Scudder
Massachusetts
Tax Free Fund
Annual Report
March 31, 1995
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
o For investors seeking double tax-free income exempt from both Massachusetts
and regular federal income taxes.
o A pure no-load(TM) fund with no commissions
to buy, sell, or exchange shares.
SCUDDER MASSACHUSETTS TAX FREE FUND
CONTENTS
2 Highlights
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
22 Report of Independent
Accountants
23 Tax Information
25 Officers and Trustees
26 Investment Products
and Services
27 How to Contact
Scudder
HIGHLIGHTS
o For its fiscal year ended March 31, 1995, Scudder Massachusetts Tax Free
Fund posted a total return of 7.37%, surpassing the 6.36% average return of
the 39 Massachusetts tax-free funds tracked by Lipper Analytical Services.
o As of March 31, 1995, the Fund's 30-day net annualized SEC yield was 5.27%,
equivalent to a 9.91% taxable yield for Massachusetts investors subject to
the 46.85% combined federal and state income tax rate.
30-Day Yield on March 31, 1995
Scudder Massachusetts Tax Free Fund 5.27%
Taxable equivalent yield 9.91%
o For the two-, three-, four-, and five-year periods ended March 31, 1995,
Scudder Massachusetts Tax Free Fund continued to rank number one among
comparable funds tracked by Lipper. Page 6 contains additional information
concerning the Fund's rankings.
2
<PAGE>
SCUDDER MASSACHUSETTS TAX FREE FUND
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Investor concerns about inflationary economic growth have abated in recent
months, after creating much turmoil for the world's investment markets in 1994.
Indications of continued low inflation and weakness in certain segments of the
economy combined with the Federal Reserve's most recent interest-rate increases
in November and February have reassured many investors that inflation is not
currently a serious concern. Bond prices have begun to recover, yields have
declined from their November highs, and bond mutual funds have enjoyed positive
net subscriptions after several months of redemptions. In the first three months
of 1995, municipal bonds, as measured by the unmanaged Lehman Brothers Municipal
Bond Index, returned 7.07% on average, more than making up for the -5.17% return
reported for all of 1994.
The rise in interest rates over the past year and a half has highlighted a
challenge for income funds: to provide shareholders with the higher income
available from bonds while protecting against price erosion. The question is,
has the interest-rate environment shifted once again and become more positive?
In our view, rates should remain relatively stable if economic growth continues
to slacken in the United States. Nevertheless, additional interest-rate
increases are not out of the question, given some lingering inflationary
concerns: Commodity prices continue to rise, factory production is still pushing
the limits of capacity, and the dollar has fallen to record lows against the
Japanese yen and German mark.
Additional uncertainty regarding interest rates may, of course, spark
episodes of volatility in fixed-income markets. Your portfolio managers will
continue to concentrate their efforts on fundamental investment research and
security selection as a means of generating high current income and attractive
total returns. As always, please call a Scudder Investor Relations
representative at 1-800-225-2470 if you have questions about your Fund. Page 27
provides more information on how to contact Scudder. Thank you for choosing
Scudder Massachusetts Tax Free Fund to help meet your investment needs.
Sincerely,
/s/ David S. Lee
David S. Lee
President,
Scudder Massachusetts Tax Free Fund
3
<PAGE>
Scudder Massachusetts Tax Free Fund
Performance Update as of March 31, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Massachusetts Tax Free Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
3/31/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,737 7.37% 7.37%
5 Year $15,258 52.58% 8.82%
Life of
Fund* $19,418 94.18% 8.83%
Lehman Broters Municipal Bond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
3/31/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,743 7.43% 7.43%
5 Year $14,859 48.59% 8.24%
Life of
Fund* $19,102 91.02% 8.61%
*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 March 31
Scudder Massachusetts Tax Free Fund
Year Amount
- ----------------------
5/31/87 10000
88 10773
89 11796
90 12726
91 13821
92 15267
93 17496
94 18066
95 19418
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
5/31/87 10000
88 10847
89 11628
90 12855
91 14041
92 15444
93 17378
94 17781
95 19102
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 March 31
- -----------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1988* 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------
Net Asset Value... $12.28 $12.23 $12.25 $12.44 $12.81 $13.61 $13.16 $13.33
Income Dividends.. $ .62 $ .88 $ .82 $ .83 $ .81 $ .84 $ .81 $ .74
Capital Gains
Distributions..... $ -- $ .20 $ .11 $ -- $ .09 $ .16 $ .12 $ .01
Fund Total
Return (%)........ 7.73 9.50 7.89 8.60 10.46 14.59 3.37 7.37
Index Total
Return (%)........ 8.48 7.21 10.56 9.22 10.02 12.52 2.32 7.43
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not temporarily capped expenses, the average annual
total return for the Fund for the one year, five year, and life of Fund
periods would have been lower.
