Scudder
Medium Term
Tax Free Fund
Annual Report
December 31, 1997
Pure No-Load(TM) Funds
A fund that seeks to provide a high level of income free from regular federal
income taxes and to limit principal fluctuation.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder Medium Term Tax Free Fund
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Date of Inception: 4/12/83 Total Net Assets as of Ticker Symbol: SCMTX
12/31/97: $657 million
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o Scudder Medium Term Tax Free Fund's 30-day net annualized SEC yield was 3.89%
as of December 31, 1997. For investors in the two highest federal tax brackets
of 36% and 39.6%, the Fund's yield was equivalent to a fully taxable 6.08% and
6.44%, respectively.
o The Fund received four stars from Morningstar, reflecting an "above-average"
rating for risk-adjusted performance through December 31, 1997.*
o For one-, three-, and five-year periods, the Fund's total returns placed it in
the top 30% of performance among similar municipal bond funds as tracked by
Lipper Analytical Services. Please see page 4 for additional Lipper performance
information.
Table of Contents
3 Letter from the Fund's President 24 Notes to Financial Statements
4 Performance Update 27 Report of Independent Accountants
5 Portfolio Summary 28 Tax Information
6 Portfolio Management Discussion 29 Shareholder Meeting Results
9 Glossary of Investment Terms 32 Officers and Trustees
10 Investment Portfolio 33 Investment Products and Services
20 Financial Statements 34 Scudder Solutions
23 Financial Highlights
* For your information, these ratings are subject to change every month and are
calculated from the Fund's five-year average annual return in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below T-bill returns. The Fund received four stars
for three-, five-, and ten-year performance, and was rated among 1494, 720,
and 337 municipal funds for the respective periods. Of the funds rated, 10%
received five stars, and 22.5% received four stars. Past performance is no
guarantee of future returns.
2 - Scudder Medium Term Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Medium Term Tax Free Fund's
performance over its most recent 12-month reporting period ended December 31,
1997. In addition to the Fund's four-star Morningstar rating as of December 31
(see page 2), the Fund placed in the top 30% of similar tax-free funds tracked
by Lipper for total return performance over one-, three-, and five-year periods.
The Fund also posted a 3.89% 30-day net annualized SEC yield as of December 31,
which is equivalent to a taxable yield of 6.44% for investors in the top federal
tax bracket. Though municipal bond yields are currently lower than in recent
years, the difference or "spread" between bond yields and inflation during the
Fund's most recent fiscal year was larger than it has been since December 1994.
Regardless of the overall level of interest rates, this spread represents what
bond investors really earn. Please see the discussion beginning on page 6 for
more information.
For those of you who are interested in new Scudder products, we recently
introduced a new industry sector fund, Scudder Financial Services Fund. One of
Scudder's Choice Series sector funds, the Fund seeks long-term growth by
investing in financial services companies in the U.S. and abroad. In addition,
two other Choice Series funds will be launched on March 2: Scudder Health Care
Fund, seeking long-term growth from health care companies located around the
world, and Scudder Technology Fund, pursuing long-term growth by investing in
companies that develop, produce, or distribute technology.
Finally, as you may know, the Fund's investment adviser has changed its
name to Scudder Kemper Investments, Inc. from Scudder, Stevens & Clark, Inc.,
pursuant to the acquisition of a majority interest in Scudder, Stevens & Clark
by Zurich Insurance Company, and the combining of Scudder's business with that
of Zurich Kemper Investments, Inc.
If you have any questions regarding Scudder Medium Term Tax Free Fund or
any other Scudder fund, please call Investor Relations at 1-800-225-2470. Or
visit Scudder's Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Medium Term Tax Free Fund
3 - Scudder Medium Term Tax Free Fund
<PAGE>
PERFORMANCE UPDATE as of December 31, 1997
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FUND INDEX COMPARISONS
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Total Return
Period Growth --------------
Ended of Average
12/31/97 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------
1 Year $ 10,769 7.69% 7.69%
5 Year $ 13,710 37.10% 6.51%
10 Year* $ 19,794 97.94% 7.07%
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LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
1 Year $ 10,921 9.21% 9.21%
5 Year $ 14,263 42.63% 7.36%
10 Year $ 22,791 127.91% 8.58%
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GROWTH OF A $10,000 INVESTMENT
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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 December 31
SCUDDER MEDIUM TERM TAX FREE FUND
Year Amount
- ----------------------
'87 $10,000
'88 $10,492
'89 $11,121
'90 $11,821
'91 $13,254
'92 $14,438
'93 $16,018
'94 $15,458
'95 $17,622
'96 $18,381
'97 $19,794
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $10,903
'89 $12,203
'90 $13,093
'91 $14,683
'92 $15,979
'93 $17,941
'94 $17,013
'95 $19,984
'96 $20,669
'97 $22,791
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 two years. Generally,
the Index's average effective maturity is longer than the Fund's. Index returns
assume dividends are reinvested and, unlike Fund returns, do not reflect any
fees or expenses.
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RETURNS AND PER SHARE INFORMATION
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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 December 31
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 10.02 $ 10.04 $ 10.11 $ 10.22 $ 10.86 $ 11.36 $ 10.39 $ 11.26 $ 11.15 $ 11.41
INCOME DIVIDENDS.. $ .54 $ .56 $ .54 $ .67 $ .65 $ .60 $ .53 $ .54 $ .53 $ .52
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ -- $ .01 $ .03 $ .06 $ .05 $ .05 $ .02 $ .05
FUND TOTAL
RETURN (%)........ 4.92 6.00 6.29 12.13 8.93 10.94 -3.50 14.32 4.02 7.69
INDEX TOTAL
RETURN (%)........ 10.16 10.79 7.29 12.14 8.82 12.28 -5.17 17.46 4.43 9.21
</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 70.52% AND 7.73%, 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 October 31, 1995, the average annual total
return of the Fund for the five year and ten year periods would have been lower.
4 - Scudder Medium Term Tax Free Fund
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1997
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DIVERSIFICATION
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Electric Utility Revenue 20%
Core Cities/Lease 16%
Hospital/Health 14%
State General Obligation 10%
Other General Obligation/Lease 6%
School District/Lease 6%
Sales & Special Tax 5%
Toll Revenue 5%
Resource Recovery 4%
Miscellaneous Municipal 14%
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100%
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A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
As of December 31, the Fund held
securities issued in 34 states plus
the District of Columbia and the
Virgin Islands.
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QUALITY
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AAA 58%
AA 14%
A 16%
BBB 10%
NR 2%
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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.
Overall credit quality remain high,
with 72% of Fund assets rated AAA
or AA.
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EFFECTIVE MATURITY
- ---------------------------------------------------------------------------
Less than 1 year 5%
1 - 5 years 29%
5 - 10 years 54%
10 - 15 years 12%
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100%
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Weighted average effective maturity: 6.4 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
During the period, the Fund maintained
an average effective maturity comparable
to its competitive universe.
