This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Limited Term
Tax Free Fund
Semiannual Report
April 30, 1996
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
10 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
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 4.31% on April 30, 1996, equivalent to a 7.14%
taxable yield for shareholders subject to the 39.6% maximum federal income
tax rate.
BAR CHART TITLE: The Fund's 30-Day Taxable Equivalent Yield
vs. Money Fund Yield
CHART PERIOD: (as of 4/30/96)
CHART DATA IBC/Donoghue's
Scudder Limited Term Taxable Equivalent Taxable Money Fund
Tax Free Fund Yield Average
------------- ----- -------
4.31% 7.14% 4.75%
o The Fund returned 1.57% for the six-month period ended April 30, 1996. By
comparison, the 24 short/intermediate municipal debt funds tracked by Lipper
Analytical Services returned 1.22% on average.
o The Fund ranked first among 15 similar funds tracked by Lipper for the
two-year period ended April 30.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
For bonds, investment results over the past six months have been mixed.
During the latter part of 1995, municipal bonds were attractively valued versus
U.S. Treasuries, which helped renew investor interest and resulted in their
outperformance. This year, indicators have raised concerns that the economy may
be stronger than originally believed, which has unsettled investors. Still,
evidence in some sectors of slower economic growth and the absence of mounting
inflationary pressures suggests that the economic expansion could wind down in
1996. While the timing and extent of any slowdown is difficult to predict,
history shows that slow growth has been beneficial for bonds. Until economic
trends become more clear, however, the Fund's challenge is to provide as much
price stability as possible should the market weaken further, while continuing
to supply competitive levels of tax-free income.
In closing, we would like to take this opportunity to announce that a
new member joined the Scudder Family of Funds as of May 8 -- Scudder Emerging
Markets Growth Fund. The new Fund focuses on stock markets of developing nations
around the globe. For more information about Scudder products and services,
please see page 22. If you have any questions about Scudder Limited Term Tax
Free Fund, please call a Scudder Investor Relations representative at
1-800-225-2470.
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, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER LIMITED TERM TAX FREE FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
4/30/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,580 5.80% 5.80%
Life of
Fund* $11,012 10.12% 4.47%
LB MUNICIPAL BOND INDEX (3 YEAR)
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
4/30/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,626 6.26% 6.26%
Life of
Fund* $11,051 10.51% 4.72%
*The Fund commenced operations on
February 15, 1994. Index comparisons
begin on February 28, 1994.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Limited Term Tax Free Fund
Year Amount
- ----------------------
2/94* $10,000
4/94 $ 9,965
7/94 $10,154
10/94 $10,099
1/95 $10,201
4/95 $10,465
7/95 $10,714
10/95 $10,901
1/96 $11,131
4/96 $11,072
Lehman Brothers Municipal Bond Index
(3 year)
Year Amount
- ----------------------
2/94* $10,000
4/94 $ 9,938
7/94 $10,070
10/94 $10,056
1/95 $10,165
4/95 $10,399
7/95 $10,695
10/95 $10,862
1/96 $11,062
4/96 $11,051
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 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
1994* 1995 1996
-------------------------
NET ASSET VALUE......... $11.80 $11.80 $11.92
INCOME DIVIDENDS........ $ .09 $ .57 $ .55
CAPITAL GAINS AND
OTHER DISTRIBUTIONS..... -- -- .01
FUND TOTAL RETURN (%)... -.35 5.01 5.80
INDEX TOTAL RETURN (%).. -.62 4.64 6.26
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 Fund for the one year and life of Fund periods would have been lower.
4
<PAGE>
PORTFOLIO SUMMARY as of April 30, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Core Cities/Lease 18%
Hospital/Health 17% The Fund continues to hold
Electric Utility Revenue 15% a large percentage of
General Obligation 12% high-coupon insured and
Water/Sewer Revenue 9% pre-refunded bonds in its
Sales/Special Tax 5% portfolio.
Housing Finance Authority 4%
Miscellaneous Municipal 20%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
AAA 61% Overall credit quality
AA 17% remains high, with over 75%
A 12% of the Fund's portfolio in
BBB 10% AAA and AA bonds.
----
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 13% We continued to emphasize
1 - 5 years 42% the shortest maturities for
5 - 10 years 45% safety and the longest
---- maturities (up to 10 years) for
100% higher yields and possible
==== capital appreciation.
