SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND/TAX FREE
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Scudder Limited Term
Tax Free Fund
Fund #044
Annual Report
May 31, 2000
The fund seeks 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.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
13 Investment Portfolio
17 Financial Statements
20 Financial Highlights
21 Notes to Financial Statements
25 Report of Independent Accountants
26 Tax Information
27 Officers and Trustees
28 Investment Products and Services
30 Scudder Solutions
2
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Scudder Limited Term Tax Free Fund
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ticker symbol SCLTX fund number 044
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Date of o In an environment of rising interest rates, Scudder
Inception: Limited Term Tax Free Fund posted a total return of
2/15/94 0.81% for its most recent fiscal year ended May 31,
2000. The fund's return outpaced the 0.27% average
performance of the fund's peers over the same period,
according to Lipper.
Total Net o For the one-, three-, and five-year periods, the fund's
Assets: total returns placed it in the top 30% of similar
$72 million municipal bond funds as tracked by Lipper Analytical
Services. Please see page 9 for additional Lipper
performance information.
o As of May 31, 2000, Scudder Limited Term Tax Free
Fund's 30-day net annualized SEC yield was 4.55%,
equivalent to an 7.11% taxable yield for investors
subject to the 36% maximum federal income tax rate.
o Scudder Limited Term Tax Free Fund received an
overall Morningstar Rating(TM) of five stars out of
1690 tax free funds as of May 31, 2000.^1
^1 Morningstar proprietary rankings reflect historical risk-adjusted performance
as of May 31, 2000. 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 five stars for the three-year period and five stars for the
five-year period. 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 1690 and 1441
funds in its broad asset class for the three- and five-year periods,
respectively.
3
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Letter from the Fund's President
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Dear Shareholders,
Municipal bonds endured a challenging investment environment during Scudder
Limited Term Tax Free Fund's most recent fiscal year ended May 31, 2000. The
fund posted a 0.81% total return during the period, outperforming the 0.27%
average return of its peers for the same period as compiled by Lipper. To match
the fund's tax-free 4.55% 30-day SEC yield on May 31, a taxable investment for
investors in the 36% tax bracket would have had to yield 7.11%. Over the period,
municipal bonds were negatively affected by significant interest rate increases
across all fixed income markets as the Federal Reserve attempted to restrain
surging U.S. economic growth and head off a major increase in inflation by
incrementally raising the Federal Funds Rate to 6.50%.
Following this period of relative underperformance compared with Treasuries, we
nevertheless believe the municipal market offers attractive return potential:
Adjusted for inflation, municipal yields are high by historical standards and
are attractive when compared to yields of comparable Treasury bonds. As of May
31, yields of 10-year AAA-rated municipal bonds were 84.40% of comparable
Treasuries. Second, recent declines in the issuance of municipal bonds should
provide strong support for bond prices.
On a related note, we'd like to point out some of the advantages of owning a
municipal bond fund compared with holding individual municipal bonds. First and
foremost, municipal bond funds offer professional management: While many
investors
4
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believe that purchasing a individual bond is a relatively simple process,
knowing what price to pay for a municipal bond and what structure and
characteristics to seek can be confusing, and can make a dramatic difference in
how a bond will perform on a total return basis. Though investors understandably
value income and coupon level, they are not the only factors that determine
whether a bond will prove to be a worthwhile investment. Other important
advantages offered by municipal bond funds include portfolio diversification,
dividend reinvestment, and quarterly statements that display performance
information clearly and concisely.
Shareholders of the fund have approved a plan to consolidate the assets of
Scudder Limited Term Tax Free Fund into Scudder Medium Term Tax Free Fund. We
expect the fund consolidation to take place on or about July 28, 2000.