5 - Scudder Medium Term Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Reflecting investors' confidence in the bond market and the U.S. economy,
municipal bonds performed well during 1997 and helped Scudder Medium Term Tax
Free Fund post a 7.69% total return for its most recent fiscal year ended
December 31. In addition, the Fund provided a 30-day net annualized SEC yield of
3.89% as of December 31, equivalent to fully taxable yields of 6.08% and 6.44%,
respectively, for investors in the 36% and 39.6% tax brackets.
The Fund's 7.69% total return was based on a $0.26 increase in net asset value
to $11.41, plus income distributions of $0.52, short-term gains of $0.01, and
long-term gains of $0.04. The Fund's return outpaced the 7.16% average of 140
similar funds as tracked by Lipper Analytical Services, Inc. As shown in the
accompanying chart, the Fund's average annual total returns place it in the top
30% of its peer group for the 12-month period, as well as for three- and
five-year periods. Please turn to the Performance Update on page for more
information on the Fund's long-term progress, including comparisons with the
unmanaged Lehman Brothers Municipal Bond Index.
Bonds Benefit as Inflation Fades
The year 1997 was rewarding for most bond investors as the market's focus
gradually shifted from the possibility of an overheating U.S. economy and
increases in inflation to the Asian currency crisis and speculation about
deflation. As Asian currencies such as the Korean won and the Thai baht
surrendered approximately half of their value versus the U.S. dollar from July
to December, expectations grew that lower-cost Asian imports and reduced profit
expectations for global U.S.-based companies would keep the domestic economy and
inflation under control for some time to come, despite nearly full employment.
Competitive Total Return
(Average annual returns for periods ended
December 31, 1997)
---------------------------------------------------------
Scudder
Medium
Term Tax Number
Free of
Fund Lipper Funds Percentile
Period return return Rank tracked Ranking
---------------------------------------------------------
1 year 7.69% 7.16% 41 of 140 Top 29%
3 years 8.59% 7.98% 23 of 112 Top 21%
5 years 6.51% 6.12% 13 of 49 Top 27%
10 years* 7.07% 7.09% 11 of 21 Top 52%
Past performance does not guarantee future results.
*Scudder Medium Term Tax Free Fund adopted its current name and objective on
November 1, 1990.
Yield declines and price gains in the municipal bond sector reflected this
favorable environment. Despite an increase in new issue volume compared with
1996, municipal bonds posted price gains across the maturity spectrum. For
example, yields of 10-year municipal bonds declined approximately one half of a
percentage point, and their prices rose 4% during the period.
6 - Scudder Medium Term Tax Free Fund
<PAGE>
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Municipal Yields Compared with Inflation
December 31, 1994 - December 31, 1997
LINE CHART DATA:
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CPI 10-year municipal bonds
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1/95 2.80% 5.80%
3.05 5.30
2.76 5.05
2.81 4.90
1/96 2.73 4.65
2.90 5.00
2.95 5.15
2.99 5.00
1/97 3.04 4.85
2.50 5.10
2.23 4.75
2.08 4.50
12/97 1.84 4.60
(chart indicates a 2.76% Spread between the 10-year municipal bonds at 4.60%
(12/97) and the CPI at 1.84% (12/97)
Municipal yields represented by 10-year, AAA-rated municipal bonds.
Inflation represented by CPI (Consumer Price Index).
Source: Salomon Brothers; Datastream
It's important to note that in the current environment of lower municipal yields
and much lower inflation, "real" interest rates -- interest rates minus
increases in the CPI, a recognized barometer of inflation -- have rarely been
higher. Real interest rates depict the level of income bondholders actually
earn, taking into account the erosion in value of their principal from
inflation. The above chart illustrates the gap between municipal bond yield
levels and inflation since December 1994.
High Grade, Intermediate-Maturity Bonds
In conjunction with our primary goals of maximizing the Fund's yield while
maintaining a significant degree of price stability, we continued to purchase
high-grade, intermediate-maturity municipal bonds. On December 31, bonds with
effective maturities between 5 and 10 years represented 54% of the Fund's
portfolio. In addition, the Fund maintained an average effective maturity
comparable to its competitive universe: As of December 31, 1997, Scudder Medium
Term Tax Free Fund's average effective maturity was 6.4 years. During the
period, we focused on premium bonds (which sell at a premium to par value and
offer attractive characteristics in the current interest rate environment), and
bonds with complex credit profiles or structures that offered attractive value.
Purchasing bonds with sufficient call protection remains a fundamental strategy,
ensuring that a significant portion of the Fund's bonds are not retired before
maturity. (Generally, as rates fall, a bond is called in by its issuer so that
it can be refinanced at a lower prevailing rate.) Our emphasis on call
protection provides a more reliable income stream than would exist if the Fund's
portfolio held a significant proportion of bonds that could be called in before
their stated maturities.
Diversification also remains an important strategy for the Fund, allowing the
spread of risk over a large number of sectors, maturities, and geographic areas.
As of December 31, 1997, the Fund held securities issued in 34 states plus the
District of Columbia and the Virgin Islands. Lastly, the Fund's overall credit
quality remains high, with 72% of Fund assets rated AAA or AA, or of equivalent
quality. Securities are rated by Standard & Poor's, Moody's Investor Service,
Fitch Investors Service, or, if unrated, assigned a rating by Scudder. The
Portfolio Summary on page provides more information about the Fund's holdings,
including quality, maturity, and sector representation.
7 - Scudder Medium Term Tax Free Fund
<PAGE>
Inflation Expectation is Low
Amid the gloom (and economic pain for the people of Asia) of the Asian currency
crisis is a ray of sunshine -- the relaxing of inflation worries in the U.S.
bond market. Though no one can predict exactly how long it will last, we expect
this slow-growth, low-inflation environment to continue and to benefit municipal
bonds over the coming months. With this in mind, we will continue to purchase
selected intermediate-term municipal bonds with attractive coupon structures
and, where possible, call protection, with an eye toward extending the Fund's
average maturity. At the same time, we will attempt to limit the amount of
taxable capital gains generated through turnover in the Fund's portfolio,
carefully weighing each trade. As always, rather than attempting to predict
short-term market movements, we will look for value as we seek high tax-free
income and attractive total returns for our investors.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/M. Ashton Patton
Donald C. Carleton M. Ashton Patton
Scudder Medium Term
Tax Free Fund:
A Team Approach to Investing
Scudder Medium Term Tax Free Fund is managed by a team of Scudder Kemper
Investments, Inc. (SKI) professionals who each play an important role in the
Fund's management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are supported
by SKI's large staff of economists, research analysts, traders, and other
investment specialists who work in our offices across the United States and
abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging SKI's extensive resources.
Lead Portfolio Manager Donald C. Carleton has had responsibility for Scudder
Medium Term Tax Free Fund's day-to-day operations since he joined SKI in 1983.
Don, who has worked in the investment industry for more than 25 years, also
serves as Lead Portfolio Manager for Scudder Managed Municipal Bonds, Scudder
Ohio Tax Free Fund, and Scudder Pennsylvania Tax Free Fund. M. Ashton Patton,
Portfolio Manager, became a member of the team in 1989. Ashton, who has worked
with municipal investments since joining SKI in 1986, focuses on the Fund's
security selection.
