Scudder
Medium Term
Tax Free Fund
Annual Report
December 31, 1998
Pure No-Load(TM) Funds
A fund that seeks to provide a high level of income free from regular federal
income taxes and to limit principal fluctuation.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder Medium Term Tax Free Fund
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Date of Inception: 4/12/83 Total Net Assets as of Ticker Symbol: SCMTX
12/31/98: $678.19 million
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o Scudder Medium Term Tax Free Fund posted a 5.58% total return over its most
recent fiscal year ended December 31, 1998. For the one-, three-, five-, and
ten-year periods ended December 31, the Fund's total returns placed it in the
top one-third of municipal bond funds as tracked by Lipper Analytical Services.
Please see page 6 for additional Lipper performance information.
o The Fund received four stars from Morningstar, reflecting an "above average"
rating for risk-adjusted performance through December 31, 1998.*
o The Fund's 30-day net annualized SEC yield was 3.55% as of December 31, 1998.
For investors in the two highest federal tax brackets of 36% and 39.6%, the
Fund's yield was equivalent to a fully taxable 5.55% and 5.88%, respectively.
Table of Contents
3 Letter from the Fund's President 25 Notes to Financial Statements
4 Performance Update 26 Report of Independent Accountants
5 Portfolio Summary 29 Tax Information
6 Portfolio Management Discussion 30 Shareholder Meeting Results
9 Glossary of Investment Terms 32 Officers and Trustees
10 Investment Portfolio 33 Investment Products and Services
21 Financial Statements 34 Scudder Solutions
24 Financial Highlights
* For your information, these ratings are subject to change every month and are
calculated from the Fund's five-year average annual return in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below T-bill returns. The Fund received four stars
for three-, five-, and ten-year performance, and was rated among 1577, 1040,
and 370 municipal funds for the respective periods. Of the funds rated, 10%
received five stars, and 22.5% received four stars. Past performance is no
guarantee of future returns.
2 - Scudder Medium Term Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
Despite the fact that mainstream media -- and most investors -- tend to focus
on stocks when discussing financial markets, the importance of including bonds
in a well diversified portfolio cannot be overstated. Many financial
professionals rank municipal bonds second only to Treasuries as secure fixed
income investments. Municipals can be counted on to deliver reliable income
along with substantially less price volatility when compared with most other
financial instruments. Moreover, in a global financial environment where market
movements are increasingly correlated, the municipal bond market is among the
most independent.
In 1998, municipals recorded modest gains amid a turbulent global financial
environment: Prices of the average 10-year AAA municipal bond rose 2% during the
year, on yield declines of one quarter of a percentage point. During its most
recent fiscal year ended December 31, 1998, Scudder Medium Term Tax Free Fund
posted a 5.58% total return based on a net asset value increase of $0.07 per
share and distributions of $0.52 per share in income, $.005 per share in
short-term gains, and $0.03 per share in long-term gains. Please read the
Portfolio Management Discussion beginning on page 6 for additional information
concerning your Fund's investment environment, strategy, and outlook.
For those of you who are interested in new Scudder products, we recently
introduced the Scudder Tax Managed Growth Fund, investing in medium- to
large-sized U.S. companies, and Scudder Tax Managed Small Company Fund, which
invests in small U.S. companies. Using a combination of quantitative and
fundamental research, the funds will focus on companies with strong earnings
growth, reasonable valuations, and favorable risk profiles. Both funds strive to
maximize after-tax returns by systematically taking into account the tax
implications of portfolio transactions and seeking to offset capital gains by
realizing losses when appropriate. Please see pages 33 through 35 for more
information on Scudder products and services.
If you have any questions regarding Scudder Medium Term Tax Free Fund or any
other Scudder fund, please call Investor Relations at 1-800-225-2470. Or visit
Scudder's Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Medium Term Tax Free Fund
3 - Scudder Medium Term Tax Free Fund
<PAGE>
Performance Update as of December 31, 1998
Fund Index Comparisons
-------------------------------------------
Total Return
--------------------------------------------
Period
Ended Growth of Average
12/31/98 $10,000 Cumulative Annual
--------------------------------------------
Scudder Medium Term Tax Free Fund
--------------------------------------------
1 Year $ 10,558 5.58% 5.58%
5 Year $ 13,046 30.46% 5.46%
10 Year* $ 19,918 99.18% 7.13%
--------------------------------------------
Lehman Brothers Municipal Bond Index
--------------------------------------------
1 Year $ 10,648 6.48% 6.48%
5 Year $ 13,527 35.27% 6.22%
10 Year* $ 22,034 120.34% 8.22%
Growth of a $10,000 Investment
- ------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Yearly periods ended December 31
Scudder Medium Term Tax Free Fund
Year Amount
- --------------------------------
'88 10000
'89 10600
'90 11267
'91 12633
'92 13761
'93 15267
'94 14733
'95 16843
'96 17520
'97 18866
'98 19918
Lehman Brothers Municipal Bond Index
Year Amount
- --------------------------------
'88 10000
'89 11080
'90 11887
'91 13331
'92 14508
'93 16289
'94 15447
'95 18144
'96 18947
'97 20693
'98 22034
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.
Returns and Per Share Information
- ---------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
Yearly periods ended December 31
CHART DATA:
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $10.04 $10.11 $10.62 $10.86 $11.36 $10.39 $11.26 $11.15 $11.41 $11.48
- -----------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .56 $ .54 $ .67 $ .65 $ .60 $ .53 $ .54 $ .53 $ .52 $ .52
- -----------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ .01 $ .03 $ .06 $ .05 $ .05 $ .02 $ .05 $ .04
- -----------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 6.00 6.29 12.13 8.93 10.94 -3.50 14.32 4.02 7.69 5.58
- -----------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 10.79 7.29 12.14 8.82 12.28 -5.17 17.46 4.43 9.21 4.76
- -----------------------------------------------------------------------------------------------------------------------------
</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 80.03% and 7.46%, 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 December 31, 1998
Diversification
- ---------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Electric Utility Revenue 22%
Core Cities/Lease 14%
Hospital/Health 13%
State General Obligation 12%
School District/Lease 7%
Other General Obligation/Lease 6%
Sales & Special Tax 5%
Toll Revenue/Transportation 4%
Resource Recovery 3%
Higher Education 3%
Miscellaneous Municipal 11%
--------------------------------------
100%
======================================
The Fund is broadly diversified, with securities issued in 36 states plus the
District of Columbia and the Virgin Islands.
Quality
- --------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
AAA 64%
AA 13%
A 12%
BBB 9%
Not Rated and Below BBB 2%
--------------------------------------
100%
======================================
Weighted average quality: AA
Overall portfolio quality remains high, with over 75% of the Fund's portfolio
rated AAA or AA, or of equivalent quality.
