Scudder
Medium Term
Tax Free Fund
Semiannual Report
June 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 A fund that seeks to provide a high level of tax-free income and limited
principal fluctuation by investing in high-grade municipal securities of
intermediate maturity.
o A pure no-load(TM)fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER MEDIUM 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
10 Investment Portfolio
20 Financial Statements
23 Financial Highlights
24 Notes to Financial Statements
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
IN BRIEF
o Scudder Medium Term Tax Free Fund posted a six-month total return of 8.10%
for the period ended June 30, 1995, as the municipal bond market recovered
from 1994's downturn.
o The Fund's 30-day net annualized SEC yield was 4.53% on June 30, 1995. For
investors in the top federal tax brackets of 36% and 39.6%, the Fund's
yield was equivalent to a 7.08% and 7.50% taxable yield, respectively.
The Tax-Free Advantage
The Fund's 30-Day Net Annualized SEC Yield 4.53%
Taxable-Equivalent Yield at 36% Tax Bracket 7.08%
Taxable-Equivalent Yield at 39.6% Tax Bracket 7.50%
o The Fund continues to outpace the average performance of similar funds,
according to Lipper Analytical Services. Please see page 6 for additional
Lipper performance information.
2
<PAGE>
SCUDDER MEDIUM TERM TAX FREE FUND
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Bonds rallied strongly during the first half of 1995, more than erasing
last year's price declines. Municipal bonds enjoyed solid price appreciation,
although they lagged overall fixed-income performance due in part to lack of
investor interest. Statistics from the Investment Company Institute, a mutual
fund trade association, tell us that nationwide sales of long-term municipal
bond funds from January through May 1995 are just over half what they were for
the same period a year ago. Events in Orange County, California, and Capitol
Hill discussions of a 17% federal flat tax (among other factors) have played a
part in softening the demand for tax-exempt investments. Nevertheless, the
municipal bond market continues to play a critical role in the development and
maintenance of infrastructure and social services in the United States, and as
such remains an important component of the overall bond market. The benefits of
tax-free investing, moreover, provide perennial appeal for investors in higher
tax brackets.
We believe the recent overperformance of the Treasury market spells
opportunity for the municipal market. In the first few months of 1995,
Treasuries rallied strongly as U.S. and foreign investors pursued a "flight to
quality" in U.S. bonds following the financial crisis in Mexico. Meanwhile, the
U.S. dollar declined and the Japanese yen soared, prompting the Bank of Japan to
make large purchases of U.S. Treasury securities in an effort to bring the two
currencies into equilibrium. Given this year's huge Treasury rally, we are
optimistic that the now small spread between Treasury and municipal yields will
result in heightened demand for municipal bonds.
As always, your portfolio managers will strive for attractive tax-free
income and total returns in the coming months. If you have any questions about
Scudder Medium Term Tax Free Fund, please call Scudder Investor Relations at
1-800-225-2470. Thank you for choosing Scudder Medium Term Tax Free Fund to help
meet your investment needs.
Sincerely,
/s/ David S. Lee
David S. Lee
President,
Scudder Medium Term Tax Free Fund
3
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Scudder Medium Term Tax Free Fund
Performance Update as of June 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Medium Term Tax Free Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,750 7.50% 7.50%
5 Year $14,622 46.22% 7.90%
10 Year* $19,704 97.04% 7.02%
Lehman Brothers Municipal Bond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,882 8.82% 8.82%
5 Year $14,870 48.70% 8.25%
10 Year $24,053 140.53% 9.17%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
Scudder Medium Term Tax Free Fund
Year Amount
- ----------------------
85 10000
86 10923
87 11653
88 12178
89 12735
90 13475
91 14565
92 16257
93 18048
94 18329
95 19704
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
85 10000
86 11652
87 12656
88 13595
89 15144
90 16175
91 17633
92 19709
93 22066
94 22103
95 24053
The unmanaged Lehman Brothers Municipal Bond Index is a market
value-weighted measure of the long-term, investment grade tax-exempt
bond market consisting of municipal bonds with a maturity of at least
one year. Generally, the Index's average effective maturity is longer
than the Fund's, so the Index will tend to outperform the Fund when
interest rates are falling. The Fund will typically have a higher return
when rates are rising. Index returns assume dividends are reinvested and,
unlike Fund returns, do not reflect any fees or expenses.
- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended June 30
- ----------------------------------
<TABLE>
Scudder Tax Free Target Fund Scudder Medium Term Tax Free Fund
Lehman Brothers Municipal Bond Index
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 | 1991 1992 1993 1994 1995
-----------------------------------------|----------------------------------------
Net Asset Value... $10.18 $10.22 $10.13 $10.03 $10.04 | $10.22 $10.72 $11.20 $10.72 $10.95
Income Dividends.. $ .62 $ .58 $ .53 $ .55 $ .55 | $ .61 $ .65 $ .64 $ .57 $ .55
Capital Gains |
Dividends......... $ .10 $ .05 $ -- $ -- $ -- | $ -- $ .01 $ .03 $ .09 $ --
Fund Total |
Return (%)........ 9.23 6.69 4.50 4.58 5.81 | 8.08 11.62 11.02 1.55 7.50
Index Total |
Return (%)........ 16.52 8.63 7.42 11.39 6.81 | 9.01 11.77 11.96 .20 8.82
</TABLE>
*On November 1, 1990, the Fund adopted its present name and objectives. Prior
to that date, the Fund was known as the 1990 Portfolio of the Scudder Tax
Free Target Fund and its objective was to provide high tax-free income
and current liquidity. Since adopting its current objectives, the cumulative
and average annual total returns are 42.16% and 7.98%, respectively.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares, when
redeemed, may be worth more or less than when purchased. If the Adviser
had not temporarily capped expenses for the period November 1, 1990 through
June 30, 1995, the average annual total return of the Fund for the
one year, five year and ten year periods would have been lower.
4
<PAGE>
Portfolio Summary as of June 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Electric Utility Revenue 19%
Core Cities/Lease 18%
Hospital/Health 12% Broad diversification among the
Other General Fund's holdings allows us to spread
Obligation/Lease 6% the portfolio's risk over a large
Port/Airport Revenue 6% number of geographic areas, bond
State General Obligation 6% sectors, and maturities.
Toll Revenue 5%
School District/Lease 4%
Escrow to Maturity/
Prerefunded 4%
Other 20%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 54%
AA 14% Portfolio credit quality remains
A 15% high, with 68% of Fund assets
BBB 13% rated AA or better.