8 - Scudder Medium Term Tax Free Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the
federal, state, or local government or a
corporation that obligates the issuer to pay the
bondholder a specified amount of interest for a
stated period -- usually a number of years --
and to repay the face amount of the bond at its
maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith and
credit" (including the taxing and further
borrowing power) of the city, state, or agency
that issues the bond. A general obligation bond
is repaid with the issuer's general revenue and
borrowings.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of
goods available in the marketplace -- in other
words, when too much money is chasing too few
goods. High inflation has a negative impact on
the prices of fixed-income securities.
MUNICIPAL BOND An interest-bearing debt security issued by a
state or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund based on
the sum of the market value of all the
securities owned by the fund divided by the
number of outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument
would have to provide to equal that of a
tax-free municipal bond on an after-tax basis.
30-DAY SEC YIELD The standard yield reference for bond funds,
based on a formula prescribed by the SEC. This
annualized yield calculation reflects the 30-day
average of the income earnings of every holding
in a given fund's portfolio, net of expenses,
assuming each is held to maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return --
annualized or compound -- is based on a
combination of share price changes plus income
and capital gain distributions, if any,
expressed as a percentage gain or loss in value.
(Sources: SKI; Barron's Dictionary of Finance and Investment Terms)
9 - Scudder Medium Term Tax Free Fund
<PAGE>
Investment Portfolio as of December 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 2.1%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona
Arizona Educational Loan Marketing Corporation, Educational Loan Revenue,
35 Day Auction, Series 1997A, 4.15%, 12/1/02* ................................ 3,850,000 AA 3,850,000
Florida
Halifax Hospital Medical Center, FL, Hospital Revenue, 35 Day Auction,
Series A, 3.84%, 10/1/19 (c)* ................................................ 3,000,000 AAA 3,000,000
Kansas
Burlington, KS, Environmental Improvement Revenue, Kansas City Power & Light,
Series B, 35 Day Auction, 4.15%, 12/1/23* .................................... 4,330,000 A 4,330,000
New Mexico
New Mexico Educational Assistance Foundation, Student Loan Revenue, 35 Day
Auction, Series 1995 A-1, 4.22%, 11/1/25* .................................... 1,000,000 AAA 1,000,000
North Dakota
Grand Forks, ND, Hospital Facilities Revenue, Series 1992, Daily Demand Note,
5.1%, 12/1/16* ............................................................... 1,000,000 MIG1 1,000,000
Ohio
Hamilton County, OH, Franciscan Sisters of the Poor Health System, Series A,
Daily Demand Note, 5.25%, 3/1/17* ............................................ 600,000 MIG1 600,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $13,780,000) 13,780,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 97.9%
- ------------------------------------------------------------------------------------------------------------------------------
Alabama
Alabama Street Docks Department, Facilities Revenue, Series 1998, 6%,
10/1/07 (c) .................................................................. 1,000,000 AAA 1,104,103
Alaska
North Slope Borough, AK, General Obligation:
Capital Appreciation, Series A, Zero Coupon, 6/30/06 (c) ..................... 11,150,000 AAA 7,537,400
Capital Appreciation, Series B, Zero Coupon, 6/30/04 (c) (f) ................. 19,500,000 AAA 14,527,890
Series A, Zero Coupon, 6/30/02 (c) ........................................... 3,275,000 AAA 2,688,939
Series A, Zero Coupon, 6/30/03 (c) (f) ....................................... 7,000,000 AAA 5,471,410
Arizona
Arizona Health Facilities Authority, Phoenix Baptist Hospital and Medical
Center, 6.1%, 9/1/03 (c) ..................................................... 2,000,000 AAA 2,183,400
Maricopa County, AZ, School District #28, Kyrene Elementary, Series B:
Zero Coupon, 1/1/03 (c) ...................................................... 4,150,000 AAA 3,341,663
Zero Coupon, 7/1/03 (c) ...................................................... 2,000,000 AAA 1,575,940
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maricopa County, AZ, Unified School District #41, Capital Appreciation Bond:
Zero Coupon, 7/1/03 (c) ..................................................... 4,500,000 AAA 3,545,865
Zero Coupon, 1/1/04 (c) ..................................................... 6,000,000 AAA 4,612,920
Zero Coupon, 7/1/06 (c) ..................................................... 7,605,000 AAA 5,183,872
Gilbert, Zero Coupon, 7/1/05 (c) ............................................ 1,790,000 AAA 1,281,103
Gilbert, Zero Coupon, 1/1/06 (c) ............................................ 2,925,000 AAA 2,039,281
Arkansas
Rogers, AR, Sales & Use Tax Revenue, Series 1996, 5.35%, 11/1/11 ............... 2,500,000 AA 2,569,600
California
California Health Facilities Finance Authority Revenue, Summit Medical Center,
Series A, 6%, 5/1/06 (c) ..................................................... 3,150,000 AAA 3,519,873
California Housing Finance Agency, Multi-Unit Rental Housing Revenue, Series A,
7.25%, 8/1/98 ................................................................ 2,270,000 A 2,312,131
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue, Senior
Lien, Series A, Step-up coupon, 0% to 1/1/05, 7.05% to 1/1/09 ................ 7,275,000 BBB 5,389,611
Long Beach, CA, Aquarium of the Pacific Project, Series 1995A, 5.75%, 7/1/05 ... 1,300,000 BBB 1,381,640
Orange County, CA, Local Transportation Authority, Sales Tax Revenue,
Measure M, Step-down Coupon, 5.1% to 2/15/98, 4.3% to 2/15/01 (c) ............ 5,100,000 AAA 5,118,972
Orange County, CA, Special Financing Authority, Teeter Plan Revenue, Series C,
Mandatory Put 11/1/99 at 100, 6.15%, 11/1/14 ................................. 2,600,000 A 2,674,022
Southern California Public Power Authority, Power Project Revenue, Palo Verde
Project, Series 1996A, 6%, 7/1/07 (c)(f) ..................................... 3,000,000 AAA 3,380,610
Colorado
Boulder County, CO, Industrial Development, Revenue Refunding, May Department
Stores, Colorado Project, Series 1992, 6.25%, 9/1/07 ......................... 3,500,000 A 3,726,205
Castle Rock Ranch, CO, Public Improvements Authority, Public Facilities
Revenue:
Series 1996, 6.1%, 12/1/05 ................................................... 2,780,000 AA 3,050,077
Series 1996, 6.5%, 12/1/09 ................................................... 3,525,000 AA 4,056,923
Colorado Health Facilities Authority, Hospital Revenue, Rocky Mountain
Adventist Healthcare Project, 6%, 2/1/98 ..................................... 2,975,000 BBB 2,980,087
Connecticut
Bristol, CT, Resource Recovery, Ogden Martin System, 6.125%, 7/1/03 ............ 10,635,000 A 11,505,368
Connecticut State Health & Educational Facilities Authority, Windham Community
Memorial Hospital, Series 1996C, 5.75%, 7/1/11 ............................... 3,700,000 BBB 3,778,662
District Of Columbia
District of Columbia, Certificate of Participation, Series 1993, 6.875%,
1/1/03 ....................................................................... 2,155,000 BB 2,259,065
