Scudder
Medium Term
Tax Free Fund
Semiannual Report
June 30, 1998
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
6/30/98: $671.30 million
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o Scudder Medium Term Tax Free Fund's 30-day net annualized SEC yield was 3.81%
as of June 30, 1998. For investors in the two highest federal tax brackets of
36% and 39.6%, the Fund's yield was equivalent to a fully taxable 5.95% and
6.31%, respectively.
o The Fund received four stars from Morningstar, reflecting an "above-average"
rating for risk-adjusted performance through June 30, 1998.*
o For one-, three-, and five-year periods ended June 30, 1998, the Fund's total
returns placed it in the top one third of similar municipal bond funds as
tracked by Lipper Analytical Services. Please see page 5 for additional Lipper
performance information.
* 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 1549, 860,
and 349 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.
Table of Contents
3 Letter from the Fund's President 20 Financial Statements
4 Performance Update 23 Financial Highlights
5 Portfolio Summary 24 Notes to Financial Statements
6 Portfolio Management Discussion 28 Officers and Trustees
9 Glossary of Investment Terms 29 Investment Products and Services
10 Investment Portfolio 30 Scudder Solutions
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 semiannual period ended June 30, 1998. The Fund
posted a 3.81% 30-day net annualized SEC yield as of June 30, equivalent to a
taxable yield of 6.31% for investors in the top federal tax bracket. In
addition, the Fund earned a four-star Morningstar rating. The Fund's one-,
three-, and five-year total returns ranked it in the top one third of similar
funds as tracked by Lipper as of June 30, 1998.
Recent evidence indicates renewed investor interest in tax-exempt bonds. In
part this traces to investors who are heavily invested in the stock market
seeking to rebalance their portfolios. A recent example was the Long Island
Power Authority's successful offering of $3.4 billion of municipal securities --
the largest ever -- which received bids for almost four times that amount from
institutional and individual investors. We are confident that investors in
higher tax brackets will continue to recognize the potential value of holding
some portion of their portfolio in tax-exempt securities.
For those of you interested in the newest Scudder offerings, we would like
to take this opportunity to highlight two upcoming additions to our
international category, both of which are scheduled to begin operations on
September 1. Scudder International Growth Fund will seek long-term capital
appreciation by investing primarily in the equity securities of foreign
companies with high earnings growth potential, and Scudder International Value
Fund will seek long-term capital appreciation by investing primarily in
undervalued foreign equity securities. These two funds make Scudder among the
first in the industry to offer funds that pursue long-term growth of capital
internationally in both the growth and value styles of investing. Please see
page 29 for more information on Scudder products and services.
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 June 30, 1998
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FUND INDEX COMPARISONS
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Total Return
Period Growth --------------
Ended of Average
6/30/98 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------
1 Year $ 10,699 6.99% 6.99%
5 Year $ 13,202 32.02% 5.71%
10 Year* $ 19,567 95.67% 6.94%
- --------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
1 Year $ 10,865 8.65% 8.65%
5 Year $ 13,675 36.75% 6.46%
10 Year $ 22,197 121.97% 8.30%
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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 June 30
SCUDDER MEDIUM TERM TAX FREE FUND
Year Amount
- ----------------------
'88 $10,000
'89 $10,458
'90 $11,066
'91 $11,960
'92 $13,350
'93 $14,820
'94 $15,051
'95 $16,180
'96 $17,017
'97 $18,289
'98 $19,567
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- ----------------------
'88 $10,000
'89 $11,138
'90 $11,898
'91 $12,969
'92 $14,498
'93 $16,232
'94 $16,260
'95 $17,694
'96 $18,869
'97 $20,430
'98 $22,197
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 June 30
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 10.03 $ 10.04 $ 10.22 $ 10.72 $ 11.20 $ 10.72 $ 10.95 $ 10.92 $ 11.17 $ 11.38
INCOME DIVIDENDS.. $ .55 $ .55 $ .61 $ .65 $ .64 $ .57 $ .55 $ .53 $ .52 $ .52
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ -- $ .01 $ .03 $ .09 $ -- $ .07 $ .03 $ .04
FUND TOTAL
RETURN (%)........ 4.58 5.81 8.08 11.62 11.02 1.55 7.50 5.17 7.47 6.99
INDEX TOTAL
RETURN (%)........ 11.39 6.81 9.01 11.77 11.96 .20 8.82 6.64 8.27 8.65
</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 74.08% AND 7.50%, 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 June 30, 1998
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DIVERSIFICATION
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Electric Utility Revenue 19%
Core Cities/Lease 16%
Hospital/Health 14%
State General Obligation 11%
School District/Lease 7%
Toll Revenue/Transportation 5%
Other General Obligation/Lease 5%
Sales & Special Tax 5%
Resource Recovery 4%
Miscellaneous Municipal 14%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Diversification remains an
important strategy for the Fund,
allowing us to spread risk over a
large number of sectors,
maturities, and geographic areas.
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QUALITY
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AAA 60%
AA 14%
A 15%
BBB 9%
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.
The Fund has maintained high
quality, with 74% of portfolio
assets rated AAA, AA or the
equivalent as of June 30, 1998.
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EFFECTIVE MATURITY
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Less than 1 year 3%
1 - 5 years 31%
5 - 8 years 36%
8 - 15 years 30%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 6.5 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,
During a period marked by a heavy supply of municipal bonds as well as rising
demand, the performance of municipal bonds was mixed over the six months ended
June 30, 1998. Scudder Medium Term Tax Free Fund provided a 2.09% total return
for the period, compared with the 2.05% average return of similar funds as
tracked by Lipper Analytical Services, Inc. In addition, the Fund posted a
30-day net annualized SEC yield of 3.81% as of June 30, equivalent to fully
taxable yields of 5.95% and 6.31%, respectively, for investors in the 36% and
39.6% federal tax brackets. The Fund's total return was comprised of a $0.03
decline in net asset value to $11.38, offset by income distributions of $0.26
per share and $0.005 per share in short-term gains and $0.003 per share in
mid-term gains. For the 12-month period ended June 30, the Fund's total return
was 6.99%.