NR or below BBB 4%
----
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
- --------------------------------------------------------------------------
Under 1 year 11%
1 to less than 5 years 15% Because the near-term direction
5 to less than 10 years 58% of the economy remains uncertain,
10 to less than 15 Years 16% we are maintaining a "neutral"
---- average effective maturity of
100% seven years.
====
Weighted average effective maturity: 7 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
5
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
SCUDDER MEDIUM TERM TAX FREE FUND
Dear Shareholders,
Municipal bond performance took a turn for the better during the first half
of 1995 as inflation fears eased among market participants. Scudder Medium Term
Tax Free Fund fully participated in this price recovery, posting a total return
of 8.10% during its semiannual period ended June 30. The Fund's net asset value
rose 5.39% from $10.39 per share on December 31, 1994, to $10.95 on June 30,
1995. The Fund's total return also included reinvestment of income distributions
to shareholders totalling $0.274 per share. Scudder Medium Term Tax Free Fund
provided a 30-day net annualized SEC yield of 4.53% as of June 30, 1995,
equivalent to a 7.08% taxable yield for investors in the 36% federal income tax
bracket.
The Fund's solid response to the recent upturn in the market matches its
longer-term record--Scudder Medium Term Tax Free Fund has outperformed the
average performance of similar funds over numerous time periods, as shown in the
chart below (all figures are annualized). Please turn to the Performance Update
on page 4 for more information on the Fund's long-term progress.
Performance Consistently Above the Group Average
------------------------------------------------------------------------
Period Scudder Medium Lipper Average Number of Funds
Term Tax Free Fund Tracked
------------------------------------------------------------------------
------------------------------------------------------------------------
6 months 8.10% 7.33% 121
1 year 7.50 6.80 103
2 years 4.49 3.98 69
3 years 6.62 5.99 41
4 years 7.85 6.91 32
5 years* 7.90 7.16 31
10 years* 7.02 7.49 9
------------------------------------------------------------------------
Performance statistics compiled by Lipper Analytical Services, Inc.
Past performance is no guarantee of future results.
* Prior to November 1, 1990, the Fund was known as the 1990 Portfolio of the
Scudder Tax Free Target Fund and had different investment parameters.
Staging a Comeback
Following one of the worst years in history for fixed- income securities,
municipal money managers and other institutional investors put cash to work
during the first quarter of the year, buying bonds they felt were significantly
6
<PAGE>
oversold. Evidence of slowing economic growth assured investors inflation was
not an immediate concern, and bond prices rose sharply as a result. The rally in
municipal bonds continued in April, May, and June, but at a slower pace.
Discount bonds performed particularly well, favored by investors because they
often offer greater upside potential versus par or premium bonds of equivalent
maturity.
As encouraging as the performance of tax-free bonds was, it did not match
the return of U.S. Treasuries. Long-term Treasury bonds rose 16.20% in price
during the first half of 1995, while municipal bonds of similar maturity rose
only 9.70%. Demand for municipals was held back by several factors, including
the outstanding performance of the stock market, continued reluctance to invest
in bonds due to the negative impact of 1994's interest rate increases, and
concerns over the Orange County, California, bankruptcy. An additional restraint
on municipal performance has been Congressional discussion of a low-rate flat
tax, which we doubt will become a reality.
While lessened demand for municipals has been a hindrance, the decrease in
the supply of bonds continues to bolster their performance. New issue volume for
the first six months of 1995 was $70 billion, down 25% from the $93 billion of
new issues sold during the first half of 1994. With refinancing activity so
diminished, we expect the supply of tax-exempt bonds to remain relatively low in
the near term.
Supply of New Municipal Issues
(in billions)
1993 $292
1994 $163
1995 $135*
*Estimated for full year
Portfolio Review
Our strategy amid the current uncertainty over the course of the U.S.
economy has been to buy municipal bonds based on careful credit analysis and our
estimation of each bond's relative value, rather than on the basis of interest
rate forecasts. Additionally, we have sought to keep the Fund's average
effective maturity roughly in the middle of its permissible range.
Our long-term investment strategy remains unchanged. In conjunction with
our primary goals of maximizing the Fund's yield while maintaining as much price
stability as possible, we continue to purchase high-grade, intermediate-maturity
municipal bonds. As we mentioned in our last report to shareholders, we
generally purchase either premium or discount bonds, and avoid bonds priced at
par (or face value).
7
<PAGE>
Diversification also remains an important investment strategy for Scudder
Medium Term Tax Free Fund, allowing us to spread the portfolio's risk over a
large number of geographic areas, bond sectors, and maturities. The Fund held
securities issued in 37 states plus the District of Columbia and the Virgin
Islands as of June 30, 1995. In addition, Fund assets were distributed among
general obligation, electric utility revenue, lease rental, hospital/healthcare,
water and sewer revenue, and several other types of bonds.
Portfolio credit quality remains high, with approximately 68% of Fund
assets rated AAA, AA, or the equivalent. Securities are rated by Standard &
Poor's Ratings Group, 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 credit quality,
maturity, and sector representation.
Lastly, call protection remains a fundamental part of our investment
strategy. When long-term interest rates on municipal bonds are declining, as
they have been so far in 1995, we believe it is important to protect a
significant portion of the Fund's bonds from being called in by their issuers
before maturity. (Generally, a bond is called in by its issuer so that it can be
refinanced at a lower prevailing rate.) Our call-protection strategy provides a
more reliable income stream than would exist if the portfolio held significant
amounts of bonds that could be called in before their stated maturities.
Our Outlook
We are optimistic about the municipal bond market's near-term prospects. If
the Federal Reserve continues its recent easing of previously tightened credit,
and short-term interest rates fall, demand for intermediate- and longer-term
municipals should increase as investors search for higher yields. Another
encouraging sign: Municipal bond yields are attractive relative to Treasuries of
equivalent maturity, underscoring the fact that municipals have not rallied to
the extent of their taxable counterparts.
8
<PAGE>
As always, Scudder Medium Term Tax Free Fund's strategy reflects our ongoing
commitment to seek a high level of tax-free income and relative share price
stability with an emphasis on quality investments.
