Scudder Pennsylvania Tax Free Fund
Semiannual Report
September 30, 1996
Pure No-Load(TM) Funds
For investors seeking double-tax-free income exempt from both Pennsylvania and
regular federal income taxes
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 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
o As of September 30, 1996, Scudder Pennsylvania Tax Free Fund's 30-day net
annualized SEC yield was 5.01%, equivalent to a 8.53% taxable yield for
Pennsylvania investors subject to the 41.29% maximum combined federal and state
income tax rate.
o For its semiannual period ended September 30, 1996, Scudder Pennsylvania Tax
Free Fund posted a total return of 2.77%, compared with the 2.97% average return
of 67 similar funds tracked by Lipper Analytical Services.
o Aided by their relatively light supply, municipal bonds outperformed Treasury
bonds of comparable maturity during the six-month period.
2 - Scudder Pennsylvania Tax Free Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We hope you enjoy our newly redesigned shareholder report. The new format, which
is being gradually introduced for all Scudder funds, is intended to enhance the
usefulness and readability of the reports. Let us know what you think.
Despite a mixed and somewhat volatile bond market environment, Scudder
Pennsylvania Tax Free Fund posted a positive total return of 2.77% over its most
recent semiannual period. And as portfolio managers Donald Carleton and Philip
Condon report in the portfolio management discussion that follows, the Fund
continues to post a high double tax-free yield by investing in a wide variety of
Pennsylvania municipal bonds. In doing so, the Fund attempts to maintain an
average maturity in line with that of the Lehman Brothers Municipal Bond Index,
but with a superior portfolio structure and the possibility of higher returns.
Please read the discussion beginning on page 6 for more information.
We would also like to take this opportunity to introduce the two newest
members of Scudder's family of pure no-load(TM) funds -- Scudder 21st Century
Growth Fund and Scudder Classic Growth Fund. Scudder 21st Century Growth Fund
seeks long-term growth by investing primarily in the securities of emerging
growth companies poised to be leaders in the 21st century. Scudder Classic
Growth Fund seeks long-term growth by investing primarily in common stocks of
medium to large U.S. companies; additionally, it seeks to keep the value of its
shares more stable than the typical capital growth mutual fund. For more
information on either of these new funds and other Scudder products and
services, please see page 22. For questions about Scudder Pennsylvania Tax Free
Fund, please call a Scudder Investor Information representative at
1-800-225-2470.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Pennsylvania Tax Free Fund
3 - Scudder Pennsylvania Tax Free Fund
<PAGE>
PERFORMANCE UPDATE as of SEPTEMBER 30, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/30/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER PENNSYLVANIA TAX FREE FUND
- --------------------------------------
1 Year $10,579 5.79% 5.79%
5 Year $14,236 42.36% 7.32%
Life of
Fund* $20,447 104.47% 7.95%
- --------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
1 Year $10,604 6.04% 6.04%
5 Year $14,323 43.23% 7.44%
Life of
Fund* $21,340 113.40% 8.46%
*The Fund comenced operations on May 28, 1987.
Index comparisons begin May 31, 1987
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
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 MONTH SEPTEMBER 30
SCUDDER PENNSYLVANIA TAX FREE FUND
Year Amount
- ----------------------
5/31/87 $10,000
'87 $ 9,622
'88 $11,008
'89 $12,058
'90 $12,605
'91 $14,363
'92 $15,864
'93 $18,117
'94 $17,489
'95 $19,328
'96 $20,447
LEHMAN BROTHERS MUNICPAL BOND INDEX
Year Amount
- ----------------------
5/31/87 $10,000
'87 $10,038
'88 $11,341
'89 $12,325
'90 $13,163
'91 $14,899
'92 $16,456
'93 $18,553
'94 $18,100
'95 $20,124
'96 $21,340
The unmanaged Lehman Brothers Municipal Bond Index is a market value-weighted
measure of municipal bonds issued across the United States. Index issues have a
credit rating of at least Baa and a maturity of at least two years. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED SEPTEMBER 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987* 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $11.30 $12.01 $12.26 $11.98 $12.78 $13.20 $14.06 $12.76 $13.31 $13.32
INCOME DIVIDENDS.. $ .25 $ .76 $ .84 $ .82 $ .80 $ .75 $ .76 $ .74 $ .72 $ .71
CAPITAL GAINS
DISTRIBUTIONS..... $ - $ .04 $ .02 $ .01 $ .02 $ .12 $ .18 $ .08 $ .03 $ .04
FUND TOTAL
RETURN (%)........ -3.78 14.41 9.54 4.54 13.94 10.45 14.20 -3.47 10.51 5.79
INDEX TOTAL
RETURN (%)........ .38 12.98 8.68 6.80 13.19 10.45 12.74 -2.44 11.18 6.04
