Scudder
Limited Term
Tax Free Fund
Semiannual Report
April 30, 1995
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
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 Officers and Trustees
22 Investment Products
and Services
23 How to Contact
Scudder
IN BRIEF
o Scudder Limited Term Tax Free Fund provided shareholders with a 30-day net
annualized SEC yield of 4.70% on April 30, 1995, equivalent to a 7.78%
taxable yield for shareholders subject to the 39.6% maximum federal tax
rate.
o The Fund returned 3.62% for the semiannual period ended April 30, 1995,
surpassing the 2.73% return on average of the 49 short municipal debt funds
tracked by Lipper Analytical Services.
o As evident in the chart below, the Fund provided significantly more price
stability than longer-term municipal bonds during a relatively tumultuous
year.
Scudder Limited Term Tax Free Fund vs.
Lehman Brothers Municipal Bond Index
(Monthly Percentage Price Change
12 months through April 30, 1995)
May 94 0 0.085 0 0.38
1 0.17 1 -1.1
Jul 94 2 0 2 1.34
3 0.08 3 -0.14
Sept 94 4 -0.68 4 -1.95
5 -0.85 5 -2.27
Nov 94 6 -1.37 6 -2.31
Dec 94 7 0.43 7 1.68
8 0.35 8 2.35
Feb 95 9 1.21 9 2.41
10 0.51 10 0.66
Apr 95 11 0 11 -0.36
Scudder Limited Term Tax Free Fund
Lehman Brothers Municipal Bond Index
o Scudder Limited Term Tax Free Fund's assets increased substantially during
the period, from approximately $67 million on October 31, 1994, to
approximately $110 million on April 30, 1995.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Investor concerns about inflationary economic growth have abated in
recent months, after creating much turmoil for the world's investment markets in
1994. Indications of continued low inflation and weakness in certain segments of
the economy, combined with the Federal Reserve's most recent interest-rate
increases in November and February, have reassured many investors. Yields have
declined from their November highs, and municipal bond prices have recovered. In
the first four months of 1995, short-term municipal bonds, as measured by the
unmanaged Lehman Brothers 3-year Municipal Bond Index, returned 3.14% on
average, compared with 0.68% for all of 1994.
Given the swings in interest rates over the past year and a half, the
question for municipal bond investors is, can the recent favorable shift in
interest rates be sustained? In our view, rates should remain relatively stable
as long as economic growth continues to slacken in the United States. Already,
evidence of a slowing economy can be seen in the recent drop in non-farm
payrolls and the declining sales of houses and automobiles.
As the economic and investment landscape unfolds, your portfolio
managers will continue to concentrate their efforts on fundamental investment
research and security selection as a means of generating tax-free income and a
high degree of price stability. As always, please call a Scudder Investor
Relations representative at 1-800-225-2470 if you have questions about your
Fund. Page 23 provides more information on how to contact Scudder. Thank you for
choosing Scudder Limited Term Tax Free Fund to help meet your investing 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 April 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Limited Term Tax Free Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
4/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,501 5.01% 5.01%
Life of
Fund* $10,408 4.08% 3.38%
LB Municipal Bond Index (3 year)
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
4/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,464 4.64% 4.64%
Life of
Fund* $10,399 3.99% 3.41%
*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* 10000
4/94 9965
7/94 10154
10/94 10099
1/95 10201
4/95 10465
LB Municipal Bond Index (3 year)
Year Amount
- ----------------------
2/94* 10000
4/94 9938
7/94 10070
10/94 10056
1/95 10165
4/95 10399
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 April 30
- ----------------------------------
<TABLE>
<S> <C> <C>
1994* 1995
---------------
Net Asset Value.......... $11.80 $11.80
Income Dividends......... $ .09 $ .57
Fund Total
Return (%)............... -.35 5.01
Index Total
Return (%)............... -.62 4.64
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return for the one year and life
of Fund periods would have been lower.
