. 2,000,000 2,159,980
Delaware County, PA, Industrial Development Authority, Series 1997 A, 6%, 1/1/2009 .......... 2,000,000 2,048,200
Latrobe, PA, Industrial Development Authority, St. Vincent College, Series 1998, 5.375%,
5/1/2013 .................................................................................. 1,885,000 1,901,192
Montgomery County, PA, Redevelopment Authority, Multi-Family Housing Revenue,
Series 1993 A, 6.375%, 7/1/2012 ........................................................... 5,500,000 5,719,945
Pennsylvania Higher Education Authority, Medical College of Pennsylvania, Series 1991 B,
7.25%, Prerefunded 3/1/2001, 3/1/2005 (c) ................................................. 1,000,000 1,077,910
Pennsylvania Intergovernmental Cooperation Authority, Series 1999, 5.25%, 6/15/2011 (b) ..... 3,000,000 3,087,240
Philadelphia, PA, Industrial Development Authority, Commercial Development Revenue,
Series 1997, 6.5%, 10/1/2027 .............................................................. 1,500,000 1,589,295
Philadelphia, PA, Hospitals & Higher Educational Facilities Authority:
Chestnut Hill College, Series 1999, 6%, 10/1/2029 ......................................... 1,000,000 983,440
Temple University, Children's Medical Center, Series 1999 A, 5.625%, 6/15/2019 ............ 3,700,000 3,589,629
Southeastern Pennsylvania Transportation Authority, Series 1999 B, 5.25%, 3/1/2017 .......... 2,180,000 2,193,124
South Carolina
Piedmont, SC, Municipal Power Agency, Series 1998 A, 5.5%, 1/1/2013 (b) ..................... 2,900,000 3,068,084
South Carolina Jobs-Economic Development Authority, Hospital Facilities Revenue, Series 1993,
5.3%, 8/1/2009 (b)* ....................................................................... 8,000,000 8,410,240
South Dakota
South Dakota Health & Educational Facilities Authority, Prairie Lakes:
Series 1992, 7.125%, 4/1/2010 ............................................................. 320,000 345,379
Series 1992, 7.125%, Prerefunded 4/1/2003, 4/1/2010 (c) ................................... 680,000 762,980
Series 1992, 7.25%, 4/1/2022 .............................................................. 320,000 353,011
Series 1992, 7.25%, Prerefunded 4/1/2003, 4/1/2022 (c) .................................... 680,000 765,707
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
South Dakota Housing Development Authority, Home Ownership Mortgage, Series 1992 A, 6.4%,
5/1/2012 .................................................................................... 3,500,000 3,672,655
Texas
Amarillo, TX, Health Facilities Corporation, Baptist St. Anthony's Hospital Corp., Series 1998,
5.5%, 1/1/2013 (b) .......................................................................... 2,645,000 2,774,177
Austin, TX, Bergstrom Landhost Enterprises Inc., Airport Hotel, Series 1999 A, 6.75%, 4/1/2027 5,000,000
5,024,450
Austin, TX, Independent School District, General Obligation, Series 1997, 5%, 8/1/2012 (b) .... 2,000,000
2,014,540
Austin, TX, Series 1998, 5.25%, 5/15/2017 (b) ................................................. 5,000,000 5,111,150
Bexar County, TX, Housing Finance Corporation, Series 1989 A, AMT, 8.2%, 4/1/2022 ............. 738,000 761,387
Dallas-Fort Worth, TX, Airport Revenue, American Airlines:
Series 1990, AMT, 7.5%, 11/1/2025 ........................................................... 1,910,000 2,026,720
Series 1992, AMT, 7.25%, 11/1/2030 .......................................................... 5,000,000 5,450,800
Hidalgo County, TX, Health Services, Mission Hospital, Series 1996, 6.75%, 8/15/2016 .......... 2,500,000 2,693,275
Lubbock, TX, Health Facilities Development Corp.:
Carillon Project, Series 1999 A, 6.5%, 7/1/2019 ............................................. 3,000,000 2,969,940
St. Joseph Health Systems, Series 1998, 5.25%, 7/1/2012 ..................................... 1,000,000 1,012,540
Midland County, TX, Hospital District, Midland Memorial Hospital, Series 1992, 7.5%,