Scudder Medium Term Tax Free Fund continues to display competitive long-term
performance: As shown in the accompanying chart, the Fund's average annual total
return placed it in the top one third of its peer group for one-, three-, and
five-year periods. Please turn to the Performance Update on page 4 for more
information on the Fund's long-term progress, including comparisons with the
unmanaged Lehman Brothers Municipal Bond Index.
Portfolio Reallocations
Boost Bonds
During the first and second quarters of 1998, U.S. equity markets continued
their winning ways, despite additional bad economic news from Asia during the
second quarter. Bonds actually benefited from news of Asia's troubles (and
outperformed equities during the second quarter), as income investors came to
believe that the Federal Reserve would not raise interest rates any time soon
despite the Fed's well-publicized current bias towards tightening credit. In
turn, mutual fund investors began to allocate a larger portion of their
portfolios to fixed income, pushing bond prices up further. Long-term Treasuries
were the most obvious benefactor of this renewed interest, as 30-year Treasury
yields declined to 5.63%, the lowest yield for this class of Treasury security
since the U.S. government began auctioning these bonds in 1972.
THE PRINTED DOCUMENT CONTAINS A TABLE HERE
TABLE TITLE:
Competitive Total Return
(Average annual returns for periods ended June 30, 1998)
TABLE DATA:
Scudder
Medium
Term Tax Lipper Number
Free average of
Fund annual Funds Percentile
Period return return Rank tracked Ranking
------ ------ ------ ---- ------- -------
Six
Months 2.09% 2.05% 59 of 151 Top 39%
1 year 6.99% 6.69% 45 of 143 Top 31%
3 years 6.54% 6.13% 26 of 120 Top 22%
5 years 5.71% 5.35% 16 of 67 Top 24%
10 years* 6.94% 6.91% 12 of 24 Top 50%
Past performance does not guarantee future results.
*Scudder Medium Term Tax Free Fund adopted its current name and objective on
November 1, 1990.
As is often the case, municipal bonds lagged behind U.S. Treasuries in terms of
yield declines and price increases. Though this lag -- when it occurs -- can
6 - Scudder Medium Term Tax Free Fund
<PAGE>
offer a benefit when yields are rising and fixed-income markets are volatile,
municipal bonds registered more modest gains compared with Treasuries during the
first six months of 1998. Over the period, 10-year Treasury bond yields declined
one-third of a percentage point and their prices rose 2.4%, while 10-year
municipal bond yields and prices were unchanged.
Part of the municipal market's slower reaction to favorable economic conditions
for bonds compared with Treasuries can be attributed to the complexity of
pricing the wide range of municipal bonds available in the marketplace, but
supply issues played the most significant role: While Treasury supply has
contracted recently, thanks to the shrinking Federal deficit, the supply of
municipal bonds has grown substantially, overwhelming recent increases in
demand. Municipal supply during the first six months of 1998 was $149 billion,
up 54% compared with the same period in 1997.
Three Part Strategy
Our portfolio strategy during the first half of 1998 had three main elements, in
conjunction with Scudder Medium Term Tax Free Fund's primary goals of generating
high tax-free income while maintaining a significant degree of price stability.
First, because longer-intermediate municipal bonds offered more attractive
yields, the Fund emphasized 13- to 15-year municipal bonds during the period.
Second, the Fund purchased several lower-quality New York City bonds over the
six months ended June 30. Lower-quality tax-exempt bonds offer higher yields and
often provide greater price stability compared with higher-quality bonds. In
February, New York City bonds were upgraded by Moody's Investors Services, Inc.,
boosting the performance of these bonds as well as the Fund's total return.
Third, the Fund continued its strong emphasis on call protection. (Generally a
bond is called in by its issuer so that it can be refinanced at a lower
prevailing rate.) Our call-protection strategy provides a more reliable income
stream for the Fund than would exist if the portfolio held a significant
proportion of bonds that could be called in before their stated maturities.
Additionally, the Fund continued to maintain an average effective maturity
similar to that of its competitive universe. As of June 30, the Fund's average
effective maturity was 6.5 years. The Fund's overall portfolio quality remains
high, with 74% of the Fund's portfolio rated AAA or AA, or of equivalent
quality. And diversification remains an important strategy for the Fund,
allowing us to spread risk over a large number of sectors, maturities, and
geographic areas. As of June 30, 1998, the Fund held securities issued in 37
states plus the District of Columbia and the Virgin Islands. The Portfolio
Summary on page 5 provides more information about the Fund's holdings, including
quality, maturity, and sector representation.
Cautious Optimism on Bonds
It is difficult to predict whether the Federal Reserve will choose to raise
short-term interest rates in the near future to prevent a resurgence of
inflation, but we do believe Asia's economic woes by themselves will restrain
U.S. economic growth for the remainder of 1998 and into 1999. Because the
7 - Scudder Medium Term Tax Free Fund
<PAGE>
difference or "spread" between the short- and long-term interest rates of
Treasury securities is unusually narrow at present, it's difficult to predict
continued significant declines in Treasury rates for the remainder of the year.
But as we've mentioned, municipal bonds have lagged Treasuries of late, and we
believe longer-maturity municipals have the potential to post gains if the U.S.
economy slows.
In conjunction with the Fund's objective to pursue high current income and
limited principal fluctuations, the Fund will seek to purchase selected
intermediate-maturity noncallable bonds over the coming months, with an eye
toward extending the Fund's average maturity. And as always, rather than
attempting to predict short-term market movements, we will continue to look for
value as we seek high tax-free income and attractive total returns for our
investors.
