Scudder
Limited Term Tax
Free Fund
Annual Report
May 31, 1999
No-Load Funds
A fund seeking to provide as high a level of income exempt from regular federal
income tax as is consistent with a high degree of principal stability.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Limited Term Tax Free Fund
- --------------------------------------------------------------------------------
Date of Inception: 2/15/94 Total Net Assets as of Ticker Symbol: SCLTX
5/31/99: $107 million
- --------------------------------------------------------------------------------
o Scudder Limited Term Tax Free Fund's fiscal year end has changed from October
31 to May 31. For its abbreviated fiscal year beginning November 1, 1998,
through May 31, 1999, Scudder Limited Term Tax Free Fund posted a total return
of 1.05%. Over the 12 months ended May 31, the Fund's 3.79% return outpaced the
3.68% average performance of the Fund's peers, according to Lipper.
o As of May 31, 1999, Scudder Limited Term Tax Free Fund's 30-day net annualized
SEC yield was 3.38%, equivalent to a 5.60% taxable yield for investors subject
to the 39.6% maximum federal income tax rate.
o Scudder Limited 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 18 Notes to Financial Statements
4 Performance Update 20 Report of Independent Accountants
5 Portfolio Summary 21 Tax Information
6 Portfolio Management Discussion 22 Shareholder Meeting Results
9 Glossary of Investment Terms 24 Officers and Trustees
10 Investment Portfolio 25 Investment Products and Services
14 Financial Statements 26 Scudder Solutions
17 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- and five-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 a 4-star rating for the three- and five-year periods, respectively.
The top 10% of funds in a broad asset class receive 5 stars and the next 22.5%
receive 4 stars. The Fund was rated among 1,586 and 1,184 funds in its broad
asset class for the three- and five-year periods, respectively.
2 - Scudder Limited Term Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Limited Term Tax Free Fund's
abbreviated fiscal year ended May 31, 1999. We have changed the Fund's fiscal
year from October 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.
The Fund posted a 1.05% total return for its abbreviated fiscal year ended May
31. In addition, the Fund's 3.79% one-year return outpaced the 3.68% return of
similar funds over the same period as compiled by Lipper.
Investors concerned about the increased volatility of the financial markets
during the past 12 months should find the chart on page 6 of interest. The chart
shows that over the 12 months ended May 31, 5-year municipal bonds displayed
measurably less price volatility than comparable Treasury securities. For more
information concerning Scudder Limited 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 pursuing 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. Page 27 provides more information on how
to contact Scudder. Thank you for choosing Scudder Limited Term Tax Free Fund to
help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Limited Term Tax Free Fund
3 - Scudder Limited Term Tax Free Fund
<PAGE>
Performance Update as of May 31, 1999
- ---------------------------------------------------
Fund Index Comparisons
- ---------------------------------------------------
Total Return
- ---------------------------------------------------
Period Ended Growth of Average
5/31/1999 $10,000 Cumulative Annual
- ---------------------------------------------------
Scudder Limited Term Tax Free Fund
- ---------------------------------------------------
1 Year $ 10,379 3.79% 3.79%
5 Year $ 12,784 27.84% 5.04%
Life of Fund* $ 12,754 27.54% 4.71%
- ---------------------------------------------------
Lehman Brothers Municipal Bond Index (3 Year)
- ---------------------------------------------------
1 Year $ 10,463 4.63% 4.63%
5 Year $ 12,907 29.07% 5.23%
Life of Fund* $ 12,887 28.87% 4.95%
- ---------------------------------------------------
* The Fund commenced operations on February 15, 1994.
Index comparisons begin February 28, 1994.
- ---------------------------------------------------
Growth of a $10,000 Investment
- ---------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
- -------------------------------------------
Lehman
Brothers
Municipal Scudder
Bond Index Limited Term
(3 year) Tax Free Fund
- -------------------------------------------
2/94* 10000 10000
- -------------------------------------------
'94 9985 10030
- -------------------------------------------
'95 10560 10613
- -------------------------------------------
'96 11061 11076
- -------------------------------------------
'97 11656 11653
- ------------------------------------------
'98 12317 12354
- -------------------------------------------
'99 12887 12823
- -------------------------------------------
Yearly periods ended May 31
The 3-year Lehman Brothers Municipal Bond Index is an unmanaged,
market-value-weighted measure of the short-term municipal bond market and
includes bonds with maturities of two to three years. Index returns assume
reinvested dividends and, unlike Fund returns, do not reflect fees or expenses.
