Scudder
Medium Term
Tax Free Fund
Annual Report
May 31, 1999
No-Load Funds
A fund that seeks to provide a high level of income free from regular federal
income taxes and to limit principal fluctuation.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Medium Term Tax Free Fund
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Date of Inception: 4/21/83 Total Net Assets Ticker Symbol: SCMTX
as of 5/31/99: $643.3 million
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o Scudder Medium Term Tax Free Fund's fiscal year end has changed from December
31 to May 31. For its abbreviated fiscal year beginning January 1, 1999, through
May 31, 1999, Scudder Medium Term Tax Free Fund posted a total return of -0.02%.
Over the 12 months ended May 31, the Fund returned 3.79%, outpacing the 3.72%
average performance of the Fund's peers over the same period, according to
Lipper Analytical Services.
o For the three-, five-, and ten-year periods, the Fund's total returns placed
it in the top one-third of municipal bond funds as tracked by Lipper. Please see
page 6 for additional Lipper performance information.
o As of May 31, 1999, Scudder Medium Term Tax Free Fund's 30-day net annualized
SEC yield was 3.75%, equivalent to a 6.21% taxable yield for investors subject
to the 39.6% maximum federal income tax rate.
o Scudder Medium Term Tax Free Fund received an overall Morningstar Rating(TM)
of four stars out of 1,586 tax free funds as of May 31, 1999*
Table of Contents
3 Letter from the Fund's President 24 Notes to Financial Statements
4 Performance Update 26 Report of Independent Accountants
5 Portfolio Summary 27 Tax Information
6 Portfolio Management Discussion 28 Officers and Trustees
10 Investment Portfolio 29 Investment Products and Services
20 Financial Statements 30 Scudder Solutions
23 Financial Highlights
* Morningstar proprietary rankings reflect historical risk-adjusted performance
as of May 31, 1999. Ratings are subject to change monthly, and past
performance does not guarantee future results. Morningstar ratings are
calculated from the Fund's three-, five-, and ten-year average annual returns
in excess of 90-day Treasury bills with appropriate fee adjustments, and a
risk factor that reflects fund performance below 90-day T-bill returns. The
Fund received three stars for the three-year period, four stars for the
five-year period, and five stars for the ten-year period. The top 10% of funds
in a broad asset class receive 5 stars, the next 22.5% receive 4 stars, and
the next 35% receive 3 stars. The Fund was rated among 1586, 1184, and 368
funds in its broad asset class for the three-, five-, and ten-year periods,
respectively.
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
abbreviated fiscal year ended May 31, 1999. We have changed the Fund's fiscal
year end from December 31 to May 31 as part of a larger effort to create
efficiencies and reduce the costs of producing Scudder fund regulatory materials
such as fund reports and prospectuses. Going forward, you will receive regular
reports following the Fund's annual and semiannual periods ending in May and
November. For its abbreviated fiscal year that began January 1, 1999, and ended
May 31, 1999, the Fund posted a total return of -0.02%. Over the 12 months ended
May 31, the Fund returned 3.79%, outpacing the 3.72% average performance of the
Fund's peers over the same period, according to Lipper.
Investors concerned about the increased volatility of the financial markets
during the past 12 months should find the chart on page 7 of interest. The
chart shows that over the 12-month period ended May 31, 30-year municipal bonds
displayed measurably less price volatility than comparable Treasury securities.
For more information concerning Scudder Medium Term Tax Free Fund's market
performance, strategy, and outlook, please see the Portfolio Management
Discussion that begins on page 6.
For those interested in new Scudder products, we are pleased to introduce
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both funds are
managed with the goal of providing long-term outperformance compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Please call a Scudder Investor Information representative at 1-800-225-2470
if you have questions about your Fund. PageNO TAG provides more information on
how to contact Scudder. Thank you for choosing Scudder Medium Term Tax Free Fund
to help meet your investment needs.
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 May 31, 1999
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Fund Index Comparisons
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Total Return
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Period Ended Growth of Average
5/31/1999 $10,000 Cumulative Annual
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Scudder Medium Term Tax Free Fund
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1 Year $ 10,379 3.79% 3.79%
5 Year $ 13,399 33.99% 6.03%
10 Year* $ 19,475 94.75% 6.89%
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Lehman Brothers Municipal Bond Index
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1 Year $ 10,467 4.67% 4.67%
5 Year $ 14,147 41.47% 7.18%
10 Year $ 21,062 110.62% 7.73%
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Growth of a $10,000 Investment
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THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Scudder Medium Lehman Brothers
Term Tax Free Fund Municipal Bond Index
'89 10000 10000
'90 10594 10733
'91 11507 11814
'92 12642 12976
'93 14065 14529
'94 14535 14888
'95 15596 16243
'96 16315 16986
'97 17426 18395
'98 18764 20121
'99 19475 21062
Yearly periods ended May 31
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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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 10.03 $ 10.27 $ 10.60 $ 11.09 $ 10.80 $ 11.01 $ 10.92 $ 11.10 $ 11.38 $ 11.26
- ------------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .56 $ .60 $ .65 $ .64 $ .58 $ .55 $ .53 $ .52 $ .52 $ .51
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Capital Gains Distributions $ -- $ -- $ .01 $ .03 $ .09 $ -- $ .07 $ .03 $ .04 $ .04
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Fund Total Return (%) 5.94 8.62 9.86 11.26 3.34 7.30 4.61 6.81 7.68 3.79
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Index Total Return (%) 7.33 10.08 9.83 11.97 2.47 9.11 4.57 8.29 9.39 4.67
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</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 80.00% and 7.09%, 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 total returns 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 May 31, 1999
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Diversification
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Electric Utility Revenue 20%
Core Cities/Lease 15%
Hospital/Health Revenue 13%
State General Obligation/Lease 12%
School District/Lease 9%
Other General Obligation/Lease 6%
Sales/Special Tax 6%
Resource Recovery 3%
Counties General Obligation/Lease 3%
Miscellaneous Municipal 13%
----------------------------------------
100%
----------------------------------------
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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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
AAA 61%
AA 11%
A 13%
BBB 9%
Not Rated 6%
--------------------------------------
100%
--------------------------------------
Weighted average quality: AA
Overall portfolio quality remains high, with 72% of portfolio assets rated AAA
or AA.
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Effective Maturity
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Less than Year 3%
1 through 5 years 37%
5 through 10 years 41%
10 through 15 years 19%
----------------------------------------------
100%
----------------------------------------------
Weighted average effective maturity:
6.26 years
The Fund continues its cautious stance on the market with respect to interest
rate risk, maintaining an average maturity similar to that of its competitive
universe.