Sincerely,
Your Portfolio Management Team
/s/ Donald C. Carleton /s/ M. Ashton Patton
Donald C. Carleton M. Ashton Patton
9
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
1.9% SHORT-TERM MUNICIPAL INVESTMENTS
------------------------------------------------------------------------------------------
ARIZONA Maricopa County, AZ, Pollution Control Revenue,
Arizona Public Service Corp., Series F, Daily
Demand Note, 4.5%, 5/1/29*.......................... 800,000 A1 800,000
CALIFORNIA Orange County, CA, Water District, Tax Exempt
Commercial Paper:
3.15%, 7/11/95.................................... 2,900,000 A1+ 2,900,000
3.6%, 7/12/95..................................... 3,000,000 A1+ 3,000,000
PENNSYLVANIA Delaware County, PA, Airport Facilities Revenue,
United Parcel Service, Daily Demand Note,
4.25%, 12/1/15*..................................... 500,000 AAA 500,000
Keystone Oaks, PA, Auction Reset Security, 3.95%,
9/1/16 (b)* ........................................ 1,650,000 AAA 1,650,000
TEXAS Harris County, TX, Health Facilities Development
Corp., St. Luke's Espiscopal Hospital, 1985 Series B,
Daily Demand Note, 4.5%, 2/15/16*................... 2,800,000 A1+ 2,800,000
State of Texas, Tax and Revenue Anticipation Notes,
Series 1994, 5%, 8/31/95............................ 2,000,000 SP1+ 2,004,380
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $13,652,983).................................. 13,654,380
----------
------------------------------------------------------------------------------------------
98.1% LONG-TERM MUNICIPAL INVESTMENTS
------------------------------------------------------------------------------------------
ALABAMA University of South Alabama, Hospital and Auxiliary
Revenue, 4.875%, 5/15/04 (b)........................ 6,680,000 AAA 6,476,060
ALASKA North Slope Borough, AK, General Obligation:
Refunding, Series G, 7.5%, 6/30/97 (b).............. 2,350,000 AAA 2,502,844
Series A, Zero Coupon, 6/30/02 (b).................. 5,000,000 AAA 3,433,950
Series A, Zero Coupon, 6/30/03 (b).................. 7,000,000 AAA 4,520,950
Series B, Zero Coupon, 6/30/04,
Capital Guaranty Insured, ........................ 19,500,000 AAA 11,810,175
Series I, Zero Coupon, 6/30/96 (b) ................. 2,800,000 AAA 2,679,432
Series I, 6.6%, 6/30/96 (b) ........................ 4,000,000 AAA 4,107,680
ARIZONA Arizona Health Facilities Authority, Phoenix Baptist
Hospital and Medical Center, 6.1%, 9/1/03 (b)....... 2,000,000 AAA 2,125,220
Maricopa County, AZ, School District #28,
Kyrene Elementary, Series B, Zero Coupon:
1/1/03 (b)........................................ 5,750,000 AAA 3,849,568
7/1/03 (b)........................................ 6,000,000 AAA 3,910,920
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maricopa County, AZ, Unified School District #41:
Capital Appreciation Bond, Zero Coupon:
7/1/03 (b)............................................. 4,500,000 AAA 2,933,190
1/1/04 (b)............................................. 6,000,000 AAA 3,773,220
Gilbert, Zero Coupon, 1/1/06 (b)......................... 2,925,000 AAA 1,612,670
Zero Coupon:
7/1/04 (b)............................................. 7,000,000 AAA 4,283,650
7/1/06 (b)............................................. 5,605,000 AAA 3,003,888
Maricopa County, AZ, Unified School District #97,
Deer Valley, Zero Coupon, 7/1/05 (b)..................... 4,060,000 AAA 2,327,557
Salt River Project, AZ, Agricultural Refunding, Series B,
5.05%, 1/1/06............................................ 1,850,000 AA 1,808,727
CALIFORNIA California General Obligation, 6.5%, 2/1/08................ 7,000,000 A 7,497,700
California Housing Finance Agency, Multi-Unit Rental
Housing Revenue, Series A, 7.25%, 8/1/98 ................ 2,270,000 A 2,416,256
California State Public Works Lease Board Revenue,
Del Norte Prison, Series C, 4.75%, 12/1/05............... 4,750,000 A 4,430,753
Foothill Eastern Transportation Toll Road Revenue,
Corridor Agency, Senior Lien, Series A,
Zero Coupon, 1/1/09...................................... 7,275,000 BBB 3,939,776
Los Angeles, California, Department of Airports
Revenue, Series B, 6.5%, 5/15/04 (b)..................... 7,000,000 AAA 7,665,840
Orange County, CA, Local Transportation Authority,
Sales Tax Revenue, 5.1%, 2/15/01 (b)..................... 5,100,000 AAA 4,917,471
University of California, Multiple Purpose Projects,
Series C, 4.7%, 9/1/06 (b)............................... 3,250,000 AAA 3,027,180
COLORADO Colorado Health Facilities Authority, Hospital Revenue:
Rocky Mountain Adventist Healthcare Project, 6%,
2/1/98................................................. 3,500,000 BBB 3,518,865
Rose Medical Center Project, 8.5%, 11/1/96 (b)........... 260,000 AAA 275,259
Denver, CO, City and County Airport Revenue:
9.75%, 12/1/95........................................... 3,080,000 BBB 3,095,800
8.375%, 8/1/96........................................... 1,455,000 BBB 1,460,223
10.5%, 12/1/00........................................... 21,040,000 BBB 21,155,476
Larimer, Weld and Boulder Counties, CO, Thompson
School District, General Obligation, No. R2-J, Zero
Coupon, 12/15/95 (b)..................................... 1,000,000 AAA 982,660
CONNECTICUT Bristol, CT, Resource Recovery, Ogden Martin System,
6.125%, 7/1/03........................................... 10,635,000 A 10,970,428
Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Mandatory Tender, Series A,
5.8%, 10/1/97............................................ 7,610,000 A 7,691,579
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DISTRICT OF COLUMBIA District of Columbia, Certificate of Participation,
Series 1993:
6%, 1/1/97............................................... 3,548,000 B 3,567,656
6.875%, 1/1/03........................................... 2,500,000 B 2,512,300
District of Columbia, General Obligation:
1993 Series A-1, 4.95%, 6/1/05 (b)......................... 3,940,000 AAA 3,741,148
8%, 6/1/05, Prerefunded 6/1/96 (c)......................... 4,000,000 B 4,224,600
Refunding, Series B, 5.3%, 6/1/05 (b)...................... 8,000,000 AAA 7,824,720
Refunding, 1993 Series B, 5.875%, 6/1/05 (b)............... 3,650,000 AAA 3,728,183
Refunding, 1993 Series A, 4.85%, 6/1/04 (b) ............... 2,000,000 AAA 1,901,100
Refunding, Series B, Zero Coupon, 6/1/01 (b)............... 7,100,000 AAA 5,200,253
Series A, 5.625%, 6/1/02 (b)............................... 8,360,000 AAA 8,520,094
Series A, 5.8%, 6/1/04 (b)................................. 6,950,000 AAA 7,099,981
Series C, 8.9%, 6/1/96..................................... 5,505,000 BB 5,637,395