- -------------------------------------------
Returns and Per Share Information
- -------------------------------------------
Yearly periods ended May 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1994* 1995 1996 1997 1998 1999(a)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 11.83 $ 11.92 $ 11.88 $ 11.95 $ 12.14 $ 12.10
- -------------------------------------------------------------------------------------
Income Dividends $ .14 $ .58 $ .55 $ .52 $ .55 $ .50
- -------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ .01 $ .02 $ -- $ --
- -------------------------------------------------------------------------------------
Fund Total Return (%) -.24 5.81 4.36 5.21 6.02 3.79
- -------------------------------------------------------------------------------------
Index Total Return (%) -.15 5.76 4.74 5.38 5.67 4.63
- -------------------------------------------------------------------------------------
</TABLE>
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. If the Adviser had not maintained the Fund's
expenses, the total returns for the Fund would have been lower.
(a) On August 10, 1998, the Board of Trustees of the Fund changed the fiscal
year end from October 31 to May 31.
4 - Scudder Limited Term Tax Free Fund
<PAGE>
Portfolio Summary as of May 31, 1999
- --------------------------------------------------------------------------------
Diversification
- --------------------------------------------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the table below.
Core Cities/Lease 22%
State General Obligation 14%
Hospital/Health Revenue 12%
School District/Lease 11%
Electric Utility Revenue 11%
Sales/Special Tax 8%
Port/Airport Revenue 4%
Industrial Development Revenue 3%
Water/Sewer Revenue 3%
Miscellaneous Municipal 12%
--------------------------------------
100%
--------------------------------------
The Fund is broadly diversified, with holdings in several categories of general
obligation and revenue bonds.
- --------------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the table below.
AAA 52%
AA 13%
A 20%
BBB 7%
Not Rated 8%
--------------------------------------
100%
--------------------------------------
Weighted average quality: AA
Overall portfolio quality remains high, with 65% of the Fund's holdings rated
AAA or AA.
- --------------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the table below.
Less 1 year 5%
1 - 5 years 72%
5 - 8 years 17%
8 - 10 6%
--------------------------------------
100%
--------------------------------------
Weighted average effective maturity: 3.68 years
Over the Fund's abbreviated fiscal year, we emphasized tax-exempt bonds with
maturities of two to five years to take advantage of attractive yields and what
we felt were the most promising capital appreciation opportunities within the
Fund's range of acceptable maturities.
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 Limited 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 Limited Term Tax Free
Fund's most recent fiscal year. During its abbreviated fiscal year beginning
November 1, 1998, through May 31, 1999, the Fund returned 1.05%. The Fund's
12-month total return of 3.79% was higher than the 3.68% average return of
similar funds as tracked by Lipper Analytical Services, Inc., an independent
analyst of investment performance. As of May 31, 1999, Scudder Limited Term Tax
Free Fund's 30-day net annualized SEC yield was 3.38%, equivalent to a 5.60%
taxable yield for investors subject to the 39.6% maximum federal income tax
rate.
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 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.
Though presidential impeachment proceedings distracted the financial markets,
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, recording a
dramatic 6% annualized increase in GDP for the fourth quarter. This show of
strength, in turn, worried bond investors, who responded by sending 30-year
Treasury bond yields back up to July 1998 levels.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
- --------------------------------------------------------------------------------
LINE CHART TITLE:
Municipals Provided Greater Stability
Monthly prices of 5-year AAA-rated municipal bonds
compared with prices of 5-year U.S. Treasury Bonds,
5/31/98-5/31/99
LINE CHART DATA:
-----------------------------------
5-year 5-year
U.S. AAA-rated
Treasury municipal
Bonds bonds
-----------------------------------
5/98 99.87 100
6/98 100.56 100
7/98 100.13 100
8/98 102.59 101.13
9/98 106.49 102.04
10/98 106.36 101.81
11/98 104.02 101.58
12/98 104.43 101.58
1/99 104.34 102.04
2/99 101.35 101.58
3/99 101.74 100.99
4/99 102.184 101.35
5/99 99.956 100.45
-----------------------------------
Past performance is not indicative of futures results.