For more complete details about the Fund's investment portfolio, see page 10.
A quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Medium Term Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Following a series of overseas and domestic financial crises that prompted
uncertainty, volatility, and a "flight to quality," bond yields plummeted, then
returned to July 1998 levels by the close of Scudder Medium Term Tax Free Fund's
most recent fiscal year. During its abbreviated fiscal year beginning January 1,
1999, through May 31, 1999, the Fund returned -0.02%. Over the 12 months ended
May 31, the Fund returned 3.79%, outpacing the 3.72% average performance of the
Fund's peers over the same period as tracked by Lipper Analytical Services,
Inc., an independent analyst of investment performance. As of May 31, 1999,
Scudder Medium Term Tax Free Fund's 30-day net annualized SEC yield was 3.75%,
equivalent to a 6.21% taxable yield for investors subject to the 39.6% maximum
federal income tax rate.
Scudder Medium Term Tax Free Fund's long-term performance record remains highly
competitive: As shown in the accompanying table, the Fund's average annual total
returns placed it in the top one-third of its peers over three-, five-, and
ten-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.
A Market Roller Coaster
Market turmoil hit a peak in the wake of the Russian currency devaluation late
last summer, followed by the near collapse of the Long Term Capital
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Competitive Long-Term Results
(Average annual returns for periods ended May 31, 1999)
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Scudder
Medium Lipper Number
Term Tax average of
Free Fund annual Funds Percentile
Period return return Rank tracked Ranking
1 year 3.79% 3.72% 58 of 134 Top 43%
3 years 6.08% 5.85% 32 of 114 Top 28%
5 years 6.03% 5.81% 24 of 88 Top 27%
10 years 6.89% 6.58% 7 of 24 Top 29%
Past performance does not guarantee future results.
Lipper Analytical Services, Inc., is an independent analyst of investment
performance. Performance includes reinvestment of dividends and capital gains.
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Management hedge fund. Volatility in the U.S. stock market increased greatly
while a massive reallocation to U.S. Treasury bonds led to substantially lower
yields. The Federal Reserve's three interest rate cuts during the third and
fourth quarters of 1998 helped to gradually restore market stability. During
this period, the U.S. economy continued to grow beyond all expectations, with a
dramatic 6% annualized increase in GDP for the fourth quarter of 1998 and a
strong start in 1999 that seemed to assure at least 4% GDP growth this year.
This show of strength, in turn, worried bond investors, who responded by sending
30-year Treasury bond yields back up to July 1998 levels. Over the twelve months
ended May 31, yields of
6 - Scudder Medium Term Tax Free Fund
<PAGE>
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Municipal Provided Greater Stability
Monthly prices of 30-year AAA-rated municipal bonds
compared with prices of 30-year U.S. Treasury bonds,
5/31/98-5/31/99.
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA
30-year 30-year
AAA-rated U.S.
municipal bonds Treasury bonds
5/31/98 100.77 100.14
100.00 103.47
7/31/98 100.00 101.57
102.33 107.12
9/30/98 105.57 114.87
102.33 111.47
11/30/98 102.33 109.83
102.33 111.47
1/31/99 103.13 111.14
101.55 103.32
3/31/99 100.77 102.11
100.31 104.665
5/31/99 98.19 100.00
Past performance is not indicative of future results.
Source: Scudder Kemper Investments, Inc.
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30-year Treasury bonds ended slightly higher, beginning at 5.60% and ending at
5.84%. Over the same time frame, yields of 30-year AAA insured municipal bonds
rose slightly, from 5.10% to 5.22%.
In addition to high tax free yields, municipal bonds have historically offered
greater price stability over time than Treasury bonds of comparable maturity.
The accompanying chart demonstrates the record over the past 12 months, when
most financial markets were at a peak of volatility.
Tax-Free Income and
Below-Average Risk
Scudder Medium Term Tax Free Fund's primary investment goals are to generate
high federally tax-free income while maintaining a significant degree of price
stability. During the Fund's abbreviated fiscal year, we maintained a two-part
strategy: First, we focused on premium "cushion" bonds -- bonds with high
coupons that compensate investors for the fact that they can be redeemed by
their issuer prior to maturity. At the same time, we continued the Fund's 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. In terms of maturity, we purchased 11- to
13-year bonds during the period, because we believe they offer the best total
return potential, based on our outlook for interest rates and the yield
differentials among bonds across the maturity spectrum.
The Fund continues its cautious stance on the market with respect to interest
rate risk, maintaining an average duration similar to that of its competitive
universe. As of May 31, 1999, the Fund's average duration was 5.3 years.
(Duration gives relative weight to both principal and interest payments through
the life of a bond and has replaced average maturity as the standard measure of
interest rate sensitivity among professional investors. Generally, the shorter
the duration, the less sensitive a portfolio will be to changes in interest
rates.)
7 - Scudder Medium Term Tax Free Fund
<PAGE>
The Fund's overall level of portfolio quality remains high, with over 70% of the
Fund's portfolio rated AAA or AA. 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 May 31, 1999, the Fund held securities
issued in 36 states plus the District of Columbia and the Virgin Islands. The
Portfolio Summary on pageNO TAG provides more information about the Fund's
holdings, including quality, maturity, and sector representation.
Outlook
In light of recent increases in short-term interest rates -- including an
increase in the Federal Funds target rate following the close of the period -- a
long-predicted slowdown in U.S. economic activity seems more likely to occur
during the second half of 1999. At the same time, we expect that inflation will
remain restrained, which should place an upper limit on interest rate increases.
Though as a general rule we maintain a portfolio duration in line with our
market, we will take a cautious approach during the coming months. We will also
monitor the level of worldwide economic activity closely over the remainder of
the year: The United States has been the only significant engine of economic
growth for some time. If the incipient economic recovery in Asia and other parts
of the world gathers steam, we will watch for additional upward pressure on
inflation and short-term interest rates and adjust our strategy accordingly.
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Scudder Medium Term
Tax Free Fund:
A Team Approach to Investing
Scudder Medium Term Tax Free Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an important
role in the Fund's management process. Team members work together to develop
investment strategies and select securities for the Fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits Fund investors
by bringing together many disciplines and leveraging our extensive resources.
Lead Portfolio Manager Ashton P. Goodfield, who joined the Adviser in 1986,
assumed responsibility for the Fund's day-to-day management and overall
investment strategies in 1994. Ms. Goodfield has been a Portfolio Manager for
the Adviser since 1990.
