Scudder Massachusetts Limited Term Tax Free Fund
Semiannual Report
April 30, 1995
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
* For investors seeking double tax-free income, exempt from both Massachusetts
and regular federal income taxes consistent with a high degree of principal
stability.
* A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER MASSACHUSETTS LIMITED TERM 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
13 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
IN BRIEF
* Scudder Massachusetts Limited Term Tax Free Fund provided shareholders with
a 30-day net annualized SEC yield of 4.82% on April 30, 1995, equivalent to
a 9.07% taxable yield for shareholders subject to the 46.85% combined
federal and state income tax rate. This yield is significantly higher than
that of the average money market fund.
(bar chart title)
30-Day Yields as of April 30, 1995
(bar chart data)
Scudder Massachusetts IBC/Donoghue's Taxable
Limited Term Tax Free Fund Taxable Equivalent Yield Money Fund Average
- --------------------------------------------------------------------------------
4.82% 9.07% 3.59%
* The Fund returned 3.83% for the semiannual period through April 30, 1995. By
comparison, the 34 short state municipal debt funds tracked by Lipper
Analytical Services, Inc. returned 3.40% on average for the same period.
* Scudder Massachusetts Limited Term Tax Free Fund's assets continue to grow,
reaching approximately $47 million on April 30, 1995.
2
<PAGE>
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. Yields have
declined from their November highs, and municipal bond prices have recovered.
Year-to-date through April 30, short-term municipal bonds, as measured by the
unmanaged Lehman Brothers 3-year Municipal Bond Index, returned 3.14% on
average, compared with 0.68% for all of 1994.
Given the swings in interest rates over the past year and a half, the
question for municipal bond investors is, can the recent positive shift in
interest rates be sustained? In our view, rates should remain relatively stable
as long as economic growth continues to slacken in the United States. Already,
evidence of a slowing economy can be seen in the recent drop in non-farm
payrolls and the declining sales of houses and automobiles.
As the economic and investment landscape unfolds, 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 23
provides more information on how to contact Scudder. Thank you for choosing
Scudder Massachusetts Limited Term Tax Free Fund to help meet your investing
needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Massachusetts Limited Term Tax Free Fund
3
<PAGE>
Scudder Massachusetts Limited Term Tax Free Fund
Performance Update as of April 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Massachusetts Limited Term Tax Free Fund
- ------------------------------------------------
Total Return
Period Growth -------------
Ended of Average
4/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,507 5.07% 5.07%
Life of
Fund* $10,383 3.83% 3.18%
LB Municipal Bond Index (3 year)
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
4/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,464 4.64% 4.64%
Life of
Fund* $10,399 3.99% 3.41%
*The Fund commenced operations on February 15, 1994.
Index comparisons begin February 28, 1994.
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:
Scudder Massachusetts Limited Term Tax Free Fund
Year Amount
- ----------------------
2/94* 10000
4/94 9912
7/94 10071
10/94 10030
1/95 10150
4/95 10414
LB Municipal Bond Index (3 year)
Year Amount
- ----------------------
2/94* 10000
4/94 9938
7/94 10070
10/94 10056
1/95 10165
4/95 10399
The 3-year Lehman Brothers (LB) Municipal Bond Index is an unmanaged,
market-value-weighted measure of the short-term municipal bond
market and includes bonds with maturities of two to three years.
Index returns assume reinvested dividends and, unlike Fund
returns, do not reflect 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 April 30
- ----------------------------------
<TABLE>
<S> <C> <C>
1994* 1995
----------------
Net Asset Value... $ 11.76 $11.81
Income Dividends.. $ .10 $ .53
Fund Total
Return (%)........ -1.18 5.07
Index Total
Return (%)........ -.62 4.64
</TABLE>
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares, when
redeemed, may be worth more or less than when purchased. If the Adviser
had not maintained the Fund's expenses, the total return for the one year
and life of Fund periods would have been lower.
4
<PAGE>
Portfolio Summary as of April 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
General Obligation 28%
Escrow & Collateral 27% We continued to hold a large
Hospital/Health 25% percentage of escrow and collateral
Housing Finance Authority 4% bonds, which offer the highest quality
Sales & Special Tax 4% available in the municipal marketplace.
Electric Utility 3%
Higher Education 2%
Water/Sewer 1%
Miscellaneous Municipal 6%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 61%
AA 11% Bonds rated A or better constitute
A 17% almost 90% of the Fund's portfolio.