Source: Scudder Kemper Investments, Inc.
- --------------------------------------------------------------------------------
Over the twelve months ended May 31, yields of five-year Treasury bonds ended
slightly higher, beginning at 5.41% and ending at 5.58%. Over the same time
frame, yields of five-year AAA insured municipal bonds declined from 4.10% to
4.00%.
In addition to high tax-free yields, municipal bonds have historically
offered greater price stability over time than Treasury bonds of comparable
maturity. The chart above demonstrates the record over the past 12 months, when
most financial markets were at a peak of volatility.
6 - Scudder Limited Term Tax Free Fund
<PAGE>
Tax-Free Income and Below-Average Risk
Scudder Limited Term Tax Free Fund is designed to deliver tax-free income with
below-average price risk through investments primarily in municipal bonds with
effective maturities between one and ten years. The Fund seeks higher income
than is typically available from tax-free money market investments and less
share price fluctuation than is found in intermediate- and long-term tax-free
bonds. The Fund's professional management, economies of scale, liquidity, and
ability to diversify its assets continue to offer advantages compared with the
holding of individual municipal bonds.
Over the Fund's most recent fiscal year the Fund emphasized tax-exempt
bonds with maturities of two to five years. We did this to take advantage of
attractive yields and what we felt were the most promising opportunities for
capital appreciation within the Fund's range of acceptable maturities. We also
emphasized high quality bonds when making new purchases: High quality bonds
generally represented attractive value, while we believe yields on bonds of
lower quality are not high enough at this time to make it worthwhile to incur
additional credit risk. The Fund's overall credit quality remains high, with 65%
of the bonds in the Fund's portfolio rated AAA or AA. Lastly, we continued to
emphasize premium bonds (91% of the Fund's portfolio as of May 31), which
generally exhibit less interest rate sensitivity than bonds priced at par.
7 - Scudder Limited Term Tax Free Fund
<PAGE>
Outlook
Because the powerful market forces that have brought the United States close to
price stability -- including technology, deregulation, globalization, and
vigilant central banks -- are still in full effect, we believe that inflation
will remain restrained over the next several years. At the same time, we believe
that higher oil prices could prompt a "gentle slowdown" in U.S. economic
activity. This would relieve some of the financial imbalances (vigorous
individual and corporate spending contrasting with shrinking savings and profit
levels, for example) that we are currently observing in the economy.
Low inflation, and any slowing of the economy, in turn, would benefit
municipal bonds, which continue to be attractively priced versus Treasuries and
could benefit from a projected shrinkage in supply. At the same time, we are
mindful that the U.S. economy is nearing "full employment," and that an economic
rebound in Asia could cause the U.S. economy to overheat. While we plan to
extend maturity slightly to take advantage of higher yields, we will also pursue
a conservative investment strategy by keeping the Fund's credit quality at a
high level, holding premium bonds, and diversifying broadly. Over the coming
months, we will pursue attractive value by weighing the maturity
characteristics, credit quality, and income potential of each bond we consider
adding to the Fund's portfolio. Thank you for investing with Scudder.
Sincerely,
Your Portfolio Management Team
/s/Ashton P. Goodfield /s/Philip G. Condon
Ashton P. Goodfield Philip G. Condon
Scudder Limited Term
Tax Free Fund:
A Team Approach to Investing
Scudder Limited 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 1999 and joined the
Adviser in 1983. Mr. Condon has 17 years of experience in municipal investing
and portfolio management.
8 - Scudder Limited Term Tax Free Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the federal,
state, or local government or a corporation that
obligates the issuer to pay the bondholder a
specified amount of interest for a stated period --
usually a number of years -- and to repay the face
amount of the bond at its maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith and
credit" (including the taxing and further
borrowing power) of the city, state, or agency that
issues the bond. A general obligation bond is repaid
with the issuer's general revenue and borrowings.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace-- in other words, when
too much money is chasing too few goods. High
inflation has a negative impact on the prices of
fixed-income securities.