Portfolio Manager Philip G. Condon joined the team in 1998 and joined the
Adviser in 1983. Mr. Condon has 17 years of experience in municipal investing
and portfolio management.
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8 - Scudder Medium Term Tax Free Fund
<PAGE>
In terms of the Fund's day-to-day strategy, we will continue to seek competitive
returns by focusing on 8- to 12-year premium cushion bonds and noncallable bonds
over the coming months. And rather than attempting to make investment decisions
based on short-term market movements, we will search for the most attractively
valued bonds as we seek a high level of tax-free income for our shareholders.
Sincerely,
Your Portfolio Management Team
/s/Ashton P. Goodfield /s/Philip G. Condon
Ashton P. Goodfield Philip G. Condon
9 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio as of May 31, 1999
Principal Market
Amount ($) Value ($)
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<S> <C> <C>
Short-Term Municipal Investments 0.4%
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New Hampshire
New Hampshire Higher Education & Health Facilities Authority,
Frisbie Memorial Hospital,
Series 1993, 5.25%, 10/1/1999 .................................................... 710,000 710,710
New York
Long Island Power Authority, NY, Electrical Systems Revenue,
Series 1998-6, Daily Demand Note,
3.2%, 5/1/2033* .................................................................. 2,000,000 2,000,000
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Total Short-Term Municipal Investments (Cost $2,709,269) 2,710,710
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Long-Term Municipal Investments 99.6%
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Alabama
Alabama Street Docks, Department Facilities Revenue, Series
1998, 6%, 10/1/2007 (b) .......................................................... 1,000,000 1,103,300
Alaska
North Slope Borough, AK, General Obligation:
Series 1992 A, Zero Coupon, 6/30/2002 (b) ........................................ 3,275,000 2,891,760
Series 1992 A, Zero Coupon, 6/30/2003 (b) ........................................ 7,000,000 5,908,280
Series 1994 B, Zero Coupon, 6/30/2004 (b) ........................................ 19,500,000 15,688,335
Series 1995 A, Zero Coupon, 6/30/2006 (b) ........................................ 11,150,000 8,116,420
Arizona
Arizona Health Facilities Authority, Hospital System Revenue,
Phoenix Baptist Hospital and
Medical Center, ETM, Series 1992, 6.1%, 9/1/2003 (b)** ........................... 2,000,000 2,160,360
Maricopa County, AZ, School District #28, General Obligation:
Series 1993 B, Zero Coupon, 1/1/2003 (b) ......................................... 4,150,000 3,582,031
Series 1993 B, Zero Coupon, 7/1/2003 (b) ......................................... 2,000,000 1,691,280
Maricopa County, AZ, School District #41, General Obligation:
Series 1993, Zero Coupon, 7/1/2003 (b) ........................................... 4,500,000 3,805,380
Series 1993, Zero Coupon, 1/1/2004 (b) ........................................... 6,000,000 4,941,960
Series 1994, Zero Coupon, 7/1/2005 (b) ........................................... 1,790,000 1,374,756
Series 1994, Zero Coupon, 1/1/2006 (b) ........................................... 2,925,000 2,184,185
Series 1994, Zero Coupon, 7/1/2006 (b) ........................................... 7,605,000 5,554,464
Salt River, AZ, Agricultural Improvement and Power District,
Electrical Systems Revenue,
Series 1992 C, 6.2%, 1/1/2012 .................................................... 1,500,000 1,600,185
Arkansas
Rogers, AR, Sales & Use Tax Revenue, Series 1996, 5.35%,
11/1/2011 ........................................................................ 2,500,000 2,561,875
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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California
<S> <C> <C>
California Health Facilities Finance Authority, Summit Medical
Center, Series 1996 A, 6%, 5/1/2006 (b) .......................................... 3,150,000 3,487,523
Central Valley Finance Authority, CA, Cogeneration Project
Revenue, Carson Ice, Series 1998, 5.25%, 7/1/2013 (b) ............................ 4,480,000 4,585,773
Foothill/Eastern Transportation Corridor Agency, CA, Toll Road
Revenue, Series 1995 A, Step-up Coupon, 0% to 1/1/2005, 7.05% to 1/1/2009 ........ 7,275,000 5,900,316
Long Beach, CA, Aquarium of the Pacific Project, Series 1995
A, 5.75%, 7/1/2005 ............................................................... 1,300,000 1,380,704
Orange County, CA, Local Transportation Authority, Sales Tax
Revenue, Series 1994 M,
Step-down Coupon, 5.10% to 2/15/1998, 4.3% to 2/15/2001 (b) ...................... 5,100,000 5,162,577
San Diego, CA, Certificate of Participation, Water Utility
Funding, Series 1998, 5.375%, 8/1/2012 (b) ....................................... 2,000,000 2,103,420
Colorado
Boulder County, CO, Industrial Development Revenue, May
Department Stores, Series 1992,
6.25%, 9/1/2007 .................................................................. 3,500,000 3,700,270
Connecticut
Bristol, CT, Resource Recovery, Ogden Martin System, Series
1995, 6.125%, 7/1/2003 ........................................................... 10,635,000 11,078,160
Connecticut State Health & Educational Facilities Authority,
Windham Community Memorial
Hospital, Series 1996 C, 5.75%, 7/1/2011 ......................................... 3,500,000 3,538,360
District of Columbia
District of Columbia, Certificate of Participation, Series
1993, 6.875%, 1/1/2003 ........................................................... 1,780,000 1,850,862
District of Columbia, General Obligation:
Series 1989 B, Zero Coupon, 6/1/2001 (b) ......................................... 7,100,000 6,562,033
Series 1993 A, 5.625%, 6/1/2002 (b) .............................................. 7,760,000 8,093,913
Series 1993 A, ETM, 5.625%, 6/1/2002 (b)** ....................................... 600,000 628,938
Series 1993 A, 4.85%, 6/1/2004 (b) ............................................... 1,900,000 1,947,481
Series 1993 A, 5.8%, 6/1/2004 (b) ................................................ 6,440,000 6,871,094
Series 1993 A, ETM, 4.85%, 6/1/2004 (b)** ........................................ 100,000 103,163
Series 1993 A, ETM, 5.8%, 6/1/2004 (b)** ......................................... 510,000 547,699
Series 1993 A, 4.95%, 6/1/2005 (b) ............................................... 3,745,000 3,850,721
Series 1993 A, 5.875%, 6/1/2005 (b) .............................................. 3,385,000 3,642,395