BBB 11%
----
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 20%
Greater than 1 less than 5 years 31% In anticipation of improved yields
Greater than 5 less than 10 years 49% and higher prices, we especially
---- emphasized the shortest and longest
100% maturity bonds the Fund can hold.
====
Weighted average maturity: 4 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
5
<PAGE>
SCUDDER MASSACHUSETTS LIMITED TERM TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Welcome to those who have recently become shareholders of Scudder
Massachusetts Limited Term Tax Free Fund. This semiannual report covers the
Fund's performance, strategy, and investment environment for the six-month
period ended April 30, 1995. The Fund's twin objectives are to seek 1) higher
tax-free income than is typically available from tax-free money market
investments; and 2) less share-price fluctuation than higher-yielding
longer-term tax-free bonds.
In 1994, U.S. bond markets weathered sharp increases in interest rates and
corresponding declines in price: Treasury bond prices dropped an average of 9.7%
as yields rose 1.5 percentage points, creating their worst 12-month total return
in history; yields of long-term municipal bonds rose almost as much. From
February 28, 1994, through November 30 of the same year, Scudder Massachusetts
Limited Term Tax Free Fund's net asset value declined only 3.3% when compared
with the prices of long-term municipal bonds (nearly 10%), as measured by the
unmanaged Lehman Brothers Municipal Bond Index. In November, the municipal bond
market began to rally, and the prices of five- and ten-year municipal bonds rose
steadily. During the six months from October 31 through April 30, 1995, the
Fund's net asset value increased $0.17 to $11.81 per share, contributing to a
total return of 3.83%, which more than made up for the Fund's earlier
performance. The Fund's total return compares favorably with that of the 34
mutual funds with similar investment objectives tracked by Lipper Analytical
Services, Inc., which returned 3.40% on average.
On April 30, the Fund provided a 30-day net annualized SEC yield of 4.82%.
For shareholders subject to the 46.85% maximum combined federal and
Massachusetts income tax rate, the Fund's yield translated into a 9.07% taxable
yield, significantly higher than current yields provided by comparable taxable
investments. The Fund's yield also compares favorably with the 6.55% average
yield of 2 1/2-year Massachusetts bank certificates of deposit as of April 30,
1995. Unlike insured fixed-rate CDs, the Fund's yield and share price fluctuate,
and principal investments in the Fund are not insured. During the semiannual
period, shareholders received a total of $0.27 per share of income exempt from
federal and Massachusetts taxes.
6
<PAGE>
Inflation Worries Abate
In late 1994 and early 1995, the Federal Reserve continued to nudge
short-term interest rates upward in an attempt to slow the economy and prevent
inflation from accelerating. By November, bond market participants already had
begun to believe that the Fed's program was taking hold, thanks to several
economic reports indicating slower growth. The Fed's last two moves -- in
November 1994 and February 1995 -- seemed to reassure the market that a
significant increase in inflation would be averted. Investors returned to the
bond market, boosting bond prices and pushing down yields of municipal bonds.
Five-year municipal bond yields fell 0.25 percentage points from November
through April, while 10-year bond yields fell almost 0.50 points.
Last fall, in anticipation of a rally, we emphasized both the shortest
maturities (for safety) and longest maturities (for higher yields and possible
capital appreciation) in the Fund's portfolio. (The maximum maturity debt
instrument that Scudder Massachusetts Limited Term Tax Free Fund can hold is a
ten-year municipal bond.) This strategy rewarded us in two ways. First, the Fund
experienced significantly less price volatility than longer-maturity investments
during the period. Second, the Fund benefited from the declines in yields of
five- to ten-year municipal bonds and their corresponding increases in price.
[line chart title]
Scudder Massachusetts Limited Term Tax Free Fund vs.