Sincerely,
Your Portfolio Management Team
/s/M. Ashton Patton /s/Philip G. Condon
M. Ashton Patton Philip G. Condon
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: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
9 - Scudder Medium Term Tax Free Fund
<PAGE>
Investment Portfolio as of June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 0.9%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
South Carolina
South Carolina Jobs -- Economic Development Authority, Franciscan Sisters of the
Poor, St. Francis Hospital, Variable Rate Daily Demand Note, 4%, 7/1/2022* ... 1,000,000 BBB 1,000,000
Washington
Washington Health Care Facilities Authority, Sisters of Providence, Daily Demand
Note, 1985 Series B, 3.8%, 10/1/2005* ........................................ 3,000,000 AA 3,000,000
Wyoming
Sweetwater, County Pollution Control Revenue, Pacific Corp. Project, Variable
Rate Daily Demand Note, Series 1994, 4%, 11/1/2024 (c)* ...................... 2,000,000 AAA 2,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $6,000,000) 6,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 99.1%
- ------------------------------------------------------------------------------------------------------------------------------
Alabama
Alabama Street Docks Department, Facilities Revenue, Series 1998, 6%,
10/1/2007 (c) (e) ............................................................ 1,000,000 AAA 1,115,630
Alaska
North Slope Borough, AK, General Obligation:
Capital Appreciation, Series A, Zero Coupon, 6/30/2006 (c) ................... 11,150,000 AAA 7,761,515
Capital Appreciation, Series B, Zero Coupon, 6/30/2004 (c) (f) ............... 19,500,000 AAA 14,948,115
Series A, Zero Coupon, 6/30/2002 (c) ......................................... 3,275,000 AAA 2,754,963
Series A, Zero Coupon, 6/30/2003 (c) (f) ..................................... 7,000,000 AAA 5,625,550
Arizona
Arizona Health Facilities Authority, Phoenix Baptist Hospital and Medical
Center, 6.1%, 9/1/2003 (c) ................................................... 2,000,000 AAA 2,176,740
Maricopa County, AZ, School District #28, Kyrene Elementary, Series B:
Zero Coupon, 1/1/2003 (c) .................................................... 4,150,000 AAA 3,414,454
Zero Coupon, 7/1/2003 (c) .................................................... 2,000,000 AAA 1,610,260
Maricopa County, AZ, Unified School District #41, Capital Appreciation Bond:
Gilbert, Zero Coupon, 7/1/2005 (c) ........................................... 1,790,000 AAA 1,311,623
Gilbert, Zero Coupon, 1/1/2006 (c) ........................................... 2,925,000 AAA 2,088,567
Zero Coupon, 7/1/2003 (c) .................................................... 4,500,000 AAA 3,623,085
Zero Coupon, 1/1/2004 (c) .................................................... 6,000,000 AAA 4,711,980
Zero Coupon, 7/1/2006 (c) .................................................... 7,605,000 AAA 5,309,735
Arkansas
Rogers, AR, Sales & Use Tax Revenue, Series 1996, 5.35%, 11/1/2011 ............. 2,500,000 AA 2,569,675
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California
California Health Facilities Finance Authority Revenue Bond, Summit Medical
Center, Series A, 6%, 5/1/2006 (c) ........................................... 3,150,000 AAA 3,491,775
California Housing Finance Agency, Multi-Unit Rental Housing Revenue, Series A,
7.25%, 8/1/1998 .............................................................. 2,270,000 A 2,276,129
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue, Senior
Lien, Series A, Step-up Coupon, 0% to 1/1/2005, 7.05% to 1/1/2009 ............ 7,275,000 BBB 5,694,725
Long Beach, CA, Aquarium of the Pacific Project, Series 1995A, 5.75%,
7/1/2005 ..................................................................... 1,300,000 BBB 1,383,837
Orange County, CA, Local Transportation Authority, Sales Tax Revenue, Measure M,
4.3%, 2/15/2001 (c) .......................................................... 5,100,000 AAA 5,142,636
Orange County, CA, Special Financing Authority, Teeter Plan Revenue, Series C,
Mandatory Put 11/1/99 at 100, 6.15%, 11/1/2014 ............................... 2,600,000 A 2,667,756
Southern California Public Power Authority, Power Project Revenue, Palo Verde
Project, Series 1996A, 6%, 7/1/2007 (c) ...................................... 3,000,000 AAA 3,375,000
Colorado
Boulder County, CO, Industrial Development Revenue, May Department Stores,
Colorado Project, Series 1992, 6.25%, 9/1/2007 ............................... 3,500,000 A 3,723,405
Castle Rock Ranch, CO, Public Improvements Authority, Public Facilities Revenue:
Series 1996, 6.1%, 12/1/2005 ................................................. 2,780,000 AA 3,043,155
Series 1996, 6.5%, 12/1/2009 ................................................. 3,525,000 AA 4,046,947
Connecticut
Bristol, CT, Resource Recovery, Ogden Martin System, 6.125%, 7/1/2003 .......... 10,635,000 A 11,509,303
Connecticut State Health & Educational Facilities Authority, Windham Community
Memorial Hospital, Series 1996C, 5.75%, 7/1/2011 ............................. 3,500,000 BBB 3,584,525
District of Columbia
District of Columbia, Certificate of Participation, Series 1993, 6.875%,
1/1/2003 ..................................................................... 2,155,000 BB 2,250,854
District of Columbia, General Obligation:
4.7%, 12/1/1999 (c) .......................................................... 5,205,000 AAA 5,266,159
4.85%, 6/1/2004 (c) .......................................................... 100,000 AAA 103,034
4.95%, 6/1/2005 (c) .......................................................... 195,000 AAA 202,297
Refunding, Series 1993 A, 4.85%, 6/1/2004 (c) ................................ 1,900,000 AAA 1,937,126
