<PAGE> PAGE 1
000 B000000 10/31/97
000 C000000 711600
000 D000000 N
000 E000000 NF
000 F000000 Y
000 G000000 N
000 H000000 N
000 I000000 3.0.a
000 J000000 A
001 A000000 SCUDDER TAX FREE TRUST
001 B000000 811-3632
001 C000000 6172952559
002 A000000 TWO INTERNATIONAL PLACE
002 B000000 BOSTON
002 C000000 MA
002 D010000 02110
003 000000 N
004 000000 N
005 000000 N
006 000000 N
007 A000000 Y
007 B000000 1
007 C010100 1
007 C010200 2
007 C020200 SCUDDER LIMITED TERM TAX FREE FUND
007 C030200 N
007 C010300 3
007 C010400 4
007 C010500 5
007 C010600 6
007 C010700 7
007 C010800 8
007 C010900 9
007 C011000 10
008 A00AA01 SCUDDER KEMPER INVESTMENTS, INC.
008 B00AA01 A
008 C00AA01 801-252
008 D01AA01 BOSTON
008 D02AA01 MA
008 D03AA01 02110
010 A00AA01 SCUDDER FUND ACCOUNTING CORPORATION, INC.
010 B00AA01 8-298
010 C01AA01 BOSTON
010 C02AA01 MA
010 C03AA01 02110
011 A00AA01 SCUDDER INVESTOR SERVICES, INC.
011 B00AA01 8-298
011 C01AA01 BOSTON
011 C02AA01 MA
011 C03AA01 02110
012 A00AA01 SCUDDER SERVICE CORPORATION
<PAGE> PAGE 2
012 B00AA01 84-1489
012 C01AA01 BOSTON
012 C02AA01 MA
012 C03AA01 02110
013 A00AA01 COOPERS & LYBRAND L.L.P.
013 B01AA01 BOSTON
013 B02AA01 MA
013 B03AA01 02109
014 A00AA01 SCUDDER INVESTOR SERVICES, INC.
014 B00AA01 8-298
018 00AA00 Y
019 A00AA00 Y
019 B00AA00 50
019 C00AA00 SCUDDERRRR
020 C000001 0
020 C000002 0
020 C000003 0
020 C000004 0
020 C000005 0
020 C000006 0
020 C000007 0
020 C000008 0
020 C000009 0
020 C000010 0
021 000000 0
022 A000001 MERRILL LYNCH
022 B000001 13-5674085
022 C000001 34574
022 D000001 32000
022 A000002 SMITH BARNEY SHEARSON
022 B000002 13-1912900
022 C000002 14498
022 D000002 13500
022 A000003 PACTUAL
022 C000003 9055
022 D000003 6900
022 A000004 OPPENHEIMER & CO.
022 B000004 13-2798343
022 C000004 2128
022 D000004 3128
022 A000005 MORGAN STANLEY & CO.
022 B000005 13-2655998
022 C000005 3000
022 D000005 4000
022 A000006 WR HOUGH
022 C000006 3049
022 D000006 2000
022 A000007 SEATTLE NORTHWEST
022 C000007 2676
022 D000007 1790
022 A000008 GOLDMAN SACHS AND CO.
<PAGE> PAGE 3
022 B000008 13-5108880
022 C000008 2049
022 D000008 2006
022 A000009 PAINE WEBBER
022 B000009 13-2638166
022 C000009 900
022 D000009 3155
022 A000010 FIRST ALBANY CORP.
022 C000010 2000
022 D000010 2000
023 C000000 90641
023 D000000 87617
024 00AA00 N
026 A000000 N
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026 C000000 N
026 D000000 Y
026 E000000 N
026 F000000 N
026 G010000 N
026 G020000 N
026 H000000 N
027 000000 Y
029 00AA00 N
030 A00AA00 0
030 B00AA00 0.00
030 C00AA00 0.00
031 A00AA00 0
031 B00AA00 0
032 00AA00 0
033 00AA00 0
034 00AA00 N
035 00AA00 0
036 B00AA00 0
037 00AA00 N
038 00AA00 0
039 00AA00 N
040 00AA00 N
042 A00AA00 0
042 B00AA00 0
042 C00AA00 0
042 D00AA00 0
042 E00AA00 0
042 F00AA00 0
042 G00AA00 0
042 H00AA00 0
043 00AA00 0
044 00AA00 0
055 A00AA00 N
055 B00AA00 N
056 00AA00 Y
<PAGE> PAGE 4
057 00AA00 N
058 A00AA00 N
059 00AA00 Y
060 A00AA00 Y
060 B00AA00 Y
061 00AA00 2500
066 A00AA00 N
067 00AA00 N
068 A00AA00 N
068 B00AA00 N
069 00AA00 N
077 A000000 Y
077 B000000 Y
077 C000000 Y
077 D000000 N
077 E000000 N
077 F000000 N
077 G000000 N
077 H000000 N
077 I000000 N
077 J000000 N
077 K000000 N
077 L000000 N
077 M000000 N
077 N000000 N
077 O000000 N
077 P000000 N
077 Q010000 Y
077 Q020000 N
077 Q030000 Y
078 000000 N
080 A00AA00 ICI MUTUAL INSURANCE COMPANY
080 C00AA00 60000
081 A00AA00 Y
081 B00AA00 34
082 A00AA00 N
082 B00AA00 0
083 A00AA00 N
083 B00AA00 0
084 A00AA00 N
084 B00AA00 0
085 A00AA00 Y
085 B00AA00 N
015 A000201 STATE STREET BANK & TRUST COMPANY
015 B000201 C
015 C010201 BOSTON
015 C020201 MA
015 C030201 02110
015 E010201 X
025 D000201 0
025 D000202 0
<PAGE> PAGE 5
025 D000203 0
025 D000204 0