4
<PAGE>
Portfolio Summary as of April 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
General Obligation 37%
Electric Utility 13% General obligation bonds from a diverse
Hospital/Health 13% range of states including Alaska, Maine,
Escrow & Collateral 12% Georgia, and Illinois offer attractive
Water/Sewer 7% value at high quality.
Higher Education 5%
Port/Airport 5%
Miscellaneous Municipal 8%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 65%
AA 17% Overall portfolio quality is high, with
A 13% 95% of holdings rated A or better.
BBB 3%
Not Rated 2%
----
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 33%
Greater than 1 less than 5 years 35% Following the rally in municipals, we have
Greater than 5 less than 10 years 32% reestablished a "neutral" average maturity
---- of approximately three years.
100%
====
Weighted average effective maturity: 3 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
5
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Welcome to those who have recently become shareholders of Scudder Limited
Term Tax Free Fund. This semiannual report covers the Fund's performance,
strategy, and investment environment for the six-month period ended April 30,
1995. The Fund's objective is to seek higher tax-free income than is typically
available from tax-free money market investments and more price stability than
higher-yielding, longer-term tax-free bonds.
In the first 10 months of 1994, U.S. bond markets weathered sharp increases
in interest rates and corresponding declines in price. Long-term municipal bond
prices declined substantially, and the Fund's relatively short average maturity
boosted performance during this difficult period. From February 28, 1994 (the
nearest month-end to the Fund's inception on February 15) through October 31 of
the same year, Scudder Limited Term Tax Free Fund posted a total return of
0.99%, compared with -4.08% for the unmanaged Lehman Brothers Municipal Bond
Index. Shortly thereafter, the municipal bond market began a rally, and the
prices of municipal bonds rose steadily. During the six months from October 31,
1994 through April 30, 1995, the Fund's net asset value increased $0.13 to
$11.80 per share, contributing to a total return of 3.62%, versus 7.57% for the
Index. Although trailing the returns of longer-term bonds, the Fund's return
surpassed that of the 49 short-term municipal debt funds tracked by Lipper
Analytical Services, which returned 2.73% on average.
On April 30, the Fund provided a 30-day net annualized SEC yield of 4.70%.
For shareholders subject to the 39.6% maximum federal income tax rate, the
Fund's yield translated into a 7.78% taxable yield, significantly higher than
yields provided by comparable taxable investments. The Fund's yield also beat
the 6.15% average yield of 2 1/2-year bank certificates of deposit as of April
30, 1995. Of course, CDs offer a fixed rate of return and are insured up to
certain limits. During the Fund's semiannual period, shareholders received a
total of $0.29 per share of income exempt from federal taxes.
6
<PAGE>
Inflation Worries Abate
In late 1994 and early 1995, the Federal Reserve continued to nudge
short-term interest rates upward in an attempt to slow the economy and prevent
inflation from accelerating. By November, bond market participants had already
begun to believe that the Fed's program was taking hold, thanks to several
economic reports indicating slower growth. Five-year municipal bond yields fell
0.30 of a percentage point from November through April, while 10-year bond
yields fell almost 0.35 of a percentage point.
Last fall, in anticipation of an eventual rally, we lengthened the Fund's
average effective maturity to 4.4 years (toward the longer end of the Fund's
maturity range). This strategy enabled the Fund to benefit from the decline in
interest rates and the increase in municipal bond prices that began last
November. As of the close of the semiannual period, we had pulled back the
average effective maturity to 3 years. As bond prices in our maturity range
become more attractive we will consider re-extending the Fund's maturity.
The Fund's largest single sector at the close of the period was general
obligation bonds. In our opinion, these bonds--from a diverse range of states
including Maine, Alaska, Georgia, and Illinois--offer attractive value and high
overall quality. In addition, we continue to hold a large percentage of
pre-refunded bonds in the Fund's portfolio. Bonds are pre-refunded when issuers
sell new debt at lower prevailing 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.
Overall portfolio quality remains high, with 95% of Fund assets rated A
or better, and 65% rated AAA. The overall weighted average quality of the Fund's
holdings was AA as of April 30, 1995. Securities are rated by Standard & Poor's,
Moody's Investors Service, Fitch Investors Service, or assigned an equivalent
rating by Scudder. The Portfolio Summary on page 5 provides more information
about the Fund's holdings including quality, maturity, and sector
representation.