Weighted average effective maturity: 4 years
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 10.
5
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Amid a U.S. economy that seems to keep "chugging along" and ongoing
uncertainty over the near-term direction of interest rates, Scudder Limited Term
Tax Free Fund continued to provide investors with lower share-price volatility
than would be available from a longer-maturity tax-exempt fund, as well as an
attractive tax-free yield.
For shareholders subject to the 39.6% maximum federal income tax rate,
the Fund's 30-day net annualized SEC yield of 4.31% as of April 30, 1996, was
equivalent to a 7.14% taxable yield, higher than current yields provided by
comparable taxable investments. The Fund's tax-equivalent yield compares
favorably with the fully taxable 4.83% average yield of two-year bank
certificates of deposit as of April 30, 1996. Of course, unlike fixed-rate CDs,
which are FDIC-insured up to certain limits, the Fund's yield and share price
fluctuate. Also, principal investments in the Fund are not insured.
As the graph below shows, over the past 12 months, the Fund's
tax-equivalent yield has been consistently higher than the average yield of
two-year CDs tracked nationally.
BAR CHART TITLE: Scudder Limited Term Tax Free Fund's
Tax-Equivalent Yield* vs. National Two-Year CD Rates
CHART PERIOD: May 1995 through April 1996
CHART DATA:
Scudder Limited Term
Tax Free Fund's National average of
tax-equivalent yield two-year CD yields
-------------------- ------------------
7.42% 5.62%
7.16 5.23
7.17 5.02
7.15 5.10
6.87 5.08
6.79 5.06
6.84 5.01
6.69 4.82
6.59 4.68
6.37 4.48
6.82 4.73
7.14 4.83
Source of CD data: BanxQuote.
* Tax equivalent yields are for the 39.6% maximum federal tax rate.
6
<PAGE>
For the six months ended April 30, 1996, the Fund's net asset value
declined $0.09 to $11.92 per share, and the Fund provided $0.27 per share in
income and $0.01 per share in capital gain distributions, contributing to a
total return of 1.57%. This return compares favorably with the average return of
the 24 similar municipal bond funds tracked by Lipper Analytical Services, Inc.
As shown in the chart below, the Fund's total return surpassed its respective
Lipper average for the one-year period, and the Fund's 5.37% average annual
return ranked number one among similar funds for the two-year period ended April
30.
Strong Relative Performance
Total returns for periods ended April 30, 1996
Number
Lipper of Funds
Period Fund Average Rank Tracked
------ ---- ------- ---- -------
Six months 1.57% 1.22% 5 24
1 year* 5.80 5.10 4 22
2 years* 5.37 4.64 1 15
Past performance does not guarantee future results.
* Average Annual
Major Market Influences
From October through December 1995 bonds rallied as the Republican
majority in Congress staged a series of partial government shutdowns in their
efforts to achieve a balanced budget agreement on their terms. Many bond market
participants viewed these events as indications that significant U.S. budget
deficit reduction would now be possible. In the first four months of 1996,
however, bonds were once again set back as Congressional balanced budget efforts
failed and the Japanese and U.S. economies showed some signs of heating up.
The municipal market, which typically follows the Treasury market but
at a more moderate pace, was temporarily affected by ongoing Congressional
discussions of "flat tax" legislation in 1995. For some investors, the flat tax
cloud overhanging the market did not completely lift until the Presidential
primaries were underway in early 1996, when additional scrutiny from the press
and public deflated the proposal.
7
<PAGE>
Municipal bonds generally underperformed Treasuries during 1995
as Treasury yields declined dramatically. During the first four months of 1996,
however, the more richly priced taxable bonds gave up more ground than
municipals as the market reacted to stronger-than-expected economic indicators.
A Consistent Strategy
Scudder Limited Term Tax Free Fund's professional management,
economies of scale, and ability to diversify its assets continue to offer
investors an advantage compared with the holding of individual municipal bonds.
Over the past six-month period we emphasized both ends of the Fund's limited
maturity range: the shortest maturities for lower share price volatility and the
longest maturities (maximum of 10 years) for higher yields and possible capital
appreciation. We pursued this strategy because we believe tax-free bonds with
maturities in the five- to 10-year range currently offer the most attractive
after-tax yields and total return potential of any bonds in which the Fund is
permitted to invest. We also sought value during the period by purchasing bonds
that were less liquid, and therefore cheaper, because they required
more-intensive-than-usual credit research. In this respect Scudder's extensive
investment analysis resources provide an advantage.