Prerefunded 6/1/2002, 6/1/2016 (c) .......................................................... 1,500,000 1,659,375
San Antonio, TX, Electric and Gas Revenue:
Series 1998 A, 5.25%, 2/1/2013 .............................................................. 1,000,000 1,021,240
Series 1998 A, 5.25%, 2/1/2014 .............................................................. 2,000,000 2,034,200
Utah
Intermountain Power Agency, Utah Power Supply, Series 1998 A, 5.25%, 7/1/2015 (b) ............. 5,575,000 5,631,308
Salt Lake City, UT, Hospital Revenue, Series 1992, 6.65%, 2/15/2012 ........................... 2,000,000 2,218,200
Vermont
Vermont Housing Finance Agency, Northgate Housing Project, Series 1989, 8.25%, 6/15/2020 ...... 1,020,000 1,112,851
Virgin Islands
Virgin Islands, Public Finance Authority:
Series 1992 A, 7.25%, Prerefunded 10/1/2002, 10/1/2018 (c) .................................. 6,500,000 7,300,735
Series 1998 C, 5.5%, 10/1/2008 .............................................................. 1,500,000 1,561,005
Virginia
Pittsylvania County, VA, Industrial Development Authority, Multitrade of Pittsylvania County,
L.P. Project, AMT:
Series 1994 A, 7.45%, 1/1/2009 ............................................................. 1,500,000 1,629,360
Series 1994 A, 7.5%, 1/1/2014 .............................................................. 3,500,000 3,804,850
Virginia College Building Authority, Educational Facilities Revenue, Marymount University,
Series 1992, 7%, Prerefunded 7/1/2002, 7/1/2022 (c) ......................................... 1,200,000 1,324,896
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder High Yield Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Washington
King County, WA, School District #403, Series 1998, 5.25%, 12/1/2014 3,945,000 3,995,812
Washington State Public Power Supply System:
Nuclear Project #2:
Series 1992 A, 6.3%, 7/1/2012 ................................... 10,000,000 11,268,200
Series 1994, Inversed Floater, 5.12%, 7/1/2012** ................ 3,000,000 3,240,000
Series 1994, Inversed Floater, 5.4%, 7/1/2012** ................. 3,250,000 3,405,448
Series 1996 A, 6%, 7/1/2008 (b) ................................. 3,000,000 3,297,360
Nuclear Project #3, Series 1989 B, 7.125%, 7/1/2016 .............. 2,500,000 3,062,675
Wisconsin
Wisconsin State Health & Educational Facilities Authority:
Aurora Health Care Inc., Series 1999 A, 5.6%, 2/15/2029 .......... 4,000,000 3,854,040
National Regency of New Berlin Project, Series 1995, 8%, 8/15/2025 1,485,000 1,652,953
- ---------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $411,657,250) 441,256,387
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $414,657,250) (a) 444,256,387
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $414,657,250. At May 31,
1999, net unrealized appreciation for all securities based on tax cost
was $29,599,137. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $31,276,922 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $1,677,785.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty,
FGIC, FSA or MBIA/BIG.
(c) Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay
principal and interest on tax-exempt issues and to retire the bonds in
full at the earliest refunding date.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such
as the coupon-equivalent of the Treasury bill rate. Variable rate
demand notes are securities whose yields are periodically reset at
levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and
normally incorporate an irrevocable letter of credit from a major bank.
These notes are carried, for purposes of calculating average weighted
maturity, at the longer of the period remaining until the next rate
change or to the extent of the demand period.
** Inverse floating rate notes are instruments whose yields may change
based on the change in the relationship between long-term and
short-term interest rates and which exhibit added interest rate
sensitivity compared to other bonds with a similar maturity. These
securities are shown at their rate as of May 31, 1999.