Lehman Brothers Municipal Bond Index
(Monthly Percentage Price Change 12 months through April 30, 1995)
[line chart data]
Massachusetts Limited Lehman Brothers
Term Tax Free Fund Municipal Bond Index
--------------------- --------------------
-0.0017 0.0038
-0.0034 -0.011
0.0034 0.0134
0.0008 -0.0014
-0.0051 -0.0195
-0.0068 -0.0227
-0.0112 -0.0231
0.0052 0.0168
0.0026 0.0235
0.0103 0.0241
0.006 0.0066
0.0008 -0.0036
7
<PAGE>
Scudder Massachusetts Limited Term Tax Free Fund is broadly diversified
among nine separate categories of municipal bonds. The Fund's largest single
sector at the close of the period was Massachusetts general obligation (G.O.)
bonds. In our opinion, these bonds offer attractive value, high overall quality,
and relative stability. In addition, we continue to hold a large percentage of
pre-refunded (also known as escrow and collateral) bonds in the Fund's
portfolio. Bonds are pre-refunded when issuers sell new debt at lower prevailing
rates and use the proceeds to establish an escrow account designated to retire
the original bonds on their future call dates (the escrowed funds are invested
in Treasury securities). These bonds offer the highest quality available in the
municipal marketplace.
Good Times for Massachusetts
Massachusetts's finances have improved dramatically since recession-year
1990, when the Commonwealth ended the fiscal year with an operating deficit of
$1.2 billion. The Commonwealth 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, Massachusetts's
1994 unemployment levels 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 the severe recession of 1990-1992.
Expectations for This Year and Beyond
We anticipate that short- to intermediate-term Massachusetts municipal
bonds will continue to earn attractive returns in the current environment of
restrained economic growth and low inflation. But some questions remain
unanswered: Will the Federal Reserve raise short-term interest rates to boost
the sagging dollar, which could choke off growth and increase 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? Additionally,
will Congress pass a flat tax or some other major revision of the federal tax
code? We cannot predict the precise outcome of the tax proposals, but because
cities, states, and state agencies need access to the municipal market more than
ever, we are confident that municipal bonds will continue to offer significant
tax advantages.
8
<PAGE>
In any case, we intend to maintain our customarily conservative
strategy, which includes a prudent average maturity, broad diversification, and
high credit quality. Additionally, we will continue to search for value by
balancing the maturity characteristics, credit quality, and income potential of
municipal bond investments for 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
Scudder Massachusetts Limited Term Tax Free Fund:
A Team Approach to Investing
Scudder Massachusetts Limited Term Tax Free Fund is run 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.
Philip G. Condon, Lead Portfolio Manager, joined Scudder in 1983 and has 15
years of experience as a portfolio manager and in municipal research. Phil has
managed Scudder Massachusetts Limited Term Tax Free Fund since its inception and
Scudder Massachusetts Tax Free Fund since 1989. Kathleen A. Meany, Portfolio
Manager, joined Scudder in 1988 and has 18 years of municipal sales and
portfolio management experience. Kathleen has managed Scudder Massachusetts
Limited Term Tax Free Fund since its inception and Scudder Massachusetts Tax
Free Fund since 1988.
9
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS LIMITED TERM TAX FREE FUND
INVESTMENT PORTFOLIO as of April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
17.3% SHORT-TERM MUNICIPAL INVESTMENTS
------------------------------------------------------------------------------------------
MASSACHUSETTS Barnstable, MA, School and Sewer Improvement,
5%, 9/15/95 ........................................ 1,030,000 AA 1,032,709
Boston, MA, Water and Sewer Commission Revenue,
Series A, Weekly Demand Note, 4%, 11/1/15* ......... 100,000 MIG1 100,000
Massachusetts Bay Transportation Authority,
Series B, 5%, 9/8/95 ............................... 2,000,000 SP1 2,004,720
Massachusetts General Obligation, Dedicated
Income Tax, Daily Demand Note:
Series D, 5.15%, 6/1/95* ......................... 800,000 A1+ 800,000
Series E, 5.15%, 12/1/97* ........................ 600,000 A1+ 600,000
Massachusetts General Obligation, Series B, Daily
Demand Note, 5.15%, 12/1/97* ....................... 100,000 A1+ 100,000
Massachusetts Water Resource Authority, Bond
Anticipation Notes, Series A, 4.125%, 10/15/95 ..... 440,000 SP1 439,736
Natick, MA, Bond Anticipation Notes, 4.1%, 9/1/95..... 1,000,000 SS&C 999,280
New Bedford, MA, Bond Anticipation Notes, 4.75%,
8/11/95 ............................................ 1,000,000 A 1,000,570