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
District of Columbia, General Obligation:
Series 1993 A-1, 4.95%, 6/1/05 (c) ........................................... 3,940,000 AAA 4,058,633
Series A, 5.625%, 6/1/02 (c) ................................................. 8,360,000 AAA 8,811,273
Series A, 5.8%, 6/1/04 (c) ................................................... 6,950,000 AAA 7,483,691
Series D, 4.7%, 12/1/99 (c) .................................................. 5,435,000 AAA 5,501,035
Refunding, Series 1993 A, 4.85%, 6/1/04 (c) .................................. 2,000,000 AAA 2,048,420
Refunding, Series 1993 A, 5.875%, 6/1/05 (c) ................................. 3,650,000 AAA 3,971,018
Refunding, Series B, Zero Coupon, 6/1/01 (c) ................................. 7,100,000 AAA 6,143,559
Refunding, Series B, 5.3%, 6/1/05 (c) ........................................ 8,000,000 AAA 8,416,000
District of Columbia, Redevelopment Land Agency, DC Sports Arena, Special Tax,
Series 1996, 5.625%, 11/1/10 ................................................. 2,830,000 BBB 2,893,449
Florida
Dade County, FL, Guaranteed Entitlement Revenue, Prerefunded 2/1/06:
Zero Coupon, 8/1/14 (c)(d) ................................................... 4,000,000 AAA 1,541,200
Zero Coupon, 8/1/18 (c)(d) ................................................... 6,000,000 AAA 1,694,880
Orange County, FL, Health Facilities Authority Revenue HSP - Orlando Regional
Healthcare, Series 1996A, 6%, 10/1/03 (c) .................................... 3,000,000 AAA 3,271,500
Georgia
Georgia State General Obligation, Series B, 6.75%, 9/1/10 ...................... 5,370,000 AAA 6,480,140
Hawaii
Hawaii State General Obligation, Unlimited Tax, Series 1993 CI, 4.75%,
11/1/08 ...................................................................... 7,050,000 AA 7,225,545
Illinois
Alton, IL, Health Facilities Revenue, 6.7%, 2/15/00 (c) ........................ 1,550,000 AAA 1,589,246
Arlington Heights, IL, Park District, Series 1997, 4%, 12/1/98 (c) ............. 1,430,000 AAA 1,432,803
Berwyn, IL, Hospital Revenue, MacNeal Memorial Hospital, Series 1995, 5.25%,
6/1/04 (c) ................................................................... 3,935,000 AAA 4,117,820
Chicago, IL, Water Revenue, Capital Appreciation, Series 1997, Zero Coupon,
11/1/11 (c) .................................................................. 5,000,000 AAA 2,501,350
Cook County, Il, Community Unit School District 401, Elmwood Park, Series 1997:
Zero Coupon, 12/1/07 (c) ..................................................... 2,400,000 AAA 1,499,448
Zero Coupon, 12/1/09 (c) ..................................................... 3,625,000 AAA 2,024,164
Hoffman Estates, IL, Tax Incremental Revenue, Capital Appreciation, Junior Lien,
Series 1991:
Zero Coupon, 5/15/04 ........................................................ 2,450,000 A 1,830,175
Zero Coupon 5/15/06 ......................................................... 8,500,000 A 5,732,910
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois, General Obligation:
6.7%, 6/1/03 ................................................................. 3,640,000 AA 3,914,128
4.6%, 12/1/05 ................................................................ 5,000,000 AA 5,070,100
Illinois Development Finance Authority Refunding Revenue, Commonwealth Edison,
Series 1994, 5.3%, 1/15/04 (c) ............................................... 7,500,000 AAA 7,858,050
Illinois Educational Facilities Authority Revenue, Loyola University, Revenue
Refunding, Series 1991A, Zero Coupon, 7/1/02 (c) ............................. 2,130,000 AAA 1,752,692
Illinois Health Facilities Authority:
Evangelical Hospitals, Series B, 6.1%, 4/15/01 (c) ........................... 1,240,000 AAA 1,313,730
Memorial Hospital, Sisters Services, Series A, 6%, 6/1/99 (c) ................ 2,500,000 AAA 2,570,175
Sisters Services, Series C:
5.875%, 6/1/98 (c) .......................................................... 2,400,000 AAA 2,421,048
6.1%, 6/1/00 (c) ............................................................ 1,500,000 AAA 1,570,155
6.2%, 6/1/01 (c) ............................................................ 1,900,000 AAA 2,025,115
Kendall, Kane and Will Counties, IL, School District, Zero Coupon,
3/1/03 (c) ................................................................... 1,345,000 AAA 1,069,813
Macon and Decatur County, IL, Public Building Commission, Certificate of
Participation, General Obligation, 6.3%, 1/1/00 (c) .......................... 1,320,000 AAA 1,378,318
Metropolitan Pier and Exposition Authority of Illinois, McCormick Place
Expansion Project, Coupon Receipts, Zero Coupon, 6/15/04 (c) ................. 14,400,000 AAA 10,818,000
Rosemont, IL, Tax Increment-2, Secondary, Series B, Zero Coupon, 12/1/02 (c) ... 2,785,000 AAA 2,250,670
Rosemont, IL, Tax Increment-3, Secondary, Series C, Zero Coupon, 12/1/02 (c) ... 3,345,000 AAA 2,703,228
Indiana
Indiana Health Facility Finance Authority Hospital Revenue, Charity Obligation
Group, Series D, Mandatory Put 11/1/07 @ 100, 5%, 11/1/26 .................... 3,500,000 AA 3,573,395
Indiana Housing Finance Authority, Single Family Mortgage Revenue, Series
1995 C-1, 5.25%, 7/1/12 ...................................................... 1,830,000 AAA 1,854,302
Indianapolis, IN, Resource Recovery Revenue, Ogden Martin Systems Inc. Project,
6.75%, 12/1/07 (c) ........................................................... 6,000,000 AAA 7,017,660
Madison County, IN, Hospital Authority, Holy Cross Health System, 6.7%,
12/1/02 (c) .................................................................. 1,385,000 AAA 1,533,389
Iowa
Iowa Certificate of Participation, Series 1992A, 6.25%, 7/1/02 (c) ............. 5,000,000 AAA 5,401,450
Kansas
Kansas City, KS, Utility System Revenue:
Zero Coupon, 3/1/03 (c) ...................................................... 3,850,000 AAA 3,084,043
Zero Coupon, 3/1/03 (c) ...................................................... 2,750,000 AAA 2,203,988
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Louisiana
Jefferson Parish, LA, School Board Sales & Use Tax Revenue, ETM, Series 1986A,
7.35%, 2/1/03** .............................................................. 5,055,000 A 5,744,148
Lousiana Housing Finance Agency, Mortgage Revenue Refunding, Single Family,
Series 1995 C-1, 5.125%, 12/1/10 (c) ......................................... 2,140,000 AAA 2,172,014
Orleans, LA, Levee District, Levee Improvement Bonds, Series 1986, 5.95%,
11/1/14 (c) .................................................................. 1,875,000 AAA 2,053,650
Massachusetts
Massachusetts General Obligation:
Refunding, Series B, 6.375%, 8/1/02 .......................................... 2,150,000 A 2,345,844
Series A, 6.4%, 8/1/03 ....................................................... 1,000,000 A 1,104,690
Massachusetts Health & Educational Facilities Authority, St. Joseph's Hospital,
Series C, Prerefunded 10/1/99, 9.5%, 10/1/20 (d) ............................. 2,780,000 AAA 3,086,745
Massachusetts Housing Finance Agency, Series 1992C, FNMA Collateralized:
6.25%, 5/15/02 ............................................................... 2,000,000 AAA 2,120,300
6.25%, 11/15/02 .............................................................. 3,420,000 AAA 3,646,678
Massachusetts Industrial Finance Agency:
Resource Recovery, North Andover Solid Waste, Series A, 6.15%, 7/1/02 ........ 3,250,000 BBB 3,422,738
Sturdy Memorial Hospital, 7.9%, 6/1/09 ....................................... 1,735,000 BBB 1,840,887
Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue,
Series A, 6.625%, 7/1/03 ..................................................... 3,165,000 A 3,442,919
Massachusetts Water Resource Authority, Series A, 7.25%, 4/1/01 ................ 1,000,000 A 1,084,870
New England Education Loan Marketing Corp., Massachusetts Student Loan Revenue
Refunding, Issue E, 5%, 7/1/99 .............................................. 3,000,000 A 3,034,980
Michigan
Greater Detroit, MI, Resource Recovery Authority, Revenue Refunding, Series B,
6.25%, 12/13/08 (c) .......................................................... 5,625,000 AAA 6,463,856
Michigan Municipal Bond Authority, Local Government Loan Program, School
Improvement, Zero Coupon, 6/15/06 (c) ........................................ 4,750,000 AAA 3,257,740
Michigan State Hospital Finance Authority, Hospital Revenue, Sinai Hospital,
Series 1995, 6%, 1/1/08 ...................................................... 2,000,000 BBB 2,142,880
Romulus Township, MI, School District, Series II, Zero Coupon,
Prerefunded 5/1/07, 5/1/22 (c)(d) ............................................ 12,400,000 AAA 2,965,584
Mississippi
Mississippi Higher Education Assistance Corp., Student Loan Revenue,
Series 1992A, 6.2%, 1/1/02 ................................................... 1,200,000 A 1,263,156
Mississippi Hospital Equipment and Facilities Authority Revenue, Rush Medical
Foundation, Series 1997A, 5.4%, 1/1/07 ....................................... 1,920,000 BBB 1,953,542
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nevada
Clark County, NV, School District, General Obligation, Building and
Renovation, Series B, 6.5%, 6/15/07 .......................................... 7,000,000 AAA 8,091,720
Nevada State Housing Division, Single Family Mortgage Revenue, Series R, 5.95%,
10/1/11 ...................................................................... 2,545,000 AA 2,661,968
New Hampshire
New Hampshire Higher Education & Health Facilities Authority, Hospital Revenue:
Catholic Charities, Series 1997A, 5.75%, 8/1/11 .............................. 1,300,000 NR 1,325,831
Frisbie Memorial Hospital, Series 1993, 5.25%, 10/1/99 ....................... 1,385,000 BBB 1,402,243
New Jersey
New Jersey Economic Development Authority, Series A, 7%, 7/1/04 (c) ............ 2,500,000 AAA 2,870,850
New Jersey, State General Obligation, Series E, 6%, 7/15/03 .................... 5,750,000 AA 6,259,623
New York
Metropolitan Transportation Authority of New York:
Commuter Facilities Revenue:
6.75%, 7/1/00 ............................................................... 1,200,000 BBB 1,272,780
6.9%, 7/1/01 ................................................................ 1,280,000 BBB 1,388,378
Transit Facilities Revenue:
Series M, 5.5%, 7/1/08 (c) .................................................. 6,320,000 AAA 6,885,703
Service Contract, 6.75%, 7/1/00 ............................................. 2,270,000 BBB 2,407,676
Service Contract Lease Revenues, 6.9%, 7/1/01 ............................... 2,415,000 BBB 2,619,478
Service Contract, Series O, 5.75%, 7/1/07 ................................... 1,975,000 BBB 2,118,365
New York City, NY, General Obligation:
Series 1992 B, 6.4%, 10/1/02 ................................................. 4,905,000 A 5,312,213
Series 1995 B, 6.75%, 8/15/03 ................................................ 7,000,000 A 7,759,570
Series 1995 E, 6.6%, 8/1/04 .................................................. 2,500,000 A 2,775,125
Series 1996 A, 7%, 8/1/06 .................................................... 2,000,000 A 2,304,940
Series 1996 G, 6.75%, 2/1/09 ................................................. 8,000,000 A 9,201,920
Series A, 7%, 8/1/04 ......................................................... 7,650,000 A 8,659,112
Series A, 6%, 8/1/05 (c) ..................................................... 2,560,000 AAA 2,817,229
Series B, 6.6%, 10/1/03 ...................................................... 10,200,000 A 11,147,376
Series B, 7.25%, 8/15/07 ..................................................... 2,800,000 A 3,306,884
Series C, 6.3%, 8/1/03 (c) ................................................... 50,000 AAA 54,757
Series H, 6.9%, ETM, 2/1/01** ................................................ 505,000 AAA 546,652
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State Dormitory Authority:
State University, 6.8%, 5/15/00 (c) .......................................... 1,915,000 AAA 2,037,311
City University System, Consolidated Revenue Lease, Series A, 5.5%, 7/1/03 ... 8,000,000 BBB 8,393,920
City University System, Consolidated Revenue Lease, Series A, 5.5%,
7/1/03 (c) .................................................................. 1,250,000 AAA 1,328,438
College and University Pooled Capital Program, 7.8%, 12/1/05 (c) ............. 1,045,000 AAA 1,096,174
Cons City University System, 5.75%, 7/1/06 (c) ............................... 1,750,000 AAA 1,917,335
New York State Energy Research and Development Authority, Pollution Control
Revenue, Electric and Gas, 5.9%, 12/1/06 (c) ................................. 5,200,000 AAA 5,785,364
New York State Medical Care Facilities, Finance Agency, Mount Sinai Hospital,
Series 1983, 5.95%, 8/15/09 .................................................. 6,170,000 AAA 6,461,533
New York State Thruway Authority, Special Obligation, Zero Coupon, 1/1/02 ...... 3,155,000 BBB 2,632,280
New York State Urban Development Corp. Revenue Correctional Facilities:
Series A, 5.3%, 1/1/05 (c) ................................................... 7,000,000 AAA 7,397,600
Series A, 5.4%, 1/1/06 (c) ................................................... 3,500,000 AAA 3,733,905
North Carolina
North Carolina, Municipal Power Agency #1, Catawba Electric Revenue:
Series 1992, 5.9%, 1/1/03 (c) ................................................ 2,550,000 AAA 2,738,930
Series 1993, 4.1%, 1/1/05 (c) ................................................ 3,000,000 AAA 2,956,920
North Dakota
Bismarck, ND, Hospital Revenue, St. Alexius Medical Center, Series 1991, Zero
Coupon, 5/1/00 (c) ........................................................... 2,850,000 AAA 2,590,707
Grand Forks, ND, Health Care Facilities, United Hospital Obligation Group,
Series A, 6%, 12/1/02 (c) .................................................... 1,160,000 AAA 1,249,274
Ohio
Franklin County, Ohio, Health Care Facilities, Revenue Refunding, Ohio
Presbyterian Services, Series 1997:
5.15%, 7/1/07 ............................................................... 1,000,000 NR 1,004,480
5.4%, 7/1/10 ................................................................ 1,000,000 NR 1,001,080
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 4,798,862
Pennsylvania
Armstrong County, PA, Hospital Authority, St. Frances Medical Center, Series A,
6.2%, 6/1/03 (c) ............................................................. 3,090,000 AAA 3,377,586
Commonwealth of Pennsylvania, Certificate Participation, Series A, 5.4%,
7/1/09 (c) ................................................................... 3,000,000 AAA 3,074,130
Delaware County, PA, Industrial Development Authority Revenue, Resource
Recovery Facility, Series A, 6.5%, 1/1/08 .................................... 3,000,000 A 3,360,780