Thank you for investing with Scudder. If you have any questions regarding
Scudder Limited Term Tax Free Fund or any other Scudder fund, please call
1-800-SCUDDER, or visit our Web site at www.scudder.com.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President,
Scudder Limited Term Tax Free Fund
5
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Performance Update
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May 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
Scudder Limited Term Lehman Brothers Municipal
Tax Free Fund Bond Index (3 Year)*
2/94** 10000 10000
'94 10030 9985
'95 10613 10560
'96 11076 11061
'97 11653 11656
'98 12354 12317
'99 12823 12887
'00 12927 13123
Yearly periods ended May 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 5/31/2000 $10,000 Cumulative Annual
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Scudder Limited Term Tax Free Fund
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1 year $ 10,081 .81% .81%
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5 year $ 12,180 21.80% 4.02%
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Life of Fund** $ 12,856 28.56% 4.07%
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Lehman Brothers Municipal Bond Index (3 Year)*
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1 year $ 10,183 1.83% 1.83%
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5 year $ 12,427 24.27% 4.44%
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Life of Fund** $ 13,123 31.23% 4.44%
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* 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.
** The Fund commenced operations on February 15, 1994. Index comparisons begin
February 28, 1994.
6
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Returns and Per Share Information
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Yearly periods ended May 31
Scudder Limited Term Lehman Brothers Municipal
Tax Free Fund Bond Index (3 Year)*
1994** -0.24 -0.15
1995 5.81 5.76
1996 4.36 4.74
1997 5.21 5.38
1998 6.02 5.67
1999 3.79 4.63
2000 0.81 1.83
1994** 1995 1996 1997 1998 1999 2000
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Fund Total
Return (%) -.24 5.81 4.36 5.21 6.02 3.79 .81
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Index Total
Return (%) -.15 5.76 4.74 5.38 5.67 4.63 1.83
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Net Asset
Value ($) 11.83 11.92 11.88 11.95 12.14 12.10 11.61
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Income
Dividends ($) .14 .58 .55 .52 .55 .50 .52
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Capital Gains
Distributions($) -- -- .01 .02 .01 -- .07
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* 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.
** The Fund commenced operations on February 15, 1994. Index comparisons begin
February 28, 1994.
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.
7
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Portfolio Summary
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May 31, 2000
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Diversification
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Core Cities/Lease 27%
Hospital/Health Revenue 13%
Electric Utility Revenue 10%
State General Obligation 6%
Student Loans 3%
Transportation/Toll Revenue 3%
Housing Finance Authority 2%
Industrial Development
Revenue 2%
Sales/Special Tax 1%
Miscellaneous 33%
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100%
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The fund benefited from broad diversification in several categories of general
obligation and revenue bonds.
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Quality
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
AAA 56%
AA 9%
A 32%
BBB 3%
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100%
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Weighted average quality: AA
Overall portfolio quality remained high during the period, with 65% of fund
holdings rated AAA or AA as of May 31.
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Effective Maturity
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Less than 1 year 21%
1 < 5 years 64%
5 < 8 years 15%
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100%
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Weighted average effective
maturity: 3.0 years
As the municipal yield curve between one and ten years flattened and interest
rates rose, we shortened the fund's average maturity and duration as a defensive
measure against market weakness.
For more complete details about the Fund's investment portfolio, see page 13. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
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May 31, 2000
Dear Shareholders,
Scudder Limited Term Tax Free Fund achieved its objectives and ranked in the top
quartile of similar funds for total return performance during the 12 months
ended May 31, 2000. The fund's most recent fiscal year comprised one of the most
difficult periods for fixed-income investments since 1994, however, as the
Federal Reserve Board Open Market Committee (FOMC) raised short-term interest
rates 1.75 percentage points to 6.50%. Reflecting this adverse environment, the
fund posted a 0.81% total return for the 12 months ended May 31, 2000. This
return placed the fund 10th out of 41 peers over the same period as compiled by
Lipper Analytical Services, Inc. The fund's solid competitive results also
placed it in the top 30% of similar funds for the three- and five-year periods
as shown in the table below.
During the 12-month period, the Federal Reserve's resolve to head off inflation,
coupled with weak investor demand for municipal bond funds, led to lower
returns. Strong U.S. economic growth, the lowest unemployment rate in 30 years,
and brisk consumer spending prompted the Fed to tighten monetary policy.