4
<PAGE>
Portfolio Summary as of March 31, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
General Obligation 21%
Hospital/Health 19% The Fund invests in a variety
Water/Sewer Revenue 17% of bonds from various sectors
Electric Utility Revenue 11% of the municipal market.
Housing Finance Authority 10%
Higher Education 5%
Toll Revenue 5%
Lease Rentals 3%
Miscellaneous Municipal 9%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 27%
AA 5%
A 52% Portfolio quality remains high,
BBB 11% with 84% of the Fund's holdings
Not Rated 5% rated A or higher.
----
100%
====
Weighted average quality: A
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 2%
1 < 5 years 3%
5 < 10 years 40% The Fund's strategy included
10 < 20 years 46% purchasing and holding 15-year
20 years or greater 9% non-callable bonds because of
---- their attractive yields and lower
100% risk characteristics.
====
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 MASSACHUSETTS TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Massachusetts Tax Free Fund endured a challenging interest-rate
environment in its fiscal year ended March 31, 1995, and emerged with solid
12-month performance. Bond investors faced a number of obstacles during 1994,
chief among them a nagging fear of inflation due to the strong U.S. economy. The
Federal Reserve hiked short-term rates repeatedly to slow the pace of economic
growth, and rates rose persistently across the maturity spectrum. By
mid-November, many investors were confident that the Fed had acted decisively
enough to prevent the U.S. economy from overheating. As inflationary fears
eased, the bond market -- including municipal bonds -- rallied.
Scudder Massachusetts Tax Free Fund posted a 7.37% total return for the 12
months ended March 31, 1995. By compar-ison, the 39 mutual funds tracked by
Lipper Analytical Services, Inc., returned 6.36% on average. The Fund's total
return reflected a $0.17 increase in net asset value to $13.33 on March 31,
1995, and distributions of $0.74 per share in tax-free income dividends and
$0.01 per share in capital gains. The Fund closed its fiscal year with a 30-day
net annualized SEC yield of 5.27%. For investors subject to the 46.85% maximum
combined federal and state income tax rate, the Fund's yield translated into a
9.91% taxable yield, significantly higher than current yields provided by
comparable taxable investments.
Despite the bond market's ups and downs since the fall of 1993, the Fund's
relative performance remains impressive: The Fund held the number one ranking
among all Massachusetts tax-exempt funds tracked by Lipper for the two-, three-,
four-, and five-year periods ended March 31, 1995.
Scudder Massachusetts
Tax Free Fund:
Consistent Top Performance
(Lipper rankings for periods
through March 31, 1995)
Number
Period Rank of Funds
One year 6 of 39
Two years 1 of 27
Three years 1 of 22
Four years 1 of 19
Five years 1 of 18
Rankings are based on historical total returns, although the Fund's main
objective is income. Rankings for the Fund reflect the effect of an expense
limitation since the Fund's inception. Had the Fund's expenses not been limited,
total returns would have been lower. Past performance does not guarantee future
results.
Good Times for Massachusetts
State finances have improved dramatically since recession-year 1990, when
Massachusetts ended the fiscal year with an operating deficit of $1.2 billion.
The state has produced an operating surplus since fiscal year 1992 and built up
substantial reserve funds. Its 1995 fiscal year is expected to end with a budget
surplus of more than $500 million. Governor Weld's proposed budget for fiscal
year 1996 is conservative and includes a 3.6% increase in revenues compared with
1995 levels. In addition, the state's unemployment level dropped below the
national average for the first time since 1989. All in all, Massachusetts
remains a wealthy state. It has recovered, both economically and financially,
from its severe recession of 1990-1992.
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
An Eventful Year for Bonds
As we've mentioned, the past 12 months were witness to major gyrations in
interest rates and bond prices. The chart below shows the progress of 30-year
municipal revenue bond yields over the period. As you can see, municipal bond
yields fluctuated in a wide range, but ended the year in almost the same
position as they began. Accordingly, prices dropped precipitously during the
year but have since recovered.