7
<PAGE>
Expectations for This Year and Beyond
We anticipate that short- to intermediate-term municipal bonds will
continue to earn attractive returns in the current environment of restrained
economic growth and low inflation. But some questions remain unanswered: Will
the Federal Reserve raise short-term interest rates to boost the sagging dollar,
which could choke off growth sooner than expected and increase investment market
volatility? Or, will consumer spending remain sufficiently restrained, resulting
in continued modest U.S. economic activity--the so-called soft landing, which is
likely to be viewed most favorably in the investment markets? Additionally, will
Congress pass a flat tax or some other major revision of the federal tax code?
We cannot predict the precise outcome of the tax proposals. But because cities,
states, and state agencies need access to the municipal market more than ever,
we are confident that municipal bonds will continue to offer significant tax
advantages.
In the meantime, we intend to maintain our customarily conservative
strategy, which includes a limited average maturity, broad diversification, and
high-quality bonds. Additionally, we will continue to search for value by
balancing the maturity characteristics, credit quality, and income potential of
municipal bond investments for Scudder Limited Term Tax Free Fund.
Sincerely,
Your Portfolio Management Team
/s/M. Ashton Patton /s/Donald C. Carleton
M. Ashton Patton Donald C. Carleton
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of April 30, 1995 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
11.6% SHORT-TERM MUNICIPAL INVESTMENTS
----------------------------------------------------------------------------------------------------
CALIFORNIA Orange County, CA, Water Revenue, Tax Exempt
Commercial Paper:
4.15%, 5/23/95............................................. 3,000,000 A1+ 2,999,400
4.2%, 5/25/95.............................................. 1,700,000 A1+ 1,699,660
University of California Regents, "SAVRS", 4.3%,
9/1/16 (c)*****............................................. 2,400,000 AAA 2,400,000
DISTRICT OF COLUMBIA District of Columbia, General Obligation, Daily
Demand Note, 5.1%, 10/1/07*................................. 5,300,000 A1+ 5,300,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $12,400,000).......................................... 12,399,060
----------
----------------------------------------------------------------------------------------------------
88.4% INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
----------------------------------------------------------------------------------------------------
ALABAMA University of South Alabama, Hospital and Auxiliary,
7%, 5/15/04, Prerefunded 5/15/00 (c)***..................... 2,000,000 AAA 2,176,420
ALASKA Alaska State, General Obligation, 5%, 7/1/96................. 1,000,000 AA 1,006,840
North Slope Boro, AK, General Obligation, 4.75%,
6/30/95 (c)................................................. 1,000,000 AAA 1,000,460
ARIZONA Arizona State Transportation & Highway Revenue,
4.4%, 7/1/02................................................ 1,460,000 AA 1,365,728
Central Arizona Water Conservation District, 7.5%,
11/1/05, Prerefunded 11/1/00***............................. 1,000,000 AA 1,131,720
Phoenix, AZ, Municipal Airport Improvement Revenue,
8.5%, 7/1/99................................................ 1,000,000 A 1,026,660
CALIFORNIA California State Revenue Anticipation Warrants,
Series C, 5.75%, 4/25/96.................................... 2,000,000 SP1 2,027,840
Norwalk, CA, Redevelopment Agency, 9.1%, 12/1/15,
Crossover Refunded 12/1/95****.............................. 2,285,000 NR 2,390,544
CONNECTICUT Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Mandatory Tender Notes:
Series A, 5.8%, 10/1/97.................................... 2,000,000 A 2,022,380
Series B, 5.8%, 10/1/97.................................... 2,000,000 A 2,022,380
DISTRICT OF COLUMBIA District of Columbia, General Obligation:
Series A, 5.625%, 6/1/02 (c)................................ 1,500,000 AAA 1,509,045
Series D, 5.25%, 12/1/03 (c)................................ 1,000,000 AAA 970,360
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
SCUDDER LIMITED TERM TAX FREE FUND
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA Georgia State, General Obligation, Series B, 7.7%,
11/1/95..................................................... 3,000,000 AAA 3,052,650
Municipal Electric Authority of Georgia, Power Revenue,
6.6%, 1/1/01................................................ 1,000,000 AAA 1,073,520
ILLINOIS Chicago, IL, General Obligation:
7.5%, 1/1/00, Prerefunded 1/1/97 (c)***..................... 1,000,000 AAA 1,062,830
Series C, 4.3%, 10/31/97.................................... 500,000 A1+ 490,010
School Finance Authority, Series 1994 A,
4.5%, 6/1/02 (c)........................................... 500,000 AAA 467,590
Tender Notes, 6.25%, 10/31/02 (c)........................... 3,450,000 AAA 3,657,345
Chicago, IL, Metropolitan Water Reclamation
District, ETM, 7.25%, 1/1/99**.............................. 2,000,000 AAA 2,159,580
Cook County, IL, General Obligation, 6.45%, 11/1/96.......... 1,000,000 A 1,025,910
Illinois Health Facilities Authority, Revenue Refunding,
Sherman Hospital Project, 6.5%, 8/1/01 (c).................. 1,025,000 AAA 1,093,050
INDIANA Indiana Bond Bank Revenue, State Revolving Fund,
5.25%, 2/1/01............................................... 530,000 A 525,029
Indiana Health Facility Finance Authority, Hospital
Revenue, Ancilla Systems Inc., Series A,
5.875%, 7/1/02 (c)......................................... 1,000,000 AAA 1,029,050
Madison County, IN, Hospital Authority, Holy Cross
Health System, 6.3%, 12/1/98 (c)............................ 1,000,000 AAA 1,043,530
IOWA Cedar Rapids, IA, Hospital Revenue, St. Lukes
Methodist Hospital, 5.65%, 8/15/02 (c)...................... 1,250,000 AAA 1,269,275
LOUISIANA Jefferson, LA, Sales Tax, Series A, 6.1%, 12/1/96 (c)........ 1,000,000 AAA 1,024,880
MAINE Maine State, General Obligation, 6%, 7/1/98.................. 1,000,000 AA 1,038,440
MARYLAND Washington Suburban Sanitation District, MD, 6.9%,
6/1/99...................................................... 675,000 AA 727,049
MASSACHUSETTS Massachusetts Dedicated Income Tax, Series A,
7.875%, 6/1/97.............................................. 465,000 A 495,578
Massachusetts General Obligation, 5.5%, 11/1/95 (c).......... 1,495,000 A 1,503,357
Massachusetts Water Resource Authority, Series A,
7%, 4/1/18, Prerefunded 4/1/00***........................... 1,200,000 AAA 1,322,376
New England Education Loan Marketing Corporation,
Massachusetts Student Loan Revenue Refunding,
Issue D, 6.2%, 9/1/00....................................... 2,000,000 AAA 2,058,240
MICHIGAN Detroit, MI, General Obligation, Distributable State
Aid, 5.375%, 5/1/96......................................... 2,375,000 BBB 2,379,916
Michigan State Hospital, Genesys Health System,
6.6%, 10/1/98............................................... 1,000,000 BBB 1,015,790
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE New Hampshire Higher Education and Health
Facilities Authority:
St. Josephs Hospital, Connie Lee Insured,
5.65%, 1/1/04............................................. 1,095,000 AAA 1,099,369
Wentworth-Douglas Hospital, Series 1994, 4.8%,
1/1/01 (c)................................................ 490,000 AAA 478,088
NEW JERSEY New Jersey State, General Obligation, 7%, 4/1/03............. 2,000,000 AA 2,194,160
NEW YORK New York City, NY, General Obligation:
Series A, 3%, 8/15/02 (c)................................... 1,000,000 AAA 854,040
Series C, ETM, 7.4%, 8/1/96**............................... 220,000 A 225,658
Series H, 5.7%, 8/1/03...................................... 3,000,000 A 2,905,710
New York State Medical Care, Mount Sinai Hospital,
8.875%, 1/15/26, Prerefunded 1/15/96***..................... 1,000,000 AAA 1,050,890
NORTH CAROLINA North Carolina Municipal Power Agency, Catawaba
Electric Revenue 2, 5.75%, 1/1/02 (c)....................... 1,000,000 AAA 1,034,010
OHIO Cincinnati, OH, School District, Revenue Anticipation
Notes, 5.1%, 6/15/95........................................ 600,000 A+ 600,348
Richland County, OH, Mansfield Hospital, 9.375%,
12/1/09 (c)................................................. 1,505,000 AAA 1,576,924
PENNSYLVANIA Allegheny County, PA, Hospital Development Authority,
6.4%, 7/1/99 (c)............................................ 1,010,000 AAA 1,064,924
Philadelphia, PA, Gas Works Revenue, 7.875%, 7/1/17,
Prerefunded 7/1/97***....................................... 500,000 AAA 540,795
Philadelphia, PA, School District, General Obligation,
6.7%, 7/1/99 (c)............................................ 3,000,000 AAA 3,207,180
University of Pittsburgh Higher Education, Series A,
8.375%, 6/1/05, Prerefunded 6/1/97***....................... 1,000,000 AAA 1,089,010
SOUTH CAROLINA South Carolina Public Service Authority Revenue,
8%, 7/1/19, Prerefunded 7/1/96***........................... 250,000 AAA 267,298
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 570,330
TENNESSEE Bristol, TN, Health and Education Facilities, Bristol
Memorial Hospital, Refunding Revenue, 4.9%,
