This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Pennsylvania
Tax Free Fund
Semiannual Report
September 30, 1995
o For investors seeking double-tax-free income exempt from both Pennsylvania
and regular federal income taxes
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
21 Officers and Trustees
22 Investment Products
and Services
23 How to Contact Scudder
IN BRIEF
o Long-term interest rates remained on a downward slope throughout the
six-month period ended September 30, 1995. Scudder Pennsylvania Tax Free
Fund generated a 4.38% total return for the period, based on an $0.18
increase in the Fund's share price to $13.31 on September 30 and reinvested
distributions totaling $0.39 per share.
o The Fund's 30-day net annualized SEC yield was 4.84% on September 30, 1995,
equivalent to an 8.24% taxable yield for Pennsylvania investors subject to
the 41.29% combined federal and state income tax rate.
BAR CHART: Fund Yield vs. Taxable Equivalent Yield
3/31/95 9/30/95
The Fund's 30-Day SEC Yield 5.29% 4.84%
Taxable Equivalent Yield 9.01% 8.24%
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
In our annual report dated March 31, we wondered whether we had seen
the highs in interest rates after their persistent rise in 1994. The answer
turned out to be "yes," for the most part. As the U.S. economy slowed and
inflation remained quiescent during the first quarter of 1995 and beyond,
interest rates (long-term and short-term alike) fell markedly lower.
Throughout 1995, investors have been anticipating an economic slowdown.
For now, economic indicators are turning up, corporate profits remain healthy,
and consumers have responded to lower short-term rates by borrowing and spending
more. We believe consumers will fuel this reacceleration of U.S. economic
activity until their increasingly high debt burdens force them to tighten their
budgetary belts. The current economic expansion cycle is extremely mature, and
we expect a slowdown sometime in the second half of 1996.
What does this mean for tax-exempt fund investors? It is possible that
the pickup in economic activity could lead to some increases in interest rates
over the short term. But the economy is extremely interest-rate sensitive and
should respond quickly to any rate changes. When the economy begins to slow
down, rates should move back down. Most importantly, the relationship between
supply and demand for municipal bonds should work in the tax-exempt investor's
favor as the supply of bonds continues to shrink, placing upward pressure on the
prices of these bonds.
As always, your portfolio managers will continue to focus their efforts
on fundamental research and security selection as a means of generating high
current income and attractive total returns. Please call a Scudder Investor
Relations representative at 1-800-225-2470 if you have questions about your
Fund. Page 23 provides more information on how to contact Scudder. Thank you for
choosing Scudder Pennsylvania Tax Free Fund to help meet your investment needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Pennsylvania Tax Free Fund
3
<PAGE>
Scudder Pennsylvania Tax Free Fund
Performance Update as of September 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Pennsylvania Tax Free Fund
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,051 10.51% 10.51%
5 Year $15,333 53.33% 8.92%
Life of
Fund* $19,328 93.28% 8.21%
Lehman Brothers Municipal Bond Index
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,118 11.18% 11.18%
5 Year $15,289 52.89% 8.86%
Life of
Fund* $20,124 101.24% 8.75%
*The Fund commenced operations on May 28, 1987.
Index comparisons begin May 31, 1987.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended September 30
Scudder Pennsylvania Tax Free Fund
Year Amount
- ----------------------
5/31/87 $10,000
87 $ 9,622
88 $11,008
89 $12,058
90 $12,605
91 $14,363
92 $15,864
93 $18,117
94 $17,489
95 $19,328
Index
Year Amount
- ----------------------
5/31/87 $10,000
87 $10,038
88 $11,341
89 $12,325
90 $13,163
91 $14,899
92 $16,456
93 $18,553
94 $18,100
95 $20,124
The unmanaged Lehman Brothers Municipal Bond Index is a market
value-weighted measure of municipal bonds issued across the United
States. Index issues have a credit rating of at least Baa and a
maturity of at least two years. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees or
expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended September 30
- ---------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987* 1988 1989 1990 1991 1992 1993 1994 1995
-----------------------------------------------------------------------
Net Asset Value... $11.30 $12.01 $12.26 $11.98 $12.78 $13.20 $14.06 $12.76 $13.31
Income Dividends.. $ .25 $ .76 $ .84 $ .82 $ .80 $ .75 $ .76 $ .74 $ .72
Capital Gains
Distributions..... $ -- $ .04 $ .02 $ .01 $ .02 $ .12 $ .18 $ .08 $ .03
Fund Total
Return (%)........ -3.78 14.41 9.54 4.54 13.94 10.45 14.20 -3.47 10.51
Index Total
Return (%)........ .38 12.98 8.68 6.80 13.19 10.45 12.74 -2.44 11.18
</TABLE>
Performance is historical and 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, the average annual
total returns for the Fund for the one year, five year, and life of Fund
periods would have been lower.