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Montgomery County, PA, Redevelopment Authority, Multi Family Housing, Revenue
Refunding, KBF Associates, LP Project, 6%, 7/1/04 ............................ 2,685,000 BBB 2,796,186
Philadelphia, PA, General Obligation, Refunding Revenue, Series A, 11.5%,
8/1/99 (c) ................................................................... 1,000,000 AAA 1,113,530
Schuykill County, PA, Redevelopment Authority, Lease Rental, Series A, 6.55%,
6/1/00 (c) ................................................................... 1,105,000 AAA 1,168,648
Scranton-Lackawanna, PA, Health & Welfare Authority, Community Hospital Medical
Center Project, Series 1998, 5.5%, 7/1/08 (c)(e) ............................. 2,725,000 AAA 2,909,346
Somerset County, PA, General Authority, Commonwealth Lease Revenue, ETM,
6.45%, 10/15/00 (c)** ........................................................ 2,000,000 AAA 2,125,940
South Carolina
South Carolina Jobs-Economic Development Authority, Franciscan Sisters of the
Poor Health System Inc., St. Francis Hospital, 6.375%, 7/1/04 ................ 3,420,000 BBB 3,651,192
Sumter County, SC, Hospital Facility, Revenue Refunding, Tuomey Medical
Center, 6.375%, 11/15/99 (c) ................................................. 1,000,000 AAA 1,043,110
South Dakota
South Dakota Student Loan Assistance Corp. Revenue, Series A, 7%, 8/1/98 ....... 490,000 A 499,139
Texas
Austin, TX, Combined Utility System Revenue, Zero Coupon, 11/15/09 (c) ......... 6,775,000 AAA 3,848,878
Brownsville, TX, Utility System Revenue Refunding:
Series 1995, 6%, 9/1/08 (c) .................................................. 1,000,000 AAA 1,127,440
Series 1995, 6%, 9/1/09 (c) .................................................. 2,700,000 AAA 3,045,951
Dallas, TX, Civic Center, Senior Lien, 8.6%, 1/1/06 ............................ 1,115,000 A 1,137,010
Denison, TX, Hospital Authority, Revenue Bond, Texoma Medical Center Project,
Inc., Series 1997, 6.125%, 8/15/12 ........................................... 1,000,000 BBB 1,056,530
Harris County, TX, Toll Road Authority, Toll Road Revenue, Subordinate Lien:
Series A, Zero Coupon, 8/15/06 (c) ........................................... 3,915,000 AAA 2,642,821
Series A, Zero Coupon, 8/15/07 (c) ........................................... 1,050,000 AAA 674,048
Richardson, TX, Hospital Authority Refunding and Improvement, Richardson
Medical Center, Series 1993, 6.5%, 12/1/12 ................................... 1,825,000 BBB 1,939,555
San Antonio, TX, General Obligation General Improvement:
Series 1996, 6%, 8/1/07 (e) .................................................. 1,000,000 AA 1,109,670
Series 1996, 6%, 8/1/08 (e) .................................................. 2,150,000 AA 2,387,231
Texas Municipal Power Agency, Zero Coupon, 9/1/07 (c) .......................... 8,385,000 AAA 5,371,683
Texas Public Finance Authority, Building Revenue Refunding, Zero Coupon,
2/1/09 (c) ................................................................... 5,860,000 AAA 3,456,521
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utah
Intermountain Power Agency, UT, Power Supply Revenue:
Series B, 6.25%, 7/1/06 (c) .................................................. 8,000,000 AAA 9,028,000
Series B, Zero Coupon, 7/1/01 (c) ............................................ 10,495,000 AAA 9,049,209
Series B, Zero Coupon, 7/1/02 (c) ............................................ 2,500,000 AAA 2,057,150
Salt Lake County, UT, Water Conservation District, Series A, Zero Coupon,
10/1/03 (c) .................................................................. 3,200,000 AAA 2,487,328
Virgin Islands
Virgin Islands, General Obligation, Public Finance Authority Revenue,
Matching Fund Loan Notes:
Series A, 6.7%, 10/1/99 ..................................................... 3,170,000 NR 3,299,938
Series A, 6.8%, 10/1/00 ..................................................... 1,035,000 NR 1,099,418
Washington
Clark County, WA, Public Utility District #1, Generating System Revenue
Bonds, 6%, 1/1/07 (c) (f) .................................................... 12,150,000 AAA 13,505,576
King County, WA, Public Hospital District, Hospital Facility, Refunding
Revenue, Valley Medical Center, 6%, 9/1/09 (c) ............................... 1,940,000 AAA 2,179,784
Snohomish County, WA, Public Utility District #1, Series 1991B, 6.4%, 1/1/00 ... 2,000,000 A 2,091,380
Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue:
Series A, 6%, 7/1/05 (c) .................................................... 2,950,000 AAA 3,236,917
Series B, 5.15%, 7/1/02 ..................................................... 5,275,000 AA 5,456,671
Series B, 5.25%, 7/1/03 ..................................................... 5,555,000 AA 5,786,199
Nuclear Project #2, Refunding Revenue:
Series 1990c, 7.5%, 7/1/03 .................................................. 5,800,000 AA 6,450,586
Series A, 6.3%, 7/1/01 ...................................................... 6,000,000 AA 6,398,160
Series A, 4.9%, 7/1/05 ...................................................... 4,330,000 AA 4,419,891
Series A, 5.8%, 7/1/07 ...................................................... 2,120,000 AA 2,302,129
Series A, 5.25%, 7/1/08 ..................................................... 3,000,000 AA 3,097,560
Series B, 5.15%, 7/1/02 ..................................................... 6,085,000 AA 6,294,567
Nuclear Project #3, Refunding Revenue:
Series B, 7.15%, 7/1/01 ..................................................... 1,310,000 AA 1,406,298
Series B, 5.15%, 7/1/02 ..................................................... 3,165,000 AA 3,274,003
Series B, 5.25%, 7/1/03 ..................................................... 3,000,000 AA 3,124,860
Series B, Zero Coupon, 7/1/04 (c) ........................................... 8,000,000 AAA 5,960,160
Washington State Housing Finance, Series A, 7.1%, 12/1/17 ...................... 1,140,000 AAA 1,168,523
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
West Virginia
South Charleston, WV, Pollution Control Revenue, Union Carbide, 7.625%,
8/1/05 ....................................................................... 2,000,000 BBB 2,349,240
Wisconsin
Wisconsin Health & Education Facilities Authority:
Columbia Hospital Inc., 6.125%, 11/15/01 (c) ................................. 1,000,000 AAA 1,069,550
Mercy Health System Corporation:
6%, 8/15/05 (c) ............................................................. 1,400,000 AAA 1,541,554
6.125%, 8/15/06 (c) ......................................................... 1,480,000 AAA 1,653,352
6.25%, 8/15/07 (c) .......................................................... 1,000,000 AAA 1,133,220
Wheaton Franciscan Hospital:
6%, 8/15/02 (c) ............................................................. 1,000,000 AAA 1,073,550
5.8%, 8/15/04 (c) ........................................................... 1,675,000 AAA 1,808,447
6%, 8/15/07 (c) ............................................................. 2,000,000 AAA 2,232,080
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $606,332,721) 646,862,292
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $620,112,721) (a) 660,642,292
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $620,112,721. At December 31,
1997, net unrealized appreciation based on tax cost for all securities was
$40,529,571. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $40,529,571.