9/1/03 (c).................................................. 250,000 AAA 240,698
TEXAS Austin, TX Utility System Revenue:
6%, 11/15/01 (c)............................................ 1,000,000 AAA 1,052,360
6.3%, 11/15/01 (c).......................................... 1,000,000 AAA 1,068,910
Austin, TX, Water, Sewer, and Electric Refunding
Revenue, 14.25%, 11/15/06, Prerefunded 5/15/97***........... 1,105,000 AAA 1,306,696
Dallas-Fort Worth, TX, International Airport Revenue,
Series A, 7.75%, 11/1/02 (c)................................ 525,000 AAA 605,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER LIMITED TERM TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harris County, TX, General Obligation, 8.6%, 10/1/95......... 2,350,000 AA 2,391,078
NorthEast Independent School District, TX, Series
1985 B, ETM, 9.6%, 2/1/96**................................. 300,000 AAA 311,445
Texas State Turnpike Authority, North Dallas Thruway
Revenue, 6.7%, 1/1/98 (c)................................... 1,310,000 AAA 1,374,007
UTAH Intermountain Power Agency, UT, Power Supply
Revenue:
8.5%, 7/1/96, Prerefunded 7/1/95***......................... 2,000,000 AAA 2,044,560
Series G, 9.375%, 7/1/18, Prerefunded 7/1/95 (c)***......... 1,000,000 AA 1,027,480
Series I, 9%, 7/1/19, Crossover Refunded 1/1/95****......... 2,000,000 AA 2,043,760
VIRGINIA Chesapeake, VA, General Obligation, 6.8%, 7/1/01,
Prerefunded 7/1/97 (c)***................................... 1,215,000 AAA 1,288,240
Fairfax County, VA, General Obligation, 7.75%,
11/1/97, Prerefunded 11/1/95***............................. 1,000,000 AAA 1,022,050
WASHINGTON Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue,
Series C, 7.3%, 7/1/98..................................... 3,000,000 AA 3,180,990
Nuclear Project #2, Refunding Revenue,
Series C, 7.3%, 7/1/00..................................... 1,300,000 AA 1,410,084
Washington State, Motor Vehicle Fuel Tax, Series E,
8%, 9/1/09, Prerefunded 9/1/96***........................... 1,000,000 AAA 1,046,040
WEST VIRGINIA Wayne County, WV, Industrial Development, Atlantic
Richfield Company Project, 11.75%, 12/1/01.................. 1,000,000 A 1,101,620
WISCONSIN Milwaukee, WI, Metropolitan Sewer Revenue, Series A,
6.7%, 10/1/01............................................... 1,000,000 AA 1,084,960
State of Wisconsin, General Obligation, 6.4%, 5/1/01,
Prerefunded 5/1/99***....................................... 1,000,000 AAA 1,065,220
Wisconsin State Health and Education
Facilities Authority:
Madison General Hospital Association, 8.2%,
12/1/95 (c)............................................... 300,000 AAA 306,546
St. Lukes Medical Center, 6.6%, 8/15/01 (c)................ 1,745,000 AAA 1,868,790
Wheaton Franciscan Services, 8.2%, 8/15/18,
Prerefunded 8/15/98 (c)***................................ 1,000,000 AAA 1,119,210
-----------
TOTAL INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
(Cost $94,146,707).......................................... 94,884,075
-----------
=============================================================================================================================
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $106,546,707) (a)..................................... 107,283,135
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $106,546,707. At April 30,
1995, net unrealized appreciation for all securities based on tax cost was
$736,428. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $924,140 and aggregate gross unrealized depreciation for all securities
in which there was an excess tax cost over market value of $187,712.
(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.
(c) Bond is insured by one of these companies: AMBAC, FGIC, or MBIA.
* 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.
***** SAVRS: Securities subject to a periodic market auction reset process.
Yield levels are generally set slightly higher than those of tax-exempt
commercial paper.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER LIMITED TERM TAX FREE FUND
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------
April 30, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $106,546,707)
(Note A).......................................................... $107,283,135
Cash................................................................. 63,573
Receivables:
Investments sold.................................................. 1,096,902
Interest.......................................................... 2,158,031
Fund shares sold.................................................. 17,350
Due from Adviser (Note C)......................................... 69,101
Deferred organization expenses (Note A).............................. 31,865