For the fund, the overriding challenge was to preserve capital. We are pleased
to report that the fund's return outpaced the 0.27% average return of similar
municipal bond funds during the 12 months ended May 31, 2000. In addition,
Scudder Limited Term Tax Free Fund received
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Solid Competitive Results
(Average annual returns for periods ended May 31, 2000)
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Scudder Lipper
Limited Term Average Number of
Tax Free Fund Annual Funds Percentile
Period Return Return Rank Tracked Ranking
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1 Year 0.81% 0.27% 10 of 41 Top 24%
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3 Years 3.52% 3.13% 11 of 38 Top 29%
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5 Years 4.02% 3.59% 5 of 26 Top 19%
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Past performance does not guarantee future results.
9
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a five-star (highest) rating from Morningstar as of November 30 (see page 2 for
additional information). Please turn to the Performance Update on page 5 for
more information on the fund's long-term progress, including comparisons with
the unmanaged Lehman Brothers 3-Year Municipal Bond Index.
Portfolio Strategy
Scudder Limited Term Tax Free Fund's investment goal has been to pursue tax-free
income with below-average price risk through investments in municipal bonds with
effective maturities between one and ten years. Over the six-month period, the
yield curve between two- and 10-year maturities flattened as overall yield
levels rose. By the close of the period we had shortened the fund's average
maturity to 3.0 years and duration to 2.56 years due to market weakness. During
the period we continued to purchase primarily premium coupon bonds to provide
protection during periods of rising interest rates. The fund also continued to
pursue high average quality: As of May 31, 2000, over 65% of fund assets were
rated AA or better.
Outlook
Given recent government statistics that suggest U.S. economic growth has begun
to moderate and the fact that the Federal Reserve raised its short-term
interest-rate target in May by 50 basis points, municipal bonds may benefit from
a more stable interest rate environment over the coming months. We believe the
municipal bond market provides attractive value, with tax-equivalent yields near
double-digit levels for investors in the highest tax brackets. In January 2000,
The Bond Buyer's Revenue Bond Index (comprised of long-maturity, A-rated bonds)
reached 6.35%, the highest level since August 1995.
10
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Shareholders of the fund have approved a plan to consolidate the assets of
Scudder Limited Term Tax Free Fund into Scudder Medium Term Tax Free Fund. We
expect the fund consolidation to take place on or about July 28, 2000.
Sincerely,
Your Portfolio Management Team
/s/Ashton P. Goodfield /s/Philip G. Condon
Ashton P. Goodfield Philip G. Condon
11
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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 offices across the United
States and abroad. The Adviser believes that a team approach benefits fund
investors by bringing together many disciplines and leveraging the firm's
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.
Portfolio manager Philip G. Condon joined the team in 1999 and joined the
Adviser in 1983. Mr. Condon has 22 years of experience in municipal investing
and portfolio management.
12
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<TABLE>
<CAPTION>
Investment Portfolio as of May 31, 2000
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Principal
Amount ($) Value ($)
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Short-Term Municipal Investments 2.1%
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<S> <C> <C>
District of Columbia
District of Columbia, General Obligation, General
Fund Recovery, Series B2, Daily Demand Note,
3.75%, 6/1/2003* .................................... 1,000,000 1,000,000
Texas
North Central, TX, Health Facilities Development
Corp. Revenue, Series C, Presbyterian Medical Center,
Daily Demand Note, 4.1%, 12/1/2015 (b)* ............. 500,000 500,000
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Total Short-Term Municipal Investments (Cost $1,500,000 ) 1,500,000
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Intermediate-Term Municipal Investments 97.9%
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Arizona
Central Arizona Water Conservation District,
Central Arizona Project, Prerefunded 11/1/00, 7.5%,
11/1/2005*** ........................................ 1,000,000 1,031,520
Arkansas
Rogers, AR, Sales and Use Tax Revenue, Series 1996,
5%, 11/1/2015 ....................................... 590,000 581,008
California
Foothill Eastern Transportation Corridor Agency, CA,
Toll Road Revenue, Series 1995 A, Step-up Coupon,
0% to 1/1/2005, 7.05% to 1/1/2009 ................... 1,000,000 798,510
Sacramento, CA, Cogeneration Revenue, Procter &
Gamble Project, Series 1995, 7%, 7/1/2004 ........... 1,000,000 1,055,630
Delaware
Delaware State Health Facilities Authorities Revenue
Bonds, Medical Center of Delaware, Series 1989,
7%, 10/1/2003 (b) ................................... 1,500,000 1,532,577
District of Columbia
District of Columbia, General Obligation:
Series 1993 A, ETM, 5.625%, 6/1/2002 (b)** .......... 735,000 743,401
Series 1993 A, 5.625%, 6/1/2002 (b) ................. 765,000 772,543
Series 1993 B, 5.5%, 6/1/2007 (b) ................... 2,000,000 2,011,540
Series 1993 D, ETM, 5.25%, 12/1/2003** .............. 935,000 938,852
Series 1993 D, 5.25%, 12/1/2003 ..................... 65,000 65,124
Florida
Dade County, FL, Port Authority Revenue, Series 1968 C,
5.5%, Prerefunded 4/1/2007, 10/1/2007*** ............ 4,015,000 4,031,783
The accompanying notes are an integral part of the financial statements.