Municipal Yields 3/31/94 - 3/31/95
As tracked by the 30-Year Revenue Bond Index
Yield
3/31/94 0 6.39
1 6.42
2 6.41
6/30 3 6.56
4 6.47
5 6.46
9/29 6 6.70
7 6.95
8 7.18
12/29 9 6.97
10 6.78
11 6.31
3/31/95 12 6.29
Despite wide fluctuation, municipal bond yields ended the period at almost the
same level as March 31, 1994.
Recently, municipal bonds have benefited from positive investor sentiment
concerning moderate economic growth, low inflation, and a lack of supply in the
municipal marketplace. New-issue volume for municipals dropped from $292 billion
in 1993 to $163 billion in 1994, a 44% decrease. We estimate that 1995's supply
of new issues will be even lower, approximately $135 billion.
In the weeks leading up to the tax-exempt bond market rally in
mid-November, municipals represented unusually good value, and we worked to
position the Fund to benefit from a market rebound. While interest rates were
rising in 1994, we favored bonds whose prices had fallen furthest and tended to
sell bonds whose prices had remained relatively steady. We followed this
strategy because groups of bonds with similar characteristics tend to rotate in
and out of the market's favor, causing prices to fluctuate accordingly.
Therefore, a high-quality bond that has dropped significantly in price (because
of its coupon, maturity, or call provision) will tend to rise sharply when its
sector revives. Our strategy was intended to provide the Fund with a high
concentration of bonds that would perform well in a rally and is consistent with
the Fund's value orientation.
7
<PAGE>
SCUDDER MASSACHUSETTS TAX FREE FUND
Another component of the Fund's short-term strategy in recent months was
the purchase of 15-year maturity noncallable bonds because of their attractive
yields and lower risk characteristics. Despite the Fund's general emphasis on
longer- to intermediate-maturity bonds, we maintained a somewhat cautious stance
during the period by establishing a relatively short average effective maturity
- -- 12 years as of the close of the Fund's fiscal year. In addition, portfolio
quality remains high. The average quality of the Fund was A on March 31, 1995.
At the close of the period, the Fund's top three sectors were general obligation
(G.O.) bonds, hospital and healthcare bonds, and water and sewer revenue bonds.
Massachusetts G.O. bonds continue to make up the Fund's largest grouping because
of their favorable prices, overall quality, and relative stability.
Longer-Term Strategy and Outlook
Our long-term objectives remain the same: to provide investors with a
competitive level of federal and state tax-exempt income while emphasizing total
return. We pursue these objectives by focusing on three types of Massachusetts
municipal bonds:
o Noncallable bonds, which an issuer cannot redeem before the maturity
date. When interest rates are falling, bond issuers tend to reduce their
borrowing expenses by redeeming "callable" existing bonds and issuing new
securities that pay lower interest rates. The focus on noncallables reflects a
longstanding philosophy that such bonds provide a relatively stable stream of
income over time and also tend to have favorable pricing characteristics.
o Steeply discounted callable bonds, which are unlikely to be subject to
redemption by their issuers in the immediate future because of their prices.
o "Cushion" bonds. We balance the Fund's long-maturity bonds by purchasing
so-called cushion bonds (high-coupon bonds) that can be redeemed by their issuer
in a relatively short time but offer higher yields and typically experience
relatively little price volatility.
8
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
We anticipate that Massachusetts municipal bonds will continue to earn
attractive returns in the current environment of restrained economic growth and
low inflation. However, some questions remain. Will the Federal Reserve raise
short-term interest rates further to boost the sagging dollar, thus potentially
choking off growth and increasing investment market volatility? Or will consumer
spending remain sufficiently restrained, making for continued modest U.S.
economic activity -- the so-called soft landing, which is likely to be viewed
most favorably in the investment markets? In any case, we intend to maintain a
conservative overall strategy, which includes a high-quality portfolio with a
prudent average maturity. Additionally, we will continue to search for value by
balancing the income potential, credit quality, and maturity characteristics of
municipal bond investments for Scudder Massachusetts Tax Free Fund.
Scudder Massachusetts Tax Free Fund:
A Team Approach to Investing
Scudder Massachusetts Tax Free Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment strategies
and select securities for the Fund. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in our offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Philip G. Condon joined Scudder in 1983 and has had
responsibility for Scudder Massachusetts Tax Free Fund's day-to-day operations
since 1989. Phil, who has 15 years of experience in municipal investing and
portfolio management, also is Lead Portfolio Manager of Scudder Massachusetts
Limited Term Tax Free Fund. Kathleen A. Meany, Portfolio Manager, has 18 years
of investment experience and has worked on the Fund since 1988. Kate joined
Scudder in 1988 and also works with Phil as a Portfolio Manager of Scudder
Massachusetts Limited Term Tax Free Fund.