025 D000205 0
025 D000206 0
025 D000207 0
025 D000208 0
028 A010200 1945
028 A020200 174
028 A030200 0
028 A040200 4976
028 B010200 2736
028 B020200 166
028 B030200 0
028 B040200 3632
028 C010200 4657
028 C020200 163
028 C030200 0
028 C040200 4649
028 D010200 6838
028 D020200 170
028 D030200 0
028 D040200 4243
028 E010200 3551
028 E020200 169
028 E030200 0
028 E040200 5325
028 F010200 2490
028 F020200 173
028 F030200 0
028 F040200 2522
028 G010200 22217
028 G020200 1015
028 G030200 0
028 G040200 25347
028 H000200 0
045 000200 Y
046 000200 N
047 000200 Y
048 000200 0.060
048 A010200 0
048 A020200 0.000
048 B010200 0
048 B020200 0.000
048 C010200 0
048 C020200 0.000
048 D010200 0
048 D020200 0.000
048 E010200 0
048 E020200 0.000
048 F010200 0
048 F020200 0.000
<PAGE> PAGE 6
048 G010200 0
048 G020200 0.000
048 H010200 0
048 H020200 0.000
048 I010200 0
048 I020200 0.000
048 J010200 0
048 J020200 0.000
048 K010200 0
048 K020200 0.000
049 000200 N
050 000200 N
051 000200 N
052 000200 N
053 A000200 Y
053 B000200 Y
053 C000200 N
054 A000200 Y
054 B000200 N
054 C000200 N
054 D000200 N
054 E000200 N
054 F000200 N
054 G000200 N
054 H000200 Y
054 I000200 N
054 J000200 Y
054 K000200 N
054 L000200 N
054 M000200 Y
054 N000200 N
054 O000200 Y
062 A000200 Y
062 B000200 0.0
062 C000200 9.0
062 D000200 0.0
062 E000200 0.0
062 F000200 0.0
062 G000200 0.0
062 H000200 0.0
062 I000200 0.0
062 J000200 0.0
062 K000200 0.0
062 L000200 0.0
062 M000200 0.0
062 N000200 0.0
062 O000200 91.0
062 P000200 0.0
062 Q000200 0.0
062 R000200 0.0
063 A000200 0
<PAGE> PAGE 7
063 B000200 3.9
064 A000200 N
064 B000200 N
070 A010200 N
070 A020200 N
070 B010200 N
070 B020200 N
070 C010200 Y
070 C020200 N
070 D010200 N
070 D020200 N
070 E010200 Y
070 E020200 N
070 F010200 Y
070 F020200 N
070 G010200 Y
070 G020200 N
070 H010200 Y
070 H020200 N
070 I010200 N
070 I020200 N
070 J010200 Y
070 J020200 N
070 K010200 Y
070 K020200 N
070 L010200 N
070 L020200 N
070 M010200 N
070 M020200 N
070 N010200 Y
070 N020200 N
070 O010200 N
070 O020200 N
070 P010200 Y
070 P020200 N
070 Q010200 N
070 Q020200 N
070 R010200 N
070 R020200 N
071 A000200 19497
071 B000200 19517
071 C000200 109334
071 D000200 18
072 A000200 12
072 B000200 6104
072 C000200 0
072 D000200 0
072 E000200 0
072 F000200 722
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<PAGE> PAGE 8
072 I000200 71
072 J000200 65
072 K000200 0
072 L000200 24
072 M000200 35
072 N000200 20
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072 Q000200 0
072 R000200 34
072 S000200 5
072 T000200 0
072 U000200 0
072 V000200 8
072 W000200 11
072 X000200 996
072 Y000200 93
072 Z000200 5202
072AA000200 75
072BB000200 0
072CC010200 1386
072CC020200 0
072DD010200 5202
072DD020200 0
072EE000200 206
073 A010200 0.5200
073 A020200 0.0000
073 B000200 0.0200
073 C000200 0.0000
074 A000200 2
074 B000200 0
074 C000200 10522
074 D000200 104912
074 E000200 0
074 F000200 0
074 G000200 0
074 H000200 0
074 I000200 0
074 J000200 0
074 K000200 0
074 L000200 1809
074 M000200 12
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074 O000200 0
074 P000200 59
074 Q000200 0
074 R010200 0
074 R020200 0
074 R030200 0
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074 S000200 0
<PAGE> PAGE 9
074 T000200 116875
074 U010200 9639
074 U020200 0
074 V010200 12.00
074 V020200 0.00
074 W000200 0.0000
074 X000200 0
074 Y000200 0
075 A000200 0
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076 000200 0.00
SIGNATURE THOMAS F. MCDONOUGH
TITLE SECRETARY
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Limited Term Tax Free Fund Annual Report for the fiscal year ended 10/31/97 snd
