This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Limited Term Tax Free Fund
Annual Report
October 31, 1995
o For investors seeking a high level of income, exempt from regular federal
income taxes and consistent with a high degree of principal stability.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
14 Financial Statements
17 Financial Highlights
18 Notes to Financial Statements
21 Report of Independent Accountants
22 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
IN BRIEF
* Scudder Limited Term Tax Free Fund provided shareholders with a 30-day net
annualized SEC yield of 4.09% on October 31, 1995, equivalent to a 6.77%
taxable yield for shareholders subject to the 39.6% maximum federal income
tax rate.
(bar chart)
30-Day Yields as of October 31, 1995
(bar chart data)
Scudder Limited Term Taxable Equivalent IBC/Donoghue's Taxable
Tax Free Fund Yield Money Fund Average
------------- ----- ------------------
4.09% 6.77% 5.22%
* The Fund returned 7.94% for the 12-month period ended October 31, 1995. By
comparison, the 49 short municipal debt funds tracked by Lipper Analytical
Services returned 6.35% on average.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
In our semiannual report dated April 30 we wondered whether
we had seen the highs in interest rates after their persistent rise
in 1994. The answer turned out to be "yes," for the most part. As
the U.S. economy slowed and inflation remained quiescent during the
first quarter of 1995 and beyond, the Federal Reserve permitted
short-term interest rates to ease downward, cutting the federal funds
rate by 0.25% in July.
Throughout 1995, investors have been anticipating an
economic slowdown, but for most of the year corporate profits have
remained healthy, and consumers have responded to lower short-term
rates by borrowing and spending more. We believe consumers'
increasingly high debt burdens will eventually force them to spend
less. The current expansion cycle is extremely mature, and we expect
a slowdown sometime in the second half of 1996.
What does this mean for tax-exempt fund investors? A slower
economy is generally good for bonds. Of course, it's possible that
we could see some increases in interest rates over the coming months
if the economy doesn't slow down sufficiently. But since the economy
is extremely interest-rate sensitive it should respond quickly to
any rate changes, allowing rates to move back to current levels.
Importantly, the relationship between supply and demand for
municipal bonds remains in the tax-exempt investor's favor as the
supply of bonds continues to shrink, placing upward pressure on
prices.
As always, your portfolio managers will continue to focus
their efforts on fundamental economic research and security
selection as a means of generating high current income and
attractive total returns. Please call a Scudder Investor Relations
representative if you have questions about your Fund. Page 27
provides more information on how to contact Scudder. We are pleased
you have chosen Scudder Limited Term Tax Free Fund to help meet your
investment needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Limited Term Tax Free Fund
3
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER LIMITED TERM TAX FREE FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,794 7.94% 7.94%
Life of
Fund* $10,842 8.42% 4.85%
LB MUNICIPAL BOND INDEX (3 YEAR)
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,801 8.01% 8.01%
Life of
Fund* $10,862 8.62% 5.09%
* The Fund commenced operations on February 15, 1994.
Index comparisons begin on February 28, 1994.
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:
Scudder Limited Term Tax Free Fund
Year Amount
- ----------------------
2/94* $10,000
4/94 $ 9,965
7/94 $10,154
10/94 $10,099
1/95 $10,201
4/95 $10,465
7/95 $10,714
10/95 $10,901
Index
Year Amount
- ----------------------
2/94* $10,000
4/94 $ 9,938
7/94 $10,070
10/94 $10,056
1/95 $10,165
4/95 $10,399
7/95 $10,695
10/95 $10,862
The 3-year Lehman Brothers Municipal Bond Index is an unmanaged,
market-value-weighted measure of the short-term municipal bond
market and includes bonds with maturities of two to three years.
Index returns assume reinvested 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 OCTOBER 31
1994* 1995
---------------------
NET ASSET VALUE... $11.67 $12.01
INCOME DIVIDENDS.. $ .38 $ .56
FUND TOTAL
RETURN (%)........ .44 7.94
INDEX TOTAL
RETURN (%)........ .56 8.01
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 total return
for the one year and life of Fund periods would have been lower.
4
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Core Cities 21%
General Obligation 18% The Fund is broadly
Hospital/Health 15% diversified, with
Electric Utility 13% investments in 27 separate
Water/Sewer 7% states and the District of
Sales/Special Tax 5% Columbia.
School District/Lease 5%
Miscellaneous Municipal 16%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
AAA 62%
AA 13% Overall credit quality
A 14% remains high, with 75% of
BBB 9% the bonds in the Fund's
Not Rated 2% portfolio rated AA or better.