AMT: Subject to alternative minimum tax
At May 31, 1999, open futures contracts purchased short were as
follows:
<TABLE>
<CAPTION>
Futures Expiration Contracts Aggregate Face Market Value ($)
------------------------------------ ------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Municipal Bond Index June 1999 150 18,295,312 18,433,256
------------ ------------
Total unrealized appreciation on open futures contracts purchased short 137,944
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder High Yield Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of May 31, 1999
<TABLE>
<CAPTION>
Assets
- -------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $414,657,250) ....... $ 444,256,387
Cash ........................................................ 99,150
Receivable for Fund shares sold ............................. 140,868
Interest receivable ......................................... 6,433,563
Other assets ................................................ 4,182
-------------
Total assets ................................................ 450,934,150
Liabilities
- -------------------------------------------------------------------------------------------------
Dividends payable ........................................... 426,261
Payable for Fund shares redeemed ............................ 89,131
Payable for daily variation margin on open futures contracts 51,688
Accrued management fee ...................................... 230,944
Other payables and accrued expenses ......................... 56,859
-------------
Total liabilities ........................................... 854,883
-------------------------------------------------------------------------------
Net assets, at market value $ 450,079,267
-------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments .............................................. 29,599,137
Futures .................................................. 137,944
Accumulated net realized gain (loss) ........................ (5,823,986)
Paid-in capital ............................................. 426,166,172
-------------------------------------------------------------------------------
Net assets, at market value $ 450,079,267
-------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($450,079,267 / 35,463,486 outstanding shares of
beneficial interest, $.01 par value, unlimited number of ---------------
shares authorized) ....................................... $ 12.69
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder High Yield Tax Free Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Five Months
Ended Year Ended
May 31, 1999 December 31,
Investment Income (Note E) 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ....................................................... $ 10,614,289 $ 22,412,866
------------ ------------
Expenses:
Management fee ................................................. 1,171,322 2,440,931
Services to shareholders ....................................... 196,973 477,718
Custodian and accounting fees .................................. 37,000 113,729
Trustees' fees and expenses .................................... 19,984 37,270
Reports to shareholders ........................................ 20,456 42,998
Legal .......................................................... 1,266 6,606
Auditing ....................................................... 40,961 39,332
Registration fees .............................................. 47,168 47,628
Other .......................................................... 6,809 15,726
------------ ------------
1,541,939 3,221,938
-------------------------------------------------------------------------------------------------
Net investment income 9,072,350 19,190,928
-------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ...................... 330,513 768,029
Net unrealized appreciation (depreciation) during the period on:
Investments ................................................. (8,975,535) 3,727,480
Futures ..................................................... 137,944 --
------------ ------------
(8,837,591) 3,727,480
-------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (8,507,078) 4,495,509
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 565,272 $ 23,686,437
-------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder High Yield Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Five Months
Ended
May 31, 1999 Years Ended December 31,
Increase (Decrease) in Net Assets (Note E) 1998 1997
- ------------------------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ............................... $ 9,072,350 $ 19,190,928 $ 16,662,353
Net realized gain (loss) from investment transactions 330,513 768,029 1,293,696
Net unrealized appreciation (depreciation) on
investment transactions during the period ........ (8,837,591) 3,727,480 17,278,728
------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations........................................ 565,272 23,686,437 35,234,777
------------- ------------- -------------
Distributions to shareholders from net investment
income............................................ (9,072,350) (19,191,807) (16,662,353)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ........................... 89,063,593 173,275,197 94,712,636
Net asset value of shares issued to shareholders in
reinvestment of distributions..................... 6,549,592 12,853,477 10,767,421
Cost of shares redeemed ............................. (69,149,802) (95,191,076) (80,462,768)
------------- ------------- -------------
Net increase (decrease) in net assets from Fund share
transactions...................................... 26,463,383 90,937,598 25,017,289
------------- ------------- -------------
Increase (decrease) in net assets ................... 17,956,305 95,432,228 43,589,713
Net assets at beginning of period ................... 432,122,962 336,690,734 293,101,021
------------- ------------- -------------
Net assets at end of period ......................... $ 450,079,267 $ 432,122,962 $ 336,690,734
------------- ------------- -------------
Other Information
- ------------------------------------------------------------------------------------------- -----------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........... 33,414,415 26,338,299 24,338,716
------------- ------------- -------------
Shares sold ......................................... 6,916,529 13,488,602 7,700,257
Shares issued to shareholders in reinvestment of
distributions..................................... 509,777 1,000,254 874,481
Shares redeemed ..................................... (5,377,235) (7,412,740) (6,575,155)
------------- ------------- -------------
Net increase (decrease) in Fund shares .............. 2,049,071 7,076,116 1,999,583
------------- ------------- -------------
Shares outstanding at end of period ................. 35,463,486 33,414,415 26,338,299
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder High Yield Tax Free Fund
<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>
Five Months
Ended
May 31, 1999 Years Ended December 31,
(Note E) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
Net asset value, beginning of period .............. $12.93 $ 12.78 $ 12.04 $ 12.19 $ 10.86 $ 12.55
--------------------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .26 .65 .67 .66 .68 .70
Net realized and unrealized gain (loss) on
investment transactions.......................... (.24) .15 .74 (.15) 1.37 (1.73)
Total from investment operations .................. .02 .80 1.41 .51 2.05 (1.03)
--------------------------------------------------------------------------
Less distributions from net investment income ..... (.26) (.65) (.67) (.66) (.72) (.66)
--------------------------------------------------------------------------
Net asset value, end of period .................... $12.69 $ 12.93 $ 12.78 $ 12.04 $ 12.19 $ 10.86
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .................................. .18** 6.38 12.04 4.43(a) 19.28(a) (8.38)(a)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............ 450 432 337 293 304 260
Ratio of operating expenses, net to average
daily net assets (%)............................. .83* .84 .90 .91 .80 .80
Ratio of operating expenses before expense
reductions, to average daily net assets (%)...... .83* .84 .90 .95 .94 .97
Ratio of net investment income to average daily
net assets (%) .................................. 4.91* 5.03 5.43 5.59 5.77 6.01
Portfolio turnover rate (%) ....................... 7.4* 14.32 33.2 21.9 27.3 34.3
</TABLE>
(a) Total return would have been lower had certain expenses not been
reduced.