(b) All of the securities held have been determined by the Adviser to be of
appropriate credit quality as required by the Fund's investment
objectives. Credit ratings are either Standard & Poor's Rating Group,
Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Unrated
securities (NR) have been determined by the Adviser to be of comparable
quality to rated eligible securities.
(c) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC,
FSA, or MBIA.
(d) 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.
(e) When-issued or forward delivery securities (See Note A in Notes to
Financial Statements).
(f) At December 31, 1997, these securities, in part or in whole, have 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.
The accompanying notes are an integral part of the financial statements.
19 - Scudder Medium Term Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $620,112,721) .............. $ 660,642,292
Cash ............................................................... 48,064
Interest receivable ................................................ 9,261,436
Receivable for investments sold .................................... 1,235,000
Receivable for Fund shares sold .................................... 1,369,449
Other assets ....................................................... 14,265
----------------
Total assets ....................................................... 672,570,506
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................. 6,562,102
Payable for when issued and forward delivery securities ............ 7,127,377
Dividends payable .................................................. 924,643
Payable for Fund shares redeemed ................................... 476,869
Accrued management fee ............................................. 314,040
Other payables and accrued expenses ................................ 214,436
----------------
Total liabilities .................................................. 15,619,467
-------------------------------------------------------------------------------------------
Net assets, at market value $ 656,951,039
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments .......... 40,529,571
Accumulated net realized gain ...................................... 239,052
Paid-in capital .................................................... 616,182,416
-------------------------------------------------------------------------------------------
Net assets, at market value $ 656,951,039
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($656,951,039 / 57,554,739 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ...................................................... $11.41
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Medium Term Tax Free Fund
<PAGE>
Statement of Operations
year ended December 31, 1997
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ........................................................... $ 34,705,748
-----------------
Expenses:
Management fee ..................................................... 3,710,976
Services to shareholders ........................................... 595,684
Custodian and accounting fees ...................................... 192,634
Trustees' fees and expenses ........................................ 36,975
Reports to shareholders ............................................ 77,766
Auditing ........................................................... 52,426
Registration fees .................................................. 31,483
Legal .............................................................. 12,965
Other .............................................................. 23,709
-----------------
4,734,618
---------------------------------------------------------------------------------------------
Net investment income 29,971,130
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments ........................................................ 1,908,529
Futures ............................................................ 65,289
-----------------
1,973,818
-----------------
Net unrealized appreciation (depreciation) during the period
on:
Investments ........................................................ 15,479,893
Futures ............................................................ 148,706
-----------------
15,628,599
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 17,602,417
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 47,573,547
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder Medium Term Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ...................................... $ 29,971,130 $ 32,089,048
Net realized gain (loss) from investments .................. 1,973,818 1,647,772
Net unrealized appreciation (depreciation) on investments
during the period ....................................... 15,628,599 (7,456,056)
-------------- ---------------
Net increase in net assets resulting from operations ....... 47,573,547 26,280,764
-------------- ---------------
Distributions to shareholders:
From net investment income ................................. (29,971,130) (32,089,048)
-------------- ---------------
From net realized gains from investment transactions ....... (2,873,760) (1,232,175)
-------------- ---------------
Fund share transactions:
Proceeds from shares sold .................................. 128,178,450 100,528,576
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 21,001,873 20,151,729
Cost of shares redeemed .................................... (157,462,022) (174,745,339)
-------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ............................................ (8,281,699) (54,065,034)
-------------- ---------------
Increase (decrease) in net assets .......................... 6,446,958 (61,105,493)
Net assets at beginning of period .......................... 650,504,081 711,609,574
-------------- ---------------
Net assets at end of period ................................ $656,951,039 $650,504,081
-------------- ---------------
Other Information
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................. 58,325,377 63,217,191
-------------- ---------------
Shares sold ................................................ 11,430,174 9,072,101
Shares issued to shareholders in reinvestment of
distributions ........................................... 1,872,167 1,819,637
Shares redeemed ............................................ (14,072,979) (15,783,552)
-------------- ---------------
Net increase (decrease) in Fund shares ..................... (770,638) (4,891,814)
-------------- ---------------
Shares outstanding at end of period ........................ 57,554,739 58,325,377
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 - Scudder Medium Term Tax Free Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ----------------------------------------------------------------------------------------
of period ...................... $11.15 $11.26 $10.39 $11.36 $10.86 $10.62 $10.11 $10.04 $10.02 $10.07
----------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ............ .52 .53 .54 .53 .60 .65 .67 .54 .56 .54
Net realized and unrealized gain
(loss) on investments .......... .31 (.09) .92 (.92) .56 .27 .52 .07 .02 (.05)
----------------------------------------------------------------------------------------
Total from investment operations.. .83 .44 1.46 (.39) 1.16 .92 1.19 .61 .58 .49
----------------------------------------------------------------------------------------
Less distributions:
From net investment income ....... (.52) (.53) (.54) (.53) (.60) (.65) (.67) (.54) (.56) (.54)
From net realized gains on
investments .................... (.05) (.02) (.05) (.05) (.06) (.03) (.01) -- -- --
----------------------------------------------------------------------------------------
Total distributions .............. (.57) (.55) (.59) (.58) (.66) (.68) (.68) (.54) (.56) (.54)
----------------------------------------------------------------------------------------
Net asset value, end of ----------------------------------------------------------------------------------------
period ......................... $11.41 $11.15 $11.26 $10.39 $11.36 $10.86 $10.62 $10.11 $10.04 $10.02
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............. 7.69 4.02 14.32 (3.50) 10.94 8.93 12.13 6.29 6.00 4.92
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................... 657 651 712 701 1,017 661 268 27 54 99
Ratio of operating expenses net,
to average daily net
assets (%) ..................... .74 .72 .70 .63 .14 -- -- .97 .91 .79
Ratio of operating expenses
before expense reductions, to
average daily net assets ....... .74 .72 .72 .71 .75 .80 .88 1.00 .91 .79
Ratio of net investment income to
average daily net assets (%) ... 4.67 4.75 4.92 4.94 5.35 6.07 6.44 5.37 5.62 5.05
Portfolio turnover rate (%) ...... 13.4 14.1 36.1 33.8 37.3 22.4 14.0 116.9 15.7 31.2
</TABLE>
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 three years in the period ended
December 31, 1990 should not be considered representative of the present Fund.