4
<PAGE>
Portfolio Summary as of September 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
General Obligation 28%
Hospital/Health 21%
Water/Sewer Revenue 17%
Higher Education 6% The Fund modestly increased
Electric Utility Revenue 5% investments in general obligation
Housing Finance bonds and remained among a
Authority 5% well-researched selection of
Core Cities/Lease 4% revenue bonds.
State Agency/Lease 4%
Pollution Control
Revenue 3%
Miscellaneous Municipal 7%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 73%
AA 7% The portfolio's emphasis on
A 6% credit quality remained intact,
BBB 10% amidst improving market
Not Rated 4% conditions.
----
100%
====
Weighted average quality: AA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 6%
1 - 5 years 12% Intermediate-term bonds constituted
5 - 10 years 26% the bulk of the Fund's portfolio,
10 - 20 years 43% and contributed solidly to the
Greater than 20 years 13% Fund's performance.
----
100%
====
Weighted average effective maturity: 12 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's Investment Portfolio,
see page 10.
5
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Pennsylvania Tax Free Fund delivered solid results during the
six-month period ended September 30, 1995, as interest rates continued to fall.
The Fund's six-month total return of 4.38% reflects an increase in share price
to $13.31 on September 30 from $13.13 six months ago, and the reinvestment of
distributions totaling $0.39 per share -- $0.36 in income distributions and
$0.03 in long-term capital gain distributions. By comparison, the Fund's peer
group of 61 Pennsylvania tax free funds tracked by Lipper Analytical Services,
Inc. returned 4.55% on average.
The Fund's 30-day net annualized SEC yield stood at 4.84% as of September
30, down from 5.29% at the start of the period, reflecting the declining rate
environment. Still, the Fund's yield on a taxable equivalent basis is
substantially higher than yields from comparable taxable investments. For
Pennsylvania taxpayers in the top combined federal and state tax bracket of
41.29%, a taxable investment had to provide a yield of 8.24% to match your
Fund's tax-free yield as of September 30.
The Fund's modest dip in yield was more than offset by its rising share
price. Price appreciation, in fact, has played a prominent role in the Fund's
performance throughout this year, as evidenced by its 11.99% return for the
first nine months of 1995. Strengthening bond prices were also behind the Fund's
June capital gain distribution -- which represented the net profits from the
sale of Fund holdings.
Favorable Overall Bond Market Conditions
Belie Differences in Specific Sectors
Despite strong performance in 1995, investors remain hesitant about bonds
- -- municipal, Treasury, and corporate -- as memories linger of 1994's price
declines. But those who did re-enter the bond markets generally encountered
favorable conditions. Encouraged by reports indicating slowing economic growth
and the continued absence of inflationary pressures, investors have pushed up
fixed-income prices and driven down yields since long-term interest rates peaked
in November 1994.
Yields did not fall uniformly nor did prices rise in lockstep across
different sectors of the bond market, however -- nor along the maturity
spectrum. Treasury securities, for instance, outperformed municipal securities
during the six-month period largely because Treasuries respond more quickly to
changing conditions, as they enjoy a larger, more active market. Moreover,
6
<PAGE>
unlike Treasuries, most municipal bonds are callable, meaning they can be
retired by their issuers before maturity. Falling interest rates typically raise
the incidence of calls as bond issuers refinance their debt at more favorable
rates. Compared with taxable investments, specifically Treasuries, long-term
municipal bonds displayed the weakest relative performance, while short-term
municipal bonds displayed the strongest.
On a positive note, the supply/demand balance for municipal bonds remains
favorable because of the continued dearth of new issues. Today, supply remains
below even 1994's levels, when rising interest rates virtually dried up the
refinancing activity that had been flooding the market with new issues for some
years.
Strategy Focuses on Intermediate Maturities, Call Protection
During the period, we took advantage of ample opportunities to make the
most of our total-return orientation. Several strategies helped provide
investors with an attractive level of tax-free income and increased overall
investment value: a focus on noncallable bonds, the addition of more
intermediate-term securities, and an overall emphasis on well-researched issues
of creditworthy municipal entities.