Refunding, Series 1993 A, 5.875%, 6/1/2005 (c) ............................... 3,650,000 AAA 3,947,658
Refunding, Series B, 5.3%, 6/1/2005 (c) ...................................... 8,000,000 AAA 8,381,440
Refunding, Series B, Zero Coupon, 6/1/2001 (c) ............................... 7,100,000 AAA 6,276,116
Series 1993 A-1, 4.95%, 6/1/2005 (c) ......................................... 3,745,000 AAA 3,821,773
Series A, 5.625%, 6/1/2002 (c) ............................................... 8,360,000 AAA 8,779,923
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A, 5.8%, 6/1/2004 (c) ................................................. 6,950,000 AAA 7,444,493
Series D, 4.7%, 12/1/1999 (c) ................................................ 230,000 AAA 233,068
District of Columbia, Redevelopment Land Agency, DC Sports Arena, Special Tax,
Series 1996, 5.625%, 11/1/2010 ............................................... 2,470,000 BBB 2,514,929
Florida
Dade County, FL, Guaranteed Entitlement Revenue, Prerefunded 2/1/06, Zero
Coupon:
8/1/2014 (c) (d) ............................................................. 4,000,000 AAA 1,588,520
8/1/2018 (c) (d) ............................................................. 6,000,000 AAA 1,746,960
Escambia County, FL, Utilities Authority, 5%, 1/1/2004 (c) (e) ................. 2,000,000 AAA 2,053,900
Orange County, FL, Health Facilities Authority Revenue HSP -- Orlando Regional
Healthcare, Series 1996A, 6%, 10/1/2003 (c) .................................. 3,000,000 AAA 3,257,850
Georgia
Clayton County, GA, Hospital Authority Revenue, 5.25%, 8/1/2012 (c) ............ 2,275,000 AAA 2,341,203
Fulton County, GA, General Obligation, 5.25%, 1/1/2013 (e) ..................... 1,500,000 AA 1,573,140
Georgia, General Obligation, 6.75%, 12/1/2012 .................................. 6,620,000 AAA 7,998,284
Georgia, General Obligation, Series B, 6.75%, 9/1/2010 ......................... 5,370,000 AAA 6,447,491
Hawaii
Hawaii State General Obligation, Unlimited Tax, Series 1993 CI, 4.75%,
11/1/2008 .................................................................... 7,050,000 AA 7,153,212
Illinois
Alton, IL, Health Facilities Revenue, 6.7%, 2/15/2000 (c) ...................... 1,065,000 AAA 1,082,455
Berwyn, IL, Hospital Revenue, MacNeal Memorial Hospital, Series 1995, 5.25%,
6/1/2004 (c) ................................................................. 3,935,000 AAA 4,101,254
Boone McHenry County, IL, General Obligation, Zero Coupon, 12/1/2012 (c) ....... 2,545,000 AAA 1,243,334
Chicago, Illinois, Water Revenue, Capital Appreciation, Series 1997, Zero
Coupon, 11/1/2011 (c) ........................................................ 5,000,000 AAA 2,611,550
Cook County, IL, Community Unit School District 401, Elmwood Park, Series 1997:
Zero Coupon, 12/1/2007 (c) ................................................... 2,180,000 AAA 1,393,216
Zero Coupon, 12/1/2009 (c) ................................................... 3,625,000 AAA 2,101,920
Hoffman Estates, IL, Tax Incremental Revenue, Capital Appreciation, Junior Lien:
Series 1991, Zero Coupon, 5/15/2006 .......................................... 8,500,000 A 5,895,685
Zero Coupon, 5/15/2004 ....................................................... 2,450,000 A 1,875,549
Illinois, General Obligation, 6.7%, Prerefunded 6/1/2000, 6/1/2003 (d) ......... 3,640,000 AAA 3,894,181
Illinois, General Obligation, 4.6%, 12/1/2005 .................................. 5,000,000 AA 5,072,050
Illinois Development Finance Authority Refunding Revenue, Commonwealth Edison,
Series 1994, 5.3%, 1/15/2004 (c) ............................................. 7,500,000 AAA 7,839,825
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois Educational Facilities Authority Revenue, Loyola University, Revenue
Refunding, Series 1991 A, Zero Coupon, 7/1/2002 (c) .......................... 2,130,000 AAA 1,791,564
Illinois Health Facilities Authority:
Evangelical Hospitals, Series B, 6.1%, 4/15/2001 (c) ......................... 1,240,000 AAA 1,305,968
Memorial Hospital, Sisters Services, Series A, 6%, 6/1/1999 (c) .............. 2,500,000 AAA 2,551,950
Sisters Services, Series C, 6.1%, 6/1/2000 (c) ............................... 1,500,000 AAA 1,558,710
Sisters Services, Series C, 6.2%, 6/1/2001 (c) ............................... 1,900,000 AAA 2,010,808
Kendall, Kane and Will Counties, IL, School District, Zero Coupon,
3/1/2003 (c) ................................................................. 1,345,000 AAA 1,096,646
Macon and Decatur County, IL, Public Building Commission, Certificate of
Participation, General Obligation, 6.3%, 1/1/2000 (c) ........................ 1,320,000 AAA 1,365,606
Metropolitan Pier and Exposition Authority of Illinois, McCormick Place
Expansion Project, Coupon Receipts, Zero Coupon, 6/15/2004 (c) ............... 14,400,000 AAA 11,058,912
Rosemont, IL, Tax Increment-2, Secondary, Series B, Zero Coupon, 12/1/2002 (c).. 2,785,000 AAA 2,300,661
Rosemont, IL, Tax Increment-3, Secondary, Series C, Zero Coupon, 12/1/2002 (c).. 3,345,000 AAA 2,763,271
Indiana
Indiana Health Facility, Hospital Revenue, Charity Obligation Group, Series D,
Mandatory Put 11/1/2007 at 100, 5%, 11/1/2026 ................................ 3,500,000 AA 3,573,080
Indiana Housing Finance Authority, Single Family Mortgage Revenue, Series 1995
C-1, 5.25%, 7/1/2012 ......................................................... 1,340,000 AAA 1,356,402
Indianapolis, IN, Resource Recovery Revenue, Ogden Martin Systems Inc. Project,
6.75%,12/1/2007 (c) .......................................................... 6,000,000 AAA 6,946,980
Madison County, IN, Hospital Authority, Holy Cross Health System, 6.7%,
12/1/2002 (c) ................................................................ 1,385,000 AAA 1,524,262
Iowa