is qualified in its entirety by reference to financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> SCUDDER LIMITED TERM TAX FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 111,820,205
<INVESTMENTS-AT-VALUE> 115,434,008
<RECEIVABLES> 1,809,055
<ASSETS-OTHER> 14,298
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 117,257,361
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 380,990
<TOTAL-LIABILITIES> 380,990
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113,220,841
<SHARES-COMMON-STOCK> 9,639,451
<SHARES-COMMON-PRIOR> 10,318,550
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,727
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,613,803
<NET-ASSETS> 116,876,371
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,103,700
<OTHER-INCOME> 0
<EXPENSES-NET> 902,166
<NET-INVESTMENT-INCOME> 5,201,534
<REALIZED-GAINS-CURRENT> 75,394
<APPREC-INCREASE-CURRENT> 1,386,314
<NET-CHANGE-FROM-OPS> 6,663,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,201,534)
<DISTRIBUTIONS-OF-GAINS> (205,773)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,856,337
<NUMBER-OF-SHARES-REDEEMED> (4,719,048)
<SHARES-REINVESTED> 183,612
<NET-CHANGE-IN-ASSETS> (6,784,060)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 172,106
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 722,447
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 995,600
<AVERAGE-NET-ASSETS> 120,296,938
<PER-SHARE-NAV-BEGIN> 11.98
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> (0.52)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.12
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Limited Term Tax
Free Fund (the "Fund") was held on October 24, 1997, at the offices of 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*
--- ------- ------- -----------------
6,342,496 87,514 67,871 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 6,426,922 70,959
Dawn-Marie Driscoll 6,425,875 72,006
Peter B. Freeman 6,406,656 91,225
George M. Lovejoy, Jr. 6,423,717 74,164
Dr. Wesley W. Marple, Jr. 6,425,031 72,850
Daniel Pierce 6,425,631 72,249
Kathryn L. Quirk 6,424,584 73,296
Jean C. Tempel 6,425,973 71,908
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*
--- ------- ------- -----------------
5,827,370 154,136 299,253 217,122
23 - Scudder Limited 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*
--- ------- ------- -----------------
6,030,530 131,033 140,949 201,386
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 5,680,643 345,627 254,491 217,122
5.2 Borrowing 5,668,132 358,138 254,491 217,122
5.3 Senior securities 5,670,234 356,036 254,491 217,122
5.4 Concentration 5,679,647 346,950 254,162 217,122
5.5 Loans 5,680,905 345,365 254,491 217,122
5.6 Underwriting of securities 5,681,005 345,265 254,491 217,122
5.7 Investment in real estate 5,682,025 344,573 254,162 217,122
5.8 Purchase of physical 5,681,333 345,265 254,162 217,122
commodities
5.9 Investment in California N/A N/A N/A N/A
municipal securities
5.10 Investment in municipal 5,682,025 344,573 254,162 217,122
securities
5.11 Investment in N/A N/A N/A N/A
Massachusetts municipal
securities
5.12 Investment in New York N/A N/A N/A N/A
municipal securities
5.13 Investment in Ohio N/A N/A N/A N/A
municipal securities
24 - Scudder Limited Term Tax Free Fund
<PAGE>
5.14 Investment in Pennsylvania N/A N/A N/A N/A
municipal securities
5.15 Investment in short-term N/A N/A N/A N/A
municipal securities
5.16 Elimination of tax N/A N/A N/A N/A
diversification
5.17 Purchases of voting 5,689,168 344,935 246,658 217,122
securities
5.18 Affiliated transactions 5,688,694 346,101 245,966 217,122
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
--- ------- -------
6,230,611 61,681 205,588
* 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.