The Fund continues to hold a large percentage of high-coupon insured
and pre-refunded bonds in its 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. The Fund's overall credit quality remains high, with over 75% of
the bonds in its portfolio rated AAA and AA.
8
<PAGE>
Our Near-Term Outlook
As stated in David Lee's letter preceding this discussion, the
direction of the U.S. economy and interest rates is currently unclear, although
many market participants are preparing themselves for the possibility of some
economic acceleration and increase in rates. We will consider lowering the
average effective maturity of the Fund (4.2 years as of April 30) somewhat if we
think further caution is warranted. However, because U.S. inflation remains
muted, we believe any increase in interest rates will be short-lived. Scudder
Limited Term Tax Free Fund can be a suitable investment for those who want to
earn tax-free yields but are seeking a higher degree of share price stability in
light of the uncertain economic environment.
We will continue to maintain a conservative investment strategy,
including holding premium bonds, diversifying broadly, and maintaining the
Fund's high credit quality. With the help of our team of investment analysts, we
will search for attractive value by weighing the maturity characteristics,
credit quality, and income potential of each bond we consider for purchase.
Sincerely,
Your Portfolio Management Team
/s/M. Ashton Patton /s/Donald C. Carleton
M. Ashton Patton Donald C. Carleton
9
<PAGE>
<TABLE>
SCUDDER LIMITED TERM TAX FREE FUND
INVESTMENT PORTFOLIO as of April 30, 1996 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount($) Rating(b) Value($)
---------------------------------------------------------------------------------------------
4.1% SHORT-TERM MUNICIPAL INVESTMENTS
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA California Community College Finance Authority,
Pooled Tax and Revenue Anticipation Notes,
Series B, 5%, 8/30/96 ................................... 2,000,000 SP1+ 2,007,960
NEW YORK New York City Municipal Water Finance Authority,
Daily Demand Note, 4.1%, 6/15/24 (c)* ................... 1,400,000 AAA 1,400,000
TEXAS Grapevine, TX, Industrial Development Authority
Corp., Daily Demand Note, 4.05%, 12/1/24* ............... 1,100,000 P1 1,100,000
Lone Star, TX, Airport Improvement Authority, 1995
Series A-3, Daily Demand Note, 4.05%, 12/1/14* .......... 400,000 MIG1 400,000
---------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $4,902,266) 4,907,960
---------
---------------------------------------------------------------------------------------------
95.9% INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
---------------------------------------------------------------------------------------------
ALABAMA University of South Alabama, Hospital and Auxiliary
Revenue, 7%, 5/15/04, prerefunded 5/15/00 (c)*** ........ 2,000,000 AAA 2,177,460
ALASKA Alaska State, General Obligation, 5%, 7/1/96 ............. 1,000,000 AA 1,002,120
North Slope Boro, AK, General Obligation, Series A,
Capital Appreciation, Zero Coupon, 6/30/99 (c) ......... 4,800,000 AAA 4,135,680
ARIZONA Central Arizona Water Conservation District, Central
Arizona Project, 7.5%, 11/1/05, prerefunded 11/1/00*** .. 1,000,000 AAA 1,133,030
CALIFORNIA Foothill/Eastern Transportation Corridor Agency,
CA, Toll Road Revenue, Senior Lien, Series A,
Zero Coupon, 1/1/05 ..................................... 1,000,000 BBB 576,260
Orange County, California, Recovery Notes, Series A,
6.5%, 6/1/05 (c) ........................................ 1,665,000 AAA 1,817,547
Sacremento, CA, Cogeneration Project Revenue,
Proctor and Gamble Project, Series 1995, 7%, 7/1/04 ..... 1,000,000 BBB 1,067,910
COLORADO Castle Rock Ranch, CO, Public Improvements Authority,
Public Facilities Revenue, Series 1996, 5.9%, 12/1/03 ... 1,475,000 AA 1,519,029
CONNECTICUT Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Mandatory Tender Notes,
Series B, 5.8%, 10/1/97 ................................. 2,000,000 A 2,035,000
DISTRICT OF COLUMBIA District of Columbia, General Obligation:
Series A, 5.625%, 6/1/02 (c) ........................... 1,500,000 AAA 1,536,750
Series D, 5.25%, 12/1/03 (c) ............................ 1,000,000 AAA 999,950
Series 1993C, 5.1%, 12/1/99 (c) ......................... 1,750,000 AAA 1,771,053
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
10
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
Principal Credit Market
Amount($) Rating(b) Value($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA Municipal Electric Authority of Georgia, Power Revenue,
6.6%, 1/1/01 (c) ............................................ 1,000,000 AAA 1,079,620