Springfield, MA, Bond Anticipation Notes, 4.75%,
8/4/95 ............................................. 1,000,000 SS&C 1,001,100
---------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(COST $8,083,839) .................................. 8,078,115
---------
------------------------------------------------------------------------------------------
82.7% INTERMEDIATE-TERM MUNICIPAL INVESTMENTS
------------------------------------------------------------------------------------------
MASSACHUSETTS Lowell, MA, General Obligation, 8.3%, 2/15/05,
Prerefunded 2/15/01** .............................. 1,635,000 BBB 1,932,079
Massachusetts Dedicated Income Tax, Series A,
7.875%, 6/1/97 ..................................... 1,190,000 A 1,268,254
Massachusetts Educational Loan Authority, Issue E,
Series A, 6.7%, 1/1/02 (c) ......................... 485,000 AAA 516,258
Massachusetts General Obligation:
5.25%, 2/1/01 (c) .................................. 3,000,000 AAA 3,026,400
Series A, 5.2%, 6/1/04 ............................. 1,000,000 AA 986,430
Series C, 7.5%, 12/1/07, Prerefunded 12/1/00** ..... 750,000 AAA 852,202
Series C, 7%, 12/1/10, Prerefunded 12/1/00** ....... 275,000 AAA 301,524
Massachusetts Health and Educational Facilities
Authority:
Bentley College, Series G, 8.125%, 7/1/17,
Prerefunded 7/1/95** ........................... 250,000 AAA 256,642
Berkshire Health System, Series D, 5.3%,
10/1/03 (c) .................................... 1,350,000 AAA 1,342,683
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Central Massachusetts Medical Center, Series B,
6%, 7/1/02 (c) ................................... 500,000 AAA 522,440
Children's Hospital, Series D, 7.75%, 12/1/18,
Prerefunded 6/1/98** ............................. 1,750,000 AA 1,923,618
Daughters of Charity:
Carney Hospital, 7.5%, 7/1/05, Prerefunded
7/1/00** ....................................... 1,000,000 AAA 1,127,160
Series D, 4.9%, 7/1/00 ........................... 1,000,000 AA 981,130
Medical Academic and Scientific:
Series A, 5.9%, 1/1/00 ........................... 500,000 A 502,785
Series A, 6%, 1/1/01 ............................. 1,000,000 A 1,008,010
Series A, 6.1%, 1/1/02 ........................... 500,000 A 504,850
St. Joseph's Hospital, Series C, 9.5%, 10/1/20,
Prerefunded 10/1/99** ............................ 3,380,000 AAA 3,997,087
Valley Regional Health System, Series C, HIBI
Insured, 5.3%, 7/1/00 ............................ 1,500,000 AAA 1,501,215
Wheaton College, Series B, 7.2%, 7/1/09
Prerefunded 7/1/99** ............................. 590,000 AAA 650,729
Massachusetts Housing Finance Agency Multi-Family
Housing Project, 1988 Series A, 8.7%, 4/1/14,
Prerefunded 4/1/98** ................................. 1,495,000 A 1,689,978
Massachusetts Housing Finance Agency Revenue,
Housing Project:
Series A, 5.2%, 10/1/00 ............................ 575,000 A 569,894
Series B, 4.05%, 12/1/95 ........................... 1,000,000 AAA 996,840
Massachusetts Industrial Finance Agency:
Cape Cod Health Systems, Series 1990,
8.5%, 11/15/20, Prerefunded 11/15/00** ............. 2,650,000 AAA 3,124,774
Leominister Hospital, Series 1989A, 8.625%, 8/1/09,
Prerefunded 8/1/99** ................................. 2,000,000 BBB 2,312,160
Milton Academy, Revenue Refunding, Series A,
7.25%, 9/1/19, Prerefunded 9/1/99** (c) .............. 700,000 AAA 774,627
Resource Recovery, North Andover Solid Waste,
Series A, 6.15%, 7/1/02 .............................. 750,000 BBB 753,368
Massachusetts Municipal Wholesale Electric
Company, Power Supply System Revenue:
Series B, 6.3%, 7/1/00 ............................. 345,000 A 360,563
Series B, 6.375%, 7/1/01 ........................... 1,000,000 A 1,051,060
Massachusetts Water Resource Authority, Series A,
6.75%, 7/15/12, Prerefunded 7/15/02** ................ 1,000,000 AAA 1,105,310
Nantucket, MA, General Obligation, 6.25%, 12/1/02....... 250,000 A 265,633
Southeastern Massachusetts University Building,
Series A, 5.5%, 5/1/04 (c) ........................... 1,010,000 AAA 1,018,908
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS LIMITED TERM TAX FREE FUND
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Worcester, MA, General Obligation, FSA Insured,
5.25%, 10/1/96 ................................... 1,250,000 AAA 1,266,200
TOTAL INTERMEDIATE-TERM MUNICIPAL INVESTMENTS ----------
(Cost $38,162,888) ............................... 38,490,811
----------
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $46,246,727) (a) ........................... 46,568,926
==========
<FN>
(a) The cost for federal income tax purposes was $46,258,334. At April 30, 1995, net
unrealized appreciation for all securities was $310,592. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $411,905 and aggregate gross unrealized depreciation
for all investment securities in which there was an excess of tax cost over market
value of $101,313.