----
100%
====
Weighted average quality: AA
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 25% We have emphasized bonds with
1 - 5 years 36% five- to 10-year maturities
5 - 10 years 39% because they offer attractive
---- after-tax yields and total
100% return potential.
====
Weighted average effective maturity: 4 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 9.
5
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Over the past 12 months, yields of short- to intermediate-term municipal
bonds fell anywhere from 0.65 to 0.95 of a percentage point, and Scudder Limited
Term Tax Free Fund turned in strong overall performance, more than making up for
1994's difficult fixed-income environment. The Fund's twin objectives are to
seek higher tax-free income than is typically available from tax-free money
market investments, and less price fluctuation than higher-yielding, longer-term
tax-free bonds.
For shareholders subject to the 39.6% maximum federal income tax rate, the
Fund's 30-day net annualized SEC yield of 4.09% as of October 31, 1995,
translated into a 6.77% yield on a taxable equivalent basis. The Fund's taxable
equivalent yield outpaced the 5.24% average yield of 2 1/2-year bank
certificates of deposit as of October 31, 1995. Of course, unlike fixed-rate
CDs, which are FDIC-insured up to certain limits, the Fund's yield and share
price fluctuate, and principal investments in the Fund are not insured.
As the graph below shows, the Fund continues to exhibit relatively little
share price volatility relative to longer-term municipal bonds, represented here
by the unmanaged Lehman Brothers Municipal Bond Index.
(line chart title)
Scudder Limited Term Tax Free Fund vs.
Lehman Brothers Municipal Bond Index
(monthly percentage price change
12 months through October 31, 1995)
(bar chart data)
-----------------------------------------------
Scudder Limited Term Lehman Brothers
Tax Free Fund Municipal Bond Index
------------- --------------------
-0.85 -2.27
-1.37 -2.31
0.43 1.68
0.35 2.35
1.21 2.41
0.51 0.66
0 -0.36
0 3
0 -1
0.3 0.5
0.3 0.8
0.2 0.2
0.3 1
6
<PAGE>
The decline in interest rates during the fiscal year did result in some
price appreciation for the Fund. For the 12 months ended October 31, the Fund's
net asset value increased $0.34 to $12.01 per share and the Fund provided $0.56
per share in income distributions, contributing to a total return of 7.94%.
Scudder Limited Term Tax Free Fund's total return was significantly higher than
the 6.35% average return of the 49 mutual funds with similar investment
objectives tracked by Lipper Analytical Services, Inc.
A Gradual Rate Decline
In our April 1995 mid-year report to shareholders we observed that the
series of inflation-fighting short-term interest rate increases by the Federal
Reserve seemed to be slowing the economy. Many municipal market participants
became convinced of this back in November of 1994, and prices began to improve
as yields of tax-exempt bonds began a gradual decline that has continued
throughout 1995. We also noted in our last report that we were emphasizing both
ends of the Fund's limited maturity range: the shortest maturities for safety
and longest maturities (maximum of 10 years) for higher yields and possible
capital appreciation. We are continuing this strategy because bonds with five-
to 10-year maturities currently offer the most attractive after-tax yield and
total return potential of any maturities in which the Fund is permitted to
invest.
To balance the five- to 10-year maturity bonds in the portfolio, we
carefully selected a number of one-year California securities during the fiscal
year, boosting the Fund's percentage of securities from that state to 14.0% from
1.6%. In purchasing these securities we took advantage of "bargain basement"
prices due to continued investor nervousness over the Orange County, California,
bankruptcy earlier in the year. As a safeguard, many of the securities we
purchased carry credit enhancements, such as bank letters of credit.
We also purchased several New York City and New York state agency bonds,
which were attractively valued because of recent heavy supply. These bonds are
part of our current efforts to enhance the Fund's yield slightly while
maintaining high overall quality: As of October 31, 1995, 75% of the bonds in
the Fund's portfolio were rated AA or better.
The Fund continues to hold a large percentage of pre-refunded bonds in its
portfolio. Bonds are pre-refunded when issuers sell new debt at lower prevailing
7
<PAGE>
rates and use the proceeds to establish an escrow account designated to retire
the original bonds on their future call dates. Typically, when bonds are
pre-refunded, their prices rise because they offer no credit risk (the escrowed
funds are invested in Treasury securities). In fact, these bonds offer the
highest quality available in the municipal marketplace. Yet, because the market
generally favors bonds priced at par versus premium pre-refunded bonds, the
latter typically have higher yields than similar municipal bonds priced at par.