ILLINOIS Berwyn, IL, Macneal Memorial Hospital Association
Project, Series 1995, 5.5%, 6/1/01 (c) ...................... 2,795,000 AAA 2,864,500
Chicago, IL, General Obligation:
Series C, 4.3%, 10/31/97 .................................... 500,000 AA 502,020
Tender Notes, Series C, 6.25%, 10/31/02 (c) ................. 3,450,000 AAA 3,718,548
Chicago, IL, Metropolitan Water District,
ETM, 7.25%, 1/1/99** ........................................ 2,000,000 AAA 2,140,880
Cook County, IL General Obligation, 6.45%, 11/1/96 ........... 1,000,000 A 1,013,210
Evergreen Park, Illinois Hospital Facilities, Little
County Mary's Hospital, 7.75%, 2/15/09 (c) .................. 1,200,000 AAA 1,279,860
Illinois Health Facilities Authority, Revenue Refunding,
Sherman Hospital Project, 6.5%, 8/1/01 (c) .................. 1,025,000 AAA 1,103,976
INDIANA Indiana Health Facility Finance Authority, Hospital
Revenue, Ancilla Systems Inc., Series A, 5.875%,
7/1/02 (c) .................................................. 1,000,000 AAA 1,051,840
Indiana Housing Finance Authority, Single Family
Mortgage Revenue, Series 1995C-1, 5.25%, 7/1/12 ............. 4,500,000 AAA 4,475,430
Madison County, IN, Hospital Authority, Holy Cross
Health System, 6.3%, 12/1/98 (c) ............................ 1,000,000 AAA 1,044,920
IOWA Cedar Rapids, IA, Hospital Revenue, St. Lukes
Methodist Hospital, 5.65%, 8/15/02 (c) ..................... 1,250,000 AAA 1,296,713
Des Moines, IA, Hospital Revenue, General
Hospital Project, Series 1996A, 6%, 11/15/02 ................ 1,750,000 AA 1,822,818
LOUISIANA Jefferson, LA, Sales Tax, Series A, 6.1%, 12/1/96 (c) ........ 1,000,000 AAA 1,013,980
MAINE Maine State, General Obligation, 6%, 7/1/98 .................. 1,000,000 AA 1,037,310
MARYLAND Washington Suburban Sanitation District, MD:
6.9%, 6/1/99 ................................................ 675,000 AA 724,619
8.75%, 6/1/01 ............................................... 1,000,000 AA 1,185,240
MASSACHUSETTS Massachusetts Water Resource Authority, Series A,
7%, 4/1/18, prerefunded 4/1/00*** ........................... 1,200,000 AAA 1,324,512
New England Education Loan Marketing Corporation,
Massachusetts Student Loan Revenue Refunding:
Series A, 6%, 9/1/98 ....................................... 1,500,000 AAA 1,551,615
Series D, 6.2%, 9/1/00 ..................................... 2,000,000 AAA 2,098,720
MICHIGAN Detroit, MI, General Obligation, Distributable State
Aid, 5.375%, 5/1/96 ......................................... 2,375,000 BBB 2,375,095
Michigan State Hospital Finance Authority Revenue,
Genesys Health System, Series A, 6.6% 10/1/98 ............... 1,000,000 BBB 1,035,290
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
11
<PAGE>
<TABLE>
<CAPTION>
SCUDDER LIMITED TERM TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------
Principal Credit Market
Amount($) Rating(b) Value($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE New Hampshire Higher Education and Health Facilities
Authority Revenue, St. Josephs Hospital, 5.65%,
1/1/04 (c) ............................................ 1,095,000 AAA 1,109,169
NEW JERSEY New Jersey State, General Obligation, 7%, 4/1/03 ....... 2,000,000 AA 2,197,660
NEW YORK New York City, NY, General Obligation:
Series A, 3%, 8/15/02 (c) ............................. 1,000,000 AAA 906,250
Series B, 6.75%, 8/15/03 .............................. 6,000,000 A 6,385,620
Series C, ETM, 7.4%, 8/1/96** ......................... 220,000 A 221,956
Series H, 5.7%, 8/1/03 ................................ 3,000,000 A 3,012,060
New York State Dormitory Authority, State University
Educational Facility, Series A, 6.5%, 5/15/04 ......... 1,000,000 BBB 1,066,930
New York State Medical Care Facilities, Financing
Agency, Mount Sinai Hospital, Series 1983,
5.95%, 8/15/09 ........................................ 1,260,000 AAA 1,270,520
New York State Urban Development Corporation
Project, Onondaga County Convention Center:
6%, 1/1/04 ........................................... 1,445,000 BBB 1,477,802
6%, 1/1/05 ........................................... 1,535,000 BBB 1,562,860
Syracuse, NY, Industrial Development Agency, Pilot
Revenue Bonds, Series 1995, 5.125%, 10/15/02 .......... 1,500,000 AA 1,482,540
NORTH CAROLINA North Carolina Municipal Power Agency #1,
Catawaba Electric Revenue, 5.75%, 1/1/02 (c) .......... 1,150,000 AAA 1,202,417
PENNSYLVANIA Allegheny County, PA, Hospital Development
Authority, 6.4%, 7/1/99 (c) ........................... 1,010,000 AAA 1,064,793
Philadelphia, PA, Gas Works Revenue, 7.875%, 7/1/17,
prerefunded 7/1/97*** ................................ 500,000 AAA 532,985
Philadelphia, PA, School District, General Obligation,
6.7%, 7/1/99 (c) ...................................... 3,000,000 AAA 3,197,250