</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 - Scudder Pennsylvania Tax Free Fund
<PAGE>
PORTFOLIO SUMMARY as of SEPTEMBER 30, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
General Obligations 23%
Hospital/Health 22%
Water/Sewer Revenue 16%
Pollution Control/
Industrial Development 9%
Electric Utility Revenue 6%
Sale Specialty Tax 5%
Housing Finance Authority 4%
Core Cities/Leasing 4%
Resource Recovery 4%
Miscellaneous Municipal 7%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund continues to be broadly diversified, with
investments in more than 10 categories of Pennsylvania municipal bonds.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
AAA 72%
AA 4%
A 6%
BB 14%
Not Rated 4%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Overall quality remains high, with 82% of portfolio
securities rated A or better.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Less than 1 year 8%
1-5 years 11%
5-10 years 32%
10-20 years 44%
Greater than 20 years 5%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
To take advantage of opportunities to lock in a substantial income
stream over time, we buy and hold noncallable municipal bonds with 15 to 20
year maturities.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio, see page 9.
5 - Scudder Pennsylvania Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Over two contrasting quarters of municipal bond market performance, Scudder
Pennsylvania Tax Free Fund continued to post a high double tax-free yield. On
September 30, 1996, the Fund's 30-day net annualized SEC yield was 5.01%,
equivalent to a 8.53% taxable yield for shareholders subject to the 41.29%
maximum combined state and federal income tax rate. This "tax-equivalent" yield
is significantly higher than current yields available from taxable investments
of similar maturity and credit quality. During its most recent semiannual period
ended September 30, the Fund's shareholders received $0.35 per share of income
exempt from federal and Pennsylvania state income taxes.
During a six-month period that saw modest price gains for the
intermediate-maturity municipal bonds the Fund primarily invests in, the Fund's
share price increased $0.01 to $13.32 per share. The combination of the increase
in the Fund's share price and $0.35 in interest income enabled the Fund to post
a positive total return of 2.77% over the semiannual period. The Fund's return
compares with the 2.97% average total return of similar funds tracked by Lipper
Analytical Services.
State Economy
on the Upswing
Continued improvement in Pennsylvania's economy has provided the basis for the
commonwealth's fourth consecutive general fund operating surplus. The largest
sources of revenue for the general fund are the state's sales tax, income tax,
and corporate income tax, which combined to provide 83% of general fund
revenues. There was a decline in total tax revenues for the state's 1996 fiscal
year stemming from a "pro-business" tax reduction initiated by Governor Ridge's
administration. Although the initial effect was a decrease in corporate income
tax receipts, the Pennsylvania Budget Office predicts corporate income taxes
will be a source of increasing revenue in the future. The commonwealth hopes
over time to encourage expansion of existing businesses and to attract new
firms.
Pennsylvania's improving economy is causing strong employment growth. This
growth, in turn, has translated into the state's lowest unemployment rate since
the first half of 1990, 5.1% as of July 1996. Pennsylvania's broad employment
base provides diversification for the commonwealth's economy, contributing
stability during changing economic cycles. In addition, Pennsylvania residents
have a low debt burden -- per capita debt is $418, or 66% of the national
average.
Economic and Market Review
The U.S. economy continued to grow at a moderate to slow pace during the Fund's
most recent semiannual period. The two quarters were mixed in terms of bond
market performance; for the second quarter of 1996, the economy picked up some
steam as snow from heavy winter storms melted, shoppers returned to retail
stores, and hiring increased. In addition, the collapse of the Congressional
Republicans' budget initiatives was viewed unfavorably by the bond market. These
two factors helped to drive bond yields higher (and prices lower) during the
second quarter. Bond yields as well as the economy retreated during the third
6 - Scudder Pennsylvania Tax Free Fund
<PAGE>
quarter as consumers seemed to feel the weight of their personal debt -- credit
card debt service payments as a percentage of disposable income rose to an
all-time high this year, and analysts predicted over a million people would
declare bankruptcy in 1996.