13
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------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
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Georgia
Atlanta, GA, Water & Wastewater Revenue, 5.45%,
1/1/2017 (b) ......................................... 2,000,000 2,037,260
Municipal Electric Authority of Georgia, Power Revenue,
Series 1991 U, ETM, 6.6%, 1/1/2001 (b)** ............. 1,000,000 1,010,700
Illinois
Chicago, IL, General Obligation, Series 1995 C,
6.25%, 10/31/2002 (b) ................................ 3,450,000 3,537,389
Illinois Health Facilities Authority, Revenue Refunding:
Methodist Medical Center, Series 1998, ETM,
5.5%, 11/15/2004 (b)** ............................. 1,245,000 1,254,736
Sherman Hospital Project, Series 1991, ETM,
6.5%, 8/1/2001 (b)** ............................... 1,025,000 1,045,275
Indiana
Indiana Health Facility Finance Authority, Hospital
Revenue, Ancilla Systems Inc., Series 1992 A, 5.875%,
7/1/2002 (b) ......................................... 1,000,000 1,014,300
Iowa
Cedar Rapids, IA, Hospital Facilities Revenue, St. Luke's
Methodist Hospital:
Series 1993, ETM, 5.65%, 5/15/2002 (b)** ........... 490,000 496,228
Series 1993, 5.65%, 8/15/2002 (b) .................. 760,000 768,079
Louisiana
Jefferson Parish, LA, School Board Sales & Use Tax
Revenue, Series 1986 A, ETM, 7.25%, 2/1/2001** ....... 6,135,000 6,225,430
Massachusetts
New England Education Loan Marketing Corporation,
Massachusetts Student Loan Revenue Refunding,
Series 1992 D, 6.2%, 9/1/2000 (b) .................... 2,000,000 2,007,140
Nevada
Nevada State Housing Division, Single Family Mortgage
Revenue, Series R, 5.95%, 10/1/2011 .................. 620,000 620,967
New Jersey
New Jersey Economic Development Authority,
Series 1999 A, 5.375%, 5/1/2006 (b) .................. 2,000,000 2,023,620
New Jersey State Turnpike Authority, Series 1968 C,
ETM, 5.2%, 1/1/2008** ................................ 1,085,000 1,077,568
New York
New York City, NY, General Obligation:
Series 1991 A, 3%, 8/15/2002 (b) ..................... 1,000,000 944,330
Series 1995 B, 6.75%, 8/15/2003 ...................... 6,000,000 6,258,180
Series 1995 D, 6.5%, 2/15/2005 ....................... 1,315,000 1,374,267
Series 1996 A, 6.75%, 8/1/2004 ....................... 1,500,000 1,577,940
The accompanying notes are an integral part of the financial statements.