University of Pittsburg, Pennsylvania Higher Education,
General Obligation, Series A, 8.375%, 6/1/05
prerefunded 6/1/97*** ................................. 1,000,000 AAA 1,068,350
RHODE ISLAND Rhode Island State, Consolidated Capital Development
Loan, General Obligation, Series 1996, 6%, 8/1/03 (c) . 1,690,000 AAA 1,803,247
SOUTH CAROLINA South Carolina Public Service Authority Revenue,
8%, 7/1/19 prerefunded 7/1/96*** ...................... 250,000 AAA 259,280
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 570,305
TEXAS Austin, TX:
Independent School District, Guaranteed General
Obligation, 8.125%, 8/1/01 ........................... 1,000,000 AAA 1,156,010
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
12
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
Principal Credit Market
Amount($) Rating(b) Value($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utility System Revenue:
6%, 11/15/01 (c) ........................................ 1,000,000 AAA 1,063,250
Series A, 6.3%, 11/15/01 (c) ............................ 1,000,000 AAA 1,077,640
Water, Sewer, and Electric Refunding Revenue,
14.25%, 11/15/06, prerefunded 5/15/97*** ................ 1,105,000 AAA 1,219,312
Harris County, TX, Toll Road Authority, Senior Lien,
8.1%, 8/15/00, prerefunded 8/15/97(c) *** ................ 1,275,000 AAA 1,379,818
Midland County, TX, Hospital District, 4.85%, 6/1/97 ...... 1,815,000 BBB 1,822,224
Texas State Turnpike Authority, North Dallas Thruway
Revenue, 6.7%, 1/1/98 (c) ................................ 1,310,000 AAA 1,362,597
UTAH Intermountain Power Agency, UT, Power Supply
Revenue, Series B, 5.5%, 7/1/01 (c) ...................... 2,000,000 AAA 2,076,260
Intermountain Power Agency, UT, Special Obligation,
7.5%, 7/1/16 crossover refunded 7/1/96 (c)**** ........... 2,500,000 AA 2,565,825
VIRGIN ISLANDS Virgin Islands, General Obligation, 6.9%, 10/1/01 ......... 1,000,000 BBB 1,049,900
WASHINGTON Lewis County, WA, Public Utility District 1, Cowlitz Falls
Hydroelectric Project, Series 1991, prerefunded
10/1/01, 7%, 10/1/22*** .................................. 1,430,000 AAA 1,607,906
Washington Public Power Supply System:
Nuclear Project #1, Revenue Refunding, Series C,
7.3%, 7/1/98 ............................................ 3,000,000 AA 3,170,550
Nuclear Project #2, Revenue Refunding,
Series 1992A, 5.7%, 7/1/02 .............................. 1,000,000 AA 1,028,680
Nuclear Project #2, Revenue Refunding,
Series C, 7.3%, 7/1/00 .................................. 1,300,000 AA 1,417,023
Washington State, Motor Vehicle Fuel Tax, Series E,
8%, 9/1/09 prerefunded 9/1/96*** ......................... 1,000,000 AAA 1,014,560
WEST VIRGINIA Wayne County, WV, Industrial Development, Atlantic
Richfield Company Project, 11.75%, 12/1/01 ............... 1,000,000 A 1,040,060
WISCONSIN Milwaukee, WI, Metropolitan Sewer District Revenue,
Series A, 6.7%, 10/1/01 .................................. 1,000,000 AA 1,094,660
Wisconsin State Health and Education Facilities Authority,
St. Lukes Medical Center, 6.6%, 8/15/01 (c) .............. 1,745,000 AAA 1,887,549
Wisconsin State Health and Education Facilities Authority,
Wheaton Franciscan Services, 8.2%, 8/15/18,
prerefunded 8/15/98 (c)*** ............................... 1,000,000 AAA 1,105,310
-----------
TOTAL INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
(Cost $112,341,260) ...................................... 114,043,633
-----------
===============================================================================================================
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $117,243,526) (a) .................................. 118,951,593
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
13
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $117,243,526. At April 30,
1996, net unrealized appreciation for all securities based on tax cost was
$1,708,067. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $1,820,256 and aggregate gross unrealized depreciation for all
securities in which there was an excess tax cost over market value of
$112,189.
(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.
(c) Bond is insured by one of these companies: AMBAC, FGIC, FSA, Connie Lee, 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.
The accompanying notes are an integral part of the financial statements.
----
14
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<CAPTION>
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $117,243,526)
(Note A) ........................................ $118,951,593
Cash ............................................... 52,659
Receivables:
Investments sold ................................ 1,818,249
Interest ........................................ 1,957,429