(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 are either Standard
& Poor's Ratings Group, Moody's Investors Service, Inc. or Fitch Investors Service,
Inc. Securities rated by Scudder (SS&C) 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 or line of credit from a major bank.
These notes are carried, for purposes of calculating average weighted maturity, at
the longer of the period remaining until the next rate change or to the extent of the
demand period.
** Prerefunded: Bonds which are prerefunded are collateralized by U.S. Treasury
securities which are held in escrow and are used to pay principal and interest on
tax-exempt issue and to retire the bonds in full at the earliest refunding date.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------
<CAPTION>
APRIL 30, 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $46,246,727)
(Note A) ................................................ $ 46,568,926
Cash ...................................................... 14,745
Receivables:
Interest ................................................ 859,899
Fund shares sold ........................................ 49,639
Due from Adviser (Note C) ............................... 39,388
Deferred organization expenses (Note A) ................... 21,350
------------
Total assets ............................................ 47,553,947
LIABILITIES
Payables:
Dividends ............................................... $ 52,651
Fund shares redeemed .................................... 20,250
Accrued management fee (Note C) ......................... 5,770
Other accrued expenses (Note C) ......................... 33,606
------------
Total liabilities ....................................... 112,277
------------
Net assets, at market value ............................... $ 47,441,670
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments .................. $ 322,199
Accumulated net realized loss ........................... (104,756)
Shares of beneficial interest ........................... 40,179
Additional paid-in capital .............................. 47,184,048
------------
Net assets, at market value ............................... $ 47,441,670
============
NET ASSET VALUE, offering and redemption price per
share ($47,441,670 -:- 4,017,861 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) .................. $11.81
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS LIMITED TERM TAX FREE FUND
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................................... $ 1,115,702
Expenses:
Management fee (Note C) ............................................ $ 5,770
Custodian and accounting fees (Note C) ............................. 13,714
Services to shareholders (Note C) .................................. 5,321
Trustees' fees (Note C) ............................................ 5,090
Auditing ........................................................... 10,226
State registration ................................................. 6,582
Reports to shareholders ............................................ 5,720
Federal registration ............................................... 2,089
Amortization of organization expense (Note A) ...................... 2,528
Other .............................................................. 2,913
-----------
Total expenses before reimbursement from Adviser ................... 59,953
Reimbursement of expenses from Adviser (Note C) .................... (39,388)
-----------
Expenses, net ...................................................... 20,565
-----------
Net investment income .............................................. 1,095,137
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from investments ................................. (15,555)
Net unrealized appreciation on investments during the period ....... 771,845
-----------
Net gain on investments ............................................ 756,290
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $ 1,851,427
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
SIX MONTHS FEBRUARY 15, 1994
ENDED (COMMENCEMENT OF
APRIL 30, OPERATIONS) TO
1995 OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................... $ 1,095,137 $ 709,232
Net realized loss on investments ................................ (15,555) (89,201)
Net unrealized appreciation (depreciation)
on investments during the period .............................. 771,845 (449,646)
------------- -----------
Net increase in net assets resulting from operations ............ 1,851,427 170,385
------------- -----------
Distributions to shareholders from net investment income
($.27 and $.36 per share, respectively) ....................... (1,095,137) (709,232)
------------- -----------
Fund share transactions:
Proceeds from shares sold ....................................... 32,177,500 45,335,631
Net asset value of shares issued to shareholders in
reinvestment of distributions ................................. 768,528 540,042
Cost of shares redeemed ......................................... (21,808,629) (9,790,045)
------------- -----------
Net increase in net assets from Fund share transactions ......... 11,137,399 36,085,628
------------- -----------
Increase in net assets .......................................... 11,893,689 35,546,781
Net assets at beginning of period ............................... 35,547,981 1,200
------------- -----------
NET ASSETS AT END OF PERIOD ..................................... $ 47,441,670 $35,547,981
============= ===========
OTHER INFORMATION INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ....................... 3,052,899 100
------------- -----------
Shares sold ..................................................... 2,773,220 3,839,448
Shares issued to shareholders in reinvestment of distributions .. 65,724 45,947
Shares redeemed ................................................. (1,873,982) (832,596)