Series 1993 A, ETM, 4.95%, 6/1/2005 (b)** ........................................ 195,000 202,086
Series 1993 A, ETM, 5.875%, 6/1/2005 (b)** ....................................... 265,000 287,477
Series 1993 B, 5.3%, 6/1/2005 (b) ................................................ 8,000,000 8,372,160
District of Columbia, Redevelopment Land Agency, DC Sports
Arena, Special Tax, Series 1996,
5.625%, 11/1/2010 ................................................................ 1,960,000 2,027,404
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Florida
<S> <C> <C>
Dade County, FL, General Obligation:
Series 1990, Zero Coupon, Prerefunded 2/1/2006, 8/1/2014 (b) (c) ................. 4,000,000 1,647,080
Series 1990, Zero Coupon, Prerefunded 2/1/2006, 8/1/2018 (b) (c) ................. 6,000,000 1,811,340
Escambia County, FL, Utilities Authority, Utilities System
Revenue, Series 1998 D, 5%, 1/1/2004 (b) ......................................... 2,000,000 2,077,120
Georgia
Clayton County, GA, Hospital Revenue, Series 1998 A, 5.25%,
8/1/2012 (b) ..................................................................... 2,275,000 2,313,834
Fulton County, GA, School District, General Obligation, Series
1998, 5.25%, 1/1/2013 ............................................................ 1,500,000 1,565,220
Georgia, General Obligation:
Series 1994 E, 6.75%, 12/1/2012 .................................................. 6,620,000 7,936,321
Series 1995 A, 6.75%, 9/1/2010 ................................................... 5,370,000 6,380,473
Hawaii
Hawaii State General Obligation, Series 1993 C, 4.75%, 11/1/2008 ................... 7,050,000 7,076,367
Honolulu, HI, General Obligation, Series 1999 B, 5.125%, 7/1/2012 .................. 1,275,000 1,288,235
Illinois
Alton, IL, Health Facilities Authority, Series 1991, ETM,
6.7%, 2/15/2000 (b)** ............................................................ 555,000 568,130
Berwyn, IL, MacNeal Memorial Hospital, Association Project,
Series 1995, 5.25%, 6/1/2004 (b) ................................................. 3,935,000 4,101,805
Boone, McHenry & Dekalb Counties, IL, United School District
#100, General Obligation,
Series 1997, Zero Coupon, 12/1/2012 (b) .......................................... 2,545,000 1,283,876
Chicago, Illinois, Water Revenue, Series 1997, Zero Coupon, 11/1/2011 (b) .......... 5,000,000 2,684,100
Cook County, IL, General Obligation:
School District #401, Elmwood Park:
Series 1997, Zero Coupon, 12/1/2007 (b) ......................................... 2,180,000 1,470,672
Series 1997, Zero Coupon, 12/1/2009 (b) ......................................... 3,625,000 2,177,393
Series 1999 B, 5.125%, 11/15/2011 (b) ............................................ 3,060,000 3,117,344
Hoffman Estates, IL, Tax Increment Revenue:
Series 1991, Zero Coupon, 5/15/2004 .............................................. 2,450,000 1,963,455
Series 1991, Zero Coupon, 5/15/2006 .............................................. 8,500,000 6,142,270
Illinois Development Finance Authority, Commonwealth Edison,
Series 1994, 5.3%, 1/15/2004 (b) ................................................. 7,500,000 7,824,300
Illinois Educational Facilities Authority, Loyola University,
Series 1991 A, ETM, Zero Coupon,
7/1/2002 (b)** ................................................................... 2,130,000 1,881,663
Illinois Health Facilities Authority:
Evangelical Hospitals, Series 1992 B, ETM, 6.1%, 4/15/2001 (b)** ................. 1,240,000 1,291,844
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sisters Services:
Series 1991 C, 6.1%, 6/1/2000 (b) ............................................... 1,500,000 1,539,105
Series 1993 C, 6.2%, 6/1/2001 (b) ............................................... 1,900,000 1,983,961
Illinois State General Obligation, Series 1994, 4.6%, 12/1/2005 .................... 5,000,000 5,096,300
Illinois State Toll Highway Authority, Series 1998 A, 5.5%, 1/1/2013 (b) ........... 6,865,000 7,255,893
Kendall, Kane & Will Counties, IL, School District #308,
Series 1991, Zero Coupon, 3/1/2003 (b) ........................................... 1,345,000 1,148,791
Macon and Decatur Counties, IL, Certificate of Participation,
Series 1991, 6.3%, 1/1/2000 (b) .................................................. 1,320,000 1,343,338
Metropolitan Pier and Exposition Authority of Illinois, Series
1992, Zero Coupon, 6/15/2004 (b) ................................................. 10,500,000 8,441,685
Rosemont, IL, General Obligation:
Series 1990 B, Zero Coupon, 12/1/2002 (b) ........................................ 2,785,000 2,412,228
Series 1990 C, Zero Coupon, 12/1/2002 (b) ........................................ 3,345,000 2,897,272
Indiana
Indiana Housing Finance Authority, Single Family Mortgage
Revenue, Series 1995 C-1, 5.25%, 7/1/2012 ........................................ 755,000 761,040
Indianapolis, IN, Resource Recovery Revenue, Ogden Martin
Systems Inc. Project, Series 1996, 6.75%, 12/1/2007 (b) .......................... 6,000,000 6,863,460
Madison County, IN, Hospital Facilities Revenue, Holy Cross
Health System, Series 1991, 6.7%,
Prerefunded 12/1/2001, 12/1/2002 (b) (c) ......................................... 1,385,000 1,505,080
Iowa
Iowa Certificate of Participation, Series 1992 A, 6.25%, 7/1/2002 (b) .............. 5,000,000 5,310,450
Kansas
Kansas City, KS, Utility System Revenue:
Series 1991, ETM, Zero Coupon, 3/1/2003 (b)** .................................... 3,850,000 3,300,220
Series 1991, Zero Coupon, 3/1/2003 (b) ........................................... 2,750,000 2,356,613
Louisiana
Jefferson Parish, LA, School Board Sales & Use Tax Revenue,
Series 1986 A, ETM, 7.35%, 2/1/2003** ............................................ 5,055,000 5,535,731
Louisiana Housing Finance Agency, Single Family Mortgage
Revenue, Series 1995 C-1, 5.125%, 12/1/2010 (b) .................................. 1,185,000 1,203,794
Orleans, LA, Levee District, Series 1986, 5.95%, 11/1/2014 (b) ..................... 1,815,000 1,965,355
Massachusetts
Massachusetts General Obligation:
Series 1992 A, 6.4%, 8/1/2003 .................................................... 1,000,000 1,088,400
Series 1992 B, 6.375%, 8/1/2002 .................................................. 2,150,000 2,307,316
Series 1998 C, 5.25%, 8/1/2012 ................................................... 4,000,000 4,119,080
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Massachusetts Health & Educational Facilities Authority, St.