Effective Maturity
- ------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Less than 1 Year 3%
1 - 5 years 38%
5 - 10 years 44%
10 - 15 years 15%
---------------------------------------
100%
======================================
Weighted average effective maturity:
6.13 years
During the period, we focused on 12- to 15- year bonds, 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.
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,
Yields of municipal bonds declined slightly and their prices rose modestly
during Scudder Medium Term Tax Free Fund's most recent fiscal year ended
December 31, 1998. The Fund provided a 5.58% total return over the 12-month
period, surpassing the 5.35% average return of similar funds as reported by
Lipper Analytical Services, Inc. The Fund posted a 3.55% 30-day net annualized
SEC yield as of December 31, equivalent to fully taxable yields of 5.55% and
5.88%, respectively, for investors in the 36% and 39.6% federal tax brackets.
Comprising the Fund's total return over the period were a $0.07 increase in its
net asset value to $11.48 as of December 31, plus fund distributions of $0.52
per share in income, $.005 per share in short-term gains, and $0.03 per share in
long-term gains.
Scudder Medium Term Tax Free Fund's long-term returns remain 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 one-, three-, five-, and
ten-year periods. Please turn to the Performance Update on page for more
information on the Fund's long-term progress, including comparisons with the
unmanaged Lehman Brothers Municipal Bond Index.
Municipals Gain Amid Turbulence
In 1998, most municipal bonds posted modest gains in the face of dramatic
financial crises that rocked the global markets. In the international capital
markets, the most troublesome developments were Russia's short-term debt default
and ruble devaluation, Japan's continuing banking crisis and recession, the run
on Brazil's currency reserves (despite an IMF stabilization package), and the
near collapse of the Long Term Capital Management hedge fund. The Federal
Reserve lowered short-term interest rates by one-quarter of a percentage point
three times between September and November -- taking the unexpected step of
adjusting interest rates between Federal Open Market Committee meetings -- in an
attempt to restore order to worldwide financial markets. Though the Fed had
reportedly changed to a "neutral" stance on interest rate adjustments by late in
1998, the more than 60 interest rate reductions by central banks around the
THE PRINTED DOCUMENT CONTAINS A TABLE HERE
===========================================================
Competitive Long-Term Results
(Average annual returns for periods ended
December 31, 1998)
- -----------------------------------------------------------
Scudder
Medium
Term Tax Lipper Number
Free average of
Fund annual Funds Percentile
Period return return Rank tracked Ranking
- -----------------------------------------------------------
1 year 5.58% 5.35% 48 of 148 Top 32%
3 years 5.75% 5.45% 37 of 123 Top 30%
5 years 5.46% 5.17% 23 of 85 Top 27%
10 years* 7.13% 6.88% 9 of 27 Top 33%
===========================================================
Past performance does not guarantee future results.
*Scudder Medium Term Tax Free Fund adopted its current name and objective on
November 1, 1990.
6 - Scudder Medium Term Tax Free Fund
<PAGE>
world during this period seemed to ease fears of rampant deflation and gave
encouragement to U.S. equity investors.
Municipal bonds registered modest gains compared with Treasuries during the
period, as municipal yield declines lagged those of their Treasury counterparts.
Over the 12 months ended December 31, 1998, yields of 10-year Treasury bonds
declined more than one percentage point and their prices rose 8.6%, while yields
of 10-year AAA-rated municipal bonds declined one-quarter of a percentage point,
and their prices rose 2%. We attribute much of this disparity in performance to
a heavy $284 billion supply of municipal bonds in 1998, the second highest
volume over the past 10 years.
A Shift in Focus
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. Over the past several years, our primary strategy has been to
purchase noncallable bonds to provide a relatively stable income stream along
with long-term price appreciation potential. While we plan to retain and take
full advantage of the Fund's large existing position in noncallable bonds, we
have recently felt that most noncallable bonds available for purchase did not
represent attractive value. Therefore, over the course of the most recent
12-month period, the Fund shifted its emphasis toward the purchase of premium
"cushion" bonds -- bonds with high coupons that compensate investors for the
fact that they can be redeemed by their issuer prior to maturity. In terms of
maturity, we focused primarily on 12- to 15-year bonds, 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 also 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 December 31, the Fund's average duration was 5.2
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.)
The Fund's overall level of portfolio quality remains high, with over 75% of the
Fund's portfolio rated AAA or AA, or of equivalent quality. And diversification
remains an important strategy for the Fund, allowing us to spread risk over a
large number of sectors, maturities, and geographic areas. As of December 31,
1998, the Fund held securities issued in 36 states plus the District of Columbia
and the Virgin Islands. The Portfolio Summary on page provides more information
about the Fund's holdings, including quality, maturity, and sector
representation.
Economic Slowdown in 1999?
Shrinking corporate profit margins, a widening trade deficit, pressure on the
dollar, and troubles in the emerging markets could dampen U.S. economic growth
during the coming months. We do not doubt, however, the power of consumer and
investor confidence to overcome adversity, as has been shown throughout the
current economic expansion.
7 - Scudder Medium Term Tax Free Fund
<PAGE>
With the outlook for the U.S. economy uncertain, the outlook for municipal bonds
is nonetheless very positive, as yields of municipals compared with Treasuries
are near historic highs. This ratio should eventually assume a more typical
level, which could mean significant yield reductions and price gains for
municipal bonds relative to U.S. Treasuries.
In terms of the day-to-day management of the Fund, we will continue to seek
competitive returns by purchasing 12- to 15-year premium cushion bonds over the
coming months. As always, we will refrain from making investment decisions based
on short-term market movements and search instead 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
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 assumed responsibility for
the Fund's day-to-day operations in 1998. Ms. Goodfield joined the
Adviser in 1986 and the Fund's team in 1989. Portfolio Manager Philip
G. Condon joined the Adviser in 1983 and the Fund's team in 1998 and
has over 16 years' experience in the investment industry.
8 - Scudder Medium Term Tax Free Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the federal,
state, or local government or a corporation that
obligates the issuer to pay the bondholder a
specified amount of interest for a stated period --
usually a number of years -- and to repay the face
amount of the bond at its maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith and
credit" (including the taxing and further
borrowing power) of the city, state, or agency that
issues the bond. A general obligation bond is repaid
with the issuer's general revenue and borrowings.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace-- in other words, when
too much money is chasing too few goods. High
inflation has a negative impact on the prices of
fixed-income securities.