Iowa Certificate of Participation, Series 1992 A, 6.25%, 7/1/2002 (c) .......... 5,000,000 AAA 5,372,150
Kansas
Kansas City, KS, Utility System Revenue:
ETM, Zero Coupon, 3/1/2003** (c) ............................................. 3,850,000 AAA 3,157,770
Zero Coupon, 3/1/2003 (c) .................................................... 2,750,000 AAA 2,256,595
Louisiana
Jefferson Parish, LA, School Board Sales & Use Tax Revenue, ETM, Series 1986A,
7.35%, 2/1/2003** ............................................................ 5,055,000 A 5,704,719
Louisiana Housing Finance Agency, Mortgage Revenue Refunding, Single Family,
Series 1995 C-1, 5.125%,12/1/2010 (c) ........................................ 1,850,000 AAA 1,875,789
Orleans, LA, Levee District, Levee Improvement Bonds, Series 1986, 5.95%,
11/1/2014 (c) ................................................................ 1,875,000 AAA 2,041,331
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts
Massachusetts General Obligation:
Refunding, Series B, 6.375%, 8/1/2002 ........................................ 2,150,000 A 2,331,374
Series A, 6.4%, 8/1/2003 ..................................................... 1,000,000 A 1,098,650
Massachusetts Health & Educational Facilities Authority, St. Joseph's Hospital,
Series C, Prerefunded 10/1/99, 9.5%, 10/1/2020 (d) ........................... 2,780,000 AAA 3,027,531
Massachusetts Housing Finance Agency, Series 1992 C, FNMA Collateralized:
6.25%, 5/15/2002 ............................................................. 2,000,000 AAA 2,107,800
6.25%, 11/15/2002 ............................................................ 3,420,000 AAA 3,627,218
Massachusetts Industrial Finance Agency:
Resource Recovery, North Andover Solid Waste, Series A, 6.15%, 7/1/2002 ...... 3,250,000 BBB 3,419,293
Sturdy Memorial Hospital, 7.9%, 6/1/2009 ..................................... 1,640,000 A 1,721,836
Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue,
Series A, 6.625%, 7/1/2003 ................................................... 3,165,000 A 3,429,436
Massachusetts Water Resource Authority, Series A, 7.25%, 4/1/2001 .............. 1,000,000 A 1,071,250
Michigan
Greater Detroit, MI, Resource Recovery Authority, Revenue Refunding Bond,
Series B, 6.25%, 12/13/2008 (c) .............................................. 5,625,000 AAA 6,428,419
Michigan Municipal Bond Authority, Local Government Loan Program, School
Improvement, Zero Coupon, 6/15/2006 (c) ...................................... 4,750,000 AAA 3,335,973
Michigan State Trunk Line Revenue Bond, 5.25%, 11/1/2012 ....................... 2,000,000 AA 2,096,600
Michigan State Hospital Finance Authority, Hospital Revenue, Sinai Hospital,
Series 1995, 6%, 1/1/2008 .................................................... 2,000,000 A 2,154,520
Romulus Township, MI, School District, Series II, Zero Coupon, Prerefunded
5/1/07, 5/1/2022 (c) (d) ..................................................... 12,400,000 AAA 3,031,428
Mississippi
Mississippi Higher Education Assistance Corp., Student Loan Revenue, Series
1992A, 6.2%, 1/1/2002 ........................................................ 1,200,000 A 1,259,484
Mississippi Hospital Equipment and Facilities Authority Revenue, Rush Medical
Foundation, Series 1997A, 5.4%, 1/1/2007 ..................................... 1,920,000 BBB 1,936,934
Nevada
Clark County, NV, School District, General Obligation, Building and
Renovation, Series B, 6.5%, 6/15/2007 (c) .................................... 7,000,000 AAA 8,039,360
Nevada State Housing Division, Single Family Mortgage Revenue, Series R, 5.95%,
10/1/2011 .................................................................... 2,370,000 AA 2,478,143
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Hampshire
New Hampshire Higher Education & Health Facilities Authority, Hospital Revenue:
Catholic Charities Series 1997A, 5.75%, 8/1/2011 ............................. 1,300,000 SKI 1,335,555
Frisbie Memorial Hospital, Series 1993, 5.25%, 10/1/1999 ..................... 1,385,000 BBB 1,399,390
New Jersey
New Jersey State General Obligation, Series E, 6%, 7/15/2003 ................... 5,750,000 AA 6,232,023
New Jersey Economic Development Authority, Series A, 7%, 7/1/2004 (c) .......... 2,500,000 AAA 2,849,550
New Mexico
Bernalillo County, NM, Gross Receipts Tax Revenue, 5%, 4/1/2012 ................ 1,000,000 AA 1,023,940
New York
Metropolitan Transportation Authority of New York:
Commuter Facilities Revenue:
6.75%, 7/1/2000 ............................................................. 1,200,000 BBB 1,260,780
6.9%, 7/1/2001 .............................................................. 1,280,000 BBB 1,376,243
Transit Facilities Revenue:
Series M, 5.5%,7/1/2008 (c) ................................................. 6,320,000 AAA 6,792,926
Service Contract, 6.75%, 7/1/2000 ........................................... 2,270,000 BBB 2,384,976
Service Contract Lease Revenues, 6.9%, 7/1/2001 ............................. 2,415,000 BBB 2,596,584
Service Contract, Series O, 5.75%, 7/1/2007 ................................. 1,975,000 BBB 2,121,308
New York City, NY, General Obligation:
Prerefunded, Series B, 6.6%, 10/1/2003 (d) ................................... 9,380,000 AAA 10,404,283
Prerefunded, Series H, ETM, 6.9%, 2/1/2001** (d) ............................. 505,000 AAA 541,234
Series A, 6%, 8/1/2005 (c) ................................................... 2,560,000 AAA 2,807,424
Series A, 7%, 8/1/2004 ....................................................... 7,650,000 A 8,653,604
Series B, 7.25%, 8/15/2007 ................................................... 2,900,000 A 3,437,486
Series C, 6.3%, 8/1/2003 (c) ................................................. 50,000 AAA 54,496
Series 1992 B, 6.4%, 10/1/2002 ............................................... 4,905,000 A 5,303,826