MUNICIPAL BOND An interest-bearing debt security issued by a
state or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund based
on the sum of the market value of all the
securities owned by the fund divided by the number of
outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument
would have to provide to equal that of a
tax-free municipal bond on an after-tax basis.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings of every holding in a given fund's
portfolio, net of expenses, assuming each is held to
maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return -- annualized or
compound -- is based on a combination of share price
changes plus income and capital gain distributions,
if any, expressed as a percentage gain or loss in
value.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
9 - Scudder Limited Term Tax Free Fund
<PAGE>
Investment Portfolio as of May 31, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 1.9%
- ----------------------------------------------------------------------------------------------------------------------------------
New York
-----------
<S> <C> <C>
Long Island, NY, Power Authority, Series 1998-6, 3.2%, 5/1/2033* (Cost $2,000,000) ...................... 2,000,000 2,000,000
-----------
Intermediate-Term Municipal Investments 98.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Arizona
Central Arizona Water Conservation District:
Series 1990, Prerefunded 11/1/2000, 7.5%, 11/1/2005*** ................................................ 1,000,000 1,074,460
Series 1991 B, Prerefunded 5/1/2001, 6.5%, 11/1/2011*** ............................................... 1,195,000 1,277,993
Arkansas
Rogers, AR, Sales and Use Tax Revenue, Series 1996, 5%, 11/1/2015 ....................................... 745,000 750,759
California
Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Revenue, Senior Lien,
Series 1995, Zero Coupon, 1/1/2005 .................................................................... 1,000,000 784,410
Sacramento, CA, Cogeneration Project Revenue, Proctor & Gamble Project,
Series 1995, 7%, 7/1/2004 ............................................................................. 1,000,000 1,114,500
Colorado
Boulder County, CO, Industrial Development Revenue, May Department Stores, Series 1997,
6.25%, 9/1/2007 ....................................................................................... 1,250,000 1,321,525
Delaware
Delaware State Health Facilities Authorities Revenue, Medical Center of Delaware,
Series 1989, 7%, 10/1/2003 (b) ........................................................................ 1,500,000 1,547,520
District of Columbia
District of Columbia, General Obligation:
Series 1993 A, ETM, 5.625%, 6/1/2002 (b)** ............................................................ 110,000 115,305
Series 1993 A, 5.625%, 6/1/2002 (b) ................................................................... 1,390,000 1,449,812
Series 1993 D, ETM, 5.25%, 12/1/2003 (b)** ............................................................ 40,000 41,993
Series 1993 D, 5.25%, 12/1/2003 (b) ................................................................... 960,000 1,001,808
Florida
Dade County, FL, Port Authority Revenue, Series 1968 C, 5.5%, Prerefunded 4/1/2007,
10/1/2007*** .......................................................................................... 4,490,000 4,676,694
Georgia
Georgia Municipal Electric Authority, Power Revenue, ETM, Series 1991 U, 6.6%,
1/1/2001 (b)** ........................................................................................ 1,000,000 1,043,280
Henry County, Georgia, School District Revenue, General Obligation, Series 1997,
5%, 9/1/2001 (b) ...................................................................................... 3,670,000 3,769,861
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Limited Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Illinois
Chicago, IL, General Obligation, Series 1995 C, 6.25%, 10/31/2002 (b) ................................... 3,450,000 3,692,432
Cook County, IL, Community High School District #219, General Obligation, Series 1998,
Zero Coupon, 12/1/2006 (b) ............................................................................ 2,360,000 1,679,777
Edgewater Medical Center, Series 1998 A, 4.7%, 7/1/2031* ................................................ 2,275,000 2,296,431
Illinois Health Facilities Authority:
Methodist Medical Center, Series 1998, 5.5%, 11/15/2004 (b) ........................................... 1,245,000 1,315,803
Sherman Hospital Project, ETM, Series 1991, 6.5%, 8/1/2001 (b)** ...................................... 1,025,000 1,084,378
Springfield, IL, Electric Revenue, Series 1995, 6%, 3/1/2004 (b) ........................................ 1,500,000 1,613,235
Indiana
Indiana Health Facilities Finance Authority, Ancilla Systems Inc., Series 1992 A,
5.875%, 7/1/2002 (b) .................................................................................. 1,000,000 1,051,900
Indiana State Housing Finance Authority, Single Family Mortgage Revenue, Series 1995 C-1,
5.25%, 7/1/2012 (b) ................................................................................... 1,070,000 1,078,560