The Fund's existing holdings of noncallable bonds contributed to
portfolio performance throughout the period. Noncallable bonds tend to perform
better than their callable counterparts when interest rates fall, since the
value of callable bonds typically diminishes as their call dates approach.
Noncallables also help the Fund maintain a stable stream of income. When
callable bonds are called, investors are forced to reinvest the proceeds in
lower-income-producing securities. Because the vast majority of municipal bonds
are callable, portfolios owning a healthy dose of noncallable bonds tend to have
an edge in performance.
We added to bonds with intermediate-term maturities during the period,
given their attractive price and yield characteristics. Specifically, we
emphasized bonds with maturities between 14 and 18 years. Because we believed
that intermediate to longer-intermediate bonds provided reasonable income
together with a measure of price stability, more than 85% of the portfolio was
invested in bonds with effective maturities under 20 years as of the end of the
period.
7
<PAGE>
In addition to this emphasis on intermediate-term securities, we replaced
shorter-term holdings with select longer-term bonds. These bonds afforded high
levels of income and strong price appreciation during the period.
As always, we remained attentive to credit quality -- average weighted
portfolio quality at the end of the period was AA. As a further protection
during the period, we added to our holdings of insured securities. (The Fund, of
course, is not insured.) Diversification, as always, retained a central role.
The portfolio was broadly diversified among general obligation bonds, which are
supported by state and local taxing authorities; and a variety of revenue bonds,
which derive their income from their underlying public projects.
Pennsylvania Review
Pennsylvania's fiscal policies reflect the state's continued efforts to
keep debt levels modest and financial operations under control -- so far with
good results. Since fiscal year 1991, the Commonwealth has consistently balanced
its budget. Further, Pennsylvania's strong cash position has fostered a
reduction in short-term borrowing. Meanwhile, fiscal year 1995 is shaping up to
be better than anticipated, with tax revenues exceeding forecasts by $459
million. The surplus will likely be channeled to a "rainy day fund" or toward
next year's budget.
Currently, Pennsylvania's economy is expanding, although at a more modest
pace than the nation as a whole. Unemployment in Pennsylvania is running
slightly above the national average -- 6.4% versus 5.6%. Fortunately, the
employment base no longer is dependent on the manufacturing sector, whose
decline has been offset by the growth of Pennsylvania's service sector. Today,
Pennsylvania's economy is more diverse than ever -- a development that should
help cushion the ill effects that future economic swings may place on the
Commonwealth's finances. We believe the combination of an increasingly
diversified economy and a commitment to borrow less in the municipal market
bodes well for Pennsylvania municipal bond investors.
Outlook
We believe the interest rate environment will remain favorable to bond
investors in the months ahead. Moreover, tax-exempt securities with maturities
longer than 10 years remain attractively priced compared with their taxable
counterparts. On this basis alone, we expect municipal bonds to outperform
8
<PAGE>
taxables. In the meantime, we expect investors in the Fund to continue to enjoy
solid price appreciation while earning a high level of income free from both
federal and Pennsylvania income taxes.
Thank you for your continued interest in Scudder Pennsylvania Tax Free
Fund.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/Philip G. Condon
Donald C. Carleton Philip G. Condon
9
<PAGE>
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
INVESTMENT PORTFOLIO AS OF SEPTEMBER 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------
4.7%
SHORT-TERM MUNICIPAL INVESTMENTS
<S> <C> <C> <C> <C>
PENNSYLVANIA Bucks County, PA, Oxford Falls Plaza, Series 1984,
Weekly Demand Note, 4.5%, 10/1/14*. . . . . . . . . . 100,000 MIG1 100,000
Delaware County, PA:
Airport Facilities Revenue, United Parcel Service,
Daily Demand Note, 4.75%, 12/1/15* . . . . . . . . . 400,000 AAA 400,000
Industrial Development Authority, British Petroleum
Project, Daily Demand Note, 4.75%, 10/1/19* . . . . . 600,000 A1+ 600,000
Pennsylvania Higher Educational Facilities Authority,
Temple University, Series 1984, Daily Demand Note,