25 - Scudder Limited Term Tax Free Fund
Scudder Tax Free Trust
Two International Place
Boston, Massachusetts 02110
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Limited Term Tax Free Fund
Ladies and Gentlemen:
Scudder Tax Free Trust (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $0.01 per share, (the "Shares") into separate
series, or funds, including Scudder Limited Term Tax Free Fund (the "Fund").
Series may be abolished and dissolved, and additional series established, from
time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth.
Accordingly, the Trust on behalf of the Fund agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Trust's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Trust under the Investment Company Act of
1940, as amended, (the "1940 Act") and the Securities Act of 1933, as amended.
Copies of the documents referred to in the preceding sentence have been
furnished to you by the Trust. The Trust has also furnished you with copies
properly certified or authenticated of each of the following additional
documents related to the Trust and the Fund:
(a) The Declaration dated December 8, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.
<PAGE>
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated December 14, 1993 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of
the rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Trust a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Trust's name
(the "Fund Name"), and (ii) the Scudder Marks in connection with the Trust's
investment products and services, in each case only for so long as this
Agreement, any other investment management agreement between you and the Trust,
or any extension, renewal or amendment hereof or thereof remains in effect, and
only for so long as you are a licensee of the Scudder Marks, provided however,
that you agree to use your best efforts to maintain your license to use and
sublicense the Scudder Marks. The Trust agrees that it shall have no right to
sublicense or assign rights to use the Scudder Marks, shall acquire no interest
in the Scudder Marks other than the rights granted herein, that all of the
Trust's uses of the Scudder Marks shall inure to the benefit of Scudder Trust
Company as owner and licensor of the Scudder Marks (the "Trademark Owner"), and
that the Trust shall not challenge the validity of the Scudder Marks or the
Trademark Owner's ownership thereof. The Trust further agrees that all services
and products it offers in connection with the Scudder Marks shall meet
commercially reasonable standards of quality, as may be determined by you or the
Trademark Owner from time to time, provided that you acknowledge that the
services and products the Trust rendered during the one-year period preceding
the date of this Agreement are acceptable. At your reasonable request, the Trust
shall cooperate with you and the Trademark Owner and shall execute and deliver
any and all documents necessary to maintain and protect (including but not
limited to in connection with any trademark infringement action) the Scudder
Marks and/or enter the Trust as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your successor) and the Trust, or you no longer are a
licensee of the Scudder Marks, the Trust shall (to the extent that, and as soon
as, it lawfully can) cease to use the Fund Name or any other name indicating
that it is advised by, managed by or otherwise connected with you (or any
organization which shall have succeeded to your business as investment manager)
or the Trademark Owner. In no event shall the Trust use the Scudder Marks or any
other name or mark confusingly similar thereto (including, but not limited to,
any name or mark that includes the name "Scudder") if this Agreement or any
other investment advisory agreement between you (or your successor) and the Fund
is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel
2
<PAGE>
to the Trust or counsel to you. You shall also make available to the Trust
promptly upon request all of the Fund's investment records and ledgers as are
necessary to assist the Trust in complying with the requirements of the 1940 Act
and other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Trust are being
conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts relating
to investments to be purchased, sold or entered into by the Fund and place
orders with broker-dealers, foreign currency dealers, futures commission
merchants or others pursuant to your determinations and all in accordance with
Fund policies as expressed in the Registration Statement. You shall determine
what portion of the Fund's portfolio shall be invested in securities and other
assets and what portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Trust's officers or Board of Trustees shall
reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities and the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends
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and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 5. In particular, but
without limiting the generality of the foregoing, you shall not be responsible,
except to the extent of the reasonable compensation of such of the Fund's
Trustees and officers as are directors, officers or employees of you whose
services may be involved, for the following expenses of the Fund: organization
expenses of the Fund (including out-of-pocket expenses, but not including your
overhead or employee costs); fees payable to you and to any other Fund advisors
or consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
principal
4
<PAGE>