MUNICIPAL BOND An interest-bearing debt security issued by a
state or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund based on the
sum of the market value of all the securities
owned by the fund divided by the number of
outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument
would have to provide to equal that of a
tax-free municipal bond on an after-tax basis.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings of every holding in a given fund's
portfolio, net of expenses, assuming each is held to
maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return -- annualized or
compound -- is based on a combination of share price
changes plus income and capital gain distributions,
if any, expressed as a percentage gain or loss in
value.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
9 - Scudder Medium Term Tax Free Fund
<PAGE>
Investment Portfolio as of December 31, 1998
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Short-Term Municipal Investments 0.5%
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Alaska
Valdez, AK, Marine Terminal Revenue, Series 1993 A, Variable Rate,
5.1%, 12/1/2033* ........................................................... 1,100,000 A1+ 1,100,000
Arizona
Maricopa County, AZ, Pollution Control Revenue, Arizona Public Service
Corporation, Series F, Daily Demand Note, 5.0%, 5/1/2029* .................. 1,000,000 P1 1,000,000
Texas
Grapevine, TX, Industrial Development Corp., American Airlines, Series
A2, Daily Demand Note, 4.85%, 12/1/2024* ................................... 1,000,000 P1 1,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $3,100,000) 3,100,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 99.5%
- ------------------------------------------------------------------------------------------------------------------------------
Alabama
Alabama Street Docks Department, Facilities Revenue, Series 1998, 6%,
10/1/2007 (c) .............................................................. 1,000,000 AAA 1,130,200
Alaska
North Slope Borough, AK, General Obligation:
Capital Appreciation, Series A, Zero Coupon, 6/30/2006 (c) ................. 11,150,000 AAA 8,104,043
Capital Appreciation, Series B, Zero Coupon, 6/30/2004 (f) ................. 19,500,000 AAA 15,598,820
Series A, Zero Coupon, 6/30/2002 (c) ....................................... 3,275,000 AAA 2,855,997
Series A, Zero Coupon, 6/30/2003 (c) ....................................... 7,000,000 AAA 5,844,370
Arizona
Arizona Health Facilities Authority, Phoenix Baptist Hospital and
Medical Center, 6.1%, 9/1/2003 (c) ......................................... 2,000,000 AAA 2,193,100
Maricopa County, AZ, School District #28, Kyrene Elementary:
Series B, Zero Coupon, 1/1/2003 (c) ........................................ 4,150,000 AAA 3,546,175
Series B, Zero Coupon, 7/1/2003 (c) ........................................ 2,000,000 AAA 1,675,720
Maricopa County, AZ, Unified School District #41:
Capital Appreciation Bond, Zero Coupon, 7/1/2003 (c) ....................... 4,500,000 AAA 3,770,370
Capital Appreciation Bond, Zero Coupon, 1/1/2004 (c) ....................... 6,000,000 AAA 4,917,240
Capital Appreciation Bond, Zero Coupon, 7/1/2006 (c) ....................... 7,605,000 AAA 5,560,016
Gilbert School, Capital Appreciation Refunding, General Obligation,
Zero Coupon, 7/1/2005 (c) .................................................. 1,790,000 AAA 1,373,199
Gilbert School, Zero Coupon, 1/1/2006 (c) .................................. 2,925,000 AAA 2,183,571
Salt River Project, AZ, Agricultural Improvement and Power District,
Electrical Systems Revenue, 6.2%, 1/1/2012 ................................. 1,500,000 AA 1,617,285
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Arkansas
Rogers, AR, Sales & Use Tax Revenue, Series 1996, 5.35%, 11/1/2011 ........... 2,500,000 AA 2,579,325
California
California Health Facilities Finance Authority Revenue Bond, Summit
Medical Center, Series A, 6%, 5/1/2006 (c) ................................. 3,150,000 AAA 3,521,952
Central Valley, CA, Finance Authority Cogeneration Project Revenue,
Carson Ice, General Project, 5.25%, 7/1/2013 (c) ........................... 4,480,000 AAA 4,704,672
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue,
Senior Lien, Series A, Step-up Coupon, 0% to 1/1/2005, 7.05% to
1/1/2009 ................................................................... 7,275,000 BBB 5,980,705
Long Beach, CA, Aquarium of the Pacific Project, 5.75%, 7/1/2005 ............. 1,300,000 BBB 1,401,712
Orange County, CA, Local Transportation Authority, Sales Tax Revenue,
Measure M, Step-down Coupon, 5.1% to 2/15/98, 4.3% to 2/15/2001 (c) ........ 5,100,000 AAA 5,197,563
Orange County, CA, Special Financing Authority, Teeter Plan Revenue,
Series C, Mandatory Put 11/1/99 at 100, 6.15%, 11/1/2014 ................... 2,600,000 A 2,659,202
San Diego, CA, Water Utility Funding, Network Systems Revenue, 5.375%,
8/1/2012 (c) ............................................................... 2,000,000 AAA 2,142,180
Southern California Public Power Authority Power Project Revenue, Palo
Verde Project, Series 1996 A, 6%, 7/1/2007 (c) ............................. 3,000,000 AAA 3,424,110
Colorado
Boulder County, CO, Industrial Development, Revenue Refunding, May
Department Stores, Colorado Project, Series 1992, 6.25%, 9/1/2007 .......... 3,500,000 A 3,741,220
Castle Rock Ranch, CO, Public Improvements Authority, Public Facilities
Revenue:
Series 1996, 6.1%, 12/1/2005 ............................................... 2,780,000 AA 3,077,933
Series 1996, 6.5%, 12/1/2009 ............................................... 3,525,000 AA 4,121,360
Connecticut
Bristol, CT, Resource Recovery, Ogden Martin System, 6.125%, 7/1/2003 ........ 10,635,000 A 11,190,466
Connecticut State Health & Educational Facilities Authority, Windham
Community Memorial Hospital, Series 1996 C, 5.75%, 7/1/2011 ................ 3,500,000 BBB 3,596,425
District of Columbia
District of Columbia, Certificate of Participation, 6.875%, 1/1/2003 ......... 1,780,000 BB 1,860,331
District of Columbia, General Obligation:
4.7%, 12/1/1999 (c) (d) .................................................... 230,000 AAA 233,365
4.7%, 12/1/1999 (c) ........................................................ 5,205,000 AAA 5,279,015
4.85%, 6/1/2004 (c) (d) .................................................... 100,000 AAA 104,436
4.85%, 6/1/2004 (c) ........................................................ 1,900,000 AAA 1,966,842
ETM, 4.95%, 6/1/2005** (c) (d) ............................................. 195,000 AAA 204,980
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
4.95%, 6/1/2005 (c) ........................................................ 3,745,000 AAA 3,897,571
Refunding, Series B, Zero Coupon, 6/1/2001 (c) ............................. 7,100,000 AAA 6,474,916
Refunding, Series B, 5.3%, 6/1/2005 (c) .................................... 8,000,000 AAA 8,481,920
District of Columbia:
Series A, 5.625%, 6/1/2002 (c) (d) ......................................... 600,000 AAA 635,604
Series A, 5.8%, 6/1/2004 (c) (d) ........................................... 510,000 AAA 555,900
Series A, 5.875%, 6/1/2005 (c) (d) ......................................... 265,000 AAA 292,266
District of Columbia, Redevelopment Land Agency, DC Sports Arena,
Special Tax, Series 1996, 5.625%, 11/1/2010 ................................ 2,055,000 BBB 2,145,728
District of Columbia, Unrefunded Balance:
Series A, 5.625%, 6/1/2002 (c) ............................................. 7,760,000 AAA 8,177,178
Series A, 5.8%, 6/1/2004 (c) ............................................... 6,440,000 AAA 6,960,867
Series A, 5.875%, 6/1/2005 (c) ............................................. 3,385,000 AAA 3,697,300
Florida
Dade County, FL, Guaranteed Entitlement Revenue:
Zero Coupon, 8/1/2014 (c) (d) .............................................. 4,000,000 AAA 1,653,040
Zero Coupon, 8/1/2018 (c) (d) .............................................. 6,000,000 AAA 1,817,940
Escambia County, FL, Utilities Authorization, Refunding, Series D, 5%,
1/1/2004 (c) ............................................................... 2,000,000 AAA 2,108,360
Orange County, FL, Health Facilities Authority Revenue Hospital,
Orlando Regional Healthcare, Series 1996 A, 6%, 10/1/2003 (c) .............. 3,000,000 AAA 3,269,880
Georgia
Clayton County, GA, Hospital Authority Revenue, 5.25%, 8/1/2012 (c) .......... 2,275,000 AAA 2,405,107
Fulton County, GA, School District, General Obligation, 5.25%, 1/1/2013 ...... 1,500,000 AA 1,609,455
Georgia, General Obligation, Series B, 6.75%, 9/1/2010 ....................... 5,370,000 AAA 6,601,717
Georgia, General Obligation, Series E, 6.75%, 12/1/2012 ...................... 6,620,000 AAA 8,203,173
Hawaii
Hawaii State General Obligation, Unlimited Tax, Series 1993 CI, 4.75%,
11/1/2008 .................................................................. 7,050,000 AA 7,273,274
Illinois
Alton, IL, Health Facilities Revenue, 6.7%, 2/15/2000 (c) .................... 1,065,000 AAA 1,088,334
Berwyn, IL, Hospital Revenue, MacNeal Memorial Hospital, Series 1995, 5.25%,
6/1/2004 (c) ............................................................... 3,935,000 AAA 4,155,006
Boone, McHenry and Dekalb Counties, IL, Community Unit School District 100,
General Obligation, Zero Coupon, 12/1/2012 (c) ............................. 2,545,000 AAA 1,311,668
Chicago, Illinois, Water Revenue, Capital Appreciation, Series 1997, Zero
Coupon, 11/1/2011 (c) ...................................................... 5,000,000 AAA 2,747,650
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Cook County, IL, Community Unit School District 401, Elmwood Park,
Series 1997:
Zero Coupon, 12/1/2007 (c) ................................................. 2,180,000 AAA 1,428,140
Zero Coupon, 12/1/2009 (c) ................................................. 3,625,000 AAA 2,213,498
Hoffman Estates, IL, Tax Increment Revenue, Capital Appreciation,
Junior Lien, Series 1991:
Zero Coupon, 5/15/2004 .................................................... 2,450,000 A 1,961,764
Zero Coupon, 5/15/2006 .................................................... 8,500,000 A 6,175,845
Illinois Development Finance Authority, Pollution Control, Revenue
Refunding, Commonwealth Edison, Series 1994, 5.3%, 1/15/2004 (c) ........... 7,500,000 AAA 7,926,450
Illinois Educational Facilities Authority Revenue, Loyola University,
Revenue Refunding, 1991 Series A, Zero Coupon, 7/1/2002 .................... 2,130,000 AAA 1,855,571
Illinois, General Obligation:
6.7%, 6/1/2003 (d) ......................................................... 2,140,000 AAA 2,279,635
4.6%, 12/1/2005 ............................................................ 5,000,000 AA 5,158,800
Illinois Health Facilities Authority:
Evangelical Hospitals, Series B, 6.1%, 4/15/2001 (c) ....................... 1,240,000 AAA 1,306,278
Sisters Services, Series C, 6.1%, 6/1/2000 (c) ............................. 1,500,000 AAA 1,554,360
Sisters Services, Series C, 6.2%, 6/1/2001 (c) ............................. 1,900,000 AAA 2,007,825
Kendall, Kane and Will Counties, IL, School District, Zero Coupon,
3/1/2003 (c) ............................................................... 1,345,000 AAA 1,136,673
Macon and Decatur County, IL, Public Building Commission, Certificate of
Participation, General Obligation, 6.3%, 1/1/2000 (c) ...................... 1,320,000 AAA 1,361,092
Metropolitan Pier and Exposition Authority of Illinois, McCormick Place
Expansion Project, Coupon Receipts, Zero Coupon, 6/15/2004 (c) ............. 14,400,000 AAA 11,521,440
Rosemont, IL, Tax Increment-2, Secondary, Series B, Zero Coupon,
12/1/2002 (c) .............................................................. 2,785,000 AAA 2,386,661
Rosemont, IL, Tax Increment-3, Secondary, Series C, Zero Coupon,
12/1/2002 (c) .............................................................. 3,345,000 AAA 2,866,565
Indiana
Indiana Housing Finance Authority, Single Family Mortgage Revenue,
Series 1995 C-1, 5.25%, 7/1/2012 ........................................... 755,000 AAA 767,012
Indianapolis, IN, Resource Recovery Revenue, Ogden Martin Systems Inc.