Series 1995 B, 6.75%, 8/15/2003 .............................................. 7,000,000 A 7,751,030
Series 1995 E, 6.6%, 8/1/2004 ................................................ 2,500,000 A 2,778,650
Series 1996 A, 7%, 8/1/2006 .................................................. 2,000,000 BBB 2,313,660
Series 1996 G, 6.75%, 2/1/2009 ............................................... 5,000,000 A 5,779,050
Unrefunded Balance, Series B, 6.6%, 10/1/2003 ................................ 820,000 NR 899,827
New York State FHA Hospital Revenue Bond, 5.5%, 2/1/2011 ....................... 4,825,000 AAA 5,141,086
New York State, Revenue Bonds, Dormitory Authority, 7%, 5/15/2016 .............. 1,900,000 A 2,022,512
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State Dormitory Authority:
City University System, Consolidated Revenue Lease, Series A, 5.5%, 7/1/2003.. 8,000,000 BBB 8,380,320
City University System, Consolidated Revenue Lease, Series A, 5.5%,
7/1/2003 (c) ................................................................. 1,250,000 AAA 1,322,638
College and University Pooled Capital Program, 7.8%,12/1/2005 (c) ............ 910,000 AAA 940,958
Cons City University System, 5.75%, 7/1/2006 (c) ............................. 1,750,000 AAA 1,906,678
New York State Energy Research and Development Authority, Pollution Control
Revenue, Electric and Gas, 5.9%, 12/1/2006 (c) ............................... 5,200,000 AAA 5,747,508
New York State Medical Care Facilities, Finance Agency, Mount Sinai Hospital,
Series 1983, 5.95%, 8/15/2009 ................................................ 5,675,000 AAA 5,974,697
New York State Thruway Authority, Special Obligation, Zero Coupon, 1/1/2002 .... 3,155,000 BBB 2,692,225
New York State Urban Development Corp. Revenue, Correctional Facilities:
Series A, 5.3%, 1/1/2005 (c) ................................................. 7,000,000 AAA 7,365,050
Series A, 5.4%, 1/1/2006 (c) ................................................. 3,500,000 AAA 3,714,725
North Carolina
North Carolina, Municipal Power Agency #1 Catawba Electric Revenue:
Series 1992, 5.9%,1/1/2003 (c) ............................................... 2,550,000 AAA 2,722,712
Series 1993, 4.1%, 1/1/2005 (c) .............................................. 3,000,000 AAA 2,955,570
North Dakota
Bismarck, ND, Hospital Revenue, St. Alexius Medical Center, Series 1991, Zero
Coupon, 5/1/2000 (c) ......................................................... 2,850,000 AAA 2,646,282
Grand Forks, ND, Health Care Facilities, United Hospital Obligation Group,
Series A, 6%, 12/1/2002 (c) .................................................. 1,160,000 AAA 1,242,267
Ohio
Franklin County, OH, Health Care Facilities, Revenue Refunding, Ohio
Presbyterian Services:
Series 1997, 5.15%, 7/1/2007 ................................................ 1,000,000 SKI 1,010,770
Series 1997, 5.4%, 7/1/2010 ................................................. 1,000,000 SKI 1,014,650
Hamilton County, OH, Health System Revenue, Franciscan Sisters of the Poor
Health System, Providence Hospital, Series 1992, 6.375%, 7/1/2004 ............ 4,495,000 BBB 4,796,884
Oregon
Chemeketa, OR, Community College General Obligation, 5.5%, 6/1/2013 ............ 2,170,000 AAA 2,330,406
Pennsylvania
Armstrong County, PA, Hospital Authority, St. Frances Medical Center, Series A,
6.2%, 6/1/2003 (c) ........................................................... 3,090,000 AAA 3,353,392
Delaware County, PA, Industrial Development Authority, Resource Recovery
Revenue, Series A, Refunding Bond, 6.5%, 1/1/2008 ............................ 3,000,000 A 3,349,110
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Montgomery County, PA, Redevelopment Authority, Multi Family Housing Revenue
Refunding, KBF Associates, LP Project, 6%, 7/1/2004 .......................... 2,685,000 BBB 2,791,729
Philadelphia, PA, General Obligation, Refunding Revenue, Series A, 11.5%,
8/1/1999 (c) ................................................................. 1,000,000 AAA 1,080,830
Schuykill County, PA, Redevelopment Authority, Lease Rental, Series A, 6.55%,
6/1/2000 (c) ................................................................. 1,105,000 AAA 1,157,079
Scranton-Lackawanna, PA, Health & Welfare Authority, Community Hospital Medical
Center Project, Series 1998, 5.5%, 7/1/2008 (c) .............................. 2,725,000 AAA 2,917,603
Somerset County, PA, General Authority, Commonwealth Lease Revenue, ETM,
6.45%, 10/15/2000 (c)** ...................................................... 2,000,000 AAA 2,110,980
South Carolina
South Carolina Jobs -- Economic Development Authority, Franciscan Sisters of the
Poor Health System Inc., St. Francis Hospital, 6.375%, 7/1/2004 .............. 3,420,000 BBB 3,649,687
Sumter County, SC, Hospital Facility Revenue Refunding, Tuomey Medical Center,
6.375%,11/15/1999 (c) ........................................................ 1,000,000 AAA 1,034,530
South Dakota
South Dakota Student Loan Assistance Corp. Revenue, Series A, 7%, 8/1/1998 ..... 490,000 A 491,382
Tennessee
Nashville and Davidson Counties, TN, Water and Sewer Revenue, 5.25%,
1/1/2013 (c) ................................................................. 3,310,000 AAA 3,467,854
Texas
Austin, TX, Combined Utility System Revenue, Zero Coupon, 11/15/2009 (c) ....... 6,775,000 AAA 3,967,508
Brownsville, TX, Utility System Revenue Refunding:
Series 1995, 6%, 9/1/2008 (c) ................................................ 1,000,000 AAA 1,119,520
Series 1995, 6%, 9/1/2009 (c) ................................................ 2,700,000 AAA 3,032,100
Dallas, TX, Civic Center, Senior Lien, 8.6%, 1/1/2006 .......................... 1,115,000 A 1,115,145
Denison, TX, Hospital Authority, Revenue Bond, Texoma Medical Center Inc.