(a) Total returns may have been lower had certain expenses not been reduced.
23 - Scudder Medium Term Tax Free Fund
<PAGE>
Notes to Financial Statements
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 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 other than money market securities
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 Board of Trustees.
Money market instruments purchased with an original 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.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased interest rate futures to manage the duration of the portfolio and
as a temporary substitute for purchasing selected investments.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities hedged. When utilizing futures contracts to hedge the Fund gives up
the opportunity to profit from favorable price movements in the hedged positions
during the term of the contract.
Amortization and Accretion. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
24 - Scudder Medium Term Tax Free Fund
<PAGE>
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, 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.
Distributions of net realized capital gains to shareholders are recorded on
ex-dividend date.
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 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 the call or maturity date.
B. Purchases and Sales of Securities
During the year ended December 31, 1997, purchases and sales of municipal
securities (excluding short-term investments) aggregated $83,842,301 and
$92,350,861, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended December 31, 1997 was $33,416,033 and $44,757,083, respectively.
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
25 - Scudder Medium Term Tax Free Fund
<PAGE>
Under the Management Agreement with Scudder Kemper, 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. 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. For the year ended December 31, 1997, the management fee
aggregated $3,710,976 which was equivalent to an annual effective rate of 0.58%
of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1997 the amount charged to the Fund by SSC amounted to
$382,526 of which $29,515 is unpaid at December 31, 1997.
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 year ended
December 31, 1997, the amount charged to the Fund by SFAC aggregated $91,551, of
which $7,665 is unpaid at December 31, 1997.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended December 31, 1997, Trustees' fees and expenses aggregated $36,975.
26 - Scudder Medium Term Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Tax Free Trust and the Shareholders of Scudder Medium
Term Tax Free Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Medium Term Tax Free Fund, including the investment portfolio, as of December
31, 1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the ten years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Medium Term Tax Free Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the ten years in the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 9, 1998
27 - Scudder Medium Term Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid from net investment income for the fiscal year ended
December 31, 1997, 100% were exempt interest dividends which are tax exempt for
regular federal income tax purposes, and are not an item of tax preference for
purposes of the federal alternative minimum tax, if applicable. The Fund paid
distributions of $.04 per share from net long-term capital gains during the year
ended December 31, 1997, of which 83% represents 20% rate gains.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$1,863,701 as capital gain dividends for the year ended December 31, 1997, of
which 14% represents 20% rate gains.
28 - Scudder Medium Term Tax Free Fund
<PAGE>
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Medium Term Tax
Free Fund (the "Fund") was held on October 24, 1997, at the office of Scudder
Kemper Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), Two
International Place, Boston, Massachusetts 02110. At the Meeting, as adjourned
and reconvened, the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below). With regard to certain
proposals, it was recommended that the Meeting be reconvened in order to provide
shareholders with an additional opportunity to return their proxies. The date of
the reconvened meeting at which the matters were decided is noted after the
proposed matter.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
34,146,643 992,978 1,411,981 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 35,706,563 845,040
Dawn-Marie Driscoll 35,688,029 863,574
Peter B. Freeman 35,668,028 880,589
George M. Lovejoy, Jr. 35,701,310 847,307
Dr. Wesley W. Marple, Jr. 35,693,383 855,233
Daniel Pierce 35,678,944 869,672
Kathryn L. Quirk 35,673,391 875,226
Jean C. Tempel 35,687,008 861,609
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
31,619,740 1,897,855 2,018,591 1,015,417
29 - Scudder Medium Term Tax Free Fund
<PAGE>
4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
32,674,620 1,611,944 2,071,556 864,116
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker
-------------------- --- ------- ------- ------
Non-Votes*
<S> <C> <C> <C> <C>
5.1 Diversification 31,463,249 1,859,992 2,212,944 1,015,417
5.2 Borrowing 31,338,098 1,985,048 2,213,039 1,015,417
5.3 Senior securities 31,465,885 1,878,369 2,191,931 1,015,417
5.4 Concentration 31,408,289 1,931,780 2,196,117 1,015,417
5.5 Loans 31,381,163 1,940,837 2,214,186 1,015,417
5.6 Underwriting of securities 31,471,982 1,863,023 2,201,180 1,015,417
5.7 Investment in real estate 31,463,417 1,872,508 2,200,260 1,015,417
5.8 Purchase of physical commodities 31,463,230 1,879,984 2,192,972 1,015,417
5.9 Investment in California municipal N/A N/A N/A N/A
securities
5.10 Investment in municipal securities 31,500,446 1,841,491 2,194,248 1,015,417
5.11 Investment in Massachusetts N/A N/A N/A N/A
municipal securities
5.12 Investment in New York municipal N/A N/A N/A N/A
securities
5.13 Investment in Ohio municipal N/A N/A N/A N/A
securities
5.14 Investment in Pennsylvania N/A N/A N/A N/A
municipal securities
30 - Scudder Medium Term Tax Free Fund
<PAGE>
5.15 Investment in short-term municipal N/A N/A N/A N/A
securities
5.16 Elimination of tax diversification N/A N/A N/A N/A
5.17 Purchases of voting securities 31,408,077 1,932,493 2,195,616 1,015,417
5.18 Affiliated transactions 31,401,909 1,918,815 2,215,462 1,015,417
5.19 Disclosed practices N/A N/A N/A N/A
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
35,070,971 386,642 1,091,002
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
31 - Scudder Medium Term Tax Free Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow, Center
for Business Ethics; President,
Driscoll Associates
Peter B. Freeman
Trustee; Corporate Director and
Trustee
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
Donald C. Carleton*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
M. Ashton Patton*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
32 - Scudder Medium Term Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **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 Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.
33 - Scudder Medium Term Tax Free Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
34 - Scudder Medium Term Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
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35 - Scudder Medium Term Tax Free Fund
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About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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