4.75%, 10/1/09* . . . . . . . . . . . . . . . . . . . 2,400,000 MIG1 2,400,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $3,500,000) . . . . . . . . . . . . . . . . . . 3,500,000
-----------
95.3%
LONG-TERM MUNICIPAL INVESTMENTS
PENNSYLVANIA Allegheny County, PA:
Hospital Development Authority, Hospital Revenue,
Magee Women's Hospital, 5.3%, 10/1/07 (c). . . . . . 1,260,000 AAA 1,263,327
Sanitary Authority, Sewer Revenues, Series 1986 B,
prerefunded, 7.5%, 6/1/99 (c)***. . . . . . . . . . . 500,000 AAA 552,870
Armstrong County, PA, Hospital Authority, St. Frances
Medical Center, Series A, 6.25%, 6/1/13 (c) . . . . . 1,000,000 AAA 1,024,060
Beaver County, PA, Industrial Development Authority,
Ohio Edison, Beaver Valley, Pollution Control
Revenue, prerefunded, 10.5%, 10/1/95*** . . . . . . . 500,000 BBB 515,170
Berks County, PA, Municipal Authority Hospital
Revenue, Reading Hospital and Medical
Center Project:
5.5%, 10/1/08 (c). . . . . . . . . . . . . . . . . . 2,000,000 AAA 2,018,500
5.7%, 10/1/14 (c). . . . . . . . . . . . . . . . . . 1,000,000 AAA 986,300
Bethlehem, PA:
Water Authority, Refunding, 4.875%, 11/15/14 (c). . . 1,000,000 AAA 888,580
Water Revenue, Series 1992, prerefunded,
6.25%, 11/15/01 (c)*** . . . . . . . . . . . . . . . 1,000,000 AAA 1,089,940
Blair County, PA, Hospital Authority,
Altoona Hospital Project, 5.5%, 7/1/07 (c). . . . . . 1,000,000 AAA 1,020,740
Bristol Township, PA, School District, Series A,
5.25%, 2/15/12 (c). . . . . . . . . . . . . . . . . . 1,920,000 AAA 1,832,582
Bucks County, PA, Water and Sewer Authority
Revenue, ETM, 6.375%, 12/1/08** . . . . . . . . . . . 425,000 NR 441,286
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
10
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Clearfield, PA, Hospital Authority Revenue,
Clearfield Hospital, 6.875%, 6/1/16 . . . . . . . . . 1,455,000 NR 1,405,836
Commonwealth of Pennsylvania, Certificate of
Participation, Lease Revenue, Series A:
5.25%, 7/1/10 (c). . . . . . . . . . . . . . . . . . 1,890,000 AAA 1,805,687
5%, 7/1/15 (c) . . . . . . . . . . . . . . . . . . . 1,000,000 AAA 898,410
Delaware County, PA:
Health Facilities Revenue, Mercy Health Corporation
of Southeastern Pennsylvania, Series B, 6%,
11/15/07 . . . . . . . . . . . . . . . . . . . . . . 1,500,000 BBB 1,494,765
Hospital Revenue, Memorial Hospital,
5.5%, 8/15/13. . . . . . . . . . . . . . . . . . . . 1,750,000 AAA 1,667,610
Delaware County Authority, Commonwealth of
Pennsylvania, University Revenue, Villanova
University, prerefunded, 7.75%, 8/1/98*** . . . . . . 200,000 AAA 221,782
Erie, PA, Higher Education Building Authority, College
Revenue, Mercyhurst College Project,
5.75%, 3/15/20. . . . . . . . . . . . . . . . . . . . 1,000,000 BBB 872,420
Erie County, PA:
General Obligation, 5.25%, 9/1/12 (c) . . . . . . . . 1,000,000 AAA 953,580
Prison Authority, Commonwealth Lease Revenue,
prerefunded, 6.25%, 11/1/01 (c)*** . . . . . . . . . 1,000,000 AAA 1,089,470
Harrisburg, PA, Water Authority Revenue,
Series 1993 B, Inverse Floater, 7.62%,
6/18/15 (c)**** . . . . . . . . . . . . . . . . . . . 1,000,000 AAA 946,250
Lebanon County, PA, Good Samaritan Hospital
Authority Revenue, Series 1989 B, prerefunded,
8.25%, 11/1/99*** . . . . . . . . . . . . . . . . . . 600,000 AAA 692,652
Lehigh County, PA, Hospital Revenue, Healtheast,
Series B, prerefunded, 9%, 7/1/97***. . . . . . . . . 200,000 AAA 219,884
Montgomery County, PA:
Holy Redeemer Hospital, 6.75%, 2/1/09 (c) . . . . . . 500,000 AAA 533,355
Redevelopment Authority Multi-Family Housing
Revenue Refunding, KBF Associates,
6.375%, 7/1/12 . . . . . . . . . . . . . . . . . . . 1,500,000 BBB 1,491,405
Pennsylvania Convention Center Authority,
Funding Revenue, 6%, 9/1/19 (c) . . . . . . . . . . . 2,200,000 AAA 2,253,504
Pennsylvania General Obligation:
10%, 4/15/02 (c). . . . . . . . . . . . . . . . . . . 2,500,000 AAA 3,224,250
6.25%, 7/1/10 . . . . . . . . . . . . . . . . . . . . 1,000,000 AA 1,064,570
5.375%, 5/1/13. . . . . . . . . . . . . . . . . . . . 1,500,000 AA 1,423,845
Prerefunded, Zero Coupon, 12/15/98*** . . . . . . . . 2,040,000 AAA 1,302,050
Pennsylvania Higher Educational Facilities Authority,
Colleges and University Revenue, Carnegie-
Mellon University, 9%, 11/1/09. . . . . . . . . . . . 50,000 AA 51,324
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
11
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania Housing Finance Agency,
Single Family Mortgage Revenue:
Series 1992-33, 6.85%, 10/1/09 . . . . . . . . . . . 840,000 AA 899,128