Project, Series 1997, 6.125%, 8/15/2012 ...................................... 1,000,000 BBB 1,055,890
Harris County, TX, Toll Road Authority, Toll Road Revenue, Subordinate Lien:
Series A, Zero Coupon, 8/15/2006 (c) ......................................... 3,915,000 AAA 2,711,999
Series A, Zero Coupon, 8/15/2007 (c) ......................................... 1,050,000 AAA 692,129
Houston, TX, Water & Sewer System Authority, Series C, Zero Coupon,
12/1/2004 (c) ................................................................ 5,000,000 AAA 3,764,650
Richardson, TX, Hospital Authority Refunding and Improvement, Richardson Medical
Center, Series 1993, 6.5%, 12/1/2012 ......................................... 1,825,000 BBB 1,958,864
Texas Municipal Power Agency, Zero Coupon, 9/1/2007 (c) ........................ 8,385,000 AAA 5,515,905
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Texas Public Finance Authority, Building Revenue Refunding, Zero Coupon,
2/1/2009 (c) ................................................................. 5,860,000 AAA 3,561,415
Utah
Intermountain Power Agency, UT, Power Supply Revenue:
Series B, 6.25%, 7/1/2006 (c) ................................................ 8,000,000 AAA 8,954,960
Series B, Zero Coupon, 7/1/2001 (c) .......................................... 10,495,000 AAA 9,244,521
Series B, Zero Coupon, 7/1/2002 (c) .......................................... 2,500,000 AAA 2,102,775
Salt Lake County, UT, Water Conservation District, Series A, Zero Coupon,
10/1/2003 (c) ................................................................ 3,200,000 AAA 2,548,640
Virgin Islands
Virgin Islands, General Obligation, Public Finance Authority Revenue, Matching
Fund Loan Notes:
Series A, 6.7%, 10/1/1999 ................................................... 3,170,000 SKI 3,287,512
Series A, 6.8%, 10/1/2000 ................................................... 1,035,000 SKI 1,099,646
Virgin Islands Revenue Bonds, Public Finance Authority, 5.5%, 10/1/2005 ........ 3,000,000 BBB 3,142,080
Virgin Islands, Water and Public Finance Authority, 5.25%, 7/1/2009 ............ 2,000,000 SKI 2,059,840
Washington
Clark County, WA, School District, General Obligation, 5%, 12/1/2011 (c) ....... 1,820,000 AAA 1,864,699
Clark County, WA, Public Utility District #1, Generating System Revenue Bonds,
6%, 1/1/2007 (c) ............................................................. 12,150,000 AAA 13,425,872
King County, WA, Public Hospital District, Hospital Facility, Revenue Refunding
Bond, Valley Medical Center, 6%, 9/1/2009 (c) ................................ 1,940,000 AAA 2,153,497
Snohomish County, WA, Public Utility District #1, Series 1991B, 6.4%, 1/1/2000.. 2,000,000 A 2,070,820
Washington Public Power Supply System, Nuclear Project #1, Refunding Revenue:
Series A, 6%, 7/1/2005 (c) ................................................... 2,950,000 AAA 3,218,834
Series B, 5.15%,7/1/2002 ..................................................... 5,275,000 AA 5,444,117
Washington Public Power Supply System, Nuclear Project #2, Refunding Revenue:
Series 1990c, 7.5%, 7/1/2003 ................................................. 5,800,000 AA 6,372,286
Series A, 6.3%, 7/1/2001 ..................................................... 6,000,000 AA 6,356,880
Series A, 4.9%, 7/1/2005 ..................................................... 4,330,000 AA 4,417,423
Series A, 5.8%, 7/1/2007 ..................................................... 2,120,000 AA 2,289,579
Series A, 5.25%, 7/1/2008 .................................................... 3,000,000 AA 3,102,930
Series B, 5.15%, 7/1/2002 .................................................... 6,085,000 AA 6,280,085
Washington Public Power Supply System, Nuclear Project #3, Refunding Revenue:
Series B, 7.15%, 7/1/2001 .................................................... 1,310,000 AA 1,390,264
Series B, 5.15%, 7/1/2002 .................................................... 3,165,000 AA 3,266,470
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series B, 5.25%,7/1/2003 ..................................................... 3,000,000 AA 3,117,480
Series B, Zero Coupon, 7/1/2004 (c) .......................................... 8,000,000 AAA 6,088,720
Washington State Higher Education Facilities Revenue Bond, 4.95%, 4/1/2011 (c).. 1,500,000 AAA 1,521,165
Washington State Housing Finance, Series A, 7.1%, 12/1/2017 .................... 590,000 AAA 600,543
West Virginia
South Charleston, WV, Pollution Control Revenue, Union Carbide, 7.625%,
8/1/2005 ..................................................................... 2,000,000 BBB 2,340,720
Wisconsin
Wisconsin Health & Educational Facilities Authority:
Columbia Hospital Inc., 6.125%, 11/15/2001 (c) ............................... 1,000,000 AAA 1,062,190
Wheaton Franciscan Hospital:
5.8%, 8/15/2004 (c) ......................................................... 1,675,000 AAA 1,798,682
6%, 8/15/2002 (c) ........................................................... 1,000,000 AAA 1,067,080
Mercy Health System Corporation,
6%, 8/15/2005 (c) ........................................................... 1,400,000 AAA 1,530,284
6.125%, 8/15/2006 (c) ....................................................... 1,480,000 AAA 1,641,542
6.25%, 8/15/2007 (c) ........................................................ 1,000,000 AAA 1,122,560
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $621,466,146) 659,509,737
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $627,466,146) (a) 665,509,737
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $627,466,146. At June
30, 1998, net unrealized appreciation based on tax cost for all
securities was $38,043,591. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $38,310,377 and aggregate
gross unrealized depreciation for all securities in which there was
an excess of tax cost over market value of $266,786.