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Principal
Amount ($) Value ($)
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Series 1996 I, 6.5%, 3/15/2005 ....................... 1,575,000 1,647,088
Series 1997 I, 6.25%, 4/15/2006 ...................... 1,000,000 1,040,170
New York State Dormitory Authority, State University
Educational Facility, Series 1995 A, 6.5%, 5/15/2004 . 1,000,000 1,041,920
New York State Medical Care Facilities, Finance Agency
Revenue, Mount Sinai Hospital, Series 1992 C,
5.95%, 8/15/2009 ..................................... 720,000 731,462
New York State Urban Development Corporation
Project, Onondaga County Convention Center:
Series 1995, 6%, 1/1/2004 .......................... 1,445,000 1,472,354
Series 1995, 6%, 1/1/2005 .......................... 1,535,000 1,566,882
Syracuse, NY, Industrial Development Agency, Pilot
Revenue Bonds, Series 1995, 5.125%, 10/15/2002 ....... 1,200,000 1,197,684
North Carolina
North Carolina Municipal Power Agency #1, Catawaba
Electric Revenue, Series 1992, 5.75%, 1/1/2002 (b) ... 1,150,000 1,161,351
Texas
Austin, TX, Utility System Revenue:
Series 1991 A, ETM, 6.3%, 11/15/2001 (b)** ........... 365,000 372,468
Series 1991 A, 6.3%, 11/15/2001 (b) .................. 635,000 647,021
Ector County, TX, Hospital District, Hospital Revenue,
Series 1997, 5.5%, 4/15/2003 (b) ..................... 1,000,000 1,005,720
Lower Colorado River Authority, TX, Series 1999 F,
6%, 5/15/2007 ........................................ 1,000,000 1,039,070
Richardson, TX, Hospital Authority, Richardson Medical
Center:
Series 1993, 6.5%, Prerefunded, 12/1/2003,
12/1/2012*** ..................................... 320,000 337,555
Series 1993, 6.5%, 12/1/2012 ....................... 505,000 482,982
Texas Department of Housing & Community Affairs,
Single-Family Mortgage Revenue, Series 1996 B, 5.5%,
3/1/2011 (b) ......................................... 400,000 399,512
Travis County, TX, Health Services, Series 1999 A, 5.75%,
11/15/2007 ........................................... 2,000,000 2,036,300
Washington
Washington Public Power Supply System, Nuclear
Project #2, Refunding Revenue:
Series 1990 C, 7.3%, 7/1/2000 ...................... 1,300,000 1,302,561
Series 1992 A, 5.7%, 7/1/2002 ...................... 1,550,000 1,566,864
West Virginia
Wayne County, WV, Industrial Development, Atlantic
Richfield Company Project, Series 1981, ETM, 11.75%,
12/1/2001** .......................................... 495,000 543,045
The accompanying notes are an integral part of the financial statements.
15
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Principal
Amount ($) Value ($)
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Wisconsin
Milwaukee, WI, Metropolitan Sewer District Revenue,
Series 1990 A, ETM, 6.7%, 10/1/2001** ...................... 1,000,000 1,023,780
Wisconsin Health and Education Facilities Authority,
St. Luke's Medical Center, Series 1991, ETM, 6.6%,
8/15/2001 (b)** ............................................ 1,745,000 1,782,465
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Total Intermediate-Term Municipal Investments (Cost $68,857,525) 69,234,151
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Total Investment Portfolio-- 100.0% (Cost $70,357,525) (a) 70,734,151
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</TABLE>
(a) The cost for federal income tax purposes was $70,357,525. At May 31, 2000,
net unrealized appreciation for all securities based on tax cost was
$376,626. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost of $692,587
and aggregate gross unrealized depreciation for all securities in which
there was an excess tax cost over value of $315,961.
(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.