Economic and Market Outlook
This year's lower interest rates helped pave the way for continued economic
expansion and low inflation. However, we believe a slowdown is likely, led by
consumers who will eventually curtail their spending under pressure from
increasing debt burdens. Consequently, our longer-term outlook for bonds is
positive, and we believe Scudder Limited Term Tax Free Fund's portfolio is well
positioned to capture attractive after-tax yields while maintaining relative
price stability.
In the short term, as investors recognize the high after-tax value of
municipals, we expect tax-free bonds to make some gains. Going forward, we
intend to maintain Scudder Limited Term Tax Free Fund's long-term strategy,
which includes a prudent average maturity, broad diversification, and high
credit quality.
Sincerely,
Your Portfolio Management Team
/s/M. Ashton Patton /s/Donald C. Carleton
M. Ashton Patton Donald C. Carleton
Scudder Limited Term
Tax Free Fund:
A Team Approach to Investing
Scudder Limited Term Tax Free Fund is run by a team of Scudder investment
professionals who each play 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 Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
M. Ashton Patton, Lead Portfolio Manager, has overseen the Fund's
investment strategy and daily operation since the Fund was introduced. Ashton is
also a Portfolio Manager of the Scudder Medium Term Tax Free Fund. Donald C.
Carleton, Portfolio Manager, has been a member of the Portfolio team since its
inception and has been at Scudder since 1983. Donald also manages the Scudder
Medium Term Tax Free Fund.
8
<PAGE>
INVESTMENT PORTFOLIO AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
10.0% SHORT-TERM MUNICIPAL INVESTMENTS
CALIFORNIA California Community College Finance Authority,
Pooled Tax and Revenue Anticipation Notes,
Series B, 5%, 8/30/96 . . . . . . . . . . . . . . . . 2,000,000 SP1+ 2,015,600
California State Revenue Anticipation Warrants,
Series D, 6.5%, 4/25/96 . . . . . . . . . . . . . . . 2,000,000 SP2 2,019,560
Riverside County, CA, School Financing Authority,
School Districts Financing, Revenue Anticipation
Notes, 4.75%, 7/18/96 . . . . . . . . . . . . . . . . 1,000,000 SP1+ 1,005,670
San Diego, CA, Area Local Governments, Tax and
Revenue Anticipation Notes, 4.75%, 10/18/96 . . . . . 3,000,000 SP1+ 3,023,070
San Diego, CA, Tax and Revenue Anticipation Notes,
4.5%, 9/30/96 . . . . . . . . . . . . . . . . . . . . 2,000,000 MIG1 2,012,360
GEORGIA Georgia Pooled Hospitals Equipment Loan Program,
Series 1991, Daily Demand Note, 4%, 3/1/01* . . . . . 300,000 A1 300,000
MASSACHUSETTS Massachusetts Consolidated Loan General Obligation,
Series 1994 C, 5.5%, 11/1/95. . . . . . . . . . . . . 1,495,000 SS&C 1,495,000
OHIO Cuyahoga County, OH, Health & Education,
University Hospital of Cleveland, Daily Demand Note,
4.1%, 1/1/16* . . . . . . . . . . . . . . . . . . . . 100,000 MIG1 100,000
Hamilton Health Systems, Franciscan Sisters of the
Poor Health Systems, Series A, Daily Demand Note,
4.1%, 3/1/17* . . . . . . . . . . . . . . . . . . . . 200,000 MIG1 200,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $12,168,570). . . . . . . . . . . . . . . . . . 12,171,260
-----------
90.0% INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
ALABAMA University of South Alabama, Hospital and Auxiliary
Revenue, 7%, 5/15/04, Prerefunded 5/15/00 (c)***. . . 2,000,000 AAA 2,213,520
ALASKA Alaska State, General Obligation, 5%, 7/1/96. . . . . . 1,000,000 AA 1,007,380
North Slope Boro, AK, General Obligation, Series A,
Capital Appreciation, Zero Coupon, 6/30/99 (c). . . . 4,800,000 AAA 4,071,504