Iowa
Cedar Rapids, IA, Hospital Facilities Revenue, St. Luke's Hospital:
Series 1993, ETM 5.65%, 8/15/2002 (b)** ............................................................... 490,000 516,240
Series 1993, 5.65%, 8/15/2002 (b) ..................................................................... 760,000 795,781
Des Moines, IA, Hospital Revenue, Des Moines General Hospital Project, Series 1996A,
6%, 11/15/2002 ........................................................................................ 1,750,000 1,851,115
Louisiana
Jefferson Parish, LA, School Board Sales & Use Tax Revenue, ETM, Series 1986 A, 7.25%,
2/1/2001** ............................................................................................ 6,135,000 6,470,462
Louisiana State, General Obligation, Series 1996 A, 6%, 8/1/2002 (b) .................................... 1,000,000 1,060,850
Massachusetts
New England Education Loan Marketing Corporation, Massachusetts Student Loan
Revenue, Series 1992 D, 6.2%, 9/1/2000 (b) ............................................................ 2,000,000 2,062,880
Nevada
Nevada State, Colorado River Commission, Series 1994, 6.5%, Prerefunded 7/1/2004,
7/1/2019*** ........................................................................................... 1,000,000 1,116,880
New Jersey
New Jersey State Turnpike Authority, ETM, Series 1968 C, 5.2%, 1/1/2008** ............................... 1,220,000 1,260,150
New York
New York City, NY, General Obligation:
Series 1991 A, 3%, 8/15/2002 (b) ...................................................................... 1,000,000 973,910
Series 1995 B, 6.75%, 8/15/2003 ....................................................................... 6,000,000 6,582,360
Series 1995 D, 6.5%, 2/15/2005 ........................................................................ 1,315,000 1,450,971
Series 1996 A, 6.75%, 8/1/2004 ........................................................................ 1,500,000 1,667,295
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Limited Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Series 1996 I, 6.5%, 3/15/2005 .......................................................... 1,575,000 1,739,950
Series 1997 I, 6.25%, 4/15/2006 ......................................................... 1,000,000 1,100,030
New York State Dormitory Authority, State University Educational Facility,
Series 1995 A, 6.5%, 5/15/2004 .......................................................... 1,000,000 1,096,440
New York State Medical Care Facilities, Finance Agency Revenue, Series 1992 C, 5.95%,
8/15/2009 (b) ........................................................................... 800,000 839,080
New York State Urban Development, Corporation Revenue, Onondaga County
Convention Center:
Series 1995, 6%, 1/1/2004 .............................................................. 1,445,000 1,542,581
Series 1995, 6%, 1/1/2005 .............................................................. 1,535,000 1,649,204
Syracuse, NY, Industrial Development Agency, Pilot Revenue, Series 1995, 5.125%, 10/15/2002 1,500,000 1,538,475
North Carolina
Charlotte, NC, Water & Sewer Revenue, General Obligation, Series 1998, 4.75%, 2/1/2001 .... 3,310,000 3,371,566
North Carolina Municipal Power Agency #1, Catawaba Electric Revenue, Series 1992,
5.75%, 1/1/2002 (b) ..................................................................... 1,150,000 1,199,324
Tennessee
Metropolitan Government Nashville & Davidson County, TN, General Obligation,
Prerefunded 5/15/2002, 6.125%, 5/15/2019*** ............................................. 1,000,000 1,079,820
Texas
Austin, TX, Independent School District, General Obligation, ETM, Series 1991,
8.125%, 8/1/2001 (b)** .................................................................. 1,000,000 1,090,900
Austin, TX, Utility System Revenue:
Series 1991 A, ETM, 6.3%, 11/15/2001 (b)** .............................................. 365,000 387,142
Series 1991 A, 6.3%, 11/15/2001 (b) ..................................................... 635,000 671,811
Ector County, TX, Hospital District Revenue, Series 1997, 5.5%, 4/15/2003 (b) ............. 1,000,000 1,045,690
Plano, TX, Independent School District, General Obligation, Series 1998, 6%, 2/15/2004 .... 4,790,000 5,163,381
Richardson, TX, Hospital Authority, Richardson Medical Center:
Prerefunded 12/01/2003, Series 1993, 6.5%, 12/1/2012*** ................................. 340,000 377,750
Series 1993, 6.5%, 12/1/2012 ............................................................ 535,000 576,270
Texas Department of Housing & Community Affairs, Single-Family Mortgage Revenue,
Series 1996 B, 5.5%, 3/1/2011 (b) ....................................................... 1,125,000 1,149,210
Texas State Public Finance Authority, General Obligation, Series 1996 C, 6%, 10/1/2008 .... 2,400,000 2,668,056
Utah
Utah State, General Obligation, Series 1997, 5.5%, 7/1/2007 ............................... 2,000,000 2,155,380
Virgin Islands
Virgin Islands, Public Finance Authority Revenue, Series 1998 C, 5.5%, 10/1/2005 .......... 1,000,000 1,045,040
The accompanying notes are an integral part of the financial statements.