Project, 6.75%, 12/1/2007 (c) .............................................. 6,000,000 AAA 7,031,400
Madison County, IN, Hospital Authority, Holy Cross Health System, 6.7%,
12/1/2002 (c) (d) .......................................................... 1,385,000 AAA 1,525,342
Iowa
Iowa Certificate of Participation, 1992 Series A, 6.25%, 7/1/2002 (c) ........ 5,000,000 AAA 5,379,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Kansas
Kansas City, KS, Utility System Revenue:
ETM, Zero Coupon, 3/1/2003** (c) (d) ....................................... 3,850,000 AAA 3,273,655
Unrefunded Balance, Zero Coupon, 3/1/2003 (c) .............................. 2,750,000 AAA 2,337,390
Louisiana
Jefferson Parish, LA, School Board Sales & Use Tax Revenue, ETM, Series
1986A, 7.35%, 2/1/2003** (d) ............................................... 5,055,000 A 5,743,137
Lousiana Housing Finance Agency, Mortgage Revenue Refunding, Single
Family, Series 1995 C-1, 5.125%, 12/1/2010 (c) ............................. 1,580,000 AAA 1,617,873
Orleans, LA, Levee District, Levee Improvement Bonds, Series 1986,
5.95%, 11/1/2014 (c) ....................................................... 1,815,000 AAA 2,007,826
Massachusetts
Massachusetts General Obligation:
Refunding, Series B, 6.375%, 8/1/2002 ...................................... 2,150,000 A 2,337,502
Series A, 6.4%, 8/1/2003 ................................................... 1,000,000 A 1,102,280
Series C, 5.25%, 8/1/2012 .................................................. 4,000,000 AA 4,245,840
Massachusetts Health & Educational Facilities Authority, St. Joseph's
Hospital, Series C, Prerefunded 10/1/1999, 9.5%, 10/1/2020 (d) ............. 2,765,000 AAA 2,948,983
Massachusetts Housing Finance Agency, Series 1992 C, FNMA Collateralized:
6.25%, 5/15/2002 ........................................................... 2,000,000 AAA 2,105,060
6.25%, 11/15/2002 .......................................................... 3,420,000 AAA 3,631,561
Massachusetts Industrial Finance Agency:
Resource Recovery, North Andover Solid Waste, Series A, 6.15%,
7/1/2002 ................................................................. 3,250,000 BBB 3,420,593
Sturdy Memorial Hospital, 7.9%, 6/1/2009 ................................... 1,640,000 A 1,701,877
Massachusetts Municipal Wholesale Electric Co., Power Supply System
Revenue, Series A, 6.625%, 7/1/2003 ........................................ 3,165,000 A 3,450,894
Massachusetts Water Resource Authority, Series A, 7.25%, 4/1/2001 ............ 1,000,000 A 1,062,090
Michigan
Detroit, MI, City School District, Refunded, Series C, 5.25%,
5/1/2013 (c) ............................................................... 1,000,000 AAA 1,066,200
Michigan Hospital Finance Authority, Hospital Revenue, Sinai Hospital,
Series 1995, 6%, 1/1/2008 .................................................. 2,000,000 A 2,207,740
Michigan Municipal Bond Authority, Local Government Loan Program, School
Improvement, Zero Coupon, 6/15/2006 (c) .................................... 4,750,000 AAA 3,479,185
Michigan State Trunk Line, Revenue Bond, 5.25%, 11/1/2012 .................... 2,000,000 AA 2,142,860
Romulus Township, MI, School District, Series II, Zero Coupon,
5/1/2022 (c) (d) ........................................................... 12,400,000 AAA 3,192,008
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Mississippi
Mississippi Higher Education Assistance Corp., Student Loan Revenue,
1992 Series A, 6.2%, 1/1/2002 .............................................. 1,200,000 A 1,257,000
Mississippi Hospital Equipment and Facilities Authority Revenue, Rush
Medical Foundation, Series 1997 A, 5.4%, 1/1/2007 .......................... 1,760,000 BBB 1,808,171
Nevada
Clark County, NV, School District, General Obligation, Building and
Renovation, Series B, 6.5%, 6/15/2007 (c) .................................. 7,000,000 AAA 8,141,700
Nevada State Housing Division, Single Family Mortgage Revenue,
Series R, 5.95%, 10/1/2011 ................................................. 2,030,000 AA 2,134,464
New Hampshire
New Hampshire Higher Education & Health Facilities Authority, Hospital
Revenue:
Catholic Charities Series 1997 A, 5.75%, 8/1/2011 .......................... 1,300,000 SKI 1,327,274
Frisbie Memorial Hospital, Series 1993, 5.25%, 10/1/1999 ................... 710,000 BBB 712,776
New Jersey
New Jersey State, General Obligation, Unlimited Refunded, Series E, 6%,
7/15/2003 .................................................................. 5,750,000 AA 6,282,508
New Jersey Economic Development Authority, Series A, 7%, 7/1/2004 (c) ........ 2,500,000 AAA 2,868,325
New Mexico
Bernalillo County, NM, Gross Receipts Tax Revenue, 5%, 4/1/2012 .............. 1,000,000 AA 1,049,220
New York
Long Island Power Authority, Electrical Systems Revenue Bond, 5.125%,
4/1/2012 (c) ............................................................... 3,000,000 AAA 3,136,380
Metropolitan Transportation Authority of New York, Service Contract:
Commuter Facilities Revenue:
6.75%, 7/1/2000 ........................................................... 1,200,000 BBB 1,255,968
6.9%, 7/1/2001 ............................................................ 1,280,000 BBB 1,375,501
Transit Facilities Revenue:
6.75%, 7/1/2000 ........................................................... 2,270,000 BBB 2,375,873
6.9%, 7/1/2001 ............................................................ 2,415,000 BBB 2,595,183
Series O, 5.75%, 7/1/2007 ................................................. 1,975,000 BBB 2,181,546
New York City, NY, General Obligation:
Series 1995 E, 6.6%, 8/1/2004 .............................................. 2,500,000 A 2,815,350
Series 1996 A, 7%, 8/1/2006 ................................................ 2,000,000 A 2,360,100
Series 1996 G, 6.75%, 2/1/2009 ............................................. 5,000,000 A 5,965,900
Series A, 6%, 8/1/2005 (c) ................................................. 2,560,000 AAA 2,833,485
Series A, 7%, 8/1/2004 ..................................................... 7,650,000 A 8,766,441
Series B, 6.75%, 8/15/2003 ................................................. 7,000,000 A 7,813,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Series B, 6.6%, 10/1/2003 (d) .............................................. 9,380,000 AAA 10,435,813
Series B, 6.6%, 10/1/2003 .................................................. 820,000 A 904,854