ARIZONA Central Arizona Water Conservation District, Central
Arizona Project, 7.5%, 11/1/05, Prerefunded
11/1/00***. . . . . . . . . . . . . . . . . . . . . . 1,000,000 AAA 1,152,900
CALIFORNIA California State Revenue Anticipation Warrants,
Series C, 5.75%, 4/25/96. . . . . . . . . . . . . . . 1,000,000 MIG1 1,009,390
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
---
9
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Foothill/Eastern Transportation Corridor Agency, CA,
Toll Road Revenue, Senior Lien, Series A,
Zero Coupon, 1/1/05 . . . . . . . . . . . . . . . . . 1,000,000 BBB 556,850
Norwalk, CA, Redevelopment Agency, 9.1%, 12/1/15,
Crossover Refunded 12/1/95****. . . . . . . . . . . . 2,285,000 NR 2,339,863
Orange County, California, Recovery Notes, Series A,
6.5%, 6/1/05 (c). . . . . . . . . . . . . . . . . . . 1,665,000 AAA 1,855,926
Sacramento, CA, Cogeneration Project Revenue,
Proctor and Gamble Project, 7%, 7/1/04. . . . . . . . 1,000,000 BBB 1,087,830
CONNECTICUT Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Mandatory Tender Notes,
Series B, 5.8%, 10/1/97 . . . . . . . . . . . . . . . 2,000,000 A 2,031,020
DISTRICT OF COLUMBIA District of Columbia, General Obligation:
Series A, 5.625%, 6/1/02 (c). . . . . . . . . . . . . 1,500,000 AAA 1,560,495
Series D, 5.25%, 12/1/03 (c). . . . . . . . . . . . . 1,000,000 AAA 1,016,410
GEORGIA Georgia State, General Obligation, Series B, 7.7%,
11/1/95 . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 AAA 3,000,000
Municipal Electric Authority of Georgia, Power
Revenue, 6.6%, 1/1/01 (c) . . . . . . . . . . . . . . 1,000,000 AAA 1,093,370
ILLINOIS Chicago, IL, General Obligation:
Series C, 4.3%, 10/31/97. . . . . . . . . . . . . . . 500,000 AA 503,335
School Finance Authority, Series 1994 A,
4.5%, 6/1/02 (c). . . . . . . . . . . . . . . . . . 500,000 AAA 496,610
Tender Notes, Series C, 6.25%, 10/31/02 (c) . . . . . 3,450,000 AAA 3,763,708
Chicago, IL, Metropolitan Water Reclamation
District, ETM, 7.25%, 1/1/99**. . . . . . . . . . . . 2,000,000 AAA 2,182,680
Cook County, IL General Obligation, 6.45%, 11/1/96. . . 1,000,000 A 1,023,190
Evergreen Park, Illinois Hospital Facilities, Little
County Mary's Hospital, 7.75%, 2/15/09 (c). . . . . . 1,200,000 AAA 1,307,676
Illinois Health Facilities Authority, Revenue Refunding,
Sherman Hospital Project, 6.5%, 8/1/01 (c). . . . . . 1,025,000 AAA 1,116,922
INDIANA Indiana Health Facility Finance Authority, Hospital
Revenue, Ancilla Systems Inc., Series A,
5.875%, 7/1/02 (c). . . . . . . . . . . . . . . . . . 1,000,000 AAA 1,065,920
Madison County, IN, Hospital Authority, Holy Cross
Health System, 6.3%, 12/1/98 (c). . . . . . . . . . . 1,000,000 AAA 1,055,660
IOWA Cedar Rapids, IA, Hospital Revenue, St. Lukes
Methodist Hospital, 5.65%, 8/15/02 (c). . . . . . . . 1,250,000 AAA 1,311,575
LOUISIANA Jefferson, LA, Sales Tax, Series A, 6.1%, 12/1/96 (c) . 1,000,000 AAA 1,023,290
MAINE Maine State, General Obligation, 6%, 7/1/98 . . . . . . 1,000,000 AA 1,047,210
MARYLAND Washington Suburban Sanitation District, MD:
6.9%, 6/1/99. . . . . . . . . . . . . . . . . . . . . 675,000 AA 733,610
8.75%, 6/1/01 . . . . . . . . . . . . . . . . . . . . 1,000,000 AA 1,209,910
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ---
10
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MASSACHUSETTS Massachusetts Water Resource Authority, Series A,
7%, 4/1/18, Prerefunded 4/1/00*** . . . . . . . . . . 1,200,000 AAA 1,344,780
New England Education Loan Marketing Corporation,
Massachusetts Student Loan Revenue Refunding:
Series A, 6%, 9/1/98. . . . . . . . . . . . . . . . 1,500,000 AAA 1,556,700