Sincerely,
Your Portfolio Management Team
/s/ Philip G. Condon /s/ Kathleen A. Meany
Philip G. Condon Kathleen A. Meany
9
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS TAX FREE FUND
INVESTMENT PORTFOLIO as of March 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-------------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2.3% SHORT-TERM MUNICIPAL INVESTMENTS
--------------------------------------------------------------------------------------------------
MASSACHUSETTS Massachusetts General Obligation, Dedicated Income
Tax, Daily Demand Note:
Series D, 4.5%, 6/1/95* ......................... 200,000 A1+ 200,000
Series E, 4.5%, 12/1/97*......................... 700,000 A1 700,000
Massachusetts General Obligation, Series B,
Daily Demand Note, 4.5%, 12/1/97*..................... 2,800,000 A1+ 2,800,000
Massachusetts Health and Educational Facilities
Authority, Beth Israel Hospital, Weekly Demand Note,
Periodic Auction Reset, 3.85%, 7/1/25 (d)*............ 3,000,000 AAA 3,000,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $6,700,000)..................................... 6,700,000
----------
97.7% LONG-TERM MUNICIPAL INVESTMENTS
--------------------------------------------------------------------------------------------------
MASSACHUSETTS Boston, MA, General Obligation, Series A,
6.5%, 7/1/12 (d)...................................... 2,320,000 AAA 2,448,319
Chicopee, MA, Electric System Revenue, ETM,
7.125%, 1/1/17**...................................... 1,210,000 AAA 1,399,957
Dedham-Westwood, MA, Water District
General Obligation, 5%, 10/15/08 (d).................. 1,035,000 AAA 960,790
Haverhill, MA, Unlimited Tax, General Obligation,
Series A, 7%, 6/15/12 (d)............................. 600,000 AAA 649,416
Inverse Variable Rate Certificate Trust, Series D,
5.477%, 4/30/03 (d)*** ............................... 9,000,000 NR 8,268,750
Massachusetts Bay Transportation Authority:
Certificate of Participation, 7.75%, 1/15/06.......... 1,000,000 A 1,101,410
General Transportation System:
Series A, 5.4%, 3/1/07........................... 13,325,000 A 12,847,965
Series A, 5.5%, 3/1/12........................... 3,000,000 A 2,838,690
Series B, 6.2%, 3/1/16........................... 2,100,000 A 2,149,518
Series C, 6.1%, 3/1/13........................... 1,250,000 A 1,277,325
Massachusetts General Obligation:
Consolidated Loan, Series A, 7.5%, 6/1/04............. 12,400,000 A 14,310,344
Hynes Convention Center, Zero Coupon, 9/1/04.......... 2,000,000 A 1,203,160
Series A, 5.25%, 2/1/08............................... 1,375,000 A 1,311,860
Series A, 6.5%, 6/1/08................................ 5,500,000 A 5,798,760
Series A, 5.8%, 6/1/14................................ 2,000,000 AA 1,927,040
Series B, 5.4%, 11/1/06............................... 5,000,000 A 4,936,250
Series B, 6.5%, 8/1/08................................ 5,400,000 A 5,814,828
Series C, 5%, 8/1/06.................................. 1,020,000 A 970,703
Series 1993 C, 5%, 8/1/07............................. 5,000,000 A 4,688,350
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-------------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Zero Coupon, 12/1/04.................................. 8,415,000 A 5,060,696
Massachusetts Health & Educational
Facilities Authority:
Anna Jaques Hospital, Series B, 6.875%, 10/1/12..... 2,000,000 BBB 1,957,220
Berkshire Health Systems, Series D, 5.6%,
10/1/08 (d)...................................... 1,760,000 AAA 1,725,733
Charlton Memorial Hospital, Series B,
7.25%, 7/1/07 (b)................................ 10,000,000 A 10,699,600
Community College Program, Series A, Connie
Lee Insured, 6.5%, 10/1/09....................... 1,000,000 AAA 1,041,670
Cooley Dickson Hospital Inc., 7.125%, 11/15/18...... 2,150,000 BBB 2,045,145
Dana Farber Cancer Institute, Series F,
6%, 12/1/15 (d).................................. 2,500,000 AAA 2,488,000
Deaconess Hospital, Series B, 6.625%, 4/1/12 (d).... 2,000,000 AAA 2,107,260
Faulkner Hospital, Series C, 6%, 7/1/13............. 2,650,000 BBB 2,363,880
Lahey Clinic Medical Center, Series B,
5.4%, 7/1/06 (d)................................. 2,500,000 AAA 2,470,750
Massachusetts General Hospital:
Series B, 5.375%, 7/1/11 (d)..................... 5,625,000 AAA 5,307,188
Series F, 6.25%, 7/1/12 (d)...................... 3,500,000 AAA 3,619,490
Medical Academic and Scientific,
Series A, 6.5%, 1/1/09........................... 5,000,000 A 5,011,550
Medical Center of Central Massachusetts,
Series A, 7%, 7/1/12 (d)......................... 3,600,000 AAA 3,869,712
Newton-Wellesley Hospital, Series D,
7%, 7/1/15 (d) .................................. 1,500,000 AAA 1,602,330