12 - Scudder Limited Term Tax Free Fund
<PAGE>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Virginia
Virginia State Public School Authority, General Obligation, Series 1994 B, Prerefunded
8/1/2004, 6.5%, 8/1/2015*** ................................................................ 3,000,000 3,382,590
Washington
Lewis County, WA, Public Utility District 1, Cowlitz Falls Hydroelectric Project, Series 1991,
Prerefunded 10/1/2001, 7%, 10/1/2022*** .................................................... 1,430,000 1,561,074
Washington Public Power Supply System, Nuclear Project #2:
Series 1990 C, 7.3%, 7/1/2000 .............................................................. 1,300,000 1,351,935
Series 1991 A, 6.3%, 7/1/2001 .............................................................. 1,000,000 1,047,880
Series 1992 A, 5.7%, 7/1/2002 .............................................................. 1,550,000 1,623,563
West Virginia
Wayne County, WV, Atlantic Richfield Company Project, ETM, Series 1981, 11.75%,
12/1/2001** ................................................................................ 495,000 587,060
Wisconsin
Milwaukee, WI, Metropolitan Sewer District, ETM, Series 1990 A, 6.7%, 10/1/2001** ............ 1,000,000 1,065,710
Wisconsin Health and Education Facilities Authority Revenue, St. Luke's Medical Center,
ETM, Series 1991, 6.6%, 8/15/2001 (b)** .................................................... 1,745,000 1,851,497
- ----------------------------------------------------------------------------------------------------------------------------------
Total Intermediate-Term Municipal Investments (Cost $100,495,800) 103,549,739
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $102,495,800) (a) 105,549,739
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $102,495,800. At May 31,
1999, net unrealized appreciation for all securities based on tax cost
was $3,053,939. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $3,130,103 and aggregate gross unrealized
depreciation for all securities in which there was an excess tax cost
over market value of $76,164.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty,
FGIC, FSA, or MBIA/BIG.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such
as the coupon-equivalent of the Treasury bill rate. Variable rate
demand notes are securities whose yields are periodically reset at
levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and
normally incorporate an irrevocable letter of credit or line of credit
from a major bank. These notes are carried, for purposes of calculating
average weighted maturity, at the longer of the period remaining until
the next rate change or to the extent of the demand period.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow by
a trustee and used to pay principal and interest on bonds so
designated.
*** Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury Securities which are held in escrow and are used to pay
principal and interest on tax-exempt issues and to retire the bonds in
full at the earliest refunding date.
The accompanying notes are an integral part of the financial statements.