Series B, 7.25%, 8/15/2007 ................................................. 2,900,000 A 3,518,425
Series C, 6.3%, 8/1/2003 (c) ............................................... 50,000 AAA 54,656
Series H, ETM, 6.9%, 2/1/2001** (d) ........................................ 505,000 AAA 539,178
New York, NY, Series B, 6.4%, 10/1/2002 (d) .................................. 1,605,000 A 1,753,559
New York, NY, Series B, 6.4%, 10/1/2002 ...................................... 3,300,000 A 3,587,859
New York State, Hospital Revenue Bond, 5.5%, 2/1/2011 (c) .................... 4,825,000 AAA 5,284,437
New York State, Revenue Bonds, Dormitory Authority, 7%, 5/15/2016 ............ 1,900,000 A 2,018,351
New York State Dormitory Authority:
City University System, Consolidated Revenue Lease, Series A, 5.5%,
7/1/2003 ................................................................. 8,000,000 BBB 8,503,280
City University System, Consolidated Revenue Lease, Series A, 5.5%,
7/1/2003 (c) ............................................................. 1,250,000 AAA 1,335,013
College and University Pooled Capital Program, 7.8%, 12/1/2005 (c) ......... 260,000 AAA 269,110
Cons City University System, 5.75%, 7/1/2006 (c) ........................... 1,750,000 AAA 1,932,438
New York State Energy Research and Development Authority, Pollution
Control Revenue, Electric and Gas, 5.9%, 12/1/2006 (c) ..................... 5,200,000 AAA 5,827,848
New York State Medical Care Facilities, Finance Agency Revenue, Mount
Sinai Hospital, 5.95%, 8/15/2009 ........................................... 5,430,000 AAA 5,730,388
New York State Thruway Authority, Special Obligation, Zero Coupon,
1/1/2002 ................................................................... 3,155,000 BBB 2,788,389
New York State Urban Development Corp. Revenue, Correctional Facilities:
Series A, 5.3%, 1/1/2005 (c) ............................................... 7,000,000 AAA 7,469,630
Series A, 5.4%, 1/1/2006 (c) ............................................... 3,500,000 AAA 3,772,230
North Carolina
North Carolina, Municipal Power Agency No. 1, Catawba Electric Revenue:
Series 1992, 5.9%, 1/1/2003 (c) ............................................ 2,550,000 AAA 2,744,642
Series 1993, 4.1%, 1/1/2005 (c) ............................................ 3,000,000 AAA 3,022,230
North Dakota
Bismarck, ND, Hospital Revenue, St. Alexius Medical Center, Series 1991,
Zero Coupon, 5/1/2000 (c) .................................................. 2,850,000 AAA 2,720,183
Grand Forks, ND, Health Care Facilities, United Hospital Obligation
Group, Series A, 6%, 12/1/2002 (c) ......................................... 1,160,000 AAA 1,248,230
Ohio
Franklin County, OH, Health Care Facilities, Revenue Refunding, Ohio
Presbyterian Services:
5.15%, 7/1/2007 ........................................................... 1,000,000 SKI 1,020,280
5.4%, 7/1/2010 ............................................................ 1,000,000 SKI 1,027,090
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Hamilton County, OH, Health System Revenue, Franciscan Sisters of the
Poor Health System, Providence Hospital, Series 1992, 6.375%, 7/1/2004 ..... 4,495,000 BBB 4,776,971
Oregon
Chemeketa, OR, Community College District, General Obligation, 5.5%,
6/1/2013 ................................................................... 2,170,000 AAA 2,380,338
Pennsylvania
Armstrong County, PA, Hospital Authority, St. Frances Medical Center,
Series A, 6.2%, 6/1/2003 (c) ............................................... 3,090,000 AAA 3,365,072
Montgomery County, PA, Redevelopment Authority, Multi Family Housing
Revenue Refunding, KBF Associates, LP Project, 6%, 7/1/2004 ................ 2,685,000 BBB 2,814,041
Pennsylvania State Industrial Development Authority, Economic
Development, 6%, 1/1/2012 (c) .............................................. 1,000,000 AAA 1,095,240
Philadelphia, PA, General Obligation, Revenue Refunding, Series A,
11.5%, 8/1/1999 (c) ........................................................ 1,000,000 AAA 1,047,940
Schuykill County, PA, Redevelopment Authority, Lease Rental, Series A,
6.55%, 6/1/2000 (c) ........................................................ 1,105,000 AAA 1,153,001
Scranton-Lackawanna, PA, Health & Welfare Authority, 5.5%, 7/1/2008 (c) ...... 2,725,000 AAA 2,962,320
Somerset County, PA, General Authority, Commonwealth Lease Revenue,
ETM, 6.45%, 10/15/2000** (c) (d) ........................................... 2,000,000 AAA 2,106,580
South Carolina
South Carolina Jobs-Economic Development Authority, Franciscan Sisters
of the Poor Health System Inc., St. Francis Hospital, 6.375%, 7/1/2004 ..... 3,420,000 BBB 3,634,537
Sumter County, SC, Hospital Facility Revenue Refunding, Tuomey Medical
Center, 6.375%, 11/15/1999 (c) ............................................. 1,000,000 AAA 1,028,490
Tennessee
Nashville and Davidson Counties, TN, Water and Sewer Revenue, Series B,
5.25%, 1/1/2013 (c) ........................................................ 3,310,000 AAA 3,537,331
Texas
Austin, TX, Combined Utility System Revenue, Zero Coupon, 11/15/2009 (c) ..... 6,775,000 AAA 4,180,717
Brownsville, TX, Utility System Revenue Refunding:
Series 1995, 6%, 9/1/2008 (c) .............................................. 1,000,000 AAA 1,134,930
Series 1995, 6%, 9/1/2009 (c) .............................................. 2,700,000 AAA 3,080,025
Denison, TX, Hospital Authority, Revenue Bond, Texoma Medical Center
Inc. Project, 6.125%, 8/15/2012 ............................................ 1,000,000 BBB 1,045,810
Harris County, TX, Toll Road Authority, Toll Road Revenue, Subordinate
Lien:
Series A, Zero Coupon, 8/15/2006 (c) ....................................... 3,915,000 AAA 2,830,741
Series A, Zero Coupon, 8/15/2007 (c) ....................................... 1,050,000 AAA 723,902
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Houston, TX, Water & Sewer System Authority, Series C, Zero Coupon,
12/1/2004 (c) .............................................................. 5,000,000 AAA 3,932,650
Laredo, TX, General Obligation, Refunded, 5.125%, 8/15/2012 (c) .............. 2,000,000 AAA 2,074,400
Richardson, TX, Hospital Authority Refunding and Improvement, Richardson
Medical Center, Series 1993, 6.5%, 12/1/2012 ............................... 1,730,000 BBB 1,924,227
San Antonio, TX, Electric and Gas Revenue Bond, Refunded, Series A,
5.25%, 2/1/2012 ............................................................ 3,000,000 AA 3,175,470