16
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
-------------------------------------------------------------------------------------
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Statement of Assets and Liabilities as of May 31, 2000
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Assets
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<S> <C>
Investments in securities, at value (cost $70,357,525) ............. $ 70,734,151
Cash ............................................................... 25,615
Receivable for investments sold .................................... 91,237
Interest receivable ................................................ 1,148,063
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Total assets ....................................................... 71,999,066
Liabilities
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Dividends payable .................................................. 140,216
Payable for Fund shares redeemed ................................... 62,101
Accrued management fee ............................................. 61,458
Accrued reorganization costs ....................................... 9,574
Accrued Trustees' fees and expenses ................................ 25,963
Other accrued expenses and payables ................................ 49,132
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Total liabilities .................................................. 348,444
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Net assets, at value $ 71,650,622
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Net Assets
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Net assets consist of:
Net unrealized appreciation (depreciation) on investment securities. 376,626
Accumulated net realized gain (loss) ............................... (525,521)
Paid-in capital .................................................... 71,799,517
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Net assets, at value $ 71,650,622
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Net Asset Value
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NetAsset Value, offering and redemption price per share ($71,650,622 /
6,170,770 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) .......................... $ 11.61
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended May 31, 2000
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Investment Income
--------------------------------------------------------------------------------
Income:
Interest ...................................................... $ 4,439,123
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Expenses:
Management fee ................................................ 520,555
Services to shareholders ...................................... 77,686
Custodian and accounting fees ................................. 42,037
Auditing ...................................................... 28,837
Legal ......................................................... 6,091
Trustees' fees and expenses ................................... 80,663
Reports to shareholders ....................................... 16,317
Registration fees ............................................. 26,577
Amortization of organization expenses ......................... 1,756
Reorganization ................................................ 11,056
Other ......................................................... 5,262
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Total expenses, before expense reductions ..................... 816,837
Expense reductions ............................................ (128,658)
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Total expenses, after expenses reductions ..................... 688,179
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Net investment income 3,750,944
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Realized and unrealized gain (loss) on investment transactions
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Net realized gain (loss) from investments ..................... (525,520)
Net unrealized appreciation (depreciation) during the period on
investments ................................................ (2,677,313)
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Net gain (loss) on investment transactions (3,202,833)
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Net increase (decrease) in net assets resulting from operations $ 548,111
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The accompanying notes are an integral part of the financial statements.
18
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<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------
Seven Months Year Ended
Year Ended May Ended May 31, October 31,
Increase (Decrease) in Net Assets 31, 2000 1999 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ........... $ 3,750,944 $ 2,869,555 $ 5,457,882
Net realized gain (loss) on
investment transactions ...... (525,520) 578,402 (139,113)
Net unrealized appreciation
(depreciation) on investment
transactions during the period (2,677,313) (2,118,666) 1,558,802
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations ................... 548,111 1,329,291 6,877,571
------------- ------------- -------------
Distributions to shareholders
from:
Net investment income ........... (3,750,944) (2,869,555) (5,457,882)
------------- ------------- -------------
Net realized gains .............. (461,778) -- (57,180)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ....... 16,982,207 20,000,539 68,479,028
Reinvestment of distributions ... 2,119,678 1,255,955 2,328,280
Cost of shares redeemed ......... (51,090,374) (41,586,645) (59,872,051)
------------- ------------- -------------
Net increase (decrease) in net
assets from Fund share
transactions ................. (31,988,489) (20,330,151) 10,935,257
------------- ------------- -------------
Increase (decrease) in net assets (35,653,100) (21,870,415) 12,297,766
Net assets at beginning of period
Net assets at end of period ..... 107,303,722 129,174,137 116,876,371
------------- ------------- -------------
Other Information ............... $ 71,650,622 $ 107,303,722 $ 129,174,137
------------- ------------- -------------
------------------------------------------------------------------------------------
Shares outstanding at beginning
of period .................... 8,870,916 10,536,316 9,639,451