Series D, 6.2%, 9/1/00. . . . . . . . . . . . . . . 2,000,000 AAA 2,120,240
MICHIGAN Detroit, MI, General Obligation, Distributable State
Aid, 5.375%, 5/1/96 . . . . . . . . . . . . . . . . . 2,375,000 BBB 2,391,245
Michigan State Hospital Finance Authority Revenue,
Genesys Health System, Series A, 6.6%, 10/1/98. . . . 1,000,000 BBB 1,031,930
NEW HAMPSHIRE New Hampshire Higher Education and Health Facilities
Authority Revenue, St. Josephs Hospital, Connie Lee
Insured, 5.65%, 1/1/04. . . . . . . . . . . . . . . . 1,095,000 AAA 1,151,151
NEW JERSEY New Jersey State, General Obligation, 7%, 4/1/03. . . . 2,000,000 AA 2,231,480
NEW YORK New York City, NY, General Obligation:
Series A, 3%, 8/15/02 (c) . . . . . . . . . . . . . . 1,000,000 AAA 909,750
Series B, 6.75%, 8/15/03. . . . . . . . . . . . . . . 6,000,000 A 6,449,640
Series C, ETM, 7.4%, 8/1/96** . . . . . . . . . . . . 220,000 A 225,361
Series H, 5.7%, 8/1/03. . . . . . . . . . . . . . . . 3,000,000 A 3,027,750
New York State Dormitory Authority, State University
Educational Facility, Series A, 6.5%, 5/15/04 . . . . 1,000,000 BBB 1,069,490
New York State Medical Care Facilities, Financing
Agency, Mount Sinai Hospital:
5.95%, 8/15/09. . . . . . . . . . . . . . . . . . . 1,360,000 AAA 1,410,986
8.875%, 1/15/26, Prerefunded 1/15/96*** . . . . . . 1,000,000 AAA 1,030,210
New York State Thruway Authority, Service Contract
Revenue, Local Highway & Bridge Building,
Series A, 6.25%, 4/1/04 (c) . . . . . . . . . . . . . 1,000,000 AAA 1,105,940
New York State Urban Development Corporation
Project, Onondaga County Convention Center:
6%, 1/1/04. . . . . . . . . . . . . . . . . . . . . 1,445,000 BBB 1,494,766
6%, 1/1/05. . . . . . . . . . . . . . . . . . . . . 1,535,000 BBB 1,581,741
NORTH CAROLINA North Carolina Municipal Power Agency #1, Catawaba
Electric Revenue, 5.75%, 1/1/02 (c) . . . . . . . . . 1,150,000 AAA 1,218,966
OHIO Ohio State Building Authority, State Facility Revenue,
Columbus State Office Building, Series 1985 C,
7.35%, 10/1/05, Prerefunded 10/1/99***. . . . . . . . 1,250,000 AAA 1,420,688
Richland County, OH, Hospital Improvement,
Mansfield General Hospital, 9.375%, 12/1/09 (c) . . . 1,505,000 AAA 1,541,767
PENNSYLVANIA Allegheny County, PA, Hospital Development
Authority, 6.4%, 7/1/99 (c) . . . . . . . . . . . . . 1,010,000 AAA 1,076,226
Philadelphia, PA, Gas Works Revenue, 7.875%, 7/1/17
Prerefunded 7/1/97***. . . . . . . . . . . . . . . . 500,000 AAA 540,680
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
---
11
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Philadelphia, PA, School District, General Obligation,
6.7%, 7/1/99 (c). . . . . . . . . . . . . . . . . . . 3,000,000 AAA 3,235,290
University of Pittsburgh, Pennsylvania Higher Education,
General Obligation, Series A, 8.375%, 6/1/05,
Prerefunded 6/1/97*** . . . . . . . . . . . . . . . . 1,000,000 AAA 1,085,710
SOUTH CAROLINA South Carolina Public Service Authority Revenue,
8%, 7/1/19, Prerefunded 7/1/96*** . . . . . . . . . . 250,000 AAA 264,245
York County, SC, Public Facilities Corporation,
Certificate of Participation, Series 1991, Detention
Center, 7.5%, 6/1/11, Prerefunded 6/1/01*** . . . . . 500,000 AAA 582,455
TEXAS Austin, TX, Independent School District, Guaranteed
General Obligation, 8.125%, 8/1/01. . . . . . . . . . 1,000,000 AAA 1,181,200
Austin, TX, Utility System Revenue:
6%, 11/15/01 (c). . . . . . . . . . . . . . . . . . . 1,000,000 AAA 1,075,790
Series A, 6.3%, 11/15/01 (c). . . . . . . . . . . . . 1,000,000 AAA 1,091,480
Austin, TX, Water, Sewer, and Electric Refunding
Revenue, 14.25%, 11/15/06, Prerefunded 5/15/97*** . . 1,105,000 AAA 1,271,468
Dallas-Fort Worth, TX, International Airport Revenue,