Series D, 4.7%, 12/1/99 (b)................................ 8,035,000 AAA 7,965,176
FLORIDA Dade County Florida, Guaranteed Entitlement
Revenue, Zero Coupon:
8/1/14, Prerefunded 2/1/06 (b)(c)........................ 4,000,000 AAA 1,231,000
8/1/18, Prerefunded 2/1/06 (b)(c)........................ 6,000,000 AAA 1,387,440
GEORGIA Georgia, General Obligation, Series C, 5%, 7/1/09............ 4,000,000 AAA 3,825,200
ILLINOIS Alton, IL, Health Facilities Revenue, 6.7%, 2/15/00 (b)...... 2,000,000 AAA 2,114,240
Chicago, IL, General Obligation, School Finance
Authority:
Series A, 4.9%, 6/1/05 (b)............................... 6,000,000 AAA 5,740,560
Series 1994 A, 4.5%, 6/1/02 (b).......................... 4,000,000 AAA 3,870,440
Chicago, IL Public Building Commission, Series A,
5.25%, 12/1/06 (b)......................................... 4,500,000 AAA 4,450,320
Illinois Development Finance Authority, Revenue
Refunding, Commonwealth Edison, 5.3%, 1/15/04.............. 7,500,000 BBB 7,225,425
Illinois Educational Facilities Authority Revenue, Loyola
University, Revenue Refunding 1991 Series A, Zero
Coupon, 7/1/02 (b)......................................... 2,130,000 AAA 1,468,656
Illinois General Obligation, 4.6%, 12/1/05................... 5,000,000 AA 4,609,100
Illinois Health Facilities Authority:
Elmhurst Memorial Hospital, Series A, 4.85%,
1/1/02................................................... 1,185,000 AAA 1,166,846
Evangelical Hospitals, Series B, 6.1%, 4/15/01 (b)........... 1,240,000 AAA 1,308,374
Memorial Hospital, Sisters Services, Series A, 6%,
6/1/99 (b)................................................. 2,500,000 AAA 2,623,175
Sisters Services, Series C:
5.875%, 6/1/98 (b)......................................... 2,400,000 AAA 2,495,880
6.1%, 6/1/00 (b)........................................... 1,500,000 AAA 1,583,130
6.2%, 6/1/01 (b)........................................... 1,900,000 AAA 2,022,474
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois State Sales Tax Revenue, Series U, 4.7%,
6/15/06.................................................... 3,865,000 AAA 3,541,268
Kendall, Kane and Will Counties, IL, School District,
Zero Coupon, 3/1/03 (b).................................... 1,345,000 AAA 888,480
Macon and Decatur County, IL, Public Building
Commission, Certificate of Participation, General
Obligation, 6.3%, 1/1/00 (b)............................... 1,320,000 AAA 1,399,873
McHenry County, IL, Conservation District, Zero
Coupon, 2/1/99 (b)......................................... 1,515,000 AAA 1,269,994
Metropolitan Pier and Exposition Authority of Illinois,
McCormick Place Expansion Project, Coupon
Receipts, Zero Coupon, 6/15/04 (b)......................... 10,500,000 AAA 6,407,520
Rosemont, IL, Tax Increment, Secondary:
Series B, Zero Coupon, 12/1/02 (b)......................... 2,785,000 AAA 1,878,260
Series C, Zero Coupon, 12/1/02 (b)......................... 3,345,000 AAA 2,255,935
INDIANA Madison County, IN, Hospital Authority, Holy Cross
Health System, 6.7%, 12/1/02 (b)........................... 1,385,000 AAA 1,528,472
Porter County, IN, Hospital Authority, Porter Memorial
Hospital, Series 1993, 5.2%, 6/1/05 (b).................... 1,500,000 AAA 1,480,515
IOWA Iowa Certificate of Participation, 1992 Series A,
6.25%, 7/1/02 (b).......................................... 5,000,000 AAA 5,322,950
Iowa Lease Purchase Agreement, 7.65%, 7/1/96................. 456,178 NR 463,135
KANSAS Kansas City, KS, Utility System Revenue,
Zero Coupon, 3/1/03 (b).................................... 6,600,000 AAA 4,416,357
KENTUCKY Kentucky Turnpike Authority:
Toll Road Revenue, 13.375%, 7/1/10
Prerefunded 8/15/95 (c).................................. 930,000 AAA 950,144
Economic Development, Revenue Refunding, 1986
Series A, 7.7%, 1/1/00 .................................... 700,000 A 739,228
LOUISIANA Louisiana State General Obligation, Series A,
7%, 5/1/02 (b)............................................. 3,000,000 AAA 3,373,020
New Orleans, LA, General Obligation, Zero Coupon,
9/1/05 (b)................................................. 3,355,000 AAA 1,905,640
St. Tammany Parish, LA, Sales Tax Revenue,
District #3, Series A, 11%, 12/1/96 (b).................... 1,065,000 AAA 1,166,644
MARYLAND Maryland Department of Transportation, 4.4%,
12/15/04................................................... 3,765,000 AA 3,510,072
Maryland State General Obligation, 4.2%, 8/1/01.............. 8,900,000 AAA 8,684,887
Northeast Maryland Waste Disposal Authority,
Southwest Resource Recovery System Revenue:
Series 1993, 6.75%, 1/1/98 (b)............................. 4,715,000 AAA 4,939,811
6.85%, 1/1/99 (b).......................................... 1,500,000 AAA 1,593,660
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS Boston, MA, General Obligation, Series A,
4.9%, 7/1/07 (b)........................................ 3,950,000 AAA 3,730,459
Brockton, MA, General Obligation, 7.75%, 12/15/96 ........ 1,675,000 A 1,742,519
Lawrence, MA, General Obligation, State Qualified
Bond, 5%, 9/15/02....................................... 1,030,000 A 1,017,661
Massachusetts General Obligation:
Series A, 6.4%, 8/1/03 ................................. 1,000,000 A 1,083,140
Series B, 6.375%, 8/1/02................................ 2,150,000 A 2,323,118
Series C, 4.95%, 8/1/05 (b)............................. 2,360,000 AAA 2,290,616
Series C, 6.9%, 12/1/96 (b)............................. 1,000,000 AAA 1,041,970
Massachusetts Health and Educational Facilities
Authority, St. Joseph's Hospital, Series C, 9.5%,
10/1/20, Prerefunded 10/1/99 (c)........................ 2,780,000 NR 3,301,333
Massachusetts Housing Finance Agency, 1992
Series C, FNMA Collateralized:
6.25%, 5/15/02........................................ 2,000,000 AAA 2,104,620
6.25%, 11/15/02....................................... 3,420,000 AAA 3,609,605
Massachusetts Industrial Finance Authority:
Resource Recovery, North Andover Solid Waste,
Series A, 6.15%, 7/1/02............................... 3,250,000 BBB 3,292,315
Sturdy Memorial Hospital, 7.9%, 6/1/09.................. 1,900,000 BBB 2,012,746
Massachusetts Municipal Wholesale Electric Co.,
Power Supply System Revenue, Series A, 6.625%,
7/1/03................................................ 3,165,000 A 3,397,248
Massachusetts Water Resource Authority, Series A,
7.25%, 4/1/01........................................... 1,000,000 A 1,110,740
New England Education Loan Marketing Corp.,
Massachusetts Student Loan Revenue Refunding:
Issue E, 5%, 7/1/99................................... 8,000,000 A 7,988,480
Issue A, 5.8%, 3/1/02................................. 8,825,000 AAA 9,039,536
MICHIGAN Michigan State Hospital, Sisters of Mercy:
4.5%, 8/15/01 (b)....................................... 2,755,000 AAA 2,682,929
1993 Series P, 4.6%, 8/15/02 (b)........................ 2,025,000 AAA 1,960,322
Romulus Township, Michigan, School District, Series II,
Zero Coupon, 5/1/22 (b)................................. 7,400,000 AAA 1,402,374
MISSISSIPPI Mississippi Higher Education Assistance Corp., Student
Loan Revenue, 1992 Series A, 6.2%, 1/1/02............... 1,200,000 A 1,240,104
NEBRASKA Omaha, NE, Public Power District, Electric Revenue,
4.5%, 2/1/04............................................ 9,500,000 AA 8,974,460
NEVADA Nevada Housing Single Family Program, Series R,
5.95%, 10/1/11.......................................... 3,740,000 AA 3,876,809
Nye County, NV, School District, 8.875%, 5/1/96 (b)....... 500,000 AAA 520,930
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE New Hampshire Higher Education and Health Facilities
Authority, Hospital Revenue, Frisbie Memorial Hospital,
Series 1993, 5.25%, 10/1/99............................... 3,215,000 BBB 3,196,578
NEW JERSEY New Jersey Economic Development, Series A,
7%, 7/1/04 (b)............................................ 2,500,000 AAA 2,849,150
NEW YORK Metropolitan Transportation Authority of New York,
Commuter Facilities Revenue:
6.75%, 7/1/00........................................... 1,200,000 BBB 1,291,932
6.9%, 7/1/01............................................ 1,280,000 BBB 1,395,098
Metropolitan Transportation Authority of New York,
Transit Facilities Revenue:
Series K, 6.25%, 7/1/05 (b) ............................ 4,250,000 AAA 4,574,020
Series M, 5.3%, 7/1/06 (b).............................. 4,750,000 AAA 4,761,733
Series M, 5.5%, 7/1/08 (b).............................. 3,500,000 AAA 3,499,965
Service Contract, 6.75%, 7/1/00......................... 2,270,000 BBB 2,443,905
Service Contract, 6.9%, 7/1/01.......................... 2,415,000 BBB 2,632,157
Service Contract, Series O, 5.75%, 7/1/07............... 1,975,000 BBB 1,943,104
New York City General Obligation:
Series 1992 B, 6.4%, 10/1/02.............................. 4,905,000 A 5,100,170
Series 1992 H, 6.9%, 2/1/01............................... 6,000,000 A 6,375,240
Series A, 7.2%, 8/15/95 .................................. 3,570,000 A 3,582,995
Series A, 7%, 8/1/04...................................... 5,150,000 A 5,524,920
Series A, 6%, 8/1/05 (b).................................. 2,560,000 AAA 2,704,614
Series A, ETM, 7.2%, 8/15/95**............................ 750,000 A 753,248
Series B, 7%, 2/1/96...................................... 2,000,000 A 2,031,480
Series B, 6.6%, 10/1/03................................... 10,200,000 A 10,700,718
Series C, 6.3%, 8/1/03 (b) ............................... 50,000 AAA 54,139
Series C, ETM, 7.4%, 8/1/96** ............................ 1,560,000 A 1,617,767
Series D, 7.75%, 8/1/95................................... 855,000 A 857,531
Series D, 7.875%, 8/1/97.................................. 2,025,000 A 2,152,028
Series D, 5.5%, 8/15/04................................... 2,800,000 A 2,700,572
Series D, ETM, 7.75%, 8/1/95**............................ 145,000 A 145,499
Series D, ETM, 7.875%, 8/1/97**........................... 530,000 A 568,918
Series H, 5.8%, 8/1/04 ................................... 5,000,000 A 4,926,950
New York City Municipal Water Finance Authority,
Water and Sewer System Revenue, Zero Coupon:
12/15/95 (b)............................................ 1,000,000 AAA 1,011,020
6/15/96 (b)............................................. 1,000,000 AAA 986,520
New York Dormitory Authority:
City University, Series A, 5.5%, 7/1/03................... 9,250,000 BBB 9,220,400
State University, 6.8%, 5/15/00 (b)....................... 1,915,000 AAA 2,096,102
College and University Pooled Capital Program,
7.8%, 12/1/05 (b)......................................... 1,285,000 AAA 1,392,876
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Medical Care Facilities, Finance
Agency Revenue, Mount Sinai Hospital, Series
1983, 5.95%, 8/15/09............................... 9,630,000 AAA 9,913,026
New York State Power Authority, Revenue and
General Purpose, Series C, 5.125%, 1/1/10.......... 6,450,000 AA 6,026,751
New York State Thruway Authority,
Zero Coupon, 1/1/02................................ 3,155,000 BBB 2,181,872
New York State Urban Development Corporation,
Lease Revenue, Correctional Facilities:
Revenue Bond, Revenue Refunding, 1993
Series A, 5.3%, 1/1/05............................. 1,105,000 BBB 1,056,513
Series A, 5.3%, 1/1/05............................. 7,000,000 BBB 6,692,840
Series A, 5.4%, 1/1/06............................. 3,500,000 BBB 3,343,340
NORTH CAROLINA Charlotte, NC, Equipment Lease Agreement, 6.75%,
9/1/95............................................. 1,200,000 NR 1,206,120
North Carolina, General Obligation, Prison
Facilities, 4.5%, 6/1/03........................... 2,675,000 AAA 2,603,631
NORTH DAKOTA Bismarck, ND, Hospital Revenue, St. Alexius Medical
Center, Series 1991, Zero Coupon, 5/1/00 (b)....... 2,850,000 AAA 2,226,563
Grand Forks, ND, Health Facilities, United Hospital
Obligation Group, Series A, 6%, 12/1/02 (b)........ 1,160,000 AAA 1,229,635
OHIO Hamilton County, OH, Health System Revenue,
Franciscan Sisters of the Poor Health System,
Providence Hospital, Series 1992, 6.375%, 7/1/04... 4,495,000 BBB 4,570,291
Ohio Public Facilities, Higher Education Authority,
4.7%, 12/1/03 (b).................................. 2,300,000 AAA 2,229,896
PENNSYLVANIA Allegheny County, PA, Hospital Development Authority,
6.5%, 7/1/00 (b)................................... 1,000,000 AAA 1,073,890
Armstrong County, PA, Hospital Authority, St Frances
Medical Center, Series A, 6.2%, 6/1/03 (b)......... 3,090,000 AAA 3,298,668
Montgomery County, PA, Redevelopment Authority,
Multi Family Housing Revenue Refunding, KBF
Associates, LP Project, 6%, 7/1/04................. 2,685,000 BBB 2,666,554
Philadelphia, PA, General Obligation, Revenue
Refunding, Series A, 11.5%, 8/1/99 (b)............. 1,000,000 AAA 1,253,010
Schuykill County, PA, Redevelopment Authority, Lease
Rental, Series A, 6.55%, 6/1/00 (b)................ 1,105,000 AAA 1,189,278
Somerset County, PA, General Authority,
Commonwealth Lease Revenue, ETM,
6.45%, 10/15/00 (b)**.............................. 2,000,000 AAA 2,167,940
SOUTH CAROLINA South Carolina Jobs Economic Development Authority