Series 1991-32, 7.15%, 4/1/15. . . . . . . . . . . . 1,000,000 AA 1,070,760
Pennsylvania Industrial Development Authority,
Economic Development Revenue, 5.8%, 1/1/08 (c). . . . 1,000,000 AAA 1,042,720
Pennsylvania Intergovernmental Cooperation
Authority, Special Tax Revenue, City of
Philadelphia, prerefunded, 6.8%, 6/15/02*** . . . . . 1,000,000 AAA 1,123,240
Philadelphia, PA, Airport Revenue, Philadelphia
Airport System, 9%, 6/15/15 . . . . . . . . . . . . . 100,000 BBB 103,458
Philadelphia, PA, Gas Works Revenue,
Series A, prerefunded, 7.3%, 7/1/97***. . . . . . . . 1,000,000 AAA 1,070,950
Philadelphia, PA, General Obligation:
11.5%, 8/1/98 (c) . . . . . . . . . . . . . . . . . . 500,000 AAA 592,235
Refunding Revenue, Series A, 11.5%, 8/1/99 (c). . . . 710,000 AAA 879,789
Philadelphia, PA, Hospital and Higher Education
Facilities Authority, Hospital Revenue:
Albert Einstein Medical Center, 7.5%, 4/1/99 . . . . 1,000,000 A 1,075,140
Children's Seashore House, Series A,
7%, 8/15/12 (c) . . . . . . . . . . . . . . . . . . 1,000,000 A 1,054,580
Graduate Health System Obligation Group,
6.625%, 7/1/21. . . . . . . . . . . . . . . . . . . 1,000,000 BBB 957,680
Temple University Hospital, Series 1993 A,
6.625%, 11/15/23. . . . . . . . . . . . . . . . . . 1,100,000 BBB 1,099,868
Philadelphia, PA, Municipal Authority, Lease
Revenue Refunding:
Series C, 5%, 4/1/07 (c) . . . . . . . . . . . . . . 2,000,000 AAA 1,970,780
Series A, 5.625%, 11/15/14 (c) . . . . . . . . . . . 1,000,000 AAA 971,410
Philadelphia, PA, Port Authority Lease Revenue,
6.2%, 9/1/13 (c). . . . . . . . . . . . . . . . . . . 2,000,000 AAA 2,020,840
Philadelphia, PA, Water and Wastewater Refunding
Revenue, 5.625%, 6/15/09 (c). . . . . . . . . . . . . 2,000,000 AAA 2,021,740
Philadelphia, PA, Water Revenue, 6.25%, 8/1/10 (c) . . 1,000,000 AAA 1,072,140
Pittsburgh, PA, General Obligation, Series 1993 A,
5.5%, 9/1/14 (c). . . . . . . . . . . . . . . . . . . 1,500,000 AAA 1,453,650
Pittsburgh, PA, Water and Sewer System Revenue:
Series A, prerefunded, 6.5%, 9/1/01 (c)***. . . . . . 1,250,000 AAA 1,394,375
ETM, 7.25%, 9/1/14 (c)**. . . . . . . . . . . . . . . 150,000 AAA 174,396
Series A, 4.75%, 9/1/16 (c) . . . . . . . . . . . . . 2,000,000 AAA 1,719,100
Pottsville, PA, Hospital Authority, Warne Clinic,
7.25%, 7/1/24 . . . . . . . . . . . . . . . . . . . . 1,000,000 BBB 1,020,780
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
12
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Somerset County, PA, General Authority,
Commonwealth Lease Revenue, prerefunded,
6.25%, 10/15/01 (c)***. . . . . . . . . . . . . . . . 1,000,000 AAA 1,088,930
Union County, PA, Higher Education Facilities
Authority, University Revenue, Bucknell University,
6.2%, 4/1/07 (c). . . . . . . . . . . . . . . . . . . 1,000,000 AAA 1,059,470
University Area, PA, Sewer Revenue, 5.25%,
11/1/14 (c) . . . . . . . . . . . . . . . . . . . . . 1,750,000 AAA 1,645,420
Upper Merion County, PA:
General Authority, Lease Revenue, crossover
refunded, 7.2%, 8/15/96***** . . . . . . . . . . . . 350,000 AA 366,114
Municipal Utility Authority, Sewer Revenue,
crossover refunded, 7.2%, 8/15/96***** . . . . . . . 150,000 AA 156,906
Washington County, PA, Lease Revenue, Shadyside
Hospital Project, prerefunded, 7.375%,
6/15/00 (c)***. . . . . . . . . . . . . . . . . . . . 1,000,000 AAA 1,145,980
York County, PA, Resource Recovery Solid Waste
Authority, General Obligation, Series C,
8.2%, 12/1/14 . . . . . . . . . . . . . . . . . . . . 315,000 A 344,575
PUERTO RICO Puerto Rico Electric Power Authority, Power Revenue
Refunding, Series N, Zero Coupon, 7/1/03 (c). . . . . 1,500,000 AAA 1,033,590
Puerto Rico, General Obligation, Public Improvement
Refunding, 5.4%, 7/1/07 . . . . . . . . . . . . . . . 1,500,000 A 1,490,835
Puerto Rico Public Building Authority, Government
Facilities Revenue, 6.25%, 7/1/13 (c) . . . . . . . . 1,000,000 AAA 1,074,770
VIRGIN ISLANDS Virgin Islands Public Finance Authority,
General Obligation, Matching Fund Loan Notes,
Series A, 7.25%, 10/1/18. . . . . . . . . . . . . . . 1,000,000 NR 1,058,890
-----------
Total Long-term Municipal Investments
(Cost $68,002,273). . . . . . . . . . . . . . . . . . 70,500,243
-----------
- -----------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0%
(Cost $71,502,273) (a). . . . . . . . . . . . . . . . 74,000,243
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
13
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $71,502,273. At September
30, 1995, net unrealized appreciation for all securities based on tax cost