Northeastern University:
Series E, 6.4%, 10/1/07 (d)...................... 1,000,000 AAA 1,062,850
Series E, 6.5%, 10/1/12 (d)...................... 450,000 AAA 469,751
St. Luke's Hospital New Bedford, Series C,
Yield Curve Notes, 6.22%, 8/15/10 (d)***......... 3,400,000 AAA 3,281,000
South Shore Hospital, 6.5%, 7/1/10 (d).............. 2,500,000 AAA 2,598,225
Stonehill College, 6.55%, 7/1/12 (d)................ 5,000,000 AAA 5,243,000
Tufts University, Series C, 7.4%, 8/1/18............ 530,000 A 570,084
Wellesley College:
Series D, 5.1%, 7/1/09........................... 1,800,000 AA 1,678,770
Series D, 5.3%, 7/1/14........................... 2,000,000 AA 1,845,520
Massachusetts Housing Finance Agency:
Housing Project Refunding Revenue:
Series A, 6.3%, 10/1/13 ............................ 7,000,000 A 6,954,640
Series B, 6.05%, 12/1/09 ........................... 3,000,000 AAA 3,034,620
Housing Project Revenue, Series A, 6.375%, 4/1/21..... 4,000,000 A 3,977,360
Residential Development, Series C, 6.87%,
11/15/11............................................ 10,250,000 AAA 10,754,608
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-------------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Single-Family Mortgage Revenue:
Series 2, 8.25%, 6/1/14 ............................ 275,000 AA 285,953
Series 3, 7.875%, 6/1/14 ........................... 4,000,000 AA 4,180,120
Massachusetts Industrial Finance Agency:
Eastern Edison Company Project, 5.875%, 8/1/08........ 2,250,000 BBB 2,137,118
Evanswood, Series A, 7.875%, 1/15/20.................. 1,000,000 NR 1,007,830
Holy Cross College, Issue II, 6.375%, 11/1/09......... 1,000,000 A 1,069,040
Massachusetts Biomedical Research Corp.,
Series A, Zero Coupon:
8/1/00........................................... 2,860,000 A 2,153,637
8/1/01........................................... 3,650,000 A 2,598,070
8/1/02 (b)....................................... 3,650,000 A 2,451,815
Milton Academy, Revenue Refunding,
Series B, 5.25%:
9/1/09 (d)....................................... 870,000 AAA 831,807
9/1/13 (d)....................................... 1,160,000 AAA 1,069,810
Museum of Science:
4.9%, 11/1/06 (d) .................................. 480,000 AAA 452,400
5%, 11/1/07 (d)..................................... 1,000,000 AAA 944,120
Pollution Control Revenue, Boston Edison
Company, Series A, 5.75%, 2/1/14.................... 2,000,000 BBB 1,802,080
Provider Lease Program, Series 1988 A-1,
8.4%, 7/15/08....................................... 1,985,000 NR 2,037,642
Resource Recovery, North Andover Solid Waste,
Series A, 6.3%, 7/1/05.............................. 6,500,000 BBB 6,523,465
Solid Waste Disposal Revenue, Peabody Monofill
Project, 9%, 9/1/05................................. 3,000,000 NR 3,046,110
Sturdy Memorial Hospital, 7.9%, 6/1/09................ 2,000,000 BBB 2,091,700
Massachusetts Municipal Wholesale Electric
Company, Power Supply Revenue:
Series A, 6.75%, 7/1/06 ............................ 2,855,000 BBB 3,042,487
Series A, 5.1%, 7/1/08 (d).......................... 840,000 AAA 777,277
Series A, 5%, 7/1/12 (d) ........................... 1,000,000 AAA 897,310
Series A, 5%, 7/1/17 (d) ........................... 3,610,000 AAA 3,149,436
Series B, 6.75%, 7/1/08 ............................ 9,000,000 BBB 9,584,460
Series B, 4.95%, 7/1/09 (d)......................... 1,575,000 AAA 1,431,974
Series C, 6.625%, 7/1/10 (d)........................ 3,500,000 AAA 3,688,685
Series C, 6.625%, 7/1/10 ........................... 1,000,000 BBB 1,048,800
Massachusetts Port Authority Revenue, Tax
Exempt Receipts, ETM, Zero Coupon, 7/1/13**........... 1,000,000 AAA 835,380
Massachusetts Water Pollution Abatement Trust,
Pooled Loan Program, Series I, 5.6%, 8/1/13........... 5,425,000 AA 5,167,801
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-------------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts Water Resource Authority:
Series A, 6.5%, 7/15/09............................... 15,000,000 A 16,023,900
Series A, 6.5%, 7/15/19............................... 3,000,000 A 3,238,530
Series B, 6%, 11/1/08................................. 5,785,000 A 5,881,552
Series B, 6.25%, 11/1/10.............................. 5,000,000 A 5,104,350
Series B, 5.5%, 11/1/15............................... 3,300,000 A 3,060,288
General Revenue, Series C, 5.25%, 12/1/08............. 2,705,000 A 2,546,217
General Revenue, Series C, 5.25%, 12/1/15............. 4,030,000 A 3,619,383
Nantucket, MA, General Obligation, 6.8%, 12/1/11......... 1,000,000 A 1,062,010
New England Educational Loan Marketing
Corporation, Massachusetts Student Loan Revenue,
5.7%, 7/1/05.......................................... 10,250,000 A 10,069,600