Texas Municipal Power Agency, Zero Coupon, 9/1/2007 (c) ...................... 8,385,000 AAA 5,769,802
Texas Public Finance Authority, Building Revenue Refunding, Zero Coupon,
2/1/2009 (c) ............................................................... 5,860,000 AAA 3,744,950
Utah
Intermountain Power Agency, UT, Power Supply Revenue:
Series A, 5.25%, 7/1/2012 (c) .............................................. 7,000,000 AAA 7,360,640
Series B, Zero Coupon, 7/1/2001 (c) ........................................ 10,495,000 AAA 9,540,690
Series B, Zero Coupon, 7/1/2002 (c) ........................................ 2,500,000 AAA 2,180,150
Series B, 6.25%, 7/1/2006 (c) .............................................. 8,000,000 AAA 9,078,800
Salt Lake County, UT, Water Conservation District, Series A, Zero
Coupon, 10/1/2003 (c) ...................................................... 3,200,000 AAA 2,650,016
Virgin Islands
Virgin Islands, General Obligation, Public Finance Authority Revenue,
Matching Fund Loan Notes, Series A, 6.8%, 10/1/2000 ........................ 1,035,000 SKI 1,095,672
Virgin Islands, Revenue Bonds, Public Finance Authority, Series C, 5.5%,
10/1/2005 .................................................................. 3,000,000 BBB- 3,182,250
Virgin Islands, Water and Public Finance Authority, Electric Systems,
Revenue Refunding, 5.25%, 7/1/2009 ......................................... 2,000,000 SKI 2,099,660
Virginia
Peninsula Ports Authority, VA, Health Systems Revenue, Refunded,
Riverside Health Systems, 5.25%, 7/1/2013 (e) .............................. 2,885,000 AA 2,978,445
Washington
Clark County, WA, Public Utility District 1, Generating System Revenue
Bonds, 6%, 1/1/2007 (c) .................................................... 12,150,000 AAA 13,631,814
Clark County, WA, School District, General Obligation, 5%, 12/1/2011 (c) ..... 1,820,000 AAA 1,906,705
King County, WA, Public Hospital District 1, Hospital Facility, Revenue
Refunding Bond, Valley Medical Center, 6%, 9/1/2009 (c) .................... 1,940,000 AAA 2,199,553
Snohomish County, WA, Public Utility District #1, 1991 Series B, 6.4%,
1/1/2000 ................................................................... 2,000,000 A 2,062,900
Washington Public Power Supply System:
Nuclear Project #1, Revenue Refunding:
Series A, 6%, 7/1/2005 (c) ................................................ 2,950,000 AAA 3,252,847
Series B, 5.15%, 7/1/2002 ................................................. 5,275,000 AA 5,490,537
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Medium Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
==============================================================================================================================
<S> <C> <C> <C>
Nuclear Project #2, Revenue Refunding:
Series A, 6.3%, 7/1/2001 6,000,000 AA 6,358,920
Series 1990 C, 7.5%, 7/1/2003 (d) 5,800,000 AA 6,345,490
Series A, 4.9%, 7/1/2005 4,330,000 AA 4,503,373
Series A, 5.8%, 7/1/2007 2,120,000 AA 2,330,156
Series A, 5.25%, 7/1/2008 3,000,000 AA 3,149,670
Series B, 5.15%, 7/1/2002 6,085,000 AA 6,333,633
Nuclear Project #3, Revenue Refunding:
Series B, 7.15%, 7/1/2001 1,310,000 AA 1,378,120
Series B, 5.15%, 7/1/2002 3,165,000 AA 3,294,322
Series B, 5.25%, 7/1/2003 3,000,000 AA 3,155,550
Series B, Zero Coupon, 7/1/2004 (c) 8,000,000 AAA 6,399,520
Washington State Housing Finance, Single Family Mortgage Revenue,
Series A, 7.1%, 12/1/2017 65,000 AAA 65,931
Washington State, Higher Education Facilities Revenue Bond, 4.95%,
4/1/2011 (c) 1,500,000 AAA 1,556,910
West Virginia
South Charleston, WV, Pollution Control Revenue, Union Carbide, 7.625%,
8/1/2005 2,000,000 BBB 2,351,600
Wisconsin
Wisconsin Health & Educational Facilities Authority:
Columbia Hospital Inc., 6.125%, 11/15/2001 (c) 1,000,000 AAA 1,063,710
Mercy Health System Corporation:
6%, 8/15/2005 (c) 1,400,000 AAA 1,544,116
6.125%, 8/15/2006 (c) 1,480,000 AAA 1,655,202
6.25%, 8/15/2007 (c) 1,000,000 AAA 1,135,180
Wheaton Franciscan Hospital:
6%, 8/15/2002 (c) 1,000,000 AAA 1,069,630
5.8%, 8/15/2004 (c) 1,675,000 AAA 1,818,179
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $623,745,301) 668,143,963
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $626,845,301) (a) 671,243,963
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Medium Term Tax Free Fund
<PAGE>
(a) The cost for federal income tax purposes was $626,845,301. At
December 31, 1998, net unrealized appreciation based on tax cost for
all securities was $44,398,662. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $44,403,040 and aggregate
gross unrealized depreciation for all securities in which there was
an excess of tax cost over market value of $4,378.
(b) All of the securities held have been determined by the Adviser to be
of appropriate credit quality as required by the Fund's investment
objectives. Credit ratings are either Standard & Poor's Rating
Group, Moody's Investors Service, Inc. or Fitch Investors Service,
Inc. Securities rated by Scudder Kemper Investments, Inc. (SKI) and
unrated securities (NR) have been determined by the Adviser to be of
comparable quality to rated securities.
(c) Bond is insured by one of these companies: AMBAC, Capital Guaranty,
FGIC, FSA or MBIA/BIG.
(d) Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay
principal and interest on tax-exempt issue and to retire the bonds
in full at the earliest refunding date.
(e) When-issued or forward delivery securities (See Note A in Notes to
Financial Statements).
(f) At December 31, 1998, these securities, in part or in whole, have
been segregated to cover when-issued or forward delivery securities.
* Floating rate and monthly, weekly, or daily demand notes are
securities whose yields vary with a designated market index
or market rate, such as the coupon-equivalent of the Treasury
bill rate. Variable rate demand notes are securities whose
yields are periodically reset at levels that are generally
comparable to tax-exempt commercial paper. These securities are
payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit or line of credit from a
major bank. These notes are carried, for purposes of calculating
average weighted maturity, at the longer of the period remaining
until the next rate change or to the extent of the demand period.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow
by a trustee and used to pay principal and interest on bonds so
designated.
The accompanying notes are an integral part of the financial statements.