was $2,497,970. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $3,018,995 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$521,025.
(b) All of the securities held have been determined to be of appropriate credit
quality as required by the Fund's investment objectives. Credit ratings
shown are assigned by either Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc. Unrated securities
(NR) have been determined to be of comparable quality to rated eligible
securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC or MBIA.
* 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 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 the tax-exempt issue and to retire the bonds in full at
the earliest refunding date.
**** Inverse floating rate notes are instruments whose yields have an inverse
relationship to benchmark interest rates. These securities are shown at
their rate as of September 30, 1995.
***** Bonds which are crossover refunded are secured by an escrow of securities
which is used to pay principal on the tax exempt issue and retire the
bonds in full at the earliest refunding date, except in the case of
default by the issuer or inadequacy in the escrow account.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
14
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $71,502,273)
(Note A). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,000,243
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,121
Receivables:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,321,491
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . 3,480
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . 75,395,335
LIABILITIES
Payables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119,272
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . 38,856
Accrued management fee (Note C) . . . . . . . . . . . . . . . 16,012
Other accrued expenses (Note C) . . . . . . . . . . . . . . . 40,563
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 214,703
------------
Net assets, at market value. . . . . . . . . . . . . . . . . . . $ 75,180,632
------------
------------
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments. . . . . . . . . . . . $ 2,497,970
Accumulated net realized gain . . . . . . . . . . . . . . . . 217,733
Shares of beneficial interest . . . . . . . . . . . . . . . . 56,474
Additional paid-in capital. . . . . . . . . . . . . . . . . . 72,408,455
------------
Net assets, at market value. . . . . . . . . . . . . . . . . . . $ 75,180,632
------------
------------
NET ASSET VALUE, offering and redemption price per share
($75,180,632 + 5,647,426 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) . . . . . . . . . . . . . . . . . . . . $13.31
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
15
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 2,190,788
Expenses:
Management fee (Note C). . . . . . . . . . . . . . . . $ 66,454
Services to shareholders (Note C). . . . . . . . . . . 41,112
Custodian and accounting fees (Note C) . . . . . . . . 35,750
Trustees' fees (Note C). . . . . . . . . . . . . . . . 7,619
Auditing . . . . . . . . . . . . . . . . . . . . . . . 16,462
Reports to shareholders. . . . . . . . . . . . . . . . 9,435
State registration . . . . . . . . . . . . . . . . . . 3,531
Legal. . . . . . . . . . . . . . . . . . . . . . . . . 1,329
Other. . . . . . . . . . . . . . . . . . . . . . . . . 4,961 186,653
-----------------------
Net investment income. . . . . . . . . . . . . . . . . 2,004,135
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENT TRANSACTIONS
Net realized gain from investment transactions . . . . 229,804
Net unrealized appreciation on investments
during the period. . . . . . . . . . . . . . . . . . 980,936
-----------
Net gain on investments. . . . . . . . . . . . . . . . 1,210,740
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . $ 3,214,875
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
16
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1995 MARCH 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income. . . . . . . . . . . . . . $ 2,004,135 $ 4,086,809
Net realized gain from investment
transactions . . . . . . . . . . . . . . . . . 229,804 181,781
Net unrealized appreciation on
investments during the period. . . . . . . . . 980,936 452,741
----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . 3,214,875 4,721,331
----------- -----------
Distributions to shareholders:
From net investment income ($.36 and $.73 per
share, respectively) . . . . . . . . . . . . . (2,004,135) (4,086,809)
----------- -----------
From net realized gains from investment