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Trust on behalf of the Fund shall pay you in United States Dollars on the last
day of each month the unpaid balance of a fee equal to the excess of 1/12 of
0.60 of 1 percent of the average daily net assets as defined below of the Fund
for such month over any compensation waived by you from time to time (as more
fully described below). You shall be entitled to receive during any month such
interim payments of your fee hereunder as you shall request, provided that no
such payment shall exceed 75 percent of the amount of your fee then accrued on
the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time) on
each day on which the net asset value of the Fund is determined consistent with
the provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully
determines the value of its net assets as of some other time on each business
day, as of such time. The value of the net assets of the Fund shall always be
determined pursuant to the applicable provisions of the Declaration and the
Registration Statement. If the determination of net asset value does not take
place for any particular day, then for the purposes of this section 6, the value
of the net assets of the Fund as last determined shall be deemed to be the value
of its net assets as of 4:00 p.m. (New York time), or as of such other time as
the value of the net assets of the Fund's portfolio may be lawfully determined
on that day. If the Fund determines the value of the net assets of its portfolio
more than once on any day, then the last such determination thereof on that day
shall be deemed to be the sole determination thereof on that day for the
purposes of this section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement, you
shall be an independent contractor and not an agent of the Trust. Whenever the
Fund and one or more other accounts or investment companies advised by the
Manager have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with procedures believed
by the Manager to be equitable to each entity. Similarly, opportunities to sell
securities shall be allocated in a manner believed by the Manager to be
equitable. The Fund recognizes
5
<PAGE>
that in some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder. Any person, even though also employed by you,
who may be or become an employee of and paid by the Fund shall be deemed, when
acting within the scope of his or her employment by the Fund, to be acting in
such employment solely for the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1998, and continue in force from year to
year thereafter, but only so long as such continuance is specifically approved
at least annually (a) by the vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of the
Secretary of the Commonwealth of Massachusetts, provides that the name "Scudder
Tax Free Trust" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of the
Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed by
the Trust on behalf of the Fund pursuant to this Agreement shall be limited in
all cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust,
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or from any Trustee, officer, employee or agent of the Trust. You understand
that the rights and obligations of each Fund, or series, under the Declaration
are separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions as may be granted by the SEC by any rule, regulation or
order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on behalf of the
Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
SCUDDER TAX FREE TRUST, on behalf of
Scudder Limited Term Tax Free Fund
By:
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President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
----------------------------------
Managing Director
7
Coopers & Lybrand Coopers & Lybrand L.L.P.
a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder Tax Free Trust and to
the Shareholders of Scudder Limited Term Tax Free Fund:
In planning and performing our audit of the financial statements and
financial highlights of Scudder Limited Term Tax Free Fund for the year ended
October 31, 1997, we considered its internal control, including controls over
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and financial
highlights and to comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of Scudder Limited Term Tax Free Fund is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls that are
relevant to an audit pertain to the entity's objective of preparing financial
statements and financial highlights for external purposes that are fairly
presented in conformity with generally accepted accounting principles. Those
controls include the safeguarding of assets against unauthorized acquisition,
use, or disposition.
Because of inherent limitations in internal control, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of internal control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of any
specific internal control component does not reduce to a relatively low level
the risk that errors or irregularities in amounts that would be material in
relation to the financial statements and financial highlights being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal control, including controls over safeguarding securities,
that we consider to be material weaknesses as defined above as of October 31,
1997.
This report is intended solely for the information and use of management
of Scudder Limited Term Tax Free Fund and the Securities and Exchange
Commission.
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 17, 1997