Revenue, Franciscan Sisters of the Poor Health
System Inc., St. Francis Hospital, 6.375%, 7/1/04.. 3,420,000 BBB 3,474,925
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sumter County, SC, Hospital Facility Revenue
Refunding, Tuomey Medical Center,
6.375%, 11/15/99 (b).................................... 1,000,000 AAA 1,070,370
SOUTH DAKOTA South Dakota Student Loan Assistance Corp.
Revenue, Series A, 7%, 8/1/98........................... 1,000,000 A 1,048,270
TENNESSEE Knox County, TN, Health, Education and Housing
Facilities Board, Fort Sanders Alliance, 4.8%,
1/1/05 (b).............................................. 6,825,000 AAA 6,484,706
TEXAS Austin, TX, Utility District, Water, Sewer & Electric
Revenue, 11%, 11/15/02, Prerefunded 5/1/97 (c).......... 2,430,000 AAA 2,729,376
Austin, TX, Utility System Revenue:
9.25%, 11/15/95......................................... 895,000 A 912,784
ETM, 9.25%, 11/15/95**.................................. 155,000 AAA 158,221
Carrollton, TX, Farmers Branch Independent School
District, ETM, 9.4%, 6/1/96** .......................... 100,000 AAA 105,052
Dallas County, TX, Hospital District, 9.75%, 4/10/96...... 750,000 A 781,875
Dallas, TX, Civic Center, Senior Lien, 8.6%, 1/1/06....... 1,115,000 A 1,142,518
Dallas-Fort Worth, TX, International Airport Revenue:
Series A, 7.7%, 11/1/00 (b)............................. 780,000 AAA 885,300
Series A, 7.75%, 11/1/01 (b)............................ 540,000 AAA 622,588
Harris County, TX, Unlimited Tax, General Obligation,
8.8%, 10/1/96........................................... 100,000 AAA 101,285
Port of Houston Authority of Harris County, TX, 8.8%,
10/1/96................................................. 150,000 AA 151,916
San Antonio, TX, Electric & Gas, Refunding Revenue,
Series A, Zero Coupon, 2/1/02 (b)....................... 4,600,000 AAA 3,255,190
Texas Municipal Power Agency, Zero Coupon,
9/1/04 (b).............................................. 6,870,000 AAA 4,166,037
Travis County, TX, Housing Finance Corp., Series A,
8.625%, 9/1/95 (b)...................................... 200,000 AAA 201,914
UTAH Intermountain Power Agency, UT, Power Supply Revenue:
Series B, 6.25%, 7/1/06 (f)............................. 8,000,000 AAA 8,416,080
Series B, Zero Coupon, 7/1/01 (b)....................... 10,495,000 AAA 7,680,136
Series B, Zero Coupon, 7/1/02 (b)....................... 2,500,000 AAA 1,723,775
Series H, 9%, 7/1/19, Crossover Refunded 7/1/95 (d)..... 2,200,000 AA 2,233,308
Series I, 9%, 7/1/19, Crossover Refunded 7/1/95 (d)..... 2,500,000 AA 2,537,850
Salt Lake County, UT, Water Conservation District,
Series A, Zero Coupon, 10/1/03 (b)...................... 3,200,000 AAA 2,048,224
Utah Associated Municipal Power System, Hunter
Project, Refunding Revenue, Zero Coupon,
7/1/03 (b).............................................. 5,900,000 AAA 3,809,984
VIRGIN ISLANDS Virgin Islands, General Obligation, Public Finance
Authority Revenue, Matching Fund Loan:
Series A, 6.7%, 10/1/99............................... 1,690,000 NR 1,770,343
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A, 6.8%, 10/1/00............................... 1,035,000 NR 1,085,932
VIRGINIA Roanoke, VA, Industrial Development Authority,
Hospital Revenue, Carilion Health System,
6.5%, 7/1/25 (b)........................................ 5,000,000 AAA 5,410,900
Southeastern, VA, Public Service Authority, Refunding,
Series A, 4.8%, 7/1/05 (b).............................. 3,250,000 AAA 3,105,635
WASHINGTON King County, WA, Water District #107, ETM, 8.7%,
3/1/96**................................................ 120,000 AAA 123,929
Seattle, WA, Municipal Light and Power Revenue,
9.7%, 9/1/07, Prerefunded 9/1/95 (c).................... 1,380,000 AAA 1,421,303
Snohomish County, WA, Public Utility District #1, 1991
Series B, 6.4%, 1/1/00.................................. 2,000,000 A 2,126,540
Washington Health Care Facilities Authority, Empire
Health Services, Series 1993, 4.35%, 11/1/96 (b)........ 1,760,000 AAA 1,771,475
Washington Public Power Power Supply System,
Nuclear Project #1, Refunding Revenue
Series A, 7%, 7/1/96.................................. 1,000,000 AA 1,027,310
Series A, 5.25%, 7/1/03 (b)........................... 5,000,000 AAA 5,016,150
Series B, 5%, 7/1/01.................................. 1,500,000 AA 1,477,110
Series B, 5.15%, 7/1/02............................... 5,275,000 AA 5,195,875
Series B, 5.25%, 7/1/03............................... 5,555,000 AA 5,459,010
Series D, 15%, 7/1/17, Prerefunded 7/1/96 (c)......... 2,595,000 AAA 2,951,319
Washington Public Power Supply System, Nuclear
Project #2, Refunding Revenue:
Series A, 6.3%, 7/1/01................................ 6,000,000 AA 6,286,200
Series A, 4.9%, 7/1/05................................ 4,930,000 AA 4,600,331
Series A, 5.8%, 7/1/07................................ 2,120,000 AA 2,089,408
Series A, 5.25%, 7/1/08............................... 3,000,000 AA 2,788,590
Series B, 5.15%, 7/1/02............................... 6,085,000 AA 5,993,725
Washington Public Power Supply System, Nuclear
Project #3, Refunding Revenue:
Series B, 5%, 7/1/01.................................. 6,210,000 AA 6,115,235
Series B, 7.15%, 7/1/01............................... 1,310,000 AA 1,421,167
Series B, 5.15%, 7/1/02............................... 3,165,000 AA 3,117,525
Series B, 5.25%, 7/1/03............................... 6,100,000 AA 5,994,592
Series B, Zero Coupon, 7/1/04 (b)..................... 8,000,000 AAA 4,844,400
Series C, 5%, 7/1/05 (g).............................. 12,250,000 AA 11,576,128
Washington State Housing Finance, Series A,
7.1%, 12/1/17........................................... 3,825,000 AAA 4,010,092
WEST VIRGINIA South Charleston, WV, Pollution Control Revenue,
Union Carbide, 7.625%, 8/1/05........................... 2,000,000 BBB 2,215,960
WISCONSIN Wisconsin Health & Educational Facilities Authority:
Wheaton Franciscan Services:
5.8%, 8/15/04 (b)..................................... 1,675,000 AAA 1,727,511
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (e) Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6%, 8/15/02 (b)................................... 1,000,000 AAA 1,056,800
Columbia Hospital Inc., 6.125%, 11/15/01 (b).......... 1,000,000 AAA 1,060,130
WYOMING Wyoming Community Development Authority, Single
Family Mortgage Revenue, Zero Coupon,
6/1/96, FHA Insured................................. 2,150,000 AA 2,043,223
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $681,214,956)................................. 693,356,431