South Essex, MA, Sewer District, 6.75%, 6/1/13 (d)....... 1,000,000 AAA 1,074,620
Worcester, MA, General Obligation, 6.9%:
5/15/05 (d)........................................... 1,850,000 AAA 2,038,589
5/15/06 (d)........................................... 1,500,000 AAA 1,648,230
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $281,274,371)................................... 287,417,683
-----------
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $287,974,371) (a)............................... 294,117,683
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SCUDDER MASSACHUSETTS TAX FREE FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $287,974,371. At March 31,
1995, net unrealized appreciation for all securities based on tax cost
was $6,143,312. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $10,449,333 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$4,306,021.
(b) At March 31, 1995 these securities, in part, have been pledged to cover
initial margin requirements for open futures contracts.
<TABLE>
AT MARCH 31, 1995, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
Muni Bond Index Jun. 1995 50 4,451,125 4,478,125
--------- ---------
Total net unrealized depreciation on open futures contracts sold short ... (27,000)
=========
</TABLE>
(c) 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.
(d) Bond is insured by one of these companies: AMBAC, Capital Guaranty, 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.
*** 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 March 31, 1995.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------
MARCH 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $287,974,371)
(Note A).............................................. $294,117,683
Cash..................................................... 63,416
Receivables:
Interest.............................................. 4,708,188
Fund shares sold...................................... 119,700
------------
Total assets..................................... 299,008,987
LIABILITIES
Payables:
Investments purchased................................. $1,740,635
Dividends............................................. 552,546
Fund shares redeemed.................................. 21,358
Accrued management fee (Note C)....................... 141,571
Other accrued expenses (Note C)....................... 71,292
Daily variation margin on open futures contracts
(Note A)......................................... 6,250
----------
Total liabilities................................ 2,533,652
------------
Net assets, at market value.............................. $296,475,335
============
NET ASSETS
Net assets consist of:
Unrealized appreciation (depreciation) on:
Investments...................................... 6,143,312
Futures.......................................... (27,000)
Accumulated net realized loss......................... (4,186,739)
Shares of beneficial interest......................... 222,364
Additional paid-in capital............................ 294,323,398
------------
Net assets, at market value.............................. $296,475,335
============
NET ASSET VALUE, offering and redemption price
per share ($296,475,335 / 22,236,389 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized)................ $13.33
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS TAX FREE FUND
- -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest............................................... $19,185,675
Expenses:
Management fee (Note C)................................ $ 925,856
Services to shareholders (Note C)...................... 275,185
Custodian and accounting fees (Note C)................. 105,847
Trustees' fees (Note C)................................ 15,138
Reports to shareholders................................ 45,984
Auditing............................................... 32,613
Legal.................................................. 11,120
State registration..................................... 8,220
Other.................................................. 31,569 1,451,532
---------------------------
Net investment income.................................. 17,734,143
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized loss from:
Investments......................................... (1,300,001)
Futures............................................. (1,695,406) (2,995,407)
-----------
Net unrealized appreciation (depreciation) during
the period on:
Investments......................................... 4,950,078
Futures............................................. (27,000) 4,923,078
---------------------------
Net gain on investments................................ 1,927,671