------------
Total assets...................................................... 110,719,957
LIABILITIES
Payables:
Dividends......................................................... $230,877
Fund shares redeemed.............................................. 335,903
Other accrued expenses (Note C)................................... 71,763
--------
Total liabilities................................................. 638,543
------------
Net assets, at market value.......................................... $110,081,414
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments............................ $ 736,428
Accumulated net realized loss..................................... (163,562)
Shares of beneficial interest..................................... 93,278
Additional paid-in capital........................................ 109,415,270
------------
Net assets, at market value.......................................... $110,081,414
============
NET ASSET VALUE, offering and redemption price per
share ($110,081,414 / $9,327,827 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized)............................ $11.80
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................... $2,438,638
Expenses:
Management fee (Note C).................................... $ -
Trustees' fees (Note C).................................... 14,129
Services to shareholders (Note C).......................... 13,212
Custodian and accounting fees (Note C)..................... 12,734
State registration......................................... 24,915
Federal registration....................................... 15,615
Reports to shareholders.................................... 11,262
Auditing................................................... 10,800
Legal...................................................... 329
Amortization of organization expense (Note A).............. 4,254
Other...................................................... 7,603
--------
Total expenses before reimbursement from Adviser........... 114,853
Reimbursement of expenses from Adviser (Note C)............ (69,101)
--------
Expenses, net.............................................. 45,752
----------
Net investment income...................................... 2,392,886
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss from investments......................... (117,065)
Net unrealized appreciation on investments during
the period............................................. 1,630,989
----------
Net gain on investments.................................... 1,513,924
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $3,906,810
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER LIMITED TERM TAX FREE FUND
- ----------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
SIX MONTHS FEBRUARY 15, 1994
ENDED (COMMENCEMENT OF
APRIL 30, OPERATIONS) TO
1995 OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income................................ $ 2,392,886 $ 1,237,032
Net realized loss on investments..................... (117,065) (46,497)
Net unrealized appreciation (depreciation)
on investments during the period................... 1,630,989 (894,561)
------------ ------------
Net increase in net assets resulting
from operations.................................... 3,906,810 295,974
------------ ------------
Distributions to shareholders from net
investment income ($.29 and $.38 per
share, respectively)............................... (2,392,886) (1,237,032)
------------ ------------
Fund share transactions:
Proceeds from shares sold............................ 81,288,019 87,372,265
Net asset value of shares issued to
shareholders in reinvestment of distributions...... 1,043,120 736,692
Cost of shares redeemed.............................. (41,352,151) (19,580,597)
------------ ------------
Net increase in net assets from Fund share
transactions....................................... 40,978,988 68,528,360
------------ ------------
INCREASE IN NET ASSETS............................... 42,492,912 67,587,302
Net assets at beginning of period.................... 67,588,502 1,200
------------ ------------
NET ASSETS AT END OF PERIOD.......................... $110,081,414 $ 67,588,502
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period............ 5,792,967 100
------------ ------------
Shares sold.......................................... 7,000,693 7,388,931
Shares issued to shareholders in
reinvestment of distributions...................... 89,156 62,407
Shares redeemed...................................... (3,554,989) (1,658,471)
------------ ------------
Net increase in Fund shares.......................... 3,534,860 5,792,867