Series A, 7.75%, 11/1/02 (c). . . . . . . . . . . . . 525,000 AAA 617,867
Harris County, TX, Toll Road Authority, Senior Lien,
8.1%, 8/15/00, Prerefunded 8/15/97*** . . . . . . . . 1,275,000 AAA 1,400,014
Midland County, TX, Hospital District, 4.85%, 6/1/97 1,815,000 BBB 1,819,864
NorthEast Independent School District, TX,
Series 1985 B, ETM, 9.6%, 2/1/96**. . . . . . . . . . 300,000 AAA 304,233
Texas State Turnpike Authority, North Dallas Thruway
Revenue, 6.7%, 1/1/98 (c) . . . . . . . . . . . . . . 1,310,000 AAA 1,377,334
UTAH Intermountain Power Agency, UT, Power Supply
Revenue, Series B, 5.5%, 7/1/01 (c) (d) . . . . . . . 2,000,000 AAA 2,064,740
Intermountain Power Agency, UT, Special Obligation,
7.5%, 7/1/16, Crossover Refunded 7/1/96 (c)**** . . . 2,500,000 AA 2,604,125
VIRGINIA Fairfax County, VA, General Obligation, 7.75%,
11/1/97 Prerefunded 11/1/95***. . . . . . . . . . . . 1,000,000 AAA 1,005,000
WASHINGTON Washington Public Power Supply System:
Nuclear Project #1, Revenue Refunding, Series C,
7.3%, 7/1/98. . . . . . . . . . . . . . . . . . . . 3,000,000 AA 3,200,070
Nuclear Project #2, Refunding Revenue, Series C,
7.3%, 7/1/00. . . . . . . . . . . . . . . . . . . . 1,300,000 AA 1,432,041
Washington State, Motor Vehicle Fuel Tax, Series E,
8%, 9/1/09, Prerefunded 9/1/96*** . . . . . . . . . . 1,000,000 AAA 1,034,550
WEST VIRGINIA Wayne County, WV, Industrial Development, Atlantic
Richfield Company Project, 11.75%, 12/1/01. . . . . . 1,000,000 A 1,074,740
WISCONSIN Milwaukee, WI, Metropolitan Sewer District Revenue,
Series A, 6.7%, 10/1/01 . . . . . . . . . . . . . . . 1,000,000 AA 1,110,380
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ---
12
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Wisconsin State Health and Education Facilities
Authority:
Madision General Hospital Association, 8.2%,
12/1/95 (c) . . . . . . . . . . . . . . . . . . . 300,000 AAA 301,089
St. Lukes Medical Center, 6.6%, 8/15/01 (c) . . . . . 1,745,000 AAA 1,910,252
Wheaton Franciscan Services, 8.2%, 8/15/18,
Prerefunded 8/15/98***. . . . . . . . . . . . . . . 1,000,000 AAA 1,123,360
-----------
TOTAL INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
(Cost $107,353,726) . . . . . . . . . . . . . . . . . 109,936,538
-----------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $119,522,296) (a) . . . . . . . . . . . . . . . 122,107,798
-----------
-----------
</TABLE>
(a) The cost for federal income tax purposes was $119,522,296. At October 31,
1995, net unrealized appreciation for all securities based on tax cost
was $2,585,502. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $2,587,977 and aggregate gross unrealized depreciation for all
securities in which there was an excess tax cost over market value of
$2,475.
(b) All of the securities held have been determined to be of appropriate
credit quality as required by the Fund's investment objectives. Credit
ratings shown are assigned by 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. Securities rated by Scudder (SS&C) have been
determined to be of comparable quality to rated eligible securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC, or MBIA.
(d) When-issued or forward delivery securities. (See Note A of the Notes to
Financial Statements).
* 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 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.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow by a
trustee and used to pay principal and interest on bonds so designated.
*** 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 issue and to retire the bonds in
full at the earliest refunding date.