Joseph's Hospital, Series 1989 C,
9.5%, Prerefunded 10/1/1999, 10/1/2020 (c) ....................................... 2,765,000 2,875,904
Massachusetts State Housing Finance Agency:
Series 1992 C, 6.25%, 5/15/2002 .................................................. 2,000,000 2,087,040
Series 1992 C, 6.25%, 11/15/2002 ................................................. 3,420,000 3,598,729
Massachusetts State Industrial Finance Agency:
Resource Recovery, Series 1993 A, 6.15%, 7/1/2002 ................................ 3,250,000 3,393,553
Sturdy Memorial Hospital, Series 1989, 7.9%, 6/1/2009 ............................ 1,545,000 1,581,014
Massachusetts Water Resource Authority, Series 1990 A, 7.25%, 4/1/2001 ............. 1,000,000 1,047,090
Michigan
Detroit, MI, City School District, General Obligation, Series
1998 C, 5.25%, 5/1/2013 (b) ...................................................... 1,000,000 1,037,040
Forest Hills, MI, Public Schools, General Obligation, Series
1999, 5%, 5/1/2013 ............................................................... 1,525,000 1,546,365
Michigan Municipal Bond Authority, Local Government Loan
Program, Series 1991, Zero Coupon, 6/15/2006 (b) ................................. 4,750,000 3,468,925
Michigan State Trunk Line, Series 1998 A, 5.25%, 11/1/2012 ......................... 2,000,000 2,076,180
Romulus, MI, Community Schools, Series 1992-II, Zero Coupon,
Prerefunded 5/1/2007, 5/1/2022 (b) (c) ........................................... 12,400,000 3,183,204
Mississippi
Mississippi Higher Education, Series 1992 B, 6.2%, 1/1/2002 ........................ 1,200,000 1,252,008
Mississippi Hospital Equipment and Facilities Authority, Rush
Medical Foundation Project,
Series 1997 A, 5.4%, 1/1/2007 .................................................... 1,760,000 1,804,827
Nevada
Clark County, NV, School District, General Obligation:
Series 1997 B, 6.5%, 6/15/2007 (b) ............................................... 7,000,000 7,941,290
Series 1999, 5.25%, 6/15/2013 (b) ................................................ 5,000,000 5,089,750
Nevada State Housing Division, Single Family Mortgage Revenue,
Series 1993 R, 5.95%, 10/1/2011 .................................................. 1,485,000 1,548,721
New Hampshire
New Hampshire Higher Education & Health Facilities Authority,
Catholic Charities,
Series 1997 A, 5.75%, 8/1/2011 ................................................... 1,300,000 1,308,294
New Jersey
New Jersey Economic Development Authority, Market Transition
Facility Revenue, Series 1994 A, 7%, 7/1/2004 (b) ................................ 2,500,000 2,816,550
New Jersey State Transportation Trust Fund Authority, Series
1998 A, 5.25%, 6/15/2010 ......................................................... 4,000,000 4,187,800
New Mexico
Bernalillo County, NM, Gross Receipts Tax Revenue, Series
1998, 5%, 4/1/2012 ............................................................... 1,000,000 1,016,060
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
New York
Long Island Power Authority, NY, Electrical Systems Revenue,
Series 1998, 5.125%, 4/1/2012 (b) ......................... 3,000,000 3,030,900
Metropolitan Transportation Authority of New York, Service
Contract:
Commuter Facilities:
Series 1991, 6.75%, 7/1/2000 ............................. 1,200,000 1,242,144
Series 1991, 6.9%, 7/1/2001 .............................. 1,280,000 1,354,880
Transit Facilities:
Series 1991, 6.75%, 7/1/2000 ............................. 2,270,000 2,349,722
Series 1991, 6.9%, 7/1/2001 .............................. 2,415,000 2,556,278
Series 1993 O, 5.75%, 7/1/2007 ........................... 1,975,000 2,115,897
New York, NY, General Obligation:
Series 1992 H, ETM, 6.9%, 2/1/2001** ...................... 505,000 531,457
Series 1992 B, ETM, 6.4%, 10/1/2002** ..................... 1,605,000 1,729,997
Series 1992 B, 6.4%, 10/1/2002 ............................ 3,300,000 3,537,105
Series 1992 B, 6.6%, 10/1/2003 ............................ 205,000 222,786
Series 1992 B, 6.6%, Prerefunded 10/1/2002, 10/1/2003 (c) . 9,995,000 10,967,314
Series 1992 C-1, 6.3%, 8/1/2003 (b) ....................... 50,000 53,924
Series 1994 A, 7%, 8/1/2004 ............................... 7,650,000 8,591,027
Series 1994 A, 6%, 8/1/2005 (b) ........................... 2,560,000 2,791,885
Series 1995 B, 6.75%, 8/15/2003 ........................... 7,000,000 7,679,420
Series 1995 B, 7.25%, 8/15/2007 ........................... 2,900,000 3,406,369
Series 1995 E, 6.6%, 8/1/2004 ............................. 2,500,000 2,761,625
Series 1996 A, 7%, 8/1/2006 ............................... 2,000,000 2,296,920
Series 1996 G, 6.75%, 2/1/2009 ............................ 5,000,000 5,763,850
New York State Dormitory Authority:
City University System, Consolidated Revenue Lease, Series
1993 A, 5.5%, 7/1/2003 .................................... 8,000,000 8,374,640
Cons City University System, Series 1993 A, 5.75%, 7/1/2006
(b) ....................................................... 1,750,000 1,898,050
Federal Housing Authority, Series 1998, 5.5%, 2/1/2011 (b) 4,825,000 5,106,153
Mental Health Services Facilities, Series 1998 G, 5%,
8/15/2008 (b) ............................................. 1,275,000 1,311,899
Pooled Capital Program, Series 1985, 7.8%, 12/1/2005 (b) .. 115,000 119,623
State University Educational Facilities, Series 1990 B, 7%,
5/15/2016 ................................................. 1,900,000 1,994,981
New York State Energy Research and Development Authority,
Pollution Control Revenue,
Series 1995 E, 5.9%, 12/1/2006 (b) ........................ 5,200,000 5,720,624
New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home,
Series 1992 C, 5.95%, 8/15/2009 ........................... 5,180,000 5,433,043
New York State Thruway Authority, Special Obligation, Series
1991 A, Zero Coupon, 1/1/2002 ............................. 3,155,000 2,835,682
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
New York State Urban Development Corp., Correctional
Facilities, Series 1994 A, 5.4%,
1/1/2006 (b) ............................................... 3,500,000 3,703,980
North Carolina
North Carolina, Municipal Power Agency #1, Catawba Electric
Revenue:
Series 1992, 5.9%, 1/1/2003 (b) ............................ 2,550,000 2,702,439
Series 1993, 4.1%, 1/1/2005 (b) ............................ 3,000,000 2,992,500
North Dakota
Bismarck, ND, Hospital Revenue, St. Alexius Medical Center,
Series 1991, ETM, Zero Coupon,
5/1/2000 (b)** ............................................. 2,850,000 2,761,736
Grand Forks, ND, Health Care Facilities, United Hospital
Obligation Group, Series 1991 A, 6%,
12/1/2002 (b) .............................................. 1,160,000 1,233,289
Ohio
Franklin County, OH, Health Care Facilities Revenue, Ohio
Presbyterian Services:
Series 1997, 5.15%, 7/1/2007 ............................... 1,000,000 1,017,690
Series 1997, 5.4%, 7/1/2010 ................................ 1,000,000 1,025,040
Hamilton County, OH, Health System Revenue, Franciscan Sisters
of the Poor, Providence