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $19,661,814
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income............................. $ 17,734,143 $ 19,719,344
Net realized gain (loss) from investment
transactions................................... (2,995,407) 336,644
Net unrealized appreciation (depreciation) on
investment transactions during the period...... 4,923,078 (11,311,943)
------------- -------------
Net increase in net assets resulting from
operations..................................... 19,661,814 8,744,045
------------- -------------
Distributions to shareholders:
From net investment income ($.74 and $.81 per
share, respectively)........................... (17,734,143) (19,719,344)
------------- -------------
From net realized gains from investment
transactions ($.08 per share).................. -- (1,957,503)
------------- -------------
In excess of net realized gains ($.01 and
$.04 per share, respectively).................. (348,200) (843,132)
------------- -------------
Fund share transactions:
Proceeds from shares sold......................... 80,817,626 175,855,379
Net asset value of shares issued to
shareholders in reinvestment
of distributions............................... 11,772,714 13,132,687
Cost of shares redeemed........................... (129,761,019) (110,597,306)
------------- -------------
Net increase (decrease) in net assets from
Fund share transactions........................ (37,170,679) 78,390,760
------------- -------------
INCREASE (DECREASE) IN NET ASSETS................. (35,591,208) 64,614,826
Net assets at beginning of period................. 332,066,543 267,451,717
------------- -------------
NET ASSETS AT END OF PERIOD....................... $ 296,475,335 $ 332,066,543
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period......... 25,223,573 19,651,437
------------- -------------
Shares sold....................................... 6,244,742 12,578,423
Shares issued to shareholders in
reinvestment of distributions.................. 905,250 942,371
Shares redeemed .................................. (10,137,176) (7,948,658)
------------- -------------
Net increase (decrease) in Fund shares............ (2,987,184) 5,572,136
------------- -------------
Shares outstanding at end of period............... 22,236,389 25,223,573
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS 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.
<CAPTION>
FOR THE PERIOD
MAY 28, 1987
(COMMENCEMENT
YEARS ENDED MARCH 31, OF OPERATIONS)
-------------------------------------------------------- TO MARCH 31,
1995 1994 1993 1992 1991 1990 1989 1988
-------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .............. $13.16 $13.61 $12.81 $12.44 $12.25 $12.23 $12.28 $12.00
------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (a)......... .74 .81 .84 .81 .83 .82 .81 .69
Net realized and unrealized gain
(loss) on investment
transactions ................ .18 (.33) .96 .46 .19 .13 .22 .21
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations..... .92 .48 1.80 1.27 1.02 .95 1.03 .90
------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment income........ (.74) (.81) (.84) (.81) (.83) (.82) (.88) (.62)
From net realized gains on
investment transactions...... -- (.08) (.16) (.09) -- (.11)(b) (.20) --
In excess of net realized gains... (.01) (.04) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions.................. (.75) (.93) (1.00) (.90) (.83) (.93) (1.08) (.62)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period....... $13.33 $13.16 $13.61 $12.81 $12.44 $12.25 $12.23 $12.28
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (c)................. 7.37 3.37 14.59 10.46 8.60 7.89 9.50 7.73**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions)...................... 296 332 267 120 67 46 31 16
Ratio of operating expenses, net
to average daily net
assets (%) (a).................... .47 .07 -- .48 .60 .60 .51 .50*
Ratio of net investment income to
average daily net assets (%)...... 5.73 5.80 6.36 6.38 6.72 6.60 7.23 7.55*
Portfolio turnover rate (%).......... 10.2 17.0 29.6 23.2 27.1 45.5 110.5 95.9*
<FN>
(a) Reflects a per share amount
of expenses, exclusive of
management fees,
reimbursed by the
Adviser of.................... $ -- $ .01 $ .02 $ -- $ -- $ -- $ .01 $ .10
Reflects a per share amount
of management fees and
other fees not imposed of..... $ .04 $ .09 $ .08 $ .05 $ .06 $ .07 $ .07 $ .05
Operating expense ratio
including expenses
reimbursed, management
fee and other expenses
not imposed (%) .............. .77 .77 .83 .93 1.05 1.16 1.20 2.25*
(b) Includes $.01 per share distributions in excess of realized gains pursuant
to Internal Revenue Code Section 4982.