------------- -----------
Net increase in Fund shares ..................................... 964,962 3,052,799
------------- -----------
Shares outstanding at end of period ............................. 4,017,861 3,052,899
============= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER MASSACHUSETTS LIMITED TERM 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>
SIX MONTHS FOR THE PERIOD
ENDED FEBRUARY 15, 1994
APRIL 30, (COMMENCEMENT
1995 OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1994
----------- ----------------
<S> <C> <C>
Net asset value, beginning of period $11.64 $12.00
------ ------
Income from investment operations:
Net investment income (a) ............................................... .27 .36
Net realized and unrealized gain (loss) on investment transactions ...... .17 (.36)
------ ------
Total from investment operations ........................................ .44 .00
------ ------
Less distributions from net investment income ........................... (.27) (.36)
------ ------
Net asset value, end of period ............................................ $11.81 $11.64
====== ======
TOTAL RETURN (%) (b) ...................................................... 3.83** 0.00**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) .................................... 47 36
Ratio of operating expenses, net to average daily net assets (%) (a) ...... .09* -
Ratio of net investment income to average daily net assets (%) ............ 4.69* 4.45*
Portfolio turnover rate (%) ............................................... 20.6* 26.3*
<FN>
(a) Reflects a per share amount of expenses, exclusive of management
fees, reimbursed by the Adviser of................................. $ .01 $ .04
Reflects a per share amount of management fee and other fees not
imposed by the Adviser of ......................................... $ 04 $ .07
Operating expense ratio including expenses reimbursed, management fee
and other expenses not imposed (%) ................................ .94* 1.44*
(b) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
* * Not annualized
</FN>
</TABLE>
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Massachusetts Limited Term Tax Free Fund (the "Fund") is a
non-diversified series of Scudder State Tax Free Trust, a Massachusetts
business trust (the "Trust"), which is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. There
are currently 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
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. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
At October 31, 1994, the Fund had a net tax basis capital loss carryforward of
approximately $77,600, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2002, whichever occurs first.
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
17
<PAGE>
SCUDDER MASSACHUSETTS LIMITED TERM TAX FREE FUND
- --------------------------------------------------------------------------------
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles. As
a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
ORGANIZATION COST. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of call or
maturity.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the six months ended April 30, 1995, purchases and sales of investments
(excluding short-term) aggregated $18,274,613 and $3,175,061, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management 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 0.60% of the Fund's average daily net assets,
computed and accrued daily and payable monthly. As manager of the assets of the
Fund, the Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio
management services, the Adviser provides certain administrative services in
accordance with the Agreement. The Agreement also provides that if the Fund's
expenses, exclusive of taxes, interest, and extraordinary expenses, exceed
specified limits, such excess, up to the
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
amount of the management fee, will be paid by the Adviser. For the period
February 15, 1994 (commencement of operations) to February 28, 1995 the Adviser
agreed not to impose all of its management fee and to maintain the annualized
expenses of the Fund at not more than 0.00% of average daily net assets.
Effective March 1, 1995, the Adviser agreed to maintain the annualized expenses
at 0.25% of average daily net assets until July 31, 1995. For the six months
ended April 30, 1995, the Adviser did not impose its fee amounting to $135,361
and the fee imposed aggregated $5,770. Further, due to the limitation of such
Agreement, the Adviser's reimbursement payable for the six months ended April
30, 1995 amounted to $39,388.
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 six months ended April 30, 1995, SSC did not impose its fee amounting
to $10,314 and the fee imposed aggregated $5,181.
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 April 30, 1995, SFAC did not impose its fee amounting to
$12,000 and the fee imposed aggregated $6,000.
The Fund 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 April 30, 1995,
Trustees' fees aggregated $5,090.
19
<PAGE>
(This page intentionally left blank.)
20
<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.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
The Scudder Family of Funds
<CAPTION>
<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)++
<FN>
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.
</FN>
</TABLE>
22
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
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 1-800-225-2470
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.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
<FN>
* 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.
</FN>
</TABLE>
23
<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.