------------- ------------- -------------
Shares sold ..................... 1,441,166 1,638,556 5,627,934
Shares issued to shareholders in
reinvestment of distributions 179,729 102,879 191,473
Shares redeemed ................. (4,321,041) (3,406,835) (4,922,542)
------------- ------------- -------------
Net increase (decrease) in Fund
shares ....................... (2,700,146) (1,665,400) 896,865
Shares outstanding at end of ------------- ------------- -------------
period ....................... 6,170,770 8,870,916 10,536,316
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
---------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
---------------------------------------------------------------------------------------
2000(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $12.10 $12.26 $12.12 $11.98 $12.01 $11.67
----------------------------------------------------
---------------------------------------------------------------------------------------
Income (loss) from investment operations:
---------------------------------------------------------------------------------------
Net investment income .52 .29 .50 .52 .53 .56
---------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.42) (.16) .15 .16 (.02) .34
----------------------------------------------------
---------------------------------------------------------------------------------------
Total from investment
operations .10 .13 .65 .68 .51 .90
---------------------------------------------------------------------------------------
Less distributions from:
---------------------------------------------------------------------------------------
Net investment income (.52) (.29) (.50) (.52) (.53) (.56)
---------------------------------------------------------------------------------------
Net realized gains on
investment transactions (.07) -- (.01) (.02) (.01) --
----------------------------------------------------
---------------------------------------------------------------------------------------
Total distributions (.59) (.29) (.51) (.54) (.54) (.56)
---------------------------------------------------------------------------------------
Net asset value, end of period $11.61 $12.10 $12.26 $12.12 $11.98 $12.01
----------------------------------------------------
---------------------------------------------------------------------------------------
Total Return (%) (d) .81 1.05** 5.37 5.89 4.33 7.94
---------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
---------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 72 107 129 117 124 122
---------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) .94(e) .81* .82 .83 .82 .85
---------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) .80(e) .75* .75 .75 .63 .23
---------------------------------------------------------------------------------------
Ratio of net investment income
(loss) (%) 4.34 4.06* 4.12 4.32 4.46 4.78
---------------------------------------------------------------------------------------
Portfolio turnover rate (%) 26 6* 23 18 38 38
---------------------------------------------------------------------------------------
</TABLE>
(a) For the year ended May 31, 2000.
(b) For the seven months ended May 31, 1999. On August 10, 1998, the Board of
Trustees of the Fund changed the fiscal year end from October 31 to May 31.
(c) For the years ended October 31.
(d) Total returns would have been lower had certain expenses not been reduced.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .87% and
.75%, respectively.
* Annualized
** Not annualized
20
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Description of the Fund
Scudder Limited Term Tax Free Fund (the "Fund") is a diversified series of
Scudder Tax Free Trust (the "Trust") which is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company organized as a Massachusetts business trust. On August 10,
1998, the Board of Trustees of the Fund changed the fiscal year end from October
31 to May 31.
B. Plan of Reorganization
On February 7, 2000, the Trustees of the Fund approved an Agreement and Plan of
Reorganization (the "Plan") between the Fund and Scudder Medium Term Tax Free
Fund, pursuant to which Scudder Medium Term Tax Free Fund would acquire all or
substantially all of the assets and liabilities of the Fund in exchange for
shares of Scudder Medium Term Tax Free Fund. The proposed transaction is part of
Scudder Kemper Investments, Inc.'s ("Scudder Kemper") initiative to restructure
and streamline the management and operations of the funds it advises. Costs
incurred in connection with this reorganization initiative are being borne
jointly by Scudder Kemper and certain funds and are included as reorganization
expense in the Statement of Operations of the Fund. These costs principally
include printing, proxy meeting expenses and professional fees. All funds under
the reorganization initiative are subject to an allocated charge of such costs
except for certain funds not expected to realize a reduction in the operating
expense ratio. The Plan can be consummated only if, among other things, it is
approved by a majority vote of the shareholders of the Fund. On July 13, 2000, a
special meeting (the "Meeting") of the shareholders of the Fund was held and the
Plan was approved.
As a result of the Plan, each shareholder of Scudder Limited Term Tax Free Fund
will become a shareholder of the shares of Scudder Medium Term Tax Free Fund and
would hold, immediately after the closing of the Plan (the "Closing"), that
number of full and fractional voting shares of Scudder Medium Term Tax Free Fund
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares held in the Fund as of the close of business on the
business day preceding the Closing. The Closing is expected to take place during
the third quarter of 2000.
21
<PAGE>
C. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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 an original
maturity 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 securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
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. Accordingly, the Fund paid no federal income taxes and no
federal income tax provision was required.
At May 31, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $443,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until May 31,
2008, the expiration date, whichever occurs first.