(c) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</FN>
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Massachusetts 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.
FUTURES CONTRACTS. The Fund may enter into interest rate and securities index
futures contracts for bona fide hedging purposes. During the year ended March
31, 1995, to hedge against the negative effects of rising interest rates, the
Fund sold municipal bond index futures contracts. Upon entering into a futures
contract, the Fund is required to deposit with a broker an amount ("initial
margin") equal to a certain percentage of the purchase price indicated in the
futures contract. Subsequent payments ("variation margin") are made or received
by the Fund each day, dependent on the daily fluctuations in the value of the
underlying security, and are recorded for financial reporting purposes as
unrealized gains or losses by the Fund. When entering into a closing
transaction, the Fund will realize, for book purposes, a gain or loss
equal to the difference between the value of the futures contract to sell and
the futures contract to buy. Futures contracts are valued at the most recent
settlement price. Certain risks may arise upon entering into futures contracts
from the contingency of imperfect market conditions.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
19
<PAGE>
SCUDDER MASSACHUSETTS TAX FREE FUND
- --------------------------------------------------------------------------------
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.
At March 31, 1995, the Fund had a net tax basis capital loss carryforward of
approximately $1,437,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until March 31,
2003, the expiration date.
In addition, from November 1, 1994 through March 31, 1995, the Fund incurred
$651,000 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 March 31, 1996.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital
loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent
federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in futures contracts. As a
result, net investment income and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are accounted for on a trade date basis.
Distributions of net gains to shareholders are recorded on the ex-dividend
date. Interest income is accrued pro rata to maturity.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended March 31, 1995, purchases and sales of municipal
securities (excluding short-term investments) aggregated $30,596,107 and
$74,022,844, respectively.
The aggregate face value of future contracts opened and closed during the year
ended March 31, 1995 was $44,982,594 and $40,531,469, 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. For the period January
1, 1994 to July 31, 1994, the Adviser agreed to maintain the total annualized
expenses of the Fund at 0.25% of average daily net assets of the Fund. Effective
August 1, 1994, the Adviser agreed to maintain the annualized expenses at
0.50% of average daily net assets of the Fund until December 31, 1994.
Effective January 1, 1995, the Adviser agreed to maintain the annualized
expenses at 0.75% of average daily net assets of the Fund until December 31,
1995. For the year ended March 31, 1995, the management fee not imposed amounted
to $928,006 and the fee imposed aggregated $925,856.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for the Fund.
For the year ended March 31, 1995, the amount charged to the Fund by SSC
aggregated $204,820, of which $15,546 is unpaid at March 31, 1995.
Effective November 14, 1994, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the year ended March 31, 1995, the amount
charged to the Fund by SFAC aggregated $21,946, of which $4,865 is unpaid at
March 31, 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 year ended March 31, 1995,
Trustees' fees charged to the Fund aggregated $15,138.
21
<PAGE>
SCUDDER MASSACHUSETTS TAX FREE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER STATE TAX FREE TRUST AND THE SHAREHOLDERS OF SCUDDER
MASSACHUSETTS TAX FREE FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Massachusetts Tax Free Fund, including the investment portfolio, as of March
31, 1995, and the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the seven years in the
period then ended, and for the period May 28, 1987 (commencement of operations)
to March 31, 1988. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Massachusetts Tax Free Fund as of March 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the seven years in the period then ended, and for the period May 28,
1987 (commencement of operations) to March 31, 1988, in conformity with
generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 8, 1995
22
<PAGE>
TAX INFORMATION
- --------------------------------------------------------------------------------
Of the dividends paid by the Fund from net investment income for the fiscal
year ended March 31, 1995, 100% constituted exempt interest dividends for
regular federal income tax and Massachusetts personal 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 Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
23
<PAGE>
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; Director, Executive Vice President and Manager,
Safeguard Scientifics, Inc.
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.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
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 Value Fund
Scudder Growth and Income 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 Fund, Inc.
Scudder Treasurers Trust(TM)++
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.
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and
transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields,
exchanges, and redemptions 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
1-00-225-2470
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 Treasurers
Trust,(TM) an institutional cash
management service for corporations,
non-profit organizations and trusts that
uses certain portfolios of Scudder Fund,
Inc.* ($100,000 minimum), call
1-800-541-7703.
For information on Scudder Institutional
Funds,* funds designed to meet the
broad investment management and service
needs of banks and other institutions,
call 1-800-854-8525.
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.
27
<PAGE>
Celebrating 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 36 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.