Fund shares sold ................................ 75,669
Deferred organization expenses (Note A) ............ 22,760
------------
Total assets .................................... 122,878,359
LIABILITIES
Payables:
Investments purchased ........................... $3,632,988
Dividends ....................................... 263,145
Fund shares redeemed ............................ 236,645
Accrued management fee (Note C) ................. 26,584
Other accrued expenses (Note C) ................. 33,191
----------
Total liabilities ............................... 4,192,553
------------
Net assets, at market value ........................ $118,685,806
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments .......... $ 1,708,067
Accumulated net realized loss ................... (68,008)
Shares of beneficial interest ................... 99,605
Additional paid-in capital ...................... 116,946,142
------------
Net assets, at market value ........................ $118,685,806
============
NET ASSET VALUE, offering and redemption price per
share ($118,685,806[division sign]9,960,487
outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares
authorized) ................................ $11.92
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
15
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest $3,047,863
Expenses:
Management fee (Note C) ....................... $ 363,484
Custodian and accounting fees (Note C) ........ 38,475
Services to shareholders (Note C) ............. 29,720
Trustees' fees and expenses (Note C) .......... 14,217
State registration ............................ 17,822
Auditing ...................................... 14,808
Reports to shareholders ....................... 6,096
Amortization of organization expense (Note A) . 4,182
Other ......................................... 5,396
---------
Total expenses before expense reductions ...... 494,200
Expense reductions (Note C) ................... (192,671)
---------
Expenses, net ................................. 301,529
----------
Net investment income ......................... 2,746,334
----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT
TRANSACTIONS
Net realized loss from investments ............ (29,953)
Net unrealized depreciation on investments
during the period ......................... (877,435)
----------
Net loss on investments ....................... (907,388)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................ $1,838,946
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
16
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1996 OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................ $ 2,746,334 $ 5,161,497
Net realized gain (loss) on investments ...... (29,953) 59,333
Net unrealized appreciation (depreciation)
on investments during the period ......... (877,435) 3,480,063
------------ ------------
Net increase in net assets resulting
from operations .......................... 1,838,946 8,700,893
------------ ------------
Distributions to shareholders from:
Net investment income ($.27 and
$.56 per share, respectively) ............ (2,746,334) (5,161,497)
------------ ------------
Net realized gains ($.01 per share) ...... (50,891) --
------------ ------------
Fund share transactions:
Proceeds from shares sold .................... 31,509,553 113,448,336
Net asset value of shares issued to
shareholders in reinvestment of
distributions ............................ 1,185,386 2,280,520
Cost of shares redeemed ...................... (34,814,990) (65,092,618)
------------ ------------
Net increase (decrease) in net assets
from Fund share transactions ............. (2,120,051) 50,636,238
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ............ (3,078,330) 54,175,634
Net assets at beginning of period ............ 121,764,136 67,588,502
------------ ------------
NET ASSETS AT END OF PERIOD .................. $118,685,806 $121,764,136
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .... 10,139,449 5,792,967
------------ ------------
Shares sold .................................. 2,614,375 9,697,002
Shares issued to shareholders in
reinvestment of distributions ............ 98,525 192,663
Shares redeemed .............................. (2,891,862) (5,543,183)
------------ ------------
Net increase (decrease) in Fund shares ....... (178,962) 4,346,482
............................................. ------------ ------------
Shares outstanding at end of period .......... 9,960,487 10,139,449
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
17
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
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, YEAR ENDED (COMMENCEMENT
1996 OCTOBER 31, OF OPERATIONS) TO
(UNAUDITED) 1995 OCTOBER 31, 1994