**** Crossover Refunded: Bonds which are crossover refunded are secured by an
escrow of securities which is used to pay principal on the tax exempt
issue and retire the bonds in full at the earliest refunding date, except
in the case of default by the issuer or inadequacy in the escrow account.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
---
13
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $119,522,296)
(Note A). . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,107,798
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,672
Receivables:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 2,338,484
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . 54,283
Due from Adviser (Note C) . . . . . . . . . . . . . . . . . 69,101
Deferred organization expenses (Note A). . . . . . . . . . . . . 26,942
-------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . 124,667,280
LIABILITIES
Payables:
When-issued and forward delivery securities (Note A). . . . $ 2,000,000
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 257,507
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . 464,583
Accrued management fee (Note C) . . . . . . . . . . . . . . 70,525
Other accrued expenses (Note C) . . . . . . . . . . . . . . 110,529
-------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 2,903,144
-------------
Net assets, at market value. . . . . . . . . . . . . . . . . . . $ 121,764,136
-------------
-------------
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments. . . . . . . . . . . $ 2,585,502
Accumulated net realized gain . . . . . . . . . . . . . . . 12,836
Shares of beneficial interest . . . . . . . . . . . . . . . 101,394
Additional paid-in capital. . . . . . . . . . . . . . . . . 119,064,404
-------------
Net assets, at market value. . . . . . . . . . . . . . . . . . . $ 121,764,136
-------------
-------------
NET ASSET VALUE, offering and redemption price per
share ($121,764,136 DIVIDED BY 10,139,449 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized). . . . . . . . . . . $12.01
------
------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ---
14
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,407,516
Expenses:
Management fee (Note C). . . . . . . . . . . . . . . . . . . . . . . . $ 70,525
Custodian and accounting fees (Note C) . . . . . . . . . . . . . . . . 55,549
Services to shareholders (Note C). . . . . . . . . . . . . . . . . . . 45,895
Trustees' fees (Note C). . . . . . . . . . . . . . . . . . . . . . . . 34,427
State registration . . . . . . . . . . . . . . . . . . . . . . . . . . 32,209
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,490
Federal registration . . . . . . . . . . . . . . . . . . . . . . . . . 19,436
Reports to shareholders. . . . . . . . . . . . . . . . . . . . . . . . 13,997
Legal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,495
Amortization of organization expense (Note A). . . . . . . . . . . . . 8,483
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,614
----------
Total expenses before reimbursement from Adviser . . . . . . . . . . . 315,120
Reimbursement of expenses from Adviser (Note C). . . . . . . . . . . . (69,101)
----------
Expenses, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,019
-----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . 5,161,497
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT
TRANSACTIONS
Net realized gain from investments . . . . . . . . . . . . . . . . . . 59,333
Net unrealized appreciation on investments during
the period . . . . . . . . . . . . . . . . . . . . . . . . . . 3,480,063
-----------
Net gain on investments. . . . . . . . . . . . . . . . . . . . . . . . 3,539,396
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . $ 8,700,893
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
---
15
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
February 15, 1994
(commencement
Year Ended of operations) to
October 31, October 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . $ 5,161,497 $ 1,237,032
Net realized gain (loss) on investments. . . . . . . . . . . 59,333 (46,497)
Net unrealized appreciation (depreciation)
on investments during the period . . . . . . . . . . 3,480,063 (894,561)
------------ -------------
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . . . . . . 8,700,893 295,974
------------ -------------
Distributions to shareholders from net
investment income ($.56 and $.38 per
share, respectively) . . . . . . . . . . . . . . . . (5,161,497) (1,237,032)
------------ -------------
Fund share transactions:
Proceeds from shares sold. . . . . . . . . . . . . . . . . . 113,448,336 87,372,265
Net asset value of shares issued to
shareholders in reinvestment of distributions. . . . 2,280,520 736,692
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . (65,092,618) (19,580,597)
------------ -------------
Net increase in net assets from Fund share
transactions . . . . . . . . . . . . . . . . . . . . 50,636,238 68,528,360
------------ -------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . 54,175,634 67,587,302
Net assets at beginning of period. . . . . . . . . . . . . . 67,588,502 1,200
------------ -------------
NET ASSETS AT END OF PERIOD. . . . . . . . . . . . . . . . . $121,764,136 $ 67,588,502
------------ -------------
------------ -------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period. . . . . . . . . . 5,792,967 100
------------ -------------
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . 9,697,002 7,388,931
Shares issued to shareholders in
reinvestment of distributions. . . . . . . . . . . . 192,663 62,407
Shares redeemed. . . . . . . . . . . . . . . . . . . . . . . (5,543,183) (1,658,471)
------------ -------------
Net increase in Fund shares. . . . . . . . . . . . . . . . . 4,346,482 5,792,867
------------ -------------
Shares outstanding at end of period. . . . . . . . . . . . . 10,139,449 5,792,967
------------ -------------
------------ -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ---
16
<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
February 15, 1994
Year Ended (commencement
October 31, of operations) to
1995 October 31, 1994
----------- ------------------
<S> <C> <C>
Net asset value, beginning of period.................................. $ 11.67 $ 12.00
-------- ---------
Income from investment operations:
Net investment income (a)........................................... .56 .38
Net realized and unrealized gain (loss) on investments.............. .34 (.33)
-------- --------
Total from investment operations...................................... .90 .05
-------- --------
Less distributions from net investment income......................... (.56) (.38)
-------- --------
Net asset value, end of period........................................ $ 12.01 $ 11.67
-------- --------
-------- --------
TOTAL RETURN (%) (b).................................................. 7.94 .44**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)................................ 122 68
Ratio of operating expenses, net to average daily net assets (%) (a).. .23 --
Ratio of net investment income to average daily net assets (%)........ 4.78 4.84*
Portfolio turnover rate (%)........................................... 37.5 36.3*
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of................. $ .01 $ .04
Reflects a per share amount of management fee and other
fees not imposed by the Adviser of............................ $ .07 $ .06
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%)............................................... .85 1.29*
(b) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
* * Not annualized
</TABLE>
----
17
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
Scudder Limited Term Tax Free Fund (the "Fund") is a diversified series of
Scudder Tax Free Trust, a Massachusetts business trust (the "Trust"), which is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. There are currently two series in the Trust. 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 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. Short-term investments having a 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 Trustees.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price.