-----------
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $694,867,939) (a)............................. 707,010,811
===========
<FN>
(a) The cost for federal income tax purposes was $694,867,939. At June 30,
1995, net unrealized appreciation for all securities was $12,142,872. This
consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of $16,918,115 and
aggregate gross unrealized depreciation for all investment securities in which
there was an excess of tax cost over market value of $4,775,243.
(b) Bond is insured by one of these companies: AMBAC, FGIC, or MBIA.
(c) Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay principal and
interest on tax-exempt issue and to retire the bonds in full at the earliest
refunding date.
(d) 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.
(e) All of the securities held have been determined to be of appropriate
credit quality as required by the Fund's investment objectives. Credit ratings
are either Standard & Poor's Corporation, 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.
(f) When-issued or forward delivery securities (See Note A in Notes to
Financial Statements).
(g) At June 30, 1995, this security, in part, has been segregated to cover
when-issued or forward delivery securities.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such as the
coupon-equivalent of the Treasury bill rate. Variable rate demand notes are
securities 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.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $694,867,939)
(Note A)................................................. $707,010,811
Cash........................................................ 63,595
Receivables:
Interest................................................. 11,132,099
Investments sold......................................... 4,254,965
Fund shares sold......................................... 110,954
Other assets............................................. 7,564
------------
Total assets........................................... 722,579,988
LIABILITIES
Payables:
When-issued and forward delivery securities (Note A)..... $8,181,200
Dividends................................................ 1,159,112
Fund shares redeemed..................................... 375,516
Accrued management fee (Note C).......................... 295,356
Accrued expenses (Note C)................................ 139,177
----------
Total liabilities...................................... 10,150,361
------------
Net assets, at market value................................. $712,429,627
============
NET ASSETS
Net assets consist of:
Net unrealized appreciation on investments............... $ 12,142,872
Accumulated net realized gain............................ 895,976
Shares of beneficial interest............................ 650,826
Additional paid-in capital............................... 698,739,953
------------
Net assets, at market value................................. $712,429,627
============
NET ASSET VALUE, offering and redemption price per share
($712,429,627 / 65,082,593 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized).................................... $10.95
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................. $20,681,125
Expenses:
Management fee (Note C).................................. $1,898,092
Services to shareholders (Note C)........................ 304,743
Custodian and accounting fees (Note C)................... 110,747
Trustees' fees (Note C).................................. 20,511
Reports to shareholders.................................. 53,587
Legal.................................................... 2,496
Auditing................................................. 30,985
State registration....................................... 28,264
Other.................................................... 29,990 2,479,415
-----------------------
Net investment income.................................... 18,201,710
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT
TRANSACTIONS
Net realized gain on investments......................... 981,007
Net unrealized appreciation on investments
during the period..................................... 35,976,471
-----------
Net gain on investments.................................. 36,957,478
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $55,159,188
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
SCUDDER MEDIUM TERM TAX FREE FUND
- --------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income.............................. $ 18,201,710 $ 43,643,974
Net realized gain from investments................. 981,007 1,334,624
Net unrealized appreciation (depreciation)
on investments during the period................ 35,976,471 (81,623,664)
------------ --------------
Net increase (decrease) in net assets
resulting from operations....................... 55,159,188 (36,645,066)
------------ --------------
Distributions to shareholders:
From net investment income ($.27 and $.53 per
share, respectively) ........................... (18,201,710) (43,643,974)
------------ --------------
From net realized gains from investment
transactions ($.05 per share) .................. -- (3,856,845)
------------ --------------
Fund share transactions:
Proceeds from shares sold.......................... 52,380,585 242,143,475
Net asset value of shares issued to
shareholders in reinvestment of
distributions................................... 10,897,674 30,767,915
Cost of shares redeemed............................ (89,243,123) (504,752,983)
------------ --------------
Net decrease in net assets from
Fund share transactions......................... (25,964,864) (231,841,593)
------------ --------------
INCREASE (DECREASE) IN NET ASSETS.................. 10,992,614 (315,987,478)
Net assets at beginning of period.................. 701,437,013 1,017,424,491
------------ --------------
NET ASSETS AT END OF PERIOD........................ $712,429,627 $ 701,437,013
============ ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period.......... 67,486,134 89,545,863
------------ --------------
Shares sold........................................ 4,874,789 22,098,846
Shares issued to shareholders in reinvestment
of distributions................................ 1,009,554 2,858,978
Shares redeemed.................................... (8,287,884) (47,017,553)
------------ --------------
Net decrease in Fund shares........................ (2,403,541) (22,059,729)
------------ --------------
Shares outstanding at end of period................ 65,082,593 67,486,134