------------ ------------
Shares outstanding at end of period.................. 9,327,827 5,792,967
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED FEBRUARY 15, 1994
APRIL 30, (COMMENCEMENT
1995 OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1994
----------- -----------------
<S> <C> <C>
Net asset value, beginning of period.................................... $11.67 $12.00
------ ------
Income from investment operations:
Net investment income (a)............................................. .29 .38
Net realized and unrealized gain (loss) on investments................ .13 (.33)
------ ------
Total from investment operations........................................ .42 .05
------ ------
Less distributions from net investment income........................... (.29) (.38)
------ ------
Net asset value, end of period.......................................... $11.80 $11.67
====== ======
TOTAL RETURN (%) (b).................................................... 3.62** .44**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions).................................. 110 68
Ratio of operating expenses, net to average daily net assets (%) (a).... .09* -
Ratio of net investment income to average daily net assets (%).......... 4.96* 4.84*
Portfolio turnover rate (%)............................................. 28.9* 36.3*
<FN>
(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.............................. $ .04 $ .06
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%)................................................. .90* 1.29*
(b) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
* * Not annualized
</FN>
</TABLE>
17
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
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.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable and tax-exempt income to its shareholders.
The Fund accordingly paid no federal income taxes and no provision for federal
income taxes was required.
At October 31, 1994, the Fund had a net tax basis capital loss carryforward of
approximately $46,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2002, whichever occurs first.
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,
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 COST. 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 six months ended April 30, 1995, purchases and sales of investments
(excluding short-term) aggregated $55,371,918 and $12,078,628, 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 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
19
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
- --------------------------------------------------------------------------------
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 February 15, 1994 (commencement of operations) 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. Effective March 1, 1995, The Adviser agreed to
maintain the annualized expenses at 0.25% of average daily net assets until
August 31, 1995. For the six months ended April 30, 1995, the Adviser did not
impose its fee amounting to $291,678. Further, due to the limitation of such
Agreement, the Adviser's reimbursement payable for the six months ended April
30, 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 six months ended April 30, 1995, SSC did not impose its fee amounting to
$16,398 and the fee imposed aggregated $6,627.
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
six months ended April 30, 1995, SFAC did not impose its fee amounting to
$12,793 and the fee imposed aggregated $5,207.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the six months
ended April 30, 1995, Trustees' fees aggregated $14,129.
20
<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; Director, Executive Vice President and Manager,
Safeguard Scientifics, Inc.
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.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
<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>
22
<PAGE>
<TABLE>
<CAPTION>
HOW TO CONTACT SCUDDER
Account Service and Information
-------------------------------------------------------------------------------------------------------------
<S> <C>
For existing account service and
transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields,
exchanges, and redemptions SCUDDER
AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional applications
and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------------------------------------
<FN>
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
</FN>
</TABLE>
23
<PAGE>
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 36 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
<PAGE>