Hospital, Series 1992, 6.375%, 7/1/2004 .................... 4,495,000 4,868,220
Oregon
Chemeketa, OR, Community College District, General Obligation,
Series 1998, 5.5%, 6/1/2013 ................................ 2,170,000 2,312,178
Pennsylvania
Armstrong County, PA, Hospital Revenue, St. Frances Medical
Center, Series 1992 A, 6.2%,
6/1/2003 ................................................... 3,090,000 3,317,206
Montgomery County, PA, Multi-Family Housing Revenue, Series
1993 A, 6%, 7/1/2004 ....................................... 2,685,000 2,792,024
Pennsylvania State Industrial Development Authority, Economic
Development Agency,
Series 1994, 6%, 1/1/2012 (b) .............................. 1,000,000 1,077,420
Philadelphia, PA, General Obligation, Series 1987 A, 11.5%,
8/1/1999 (b) ............................................... 1,000,000 1,013,730
Schuykill County, PA, Redevelopment Authority, Lease Revenue,
Series 1991 A, 6.55%,
6/1/2000 (b) ............................................... 1,105,000 1,139,962
Scranton-Lackawanna, PA, Health & Welfare Authority, Community
Medical Center Project,
Series 1998, 5.5%, 7/1/2008 (b) ............................ 2,725,000 2,880,543
Somerset County, PA, Certificate of Participation, Series
1991, ETM, 6.45%, 10/15/2000 (b)** ......................... 2,000,000 2,081,640
South Carolina
South Carolina Jobs-Economic Development Authority, St .......
Francis Hospital, Series 1992,
6.375%, 7/1/2004 ........................................... 3,420,000 3,597,395
Sumter County, SC, Hospital Facility Revenue, Tuomey Regional
Medical Center, Series 1991,
6.375%, 11/15/1999 (b) ..................................... 1,000,000 1,013,990
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Tennessee
Johnson City, TN, Health and Educational Facilities Authority,
Medical Center Hospital,
Series 1998, 5.5%, 7/1/2013 (b) ............................ 2,270,000 2,397,846
Nashville & Davidson Counties, TN, Water and Sewer Revenue,
Series 1998 B, 5.25%,
1/1/2013 (b) ............................................... 3,310,000 3,443,856
Texas
Arlington, TX, Independent School District, General
Obligation, Series 1999, 5.125%,
2/15/2013 .................................................. 1,000,000 1,011,830
Austin, TX, Combined Utility System Revenue, Zero Coupon,
Series 1992, 11/15/2009 (b) ................................ 6,775,000 4,120,148
Boerne, TX, Independent School District, General Obligation,
Series 1999, Zero Coupon,
2/1/2013 ................................................... 3,285,000 1,636,718
Brownsville, TX, Utility System Revenue:
Series 1995, 6%, 9/1/2008 (b) .............................. 1,000,000 1,105,300
Series 1995, 6%, 9/1/2009 (b) .............................. 2,700,000 2,994,489
Denison, TX, Hospital Revenue, Texoma Medical Center Inc. ....
Project, Series 1997, 6.125%,
8/15/2012 .................................................. 1,000,000 1,028,480
Harris County, TX, Toll Road Revenue:
Series 1994 A, Zero Coupon, 8/15/2006 (b) .................. 3,915,000 2,833,951
Series 1994 A, Zero Coupon, 8/15/2007 (b) .................. 1,050,000 720,951
Laredo, TX, General Obligation, Series 1998, 5.125%, 8/15/2012
(b) ........................................................ 2,000,000 2,011,700
Richardson, TX, Hospital Authority, Richardson Medical Center:
Series 1993, 6.5%, Prerefunded 12/1/2003, 12/1/2012 (c) .... 665,000 738,835
Series 1993, 6.5%, 12/1/2012 ............................... 1,065,000 1,147,154
San Antonio, TX, Electric and Gas Revenue, Series 1998 A,
5.25%, 2/1/2012 ............................................ 3,000,000 3,078,720
Texas Municipal Power Agency, Series 1989, Zero Coupon,
9/1/2007 (b) ............................................... 8,385,000 5,745,654
Texas Public Finance Authority, Series 1990, Zero Coupon,
2/1/2009 (b) ............................................... 5,860,000 3,699,828
Utah
Intermountain Power Agency, UT, Power Supply Revenue:
Series 1988 B, Zero Coupon, 7/1/2001 (b) ................... 10,495,000 9,675,445
Series 1988 B, Zero Coupon, 7/1/2002 (b) ................... 2,500,000 2,207,200
Series 1996 B, 6.25%, 7/1/2006 (b) ......................... 8,000,000 8,887,680
Series 1998 A, 5.25%, 7/1/2012 (b) ......................... 7,000,000 7,164,920
Salt Lake County, UT, Water Conservation District, Series 1992
A, Zero Coupon, 10/1/2003 (b) .............................. 3,200,000 2,672,768
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Virgin Islands
Virgin Islands, Public Finance Authority:
Series 1992 A, ETM, 6.8%, 10/1/2000** ..................... 1,035,000 1,081,337
Series 1998 C, 5.5%, 10/1/2005 ............................ 3,000,000 3,135,120
Virgin Islands, Water and Power Authority, Electric System
Revenue, Series 1998, 5.25%,
7/1/2009 .................................................. 2,000,000 2,057,520
Virginia
Peninsula Ports Authority, VA, Riverside Health Systems
Project, Series 1998, 5.25%, 7/1/2013 ..................... 2,885,000 2,914,831
Washington
Clark County, WA:
Public Utility District #1, Series 1998, 6%, 1/1/2007 (b) . 12,150,000 13,302,306
School District #117, Series 1998, 5%, 12/1/2011 (b) ...... 1,820,000 1,843,660
King County, WA, Public Hospital District, Valley Medical
Center, Series 1997 N, 6%,
9/1/2009 (b) .............................................. 1,940,000 2,125,037
Snohomish County, WA, Public Utility District #1, Series 1991
B, 6.4%, 1/1/2000 ......................................... 2,000,000 2,035,880
Thurston County, WA, School District, General Obligation,
Series 1996 B, Zero Coupon,
12/1/2010 (b) ............................................. 4,000,000 2,283,720
Washington State Public Power Supply System:
Nuclear Project #1:
Series 1993 B, 5.15%, 7/1/2002 ........................... 5,275,000 5,443,378
Series 1996 A, 6%, 7/1/2005 (b) .......................... 2,950,000 3,211,193
Nuclear Project #2:
Series 1991 A, 6.3%, 7/1/2001 ............................ 6,000,000 6,287,280
Series 1993 A, 5.8%, 7/1/2007 ............................ 2,120,000 2,288,688
Series 1993 B, 5.15%, 7/1/2002 ........................... 6,085,000 6,279,233
Series 1994 A, 4.9%, 7/1/2005 ............................ 4,330,000 4,449,075
Series 1994 A, 5.25%, 7/1/2008 ........................... 3,000,000 3,098,400
Nuclear Project #3:
Series 1989 B, 7.15%, 7/1/2001 ........................... 1,310,000 1,359,963
Series 1989 B, Zero Coupon, 7/1/2004 (b) ................. 8,000,000 6,422,640
Series 1993 B, 5.15%, 7/1/2002 ........................... 3,165,000 3,266,027
Series 1993 B, 5.25%, 7/1/2003 ........................... 3,000,000 3,122,880
Washington State, Higher Education Facilities Authority,
Series 1998, 4.95%, 4/1/2011 (b) .......................... 1,500,000 1,505,235
West Virginia
South Charleston, WV, Pollution Control Revenue, Union
Carbide, Series 1985, 7.625%,
8/1/2005 .................................................. 2,000,000 2,298,420
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Wisconsin
Milwaukee County, WI, General Obligation, Series 1993 A, Zero