----------- ---------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period .................. $12.01 $11.67 $12.00
------ ------ ------
Income from investment operations:
Net investment income (a) ........................... .27 .56 .38
Net realized and unrealized gain (loss)
on investments .................................... (.08) .34 (.33)
------ ------ ------
Total from investment operations ...................... .19 .90 .05
------ ------ ------
Less distributions from:
Net investment income ............................... (.27) (.56) (.38)
Net realized gain on investment transactions ........ (.01) -- --
------ ------ ------
Total distributions ................................... (.28) (.56) (.38)
------ ------ ------
Net asset value, end of period ........................ $11.92 $12.01 $11.67
====== ====== ======
TOTAL RETURN (%) (b) .................................. 1.57** 7.94 .44**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ................ 119 122 68
Ratio of operating expenses, net to average
daily net assets (%) (a) ............................ .50* .23 --
Ratio of net investment income to average
daily net assets (%) ................................ 4.56* 4.78 4.84*
Portfolio turnover rate (%) ........................... 31.7* 37.5 36.3*
(a) Reflects a per share amount of expenses,
exclusive of management fees, reimbursed by
the Adviser of ................................... $ -- $ .01 $ .04
Reflects a per share amount of management fee
and other fees not imposed by the Adviser of ..... $ .02 $ .07 $ .06
Operating expense ratio before expense
reductions (%) ................................... .82* .85 1.29*
(b) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</TABLE>
----
18
<PAGE>
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio debt securities 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. 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.
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.
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.
----
19
<PAGE>
SCUDDER LIMITED TERM TAX FREE FUND
- --------------------------------------------------------------------------------
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
OTHER. Investment transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the call
or maturity date.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the six months ended April 30, 1996, purchases and sales of investments
(excluding short-term) aggregated $23,974,932 and $18,574,728, 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
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.
----
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the period September 1, 1995 to April 30, 1996 the Adviser agreed not to
impose all or a portion of its management fee and to maintain the annualized
expenses of the Fund at not more than 0.50% of average daily net assets.
Effective May 1, 1996, the Adviser agreed to maintain the annualized expenses at
0.75% of average daily net assets until December 31, 1996. For the six months
ended April 30, 1996, the Adviser imposed fees amounting to $170,813 and the
portion not imposed amounted to $192,671 at April 30, 1996.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1996, the amount charged to the Fund by SSC
aggregated $22,621.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 1996, the amount charged to the Fund by SFAC aggregated $19,805.
The Trust 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, 1996, Trustees' fees and expenses charged to the Fund aggregated
$14,217.
----
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond 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 Emerging Markets Growth Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Fund
Scudder Massachusetts Tax Free Fund* Scudder Global Discovery Fund
Scudder Medium Term Tax Free Fund Scudder Gold Fund
Scudder New York Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Ohio Tax Free Fund* Scudder International Fund
Scudder Pennsylvania Tax Free Fund* Scudder Latin America Fund
Growth and Income Scudder Pacific Opportunities Fund
Scudder Balanced Fund Scudder Quality Growth Fund
Scudder Growth and Income Fund Scudder Small Company Value Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
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>
22
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<CAPTION>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
<S> <C>
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM)an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* 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>
23
<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 38 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.