13 - Scudder Limited 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 $102,495,800) $105,549,739
Cash ................................................ 392,638
Receivable for investments sold ..................... 45,619
Interest receivable ................................. 1,608,673
Receivable for Fund shares sold ..................... 289,069
Other assets ........................................ 1,264
------------
Total assets ........................................ 107,887,002
Liabilities
- ---------------------------------------------------------------------------------------
Dividends payable ................................... 206,569
Payable for Fund shares redeemed .................... 260,968
Accrued management fee .............................. 46,406
Other payables and accrued expenses ................. 69,337
------------
Total liabilities ................................... 583,280
---------------------------------------------------------------------
Net assets, at market value ......................... $107,303,722
---------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------
Net assets consist of:
Unrealized appreciation (depreciation) on investments 3,053,939
Accumulated net realized gain (loss) ................ 439,289
Paid-in capital ..................................... 103,810,494
---------------------------------------------------------------------
Net assets, at market value ......................... $107,303,722
---------------------------------------------------------------------
Net Asset Value
- ---------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per
share ($107,303,722 / 8,870,916 shares outstanding
of beneficial interest, $.01 par value, unlimited
number of shares authorized).......................... $12.10
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Limited Term Tax Free Fund
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Seven Months Year Ended
Ended May 31, October 31,
Investment Income 1999 (Note E) 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest ........................................... $ 3,400,261 $ 6,452,037
----------- -----------
Expenses:
Management fee ..................................... 424,563 794,767
Custodian and accounting fees ...................... 32,505 65,451
Services to shareholders ........................... 24,508 76,305
Trustees' fees and expenses ........................ 20,187 43,170
Registration fees .................................. 17,001 26,770
Auditing ........................................... 36,707 30,448
Legal .............................................. 1,049 6,858
Reports to shareholders ............................ 6,050 21,248
Amortization of organization expense ............... 1,756 8,388
Other .............................................. 8,453 7,625
----------- -----------
Total expenses before expense reductions ........... 572,779 1,081,030
Expense reductions ................................. (42,073) (86,875)
----------- -----------
Expenses, net ...................................... 530,706 994,155
---------------------------------------------------------------------------------
Net investment income .............................. 2,869,555 5,457,882
---------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments .......... 578,402 (139,113)
Net unrealized appreciation (depreciation) on
investments during the period....................... (2,118,666) 1,558,802
---------------------------------------------------------------------------------
Net gain (loss) on investments ..................... (1,540,264) 1,419,689
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from $ 1,329,291 $ 6,877,571
operations
---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Limited Term Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Seven Months
Ended
May 31, 1999 Years Ended October 31,
Increase (Decrease) in Net Assets (Note E) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ............................. $ 2,869,555 $ 5,457,882 $ 5,201,534
Net realized gain (loss) on investments ........... 578,402 (139,113) 75,394
Net unrealized appreciation (depreciation) on
investments during the period...................... (2,118,666) 1,558,802 1,386,314
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations.................................... 1,329,291 6,877,571 6,663,242
------------- ------------- -------------
Distributions to shareholders from:
Net investment income ............................. (2,869,555) (5,457,882) (5,201,534)
------------- ------------- -------------
Net realized gains ................................ -- (57,180) (205,773)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ......................... 20,000,539 68,479,028 46,364,831
Net asset value of shares issued to shareholders in
reinvestment of distributions ..................... 1,255,955 2,328,280 2,206,361
Cost of shares redeemed ........................... (41,586,645) (59,872,051) (56,611,187)
------------- ------------- -------------
Net increase (decrease) in net assets from Fund
share transactions................................. (20,330,151) 10,935,257 (8,039,995)
------------- ------------- -------------
Increase (decrease) in net assets ................. (21,870,415) 12,297,766 (6,784,060)
Net assets at beginning of period ................. 129,174,137 116,876,371 123,660,431
------------- ------------- -------------
Net assets at end of period ....................... $ 107,303,722 $ 129,174,137 $ 116,876,371
------------- ------------- -------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ......... 10,536,316 9,639,451 10,318,550
------------- ------------- -------------
Shares sold ....................................... 1,638,556 5,627,934 3,856,337
Shares issued to shareholders in reinvestment of
distributions ..................................... 102,879 191,473 183,612
Shares redeemed ................................... (3,406,835) (4,922,542) (4,719,048)
------------- ------------- -------------
Net increase (decrease) in Fund shares ............ (1,665,400) 896,865 (679,099)
------------- ------------- -------------
Shares outstanding at end of period ............... 8,870,916 10,536,316 9,639,451
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Limited 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>
For the Period
February 15,
1994
(commencement
Seven Months of operations)