* Annualized
** Not annualized
22 - Scudder High Yield Tax Free Fund
<PAGE>
Notes to Financial Statements
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, is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities purchased with remaining
maturities greater than sixty days are valued by pricing agents approved by the
officers of the Fund, whose quotations 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. Money market instruments purchased with an original
maturity of sixty days or less are valued at amortized cost. All other debt
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
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 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. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
At May 31, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $3,900,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until May 31,
2004, the expiration date.
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.
Distributions of net realized capital gains to shareholders are recorded on the
ex-dividend date.
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. 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 identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
23 - Scudder High Yield Tax Free Fund
<PAGE>
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 purchased index futures to hedge against changes 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.
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.
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
During the five months ended May 31, 1999, purchases and sales of municipal
securities (excluding short-term investments) aggregated $42,027,840 and
$13,366,357, respectively. During the year ended December 31, 1998, purchases
and sales of municipal securities (excluding short-term investments) aggregated
$133,526,326 and $51,446,036, respectively.
The aggregate face value of futures contracts opened during the five months
ended May 31, 1999 was $18,433,256. No futures contracts were closed during the
period.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objective, 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 approximately 0.65% on
the first $300,000,000 of the Fund's average daily net assets and 0.60% of such
net assets in excess of $300,000,000, computed and accrued daily and payable
monthly. For the five months ended May 31, 1999, the fee pursuant to this
agreement aggregated $1,171,322, which was equivalent to an annual effective
rate of 0.63% of the Fund's average daily net assets. For the year ended
December 31, 1998, the fee pursuant to this agreement aggregated $2,440,931,
which was equivalent to an annual effective rate of 0.64% of the Fund's average
daily net assets.
24 - Scudder High Yield Tax Free Fund
<PAGE>
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
five months ended May 31, 1999, the amount charged to the Fund by SSC aggregated
$127,716, of which $25,498 is unpaid at May 31, 1999. For the year ended
December 31, 1998, the amount charged to the Fund by SSC aggregated $312,600.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the five months
ended May 31, 1999, the amount charged to the Fund by SFAC aggregated $30,972,
of which $6,308 is unpaid at May 31, 1999. For the year ended December 31, 1998,
the amount charged to the Fund by SFAC aggregated $67,621.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the five months ended May 31, 1999,
Trustees' fees and expenses aggregated $19,984. For the year ended December 31,
1998, the Trustee's fees and expenses aggregated $37,270.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Year End Change
On August 10, 1998, the Board of Trustees of the Trust changed the fiscal year
end of the Fund from December 31 to May 31.
25 - Scudder High Yield Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Municipal Trust and the Shareholders of Scudder High
Yield Tax Free Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder High Yield Tax Free Fund
(the "Fund") at May 31, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards 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 May 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 21, 1999
26 - Scudder High Yield Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid from net investment income for the five months ended May
31, 1999, 100% are designated as exempt interest dividends for federal income
tax purposes.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
27 - Scudder High Yield Tax Free Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee; Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Venture Partner,
Venture Capital Group
Philip G. Condon*
Vice President
Ashton P. Goodfield*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder High Yield Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market^+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series --
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free^+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
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. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. ++Only the International
Shares of the Fund are part of the Scudder Family of Funds. +++ +++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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by Scudder's
insurance agencies, 1-800-225-2470. #These funds, advised by Scudder Kemper
Investments, Inc., are traded on the New York Stock Exchange and, in some cases,
on various other stock exchanges.
29 - Scudder High Yield Tax Free Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder High Yield Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
31 - Scudder High Yield Tax Free Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