transactions ($.03 and $.03 per share,
respectively). . . . . . . . . . . . . . . . . (180,267) (157,473)
----------- -----------
Fund share transactions:
Proceeds from shares sold. . . . . . . . . . . . 6,305,141 15,679,635
Net asset value of shares issued to
shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . 1,408,461 2,980,880
Cost of shares redeemed. . . . . . . . . . . . . (5,855,560) (20,409,846)
----------- -----------
Net increase (decrease) in net assets from
Fund share transactions. . . . . . . . . . . . 1,858,042 (1,749,331)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . 2,888,515 (1,272,282)
Net assets at beginning of period. . . . . . . . 72,292,117 73,564,399
----------- -----------
NET ASSETS AT END OF PERIOD. . . . . . . . . . . $ 75,180,632 $ 72,292,117
----------- -----------
----------- -----------
OTHER INFORMATION
Increase (decrease) in Fund shares
Shares outstanding at beginning of period. . . . 5,507,084 5,653,359
----------- -----------
Shares sold. . . . . . . . . . . . . . . . . . . 474,887 1,242,877
Shares issued to shareholders in
reinvestment of distributions. . . . . . . . . 106,259 232,520
Shares redeemed. . . . . . . . . . . . . . . . . (440,804) (1,621,672)
----------- -----------
Net increase (decrease) in Fund shares . . . . . 140,342 (146,275)
----------- -----------
Shares outstanding at end of period. . . . . . . 5,647,426 5,507,084
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
17
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS MAY 28, 1987
ENDED (COMMENCEMENT
SEPTEMBER 30, YEARS ENDED MARCH 31, OF OPERATIONS)
1995 ----------------------------------------------------------------- TO MARCH 31,
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988
----------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. . . . . . . . . $13.13 $13.01 $13.46 $12.80 $12.35 $12.27 $12.08 $11.80 $12.00
Income from investment operations:
Net investment income (a). . . . . . .36 .73 .75 .76 .77 .82 .84 .79 .65
Net realized and unrealized gain
(loss) on investment
transactions . . . . . . . . . . . . .21 .15 (.36) .87 .52 .08 .20 .40 (.26)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations . . . .57 .88 .39 1.63 1.29 .90 1.04 1.19 .39
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment income . . . . . (.36) (.73) (.75) (.76) (.77) (.82) (.84) (.85) (.59)
From net realized gains on
investment transactions. . . . . . (.03) (.03) (.09) (.21) (.07) - (.01) (.06) -
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions. . . . . . . . . . (.39) (.76) (.84) (.97) (.84) (.82) (.85) (.91) (.59)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period . . . . $13.31 $13.13 $13.01 $13.46 $12.80 $12.35 $12.27 $12.08 $11.80
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN (%)(b). . . . . . . . . . 4.38** 7.09 2.70 13.19 10.70 7.58 8.75 11.00 3.39**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) . . . . . . . . . . . . 75 72 74 61 39 26 18 11 5
Ratio of operating expenses, net to
average daily net assets (%)(a). . . .50* .50 .50 .50 .50 .50 .50 .50 .50*
Ratio of net investment income to
average daily net assets (%) . . . . 5.37* 5.74 5.42 5.79 6.05 6.67 6.78 7.09 7.16*
Portfolio turnover rate (%). . . . . . 19.3* 26.2 17.4 29.2 11.2 7.8 2.0 13.5 97.6*
(a) Reflects a per share amount of
expenses, exclusive of
management fees, reimbursed
by the Adviser of. . . . . . . . $ - $ - $ - $ - $ - $ .02 $ .06 $ .15 $ .43
Reflects a per share amount of
management fees and other
fees not imposed of. . . . . . . $ .03 $ .06 $ .06 $ .07 $ .08 $ .07 $ .07 $ .07 $ .05
Operating expense ratio
including expenses reimbursed,
management fee and other
expenses not imposed (%) . . . . .92* .94 .95 1.02 1.13 1.43 1.84 2.43 5.75*
</TABLE>
(b) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
- ----
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Pennsylvania Tax Free Fund (the "Fund") is a non-diversified series
of Scudder State Tax Free Trust (the "Trust"). The Trust is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. There
are currently six series in the Trust. The policies described below are followed
consistently by the Fund in the preparation of its financial statements in
conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, which 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. Short-term investments having a maturity of sixty days or less
are valued at amortized cost. All other debt securities are valued at their
fair value as determined in good faith by the Valuation Committee of the Board