(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. Securities rated by Scudder Kemper Investments, Inc. (SKI) and
unrated securities (NR) have been determined by the Adviser to be of
comparable quality to rated 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 June 30, 1998, 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 June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $627,466,146) ................ $ 665,509,737
Cash ................................................................. 422,462
Receivable for investments sold ...................................... 4,786,718
Interest receivable .................................................. 9,091,087
Receivable for Fund shares sold ...................................... 405,739
Other assets ......................................................... 11,905
----------------
Total assets ......................................................... 680,227,648
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 6,799,701
Dividends payable .................................................... 933,321
Payable for Fund shares redeemed ..................................... 729,406
Accrued management fee ............................................... 305,262
Other payables and accrued expenses .................................. 156,058
----------------
Total liabilities .................................................... 8,923,748
-------------------------------------------------------------------------------------------
Net assets, at market value $ 671,303,900
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments ............ 38,043,591
Accumulated net realized gain ........................................ 590,631
Paid-in capital ...................................................... 632,669,678
-------------------------------------------------------------------------------------------
Net assets, at market value $ 671,303,900
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($671,303,900 / 58,990,116 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ........................................................ $11.38
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Medium Term Tax Free Fund
<PAGE>
Statement of Operations
six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................. $ 17,658,585
----------------
Expenses:
Management fee ....................................................... 1,917,736
Services to shareholders ............................................. 324,823
Custodian and accounting fees ........................................ 93,162
Trustees' fees and expenses .......................................... 19,440
Reports to shareholders .............................................. 31,039
Auditing ............................................................. 26,237
Registration fees .................................................... 12,284
Legal ................................................................ 8,069
Other ................................................................ 7,783
----------------
2,440,573
-------------------------------------------------------------------------------------------
Net investment income 15,218,012
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments .............................. 827,498
Net unrealized appreciation (depreciation) during the period on
investments ........................................................ (2,485,980)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (1,658,482)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 13,559,530
-------------------------------------------------------------------------------------------
</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>
Six Months
Ended
June 30, Year Ended
1998 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 15,218,012 $ 29,971,130
Net realized gain (loss) from investments ..................... 827,498 1,973,818
Net unrealized appreciation (depreciation) on
investments during the period ............................... (2,485,980) 15,628,599
---------------- ----------------
Net increase in net assets resulting from operations .......... 13,559,530 47,573,547
---------------- ----------------
Distributions to shareholders:
From net investment income .................................... (15,218,012) (29,971,130)
---------------- ----------------
From net realized gains from investment transactions .......... (475,919) (2,873,760)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ..................................... 92,492,805 128,178,450
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 9,880,746 21,001,873
Cost of shares redeemed ....................................... (85,886,289) (157,462,022)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ................................................ 16,487,262 (8,281,699)
---------------- ----------------
Increase (decrease) in net assets ............................. 14,352,861 6,446,958
Net assets at beginning of period ............................. 656,951,039 650,504,081
---------------- ----------------
Net assets at end of period ................................... $ 671,303,900 $ 656,951,039
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ..................... 57,554,739 58,325,377
---------------- ----------------
Shares sold ................................................... 8,106,993 11,430,174
Shares issued to shareholders in reinvestment of
distributions ............................................... 868,179 1,872,167
Shares redeemed ............................................... (7,539,795) (14,072,979)
---------------- ----------------
Net increase (decrease) in Fund shares ........................ 1,435,377 (770,638)
---------------- ----------------
Shares outstanding at end of period ........................... 58,990,116 57,554,739
---------------- ----------------
</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>
Six Months
Ended June 30,
1998 Years Ended December 31,
(Unaudited) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------
period ......................... $11.41 $11.15 $11.26 $10.39 $11.36 $10.86
Income from investment ----------------------------------------------------------------------------------
operations:
Net investment income ............ .26 .52 .53 .54 .53 .60
Net realized and unrealized
gain (loss) on investments ..... (.02) .31 (.09) .92 (.92) .56
----------------------------------------------------------------------------------
Total from investment operations.. .24 .83 .44 1.46 (.39) 1.16
----------------------------------------------------------------------------------
Less distributions:
From net investment income ....... (.26) (.52) (.53) (.54) (.53) (.60)
From net realized gains on
investments .................... (.01) (.05) (.02) (.05) (.05) (.06)
----------------------------------------------------------------------------------
Total distributions .............. (.27) (.57) (.55) (.59) (.58) (.66)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Net asset value, end of period ... $11.38 $11.41 $11.15 $11.26 $10.39 $11.36
----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 2.09** 7.69 4.02 14.32(a) (3.50)(a) 10.94(a)
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................... 671 657 651 712 701 1,017
Ratio of operating expenses
net, to average daily net
assets (%) ..................... .73* .74 .72 .70 .63 .14
Ratio of operating expenses
before expense reductions, to
average daily net assets ....... .73* .74 .72 .72 .71 .75
Ratio of net investment income
to average daily net
assets (%) ..................... 4.56* 4.67 4.75 4.92 4.94 5.35
Portfolio turnover rate (%) ...... 10.4* 13.4 14.1 36.1 33.8 37.3
</TABLE>
(a) Total returns may have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
23 - Scudder Medium Term Tax Free Fund
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Medium Term Tax Free Fund (the "Fund") is a diversified series of
Scudder Tax Free Trust, a Massachusetts business trust (the "Trust"), which is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The 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
instruments with an original maturity over sixty days are valued by pricing
agents approved by the officers of the Fund, which quotations reflect
broker/dealer-supplied valuations and electronic data processing techniques. If
the pricing agents are unable to provide such quotations, the most recent bid
quotation supplied by a bona fide market maker shall be used. Money market
instruments purchased with an original maturity of sixty days or less are valued
at amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
When-issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price.
Amortization and Accretion. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, 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.
24 - Scudder Medium Term Tax Free Fund
<PAGE>
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 six months ended June 30, 1998, purchases and sales of municipal
securities (excluding short-term investments) aggregated $45,311,271 and
$34,544,874, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (the "Adviser"), the Adviser directs the investments of the
Fund in accordance with its investment objective, policies, and restrictions.
The Adviser determines the securities, instruments, and other contracts relating
to investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Management Agreement. 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
six months ended June 30, 1998, the management fee aggregated $1,917,736 which
was equivalent to an annual effective rate of 0.57% 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
six months ended June 30, 1998 the amount charged to the Fund by SSC amounted to
$175,909 of which $28,816 is unpaid at June 30, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 1998, the amount charged to the Fund by SFAC aggregated $46,943,
of which $7,731 is unpaid at June 30, 1998.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1998, Trustees' fees and expenses aggregated $19,440.
25 - Scudder Medium Term Tax Free Fund
<PAGE>
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intentionally
left blank.
26 - Scudder Medium Term Tax Free Fund
<PAGE>
This Page
intentionally
left blank.
27 - 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; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee; Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
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.
28 - 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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.
29 - 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.
Distributions Direct
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
- ------------------------------------------------------------------------------------------------------------------------------
30 - 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 8,000 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 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
</TABLE>
31 - Scudder Medium Term Tax Free Fund
<PAGE>
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
United States.
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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