Coupon, 12/1/2010 (b) ..................................... 4,160,000 2,375,069
Wisconsin Health & Educational Facilities Authority:
Columbia Hospital Inc., Series 1991, 6.125%, 11/15/2001 (b) 1,000,000 1,051,240
Mercy Health System Corporation:
Series 1995, 6%, 8/15/2005 (b) ........................... 1,400,000 1,518,944
Series 1995, 6.125%, 8/15/2006 (b) ....................... 1,480,000 1,622,332
Series 1995, 6.25%, 8/15/2007 (b) ........................ 1,000,000 1,108,120
Wheaton Franciscan Hospital:
Series 1991, 6%, 8/15/2002 (b) ........................... 1,000,000 1,056,900
Series 1993, 5.8%, 8/15/2004 (b) ......................... 1,675,000 1,791,915
- -----------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $602,672,688) 632,956,391
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $605,381,957) (a) 635,667,101
- -----------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $605,381,957. At May 31, 1999,
net unrealized appreciation based on tax cost for all securities was
$30,285,144. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $31,826,641 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,541,497.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC,
FSA or MBIA/BIG.
(c) Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay principal
and interest on tax-exempt issues and to retire the bonds in full at the
earliest refunding date.
* 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 May 31, 1999
<TABLE>
<CAPTION>
Assets
- -------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $605,381,957) ... $635,667,101
Cash .................................................... 386,267
Receivable for investments sold ......................... 635,000
Interest receivable ..................................... 9,354,860
Receivable for Fund shares sold ......................... 166,534
Other assets ............................................ 17,103
------------
Total assets ............................................ 646,226,865
Liabilities
- -------------------------------------------------------------------------------------------
Dividends payable ....................................... 841,669
Payable for Fund shares redeemed ........................ 1,521,886
Accrued management fee .................................. 300,123
Other payables and accrued expenses ..................... 292,885
------------
Total liabilities ....................................... 2,956,563
-------------------------------------------------------------------------
Net assets, at market value $643,270,302
-------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments 30,285,144
Accumulated net realized gain (loss) .................... 1,670,185
Paid-in capital ......................................... 611,314,973
-------------------------------------------------------------------------
Net assets, at market value $643,270,302
-------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($643,270,302 / 57,106,903 outstanding shares of
beneficial interest, $.01 par value, unlimited ---------------
number of shares authorized).......................... $11.26
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Medium Term Tax Free Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Five Months
Ended Year Ended
May 31, 1999 December 31,
Investment Income (Note E) 1998
- ------------------------------------------------------------------------------ -------------
<S> <C> <C>
Income:
Interest ................................... $ 14,415,788 $ 35,234,097
------------ ------------
Expenses:
Management fee ............................. 1,588,972 3,867,414
Services to shareholders ................... 230,514 611,122
Custodian and accounting fees .............. 45,048 153,255
Trustees' fees and expenses ................ 19,403 38,387
Reports to shareholders .................... 32,412 61,235
Auditing ................................... 48,737 53,448
Registration fees .......................... 18,920 38,074
Legal ...................................... 7,749 12,966
Other ...................................... 10,356 22,371
------------ ------------
2,002,111 4,858,272
----------------------------------------------------------- ------------
Net investment income 12,413,677 30,375,825
----------------------------------------------------------- ------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------ -------------
Net realized gain (loss) from investments .. 1,867,179 2,094,910
Net unrealized appreciation (depreciation)
during the period on investments............ (14,113,518) 3,869,091
----------------------------------------------------------- ------------
Net gain (loss) on investment transactions . (12,246,339) 5,964,001
----------------------------------------------------------- ------------
----------------------------------------------------------- ------------
Net increase (decrease) in net assets
resulting from operations $ 167,338 $ 36,339,826
----------------------------------------------------------- ------------
</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>
Five Months
Ended
May 31, 1999 Years Ended December 31,
Increase (Decrease) in Net Assets (Note E) 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ............................... $ 12,413,677 $ 30,375,825 $ 29,971,130
Net realized gain (loss) from investment transactions 1,867,179 2,094,910 1,973,818
Net unrealized appreciation (depreciation) on
investment transactions during the period (14,113,518) 3,869,091 15,628,599
------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations....................................... 167,338 36,339,826 47,573,547
------------- ------------- -------------
Distributions to shareholders from:
Net investment income ............................... (12,413,677) (30,380,935) (29,971,130)
------------- ------------- -------------
Net realized gains .................................. (409,765) (2,121,192) (2,873,760)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ........................... 45,891,601 148,879,720 128,178,450
Net asset value of shares issued to shareholders in
reinvestment of distributions..................... 8,500,137 20,941,810 21,001,873
Cost of shares redeemed ............................. (76,655,887) (152,419,713) (157,462,022)
------------- ------------- -------------
Net increase (decrease) in net assets from Fund share
transactions...................................... (22,264,149) 17,401,817 (8,281,699)
------------- ------------- -------------
Increase (decrease) in net assets ................... (34,920,253) 21,239,516 6,446,958
Net assets at beginning of period ................... 678,190,555 656,951,039 650,504,081
------------- ------------- -------------
Net assets at end of period ......................... $ 643,270,302 $ 678,190,555 $ 656,951,039
------------- ------------- -------------
Other Information
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........... 59,066,560 57,554,739 58,325,377
------------- ------------- -------------
Shares sold ......................................... 4,009,345 13,026,477 11,430,174