of Trustees.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code 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
provision for federal income taxes was required.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital
loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. As a
----
19
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
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 security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the ex-
dividend date. Interest income is accrued pro rata to maturity.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the six months ended September 30, 1995, purchases and sales of municipal
securities (excluding short-term investments) aggregated $7,945,979 and
$6,575,615, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a fee
equal to an annual rate of approximately 0.60% of the Fund's average daily net
assets, computed and accrued daily and payable monthly. 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 Adviser has agreed not to impose all or a portion of its
management fee until July 31, 1996, and during such period to maintain the
annualized expenses of the Fund at not more than 0.50% of average daily net
assets. For the six months ended September 30, 1995, the Adviser did not impose
a portion of its management fee amounting to $156,926 and the portion imposed
amounted to $66,454, of which $16,012 was unpaid at September 30, 1995.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for the Fund.
Included in services to shareholders is $31,557 charged to the Fund by SSC
for the six months ended September 30, 1995, of which $5,257 is unpaid at
September 30, 1995.
- ----
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Scudder Fund Accounting Corporation ("SFAC"), a wholly-owned 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 six months ended September 30, 1995, the amount charged to the Fund
by SFAC aggregated $18,000, of which $6,000 is unpaid at September 30, 1995.
The Trust pays each Trustee not affiliated with the Adviser $12,000 annually,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the six months ended September 30,
1995, Trustees' fees charged to the Fund aggregated $7,619.
OFFICERS AND TRUSTEES
David S. Lee*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and
General Manager, WGBH
Educational Foundation
Dawn-Marie Driscoll
Trustee; Attorney and
Corporate Director
Peter B. Freeman
Trustee; Corporate Director
and Trustee
Dudley H. Ladd*
Trustee
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
Juris Padegs*
Trustee
Daniel Pierce*
Trustee
Jean C. Tempel
Trustee; General Partner,
TL Ventures
Donald C. Carleton*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
21
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder 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. +A portion of the income from the tax-free funds may
be subject to federal, state, and local taxes. *Not available in all states.
+++ 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, Stevens & Clark, Inc. are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust,(TM) an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
22
<PAGE>
<TABLE>
<CAPTION>
HOW TO CONTACT SCUDDER
Account Service and Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund SCUDDER AUTOMATED
INFORMATION LINE (SAIL) 1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
To receive information about the
Scudder funds, for additional
applications and prospectuses, or for
investment questions SCUDDER INVESTOR
RELATIONS 1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
23
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens,
and F. Haven Clark, Scudder, Stevens & Clark was the first
independent investment counsel firm in the United States.
Since its birth, Scudder's pioneering spirit and commitment to
professional long-term investment management have helped shape
the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 37 pure no load(TM)
funds, including the first international mutual fund offered
to U.S. investors.
Over the years, Scudder's global investment perspective
and dedication to research and fundamental investment
disciplines have helped us become one of the largest and most
respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our
long-standing principles: managing money with integrity and
distinction; keeping the interests of our clients first;
providing access to investments and markets that may not be
easily available to individuals; and making investing as
simple and convenient as possible through friendly,
comprehensive service.