In addition, from November 1, 1999 through May 31, 2000, the Fund incurred
approximately $83,000 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ended May 31, 2001.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. 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 at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
22
<PAGE>
regulations which may differ from accounting principles generally accepted in
the United States. 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. All premiums and original issue discounts are
amortized/accreted for both tax and financial 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.
D. Purchases and Sales of Securities
During the year ended May 31, 2000, purchases and sales of investments
(excluding short-term) aggregated $21,823,829 and $52,439,603, respectively.
E. 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 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, 2000. Certain
expenses incurred in connection with the reorganization are excluded from the
expense limitation. For the year ended May 31, 2000, the Adviser did not impose
a portion of its fee amounting to $97,448 and the amount imposed aggregated
$423,107.
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 May 31, 2000, the amount charged to the Fund by SSC aggregated
$38,273 of which $4,410 was unpaid at May 31, 2000.
23
<PAGE>
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 May
31, 2000, the amount charged to the Fund by SFAC aggregated $36,000, of which
$3,000 was unpaid at May 31, 2000.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the year
ended May 31, 2000, Trustees' fees and expenses aggregated $26,446. In addition,
a one-time fee of $54,217 was accrued for payment to those Trustees not
affiliated with the Adviser who are not standing for re-election, under the
reorganization discussed in Note B. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $27,109 of such costs.
F. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the year ended May 31, 2000, the
Fund's custodian and transfer agent fees were reduced by $1,588 and $2,513,
respectively, under these arrangements.
G. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
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 based upon net assets, 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.
24
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of Scudder Tax Free Trust and 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, 2000, the results of its operations, the changes in its
net assets, and the financial highlights for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States. 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 auditing standards generally accepted in the
United States, 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, 2000 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 14, 2000
25
<PAGE>
Tax Information
--------------------------------------------------------------------------------
The Fund paid distributions of $0.065 per share from net long-term capital gains
during its year ended May 31, 2000, of which 100% represents 20% rate gains.
Of the dividends paid from net investment income for the taxable year ended May
31, 2000, 100% are designated as exempt interest dividends for federal income
tax purposes.
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 account, please call 1-800-SCUDDER.
26
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* Ashton P. Goodfield*
o President and Trustee o Vice President
Henry P. Becton, Jr. Ann M. McCreary*
o Trustee; President and General o Vice President
Manager, WGBH Educational
Foundation John Millette*
o Vice President and Secretary
Dawn-Marie Driscoll
o Trustee; Executive Fellow, Center John R. Hebble*
for Business Ethics, Bentley o Treasurer
College; President, Driscoll
Associates Caroline Pearson*
o Assistant Secretary
Peter B. Freeman
o Trustee; Corporate Director and *Scudder Kemper Investments, Inc.
Trustee
George M. Lovejoy, Jr.
o Trustee; President and Director,
Fifty Associates; Chairman
Emeritus, Meredith and Grew, Inc.
Wesley W. Marple, Jr.
o Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
o Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
o Trustee; Managing Director,
First Light Capital
27
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
The Scudder Family of Funds+++
--------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Scudder Tax Free Money Fund+ Growth
Scudder Classic Growth Fund***
Tax Free+ Scudder Large Company Growth Fund***
Scudder Limited Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Medium Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder 21st Century Growth Fund***
Scudder High Yield Tax Free Fund***
Scudder California Tax Free Fund** Global Equity
Scudder Massachusetts Limited Term Worldwide
Tax Free Fund** Scudder Global Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder Global Discovery Fund***
U.S. Income Scudder Emerging Markets Growth Fund
Scudder Short Term Bond Fund Scudder Gold Fund
Scudder GNMA Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.***
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Health Care Fund
Asset Allocation Scudder Technology Fund
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio Preferred Series
Scudder Pathway Growth Portfolio Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
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
</TABLE>
28
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Closed-End Funds#
-----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
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 Class S 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
Kemper Investment'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 Kemper Investment's insurance agencies,
1-800-225-2470.
# These funds, advised by Scudder Kemper Investments, Inc., are
traded on the New York Stock Exchange and, in some cases, on
various other stock exchanges.
29
<PAGE>
Scudder Solutions
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
30
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
31
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 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 over 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
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of [LOGO] Zurich Financial Services Group