20 - Scudder Medium Term Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1998
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $626,845,301) .................. $ 671,243,963
Cash ................................................................... 680,715
Receivable for investments sold ........................................ 1,645,000
Interest receivable .................................................... 9,240,661
Receivable for Fund shares sold ........................................ 323,341
Other assets ........................................................... 14,265
----------------
Total assets ........................................................... 683,147,945
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 2,987,312
Dividends payable ...................................................... 900,919
Payable for Fund shares redeemed ....................................... 527,808
Accrued management fee ................................................. 323,906
Other payables and accrued expenses .................................... 217,445
----------------
Total liabilities ...................................................... 4,957,390
---------------------------------------------------------------------------------------------
Net assets, at market value $ 678,190,555
---------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments .............. 44,398,662
Accumulated net realized gain .......................................... 212,771
Paid-in capital ........................................................ 633,579,122
---------------------------------------------------------------------------------------------
Net assets, at market value $ 678,190,555
---------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($678,190,555 /59,066,560 outstanding shares of beneficial interest, ----------------
$.01 par value, unlimited number of shares authorized)............... $11.48
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder Medium Term Tax Free Fund
<PAGE>
Statement of Operations
year ended December 31, 1998
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................... $ 35,234,097
----------------
Expenses:
Management fee ......................................................... 3,867,414
Services to shareholders ............................................... 611,122
Custodian and accounting fees .......................................... 153,255
Trustees' fees and expenses ............................................ 38,387
Reports to shareholders ................................................ 61,235
Auditing ............................................................... 53,448
Registration fees ...................................................... 38,074
Legal .................................................................. 12,966
Other .................................................................. 22,371
----------------
4,858,272
---------------------------------------------------------------------------------------------
Net investment income 30,375,825
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments ................................ 2,094,910
Net unrealized appreciation (depreciation) during the period on
investments ......................................................... 3,869,091
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 5,964,001
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 36,339,826
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 - Scudder Medium Term Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 30,375,825 $ 29,971,130
Net realized gain (loss) from investments .............. 2,094,910 1,973,818
Net unrealized appreciation (depreciation) on
investments during the period ....................... 3,869,091 15,628,599
---------------- ----------------
Net increase in net assets resulting from operations ... 36,339,826 47,573,547
---------------- ----------------
Distributions to shareholders:
From net investment income ............................. (30,380,935) (29,971,130)
---------------- ----------------
From net realized gains from investment transactions ... (2,121,192) (2,873,760)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .............................. 148,879,720 128,178,450
Net asset value of shares issued to shareholders
in reinvestment of distributions .................... 20,941,810 21,001,873
Cost of shares redeemed ................................ (152,419,713) (157,462,022)
---------------- ----------------
Net increase (decrease) in net assets from Fund
share transactions .................................. 17,401,817 (8,281,699)
---------------- ----------------
Increase (decrease) in net assets ...................... 21,239,516 6,446,958
Net assets at beginning of period ...................... 656,951,039 650,504,081
---------------- ----------------
Net assets at end of period ............................ $678,190,555 $656,951,039
---------------- ----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............. 57,554,739 58,325,377
---------------- ----------------
Shares sold ............................................ 13,026,477 11,430,174
Shares issued to shareholders in reinvestment of
distributions ....................................... 1,831,600 1,872,167
Shares redeemed ........................................ (13,346,256) (14,072,979)
---------------- ----------------
Net increase (decrease) in Fund shares ................. 1,511,821 (770,638)
---------------- ----------------
Shares outstanding at end of period .................... 59,066,560 57,554,739
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 - Scudder Medium Term Tax Free Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996 1995 1994
============================================================================================================================
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
Net asset value, beginning of period ........................ $ 11.41 $ 11.15 $ 11.26 $ 10.39 $ 11.36
------------------------------------------------------------
Income from investment operations:
Net investment income ....................................... .52 .52 .53 .54 .53
Net realized and unrealized gain (loss) on investments ...... .11 .31 (.09) .92 (.92)
------------------------------------------------------------
Total from investment operations ............................ .63 .83 .44 1.46 (.39)
------------------------------------------------------------
Less distributions:
From net investment income .................................. (.52) (.52) (.53) (.54) (.53)
From net realized gains on investments ...................... (.04) (.05) (.02) (.05) (.05)
------------------------------------------------------------
Total distributions ......................................... (.56) (.57) (.55) (.59) (.58)
------------------------------------------------------------
------------------------------------------------------------
Net asset value, end of period .............................. $ 11.48 $ 11.41 $ 11.15 $ 11.26 $ 10.39
------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............................................ 5.58 7.69 4.02 14.32(a) (3.50)(a)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ...................... 678 657 651 712 701
Ratio of operating expenses net, to average daily net
assets (%) ................................................ .72 .74 .72 .70 .63
Ratio of operating expenses before expense reductions, to
average daily net assets .................................. .72 .74 .72 .72 .71
Ratio of net investment income to average daily net
assets (%) ................................................ 4.51 4.67 4.75 4.92 4.94
Portfolio turnover rate (%) ................................. 10.75 13.4 14.1 36.1 33.8
</TABLE>
(a) Total returns may have been lower had certain expenses not been reduced.
24 - Scudder Medium Term Tax Free Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Medium Term Tax Free Fund (the "Fund") is a diversified series of
Scudder Tax Free Trust, a Massachusetts business trust (the "Trust"), which is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities 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. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
When-issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price.
Amortization and Accretion. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
From November 1 through December 31, 1998, the Fund incurred approximately
$5,000 of net realized capital losses. As permitted by tax regulations, the Fund
intends to elect to defer theses losses and treat them as arising in the fiscal
year ended December 31, 1999.
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.
25 - Scudder Medium Term Tax Free Fund
<PAGE>
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment transactions are accounted for on a trade date basis. Interest
income is accrued pro rata to the earlier of the call or maturity date.
B. Purchases and Sales of Securities
During the year ended December 31, 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 Investment 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 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.
Effective September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner
of the Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. In December 1998, the Board of
Trustees and the shareholders of the Fund approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the former
Agreement, except for the dates of execution and termination.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1998 the amount charged to the Fund by SSC aggregated
$347,239, of which $30,267 is unpaid at December 31, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
December 31, 1998, the amount charged to the Fund by SFAC aggregated $93,421, of
which $7,790 is unpaid at December 31, 1998.
26 - Scudder Medium Term Tax Free Fund
<PAGE>
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended December 31, 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 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.
27 - 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 December 31, 1998, the results of its operations for the year
then ended and the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, 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 December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts PricewaterhouseCoopers LLP
February 16, 1999
28 - Scudder Medium Term Tax Free Fund
<PAGE>
Tax Information
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
Of the dividends paid from net investment income for the fiscal year ended
December 31, 1998, 100% were exempt interest dividends which are tax exempt for
regular federal income tax purposes. The Fund paid distributions of $0.031 per
share from net long-term capital gains during the year ended December 31, 1998.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$2,100,000 as capital gain dividends for the year ended December 31, 1998.
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.
29 - Scudder Medium Term Tax Free Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Medium 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*
--- ------- ------- -----------------
36,583,507 722,632 1,220,408 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
33,361,375 1,377,775 1,537,135 2,250,262
- --------------------------------------------------------------------------------
* 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.
30 - Scudder Medium Term Tax Free Fund
<PAGE>
This Page
intentionally
left blank.
31 - Scudder Medium Term Tax Free Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee; Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
Thomas W. Joseph*
Vice President
Ashton P. Goodfield*
Vice President
Ann M. McCreary*
Vice President
Thomas F. McDonough*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
32 - Scudder Medium Term Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
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 Zero Coupon 2000 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 S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
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
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
33 - Scudder Medium Term Tax Free Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- 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
- ------------------------------------------------------------------------------------------------------------------------------
34 - Scudder Medium Term Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 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 Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
35 - 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 $230 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 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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