Supplement to currently effective
Statement of Additional Information
for each of the listed funds:
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Fee
Scudder California Tax Free Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund
The following disclosure supplements and, where appropriate, replaces the
current information for each fund listed above in their respective Statements of
Additional Information.
Municipal Lease Obligations and Participation Interests.
Participation interests represent undivided interests in municipal leases,
installment purchase contracts, conditional sales contracts or other
instruments. These are typically issued by a Trust or other entity which has
received an assignment of the payments to be made by the state or political
subdivision under such leases or contracts. They may be variable rate or fixed
rate.
Short term securities: the Fund may purchase from banks participation interests
in all or part of specific holdings of municipal obligations, provided the
participation interest is fully insured. Each participation is backed by an
irrevocable letter of credit or guarantee of the selling bank that the Adviser
has determined meets the prescribed quality standards of the Fund. Therefore,
either the credit of the issuer of the municipal obligation or the selling bank,
or both, will meet the quality standards of the particular Fund. The Fund has
the right to sell the participation back to the bank after seven days' notice
for the full principal amount of the Fund's interest in the municipal obligation
plus accrued interest, but only (i) as required to provide liquidity to the
Fund, (ii) to maintain a high quality investment portfolio or (iii) upon a
default under the terms of the municipal obligation. The selling bank will
receive a fee from the Fund in connection with the arrangement. The Fund will
not purchase participation interests unless in the opinion of bond counsel,
counsel for the issuers of such participations or counsel selected by the
Adviser, the interest from such participations is exempt from regular federal
income tax and state income tax, if applicable, for the Fund.
A municipal lease obligation may take the form of a lease, installment purchase
contract or conditional sales contract which is issued by a state or local
government and authorities to acquire land, equipment and facilities. Income
from such obligations is generally exempt from state and local taxes in the
state of issuance. Municipal lease obligations frequently involve special risks
not normally associated with general obligations or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title in the leased asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt issuance limitations are deemed to be inapplicable because of
the inclusion in many leases or contracts of "non-appropriation" clauses that
relieve the governmental issuer of any obligation to make future payments under
the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. In addition,
such leases or contracts may be subject to the temporary abatement of payments
in the event the issuer is prevented from maintaining occupancy of the leased
premises or utilizing the leased equipment. Although the obligations may be
secured by the leased equipment or facilities, the disposition of the property
in the event of nonappropriation or foreclosure might prove difficult, time
consuming and costly, and result in a delay in recovery or the failure to fully
recover the Fund's original investment.
Certain municipal lease obligations and participation interests may be deemed
illiquid for the purpose of the Fund's limitation on investments in illiquid
securities. Other municipal lease obligations and participation interests
acquired by the Fund may be determined by the Adviser to be liquid securities
for the purpose of such limitation. In determining the liquidity of municipal
lease obligations and participation interests, the Adviser will consider a
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variety of factors including: (1) the willingness of dealers to bid for the
security; (2) the number of dealers willing to purchase or sell the obligation
and the number of other potential buyers; (3) the frequency of trades or quotes
for the obligation; and (4) the nature of the marketplace trades. In addition,
the Adviser will consider factors unique to particular lease obligations and
participation interests affecting the marketability thereof. These include the
general creditworthiness of the issuer, the importance to the issuer of the
property covered by the lease and the likelihood that the marketability of the
obligation will be maintained throughout the time the obligation is held by the
Fund.
August 4, 2000
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