============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<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 Ended
June 30, Years Ended December 31,
1995 -------------------------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period...................... $10.39 $11.36 $10.86 $10.62 $10.11 $10.04 $10.02 $10.07 $10.34 $10.03 $ 9.67
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income (a).... .27 .53 .60 .65 .67 .54 .56 .54 .54 .62 .68
Net realized and
unrealized gain (loss)
on investments............. .56 (.92) .56 .27 .52 .07 .02 (.05) (.22) .41 36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations. .83 (.39) 1.16 .92 1.19 .61 .58 .49 .32 1.03 1.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
From net investment income..... (.27) (.53) (.60) (.65) (.67) (.54) (.56) (.54) (.54) (.62) (.68)
From net realized
gains on investments......... -- (.05) (.06) (.03) (.01) -- -- -- (.05) (.10) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions............ (.27) (.58) (.66) (.68) (.68) (.54) (.56) (.54) (.59) (.72) (.68)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period. $10.95 $10.39 $11.36 $10.86 $10.62 $10.11 $10.04 $10.02 $10.07 $10.34 $10.03
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (B)............. 8.10** (3.50) 10.94 8.93 12.13 6.29 6.00 4.92 3.23 10.54 11.02
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions)................... 712 701 1,017 661 268 27 54 99 125 104 59
Ratio of operating expenses
net, to average daily net
assets (%) (a)................. .70* .63 .14 -- -- .97 .91 .79 .80 .82 .85
Ratio of net investment income
to average net assets (%)...... 5.12* 4.94 5.35 6.07 6.44 5.37 5.62 5.05 5.37 6.00 6.76
Portfolio turnover rate (%)...... 34.3* 33.8 37.3 22.4 14.0 116.9 15.7 31.2 32.6 44.3 132.2
<FN>
(a) Portion of expenses
reimbursed by
the Adviser................. $ -- $ -- $ .005 $ .014 $ .020 $ .001 $ -- $ -- $ -- $ -- $ --
Management fee and
other fees not imposed...... $ .002 $ .01 $ .063 $ .064 $ .062 $ .002 $ -- $ -- $ -- $ -- $ .001
Annualized ratio of operating expenses, including expenses reimbursed, management fee and other expenses not imposed, to
average daily net assets aggregated 0.74%, 0.71%, 0.75%, 0.80%, 0.88% and 1.00% for the six months ended June 30, 1995
and for the years ended December 31, 1994, 1993, 1992, 1991 and 1990, respectively.
(b) Total returns may have been higher due to maintenance of the Fund's expenses.
On November 1, 1990, the Fund adopted its present name and objective. Prior to that date, the Fund was known as the 1990
Portfolio of the Scudder Tax Free Target Fund and its objective was to provide high tax--free income and current liquidity.
Financial information for each of the six years in the period ended December 31, 1990 should not be considered representative
of the present Fund.
* Annualized
** Not annualized
</FN>
</TABLE>
23
<PAGE>
SCUDDER MEDIUM TERM TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Medium 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. The policies described below are followed
consistently by the Fund in the preparation of its financial statements in
conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, which prices reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Trustees. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
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 federal income taxes and no
provision for federal income taxes was required.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital
loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences relate primarily to investments in futures and certain
securities sold at a loss. As a result, net investment income and net realized
gain (loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment transactions are accounted for on a trade date basis. Interest
income is accrued pro rata to the earlier of call or maturity.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the six months ended June 30, 1995, purchases and sales of investments
(excluding short-term) aggregated $118,813,380 and $153,901,875, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Management Agreement (the "Management Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objective, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Management Agreement.
25
<PAGE>
SCUDDER MEDIUM TERM TAX FREE FUND
- --------------------------------------------------------------------------------
The management fee payable under the Management Agreement is equal to an annual
rate of 0.60% of the first $500,000,000 of the Fund's average daily net assets
and 0.50% of such assets in excess of $500,000,000 computed and accrued daily
and payable monthly. The Management Agreement 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. The Adviser has agreed not to impose all or a portion of
its management fee until October 31, 1995, and during such period to maintain
the annualized expenses of the Fund at not more than 0.70% of average daily net
assets. For the six months ended June 30, 1995, the management fee aggregated
$2,035,309 of which $137,217 was not imposed and $295,356 is unpaid at June 30,
1995.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the six months ended June 30, 1995 the amount charged to the Fund by SSC
amounted to $230,482 of which $37,478 is unpaid at June 30, 1995.
Effective February 21, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the six months ended June 30, 1995, the
amount charged to the Fund by SFAC aggregated $37,394, of which $8,392 is unpaid
at June 30, 1995.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1995, Trustees' fees aggregated $20,511.
26
<PAGE>
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27
<PAGE>
(This page intentionally left blank.)
28
<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 College of Business Administration
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.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,(TM) an institutional cash management
service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000
minimum), call 1-800-541-7703.
</TABLE>
30
<PAGE>
HOW TO CONTACT SCUDDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Account Service and Information
<S> <C> <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.
-------------------------------------------------------------------------------------------------------------
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.
</TABLE>
31
<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 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.