Ended May 31, Years Ended October 31, to October 31,
1999 (Note E) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 12.26 $ 12.12 $ 11.98 $ 12.01 $ 11.67 $ 12.00
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income .................... .29 .50 .52 .53 .56 .38
Net realized and unrealized gain (loss) on
investments............................. (.16) .15 .16 (.02) .34 (.33)
---------------------------------------------------------------------------------
Total from investment operations ......... .13 .65 .68 .51 .90 .05
---------------------------------------------------------------------------------
Less distributions from:
Net investment income .................... (.29) (.50) (.52) (.53) (.56) (.38)
Net realized gain on investment
transactions............................ -- (.01) (.02) (.01) -- --
---------------------------------------------------------------------------------
Total distributions ...................... (.29) (.51) (.54) (.54) (.56) (.38)
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net asset value, end of period ........... $ 12.10 $ 12.26 $ 12.12 $ 11.98 $ 12.01 $ 11.67
---------------------------------------------------------------------------------
Total Return (%) (a) ..................... 1.05** 5.37 5.89 4.33 7.94 .44**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ... 107 129 117 124 122 68
Ratio of operating expenses, net to
average daily net assets (%)............ .75* .75 .75 .63 .23 --
Ratio of operating expenses before expense
reductions, to average daily net assets % .81* .82 .83 .82 .85 1.29*
Ratio of net investment income to average 4.06* 4.12 4.32 4.46 4.78 4.84*
daily net assets (%)
Portfolio turnover rate (%) .............. 5.6* 23.2 17.8 37.7 37.5 36.3*
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
17 - Scudder Limited Term Tax Free Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Limited Term Tax Free Fund (the "Fund") is a diversified series of
Scudder Tax Free Trust, a Massachusetts business trust (the "Trust"), which is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. There are currently two series in the Trust.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities 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.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization were deferred and amortized on a straight-line basis over a
five-year period.
Other. Investment transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the
call or maturity date.
18 - Scudder Limited Term Tax Free Fund
<PAGE>
B. Purchases and Sales of Securities
During the seven months ended May 31, 1999, purchases and sales of investments
(excluding short-term) aggregated $3,879,238 and $23,351,023, respectively. For
the year ended October 31, 1998, purchases and sales of investments (excluding
short-term) aggregated $45,151,971 and $28,658,201, 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 objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.60%, computed and
accrued daily and payable monthly. The Adviser agreed to maintain the Fund's
expenses at 0.75% of average daily net assets until September 30, 1999. For the
seven months ended May 31, 1999, the Adviser did not impose a portion of its fee
amounting to $42,073 and the amount imposed aggregated $382,490. For the year
ended October 31, 1998, the Adviser did not impose a portion of its fee
amounting to $86,875 and the amount imposed aggregated $707,892.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
seven months ended May 31, 1999, the amount charged to the Fund by SSC
aggregated $24,095 of which $3,300 was unpaid at May 31, 1999. For the year
ended October 31, 1998, the amount charged to the Fund by SSC aggregated
$44,864.
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 seven months
ended May 31, 1999, the amount charged to the Fund by SFAC aggregated $18,697 of
which $3,000 was unpaid at May 31, 1999. For the year ended October 31, 1998,
the amount charged to the Fund aggregated $40,937.
The Trust pays each Trustee not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the seven months ended May 31, 1999 and the year ended October 31, 1998,
Trustees' fees and expenses charged to the Fund aggregated $20,187 and $43,170,
respectively.
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 Fund changed the fiscal year
end from October 31 to May 31.
19 - Scudder Limited Term Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Tax Free Trust and to the Shareholders of Scudder
Limited 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 Limited 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 1, 1999
20 - Scudder Limited Term Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid by the Scudder Limited Term Tax Free Fund from net
investment income for the seven months ended May 31, 1999, 100% are designated
as exempt interest dividends for federal income tax purposes.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$465,000 as capital gain dividends for the seven months ended May 31, 1999.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call 1-800-SCUDDER.
21 - Scudder Limited Term Tax Free Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Limited Term Tax
Free Fund (the "Fund") was held on December 15, 1998, at the office of Scudder
Kemper Investments, Inc., Two International Place, Boston, Massachusetts 02110.
At the Meeting the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,691,698 166,817 122,716 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,205,299 198,897 256,126 320,909
- --------------------------------------------------------------------------------
* 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.
22 - Scudder Limited Term Tax Free Fund
<PAGE>
This Page
intentionally
left blank.
23 - Scudder Limited Term Tax Free Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow, Center
for Business Ethics, Bentley
College; President, Driscoll
Associates
Peter B. Freeman
Trustee; Corporate Director and
Trustee
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; 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.
24 - Scudder Limited 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.
25 - Scudder Limited 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
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Limited 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>
27 - Scudder Limited 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