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
- ----
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
federal income taxes and no provision for federal income taxes was required.
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. 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.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
OTHER. Investment transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the ex-
dividend date. Interest income is accrued pro rata to the earlier of call or
maturity date.
B. PURCHASES AND SALES OF SECURITIES
- -------------------------------------------------------------------------------
For the year ended October 31, 1995, purchases and sales of investments
(excluding short-term) aggregated $88,131,175 and $36,607,691, respectively.
C. RELATED PARTIES
- -------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a fee
equal to an annual rate of 0.60% of the Fund's
----
19
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
average daily net assets, computed and accrued daily and payable monthly. As
manager of the assets of the Fund, 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 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. For the period November 1, 1994 to February 28,
1995 the Adviser agreed not to impose all of its management fee and to maintain
the annualized expenses of the Fund at not more than 0.00% of average daily net
assets. For the period March 1, 1995 to August 31, 1995, the Adviser agreed to
maintain the annualized expenses at 0.25% of average daily net assets. Effective
September 1, 1995, the Adviser agreed to maintain the annualized expenses at
0.50% of average daily net assets until April 30, 1996. For the year ended
October 31, 1995, the Adviser did not impose a portion of its fee amounting to
$577,208 and the fee imposed aggregated $70,525, all of which is unpaid at
October 31, 1995. Further, due to the limitation of such Agreement, the
Adviser's reimbursement payable for the year ended October 31, 1995 amounted to
$69,101.
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 year ended October 31, 1995, SSC did not impose a portion of its fee
amounting to $15,288 and the fee imposed aggregated $31,712.
Scudder Fund Accounting Corporation ("SFAC"), a wholly-owned 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
year ended October 31, 1995, SFAC did not impose a portion of its fee amounting
to $12,000 and the fee imposed aggregated $25,972.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the year ended
October 31, 1995, Trustees' fees aggregated $34,427.
- ----
20
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF SCUDDER TAX FREE TRUST AND TO THE SHAREHOLDERS OF SCUDDER
LIMITED TERM TAX FREE FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Limited Term Tax Free Fund, including the investment portfolio, as of October
31, 1995, and the related statement of operations for the year then ended, the
statements of changes in net assets and the financial highlights for the year
then ended and the period February 15, 1994 (commencement of operations) to
October 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Limited Term Tax Free Fund as of October 31, 1995, the results of its
operations for the year then ended, the statements of changes in its net assets
and the financial highlights for year then ended and the period February 15,
1994 (commencement of operations) to October 31, 1994 in conformity with
generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 4, 1995
----
21
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
TAX INFORMATION
Of the dividends paid by the Scudder Limited Term Tax Free Fund from net
investment income for the taxable year ended October 31, 1995, 100% constituted
exempt interest dividends for regular federal income tax purposes.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $9,047
as capital gain dividends for its taxable year ended October 31, 1995.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
22
<PAGE>
(This page intentionally left blank.)
23
<PAGE>
(This page intentionally left blank.)
24
<PAGE>
OFFICERS AND TRUSTEES
David S. Lee*
President and Trustee
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
Peter B. Freeman
Trustee; Corporate Director and Trustee
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Juris Padegs*
Trustee
Jean C. Tempel
Trustee; General Partner, TL Ventures
Donald C. Carleton*
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>
<S> <C> <C>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
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 Small Company Value Fund
Scudder Growth and Income Fund Scudder Value 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
<FN>
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.
</FN>
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
Account Service and Information
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For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
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
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder Investor
Services, Inc., Distributor.
<FN>
* 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.
</FN>
</TABLE>
27
<PAGE>
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 37 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.