Shares issued to shareholders in reinvestment of .... 745,387 1,831,600 1,872,167
distributions
Shares redeemed ..................................... (6,714,389) (13,346,256) (14,072,979)
------------- ------------- -------------
Net increase (decrease) in Fund shares .............. (1,959,657) 1,511,821 (770,638)
------------- ------------- -------------
Shares outstanding at end of period ................. 57,106,903 59,066,560 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>
Five Months Ended
May 31, 1999 Years Ended December 31,
(Note E) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $11.48 $ 11.41 $ 11.15 $ 11.26 $ 10.39 $ 11.36
----------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .21 .52 .52 .53 .54 .53
Net realized and unrealized gain (loss) on
investment transactions .................... (.21) .11 .31 (.09) .92 (.92)
----------------------------------------------------------------------
Total from investment operations ............. -- .63 .83 .44 1.46 (.39)
----------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.21) (.52) (.52) (.53) (.54) (.53)
Net realized gains on investment transactions (.01) (.04) (.05) (.02) (.05) (.05)
Total distributions .......................... (.22) (.56) (.57) (.55) (.59) (.58)
----------------------------------------------------------------------
Net asset value, end of period ............... $11.26 $ 11.48 $ 11.41 $ 11.15 $ 11.26 $ 10.39
----------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Total Return (%) ............................. (.02)** 5.58 7.69 4.02 14.32(a) (3.50)(a)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ....... 643 678 657 651 712 701
Ratio of operating expenses net, to average
daily net assets (%) ....................... .72* .72 .74 .72 .70 .63
Ratio of operating expenses before expense
reductions, to average daily net assets .... .72* .72 .74 .72 .72 .71
Ratio of net investment income to average 4.49* 4.51 4.67 4.75 4.92 4.94
daily net assets (%)........................
Portfolio turnover rate (%) .................. 12.5* 10.8 13.4 14.1 36.1 33.8
</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
A. Significant Accounting Policies
Scudder Medium Term Tax Free Fund (the "Fund") is organized as a diversified
series of Scudder Tax Free Trust, a Massachusetts business trust (the "Trust"),
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 purchased with remaining
maturities greater than sixty days are valued by pricing agents approved by the
officers of the Fund, whose 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 debt
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
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 of 1986, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed and, therefore,
will be distributed to shareholders. An additional distribution may be made to
the extent necessary to avoid the payment of a four percent federal excise tax.
Distributions of net realized capital gains to shareholders are recorded on
ex-dividend date.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
The Fund uses the identified cost 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.
24 - Scudder Medium Term Tax Free Fund
<PAGE>
B. Purchases and Sales of Securities
During the five months ended May 31, 1999, purchases and sales of municipal
securities (excluding short-term investments) aggregated $34,136,426 and
$59,538,261, respectively. During the year ended December 31, 1998, purchases
and sales of municipal securities (excluding short-term investments) aggregated
$78,573,792 and $70,467,320, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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 Agreement. The management fee
payable under the 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 net assets
in excess of $500,000,000 computed and accrued daily and payable monthly. For
the five months ended May 31, 1999, the management fee aggregated $1,588,972
which was equivalent to an annual effective rate of 0.57% of the Fund's average
daily net assets. For the year ended December 31, 1998, the management fee
aggregated $3,867,414 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
five months ended May 31, 1999 the amount charged to the Fund by SSC aggregated
$135,451, of which $26,604 is unpaid at May 31, 1999. For the year ended
December 31, 1998, the amount charged to the Fund by SSC aggregated $347,239.
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 five months
ended May 31, 1999, the amount charged to the Fund by SFAC aggregated $38,815,
of which $7,681 is unpaid at May 31, 1999. For the year ended December 31, 1998,
the amount charged to the Fund by SFAC aggregated $93,421.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the five
months ended May 31, 1999, Trustees' fees and expenses aggregated $19,403. For
the year ended December 31, 1998, Trustees' fees and expenses aggregated
$38,387.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Year End Change
On August 10, 1998, the Board of Trustees of the Trust changed the fiscal year
end of the Fund from December 31 to May 31.
25 - Scudder Medium Term Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Tax Free Trust and the Shareholders of Scudder Medium
Term Tax Free Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Medium Term Tax Free Fund
(the "Fund") at May 31, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 19, 1999
26 - Scudder Medium Term Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid from net investment income for the five months ended May
31, 1999, 100% were exempt interest dividends which are tax exempt for regular
federal income tax purposes. The Fund paid distributions of $.01 per share from
net long-term capital gains during the five months ended May 31, 1999.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$1,900,000 as capital gain dividends for the five months ended May 31, 1999.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
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; Venture Partner,
Venture Capital Group
Ashton P. Goodfield*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
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 --
Prime Reserve Shares*
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 GNMA Fund
Scudder Income Fund
Scudder Corporate Bond 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 Select 500 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 Select 1000 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
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
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 or classes thereof 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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold 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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. 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.
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 $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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