Over the past several years, the economy has progressed at a fairly consistent
pace, with inflation restrained throughout. The bond market, on the other hand,
has been fairly volatile, constantly anticipating far greater changes than the
economy has exhibited. Now, after six years of expansion, the U.S. economy may
actually be slowing. Consumers appear to be overburdened, retail sales figures
were negative during the third quarter, the government's monetary policy is
tight by historical standards (with a Fed Funds rate of 5.25%), and business
investment is slowing. In recent months, bond yields have fluctuated, but have
generally declined in step with this pullback.
For the semiannual period, municipal bonds, which typically exhibit less price
volatility than Treasury bonds, held their own, thanks in part to a relatively
light supply. While yields of long-term Treasury bonds rose two tenths of a
percentage point and prices declined 2.4% during the period, yields of municipal
bonds of similar maturity declined two tenths of a percentage point while prices
rose 2.9% for the same period. Large numbers of municipal bonds were called or
reached maturity during the period, especially in June and July. In September,
new municipal issues totaled $10.5 billion, the lowest monthly number in over a
year. The municipal market continues to be supported both by retail bond buyers
and institutions such as insurance companies.
Three-Point Strategy
Our strategy in managing Scudder Pennsylvania Tax Free Fund's portfolio is to
buy and hold noncallable intermediate maturity bonds (those with maturities of
15 to 20 years) to take advantage of opportunities to lock in a substantial
income stream for the Fund over time. As of September 30, 19% of the Fund's
securities had maturities in this range. We also continue to look for
opportunities to add some BBB-rated and non-rated bonds to the portfolio. These
bonds, while carrying some additional credit risk, generally exhibit less
interest rate sensitivity than municipal bonds rated A or above. The Fund held
18% of bonds in these two categories as of September 30. (For a summary of the
Fund's quality, diversification, and maturity structure, see page 5.) Lastly,
our goal is to have an average effective maturity similar to that of the
unmanaged Lehman Brothers Municipal Bond Index, the Fund's benchmark, but with a
superior, call-protected structure. As of September 30, the Fund's average
effective maturity was 10 years.
The Fund's overall quality remains high, with 82% of portfolio securities rated
A or better as of September 30. We continue to invest in a broad selection of
Pennsylvania municipal bonds, including general obligation, hospital/health, and
water/sewer revenue bonds.
7 - Scudder Pennsylvania Tax Free Fund
<PAGE>
An Emphasis on Income and
Competitive Performance
The Fund seeks to provide investors with a high level of federal and state
tax-exempt income as well as competitive total returns. We pursue the Fund's
objective by concentrating on three broad categories of Pennsylvania municipal
bonds:
o Noncallable bonds, which an issuer cannot redeem before the maturity date.
When interest rates fall, bond issuers tend to reduce their borrowing expenses
by redeeming "callable" existing bonds and issuing new securities that pay lower
interest rates. Noncallable bonds provide a relatively stable stream of income
and solid price appreciation potential over time. During the period, we sold
bonds with weak call protection in favor of those with better call protection.
As of September 30, 57% of bonds the Fund held were noncallable.
o Steeply discounted callable bonds, which are unlikely to be subject to early
redemption at par value by their issuers.
o "Cushion" bonds. We balance the Fund's long-maturity bonds by purchasing
so-called cushion bonds -- bonds with high coupons that compensate investors for
the fact that they can be redeemed by their issuer in a relatively short time.
A Further Slowdown?
The U.S. economy is flashing several caution lights. Some companies -- notably
fast food outlets and department stores -- are attempting to interest their
customers in higher priced items. That these and other companies are even
considering raising prices makes us believe that the economy may slow further,
because we are confident that the Federal Reserve will raise interest rates at
the first signs of any uptick in inflation. Though we believe that any excesses
in the U.S. economy would soon be corrected, and that the economy will remain
resilient, any further slowdown should benefit the municipal bond market.
Meanwhile, as managers we will retain our focus on noncallable,
intermediate-maturity tax-free bonds, because we believe they offer the most
attractive balance of return and risk. We will continue to maintain a neutral
average maturity for the Fund and pay close attention to credit quality as we
pursue double tax-free income and competitive total return for Scudder
Pennsylvania Tax Free Fund shareholders.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/Philip G. Condon
Donald C. Carleton Philip G. Condon
8 - Scudder Pennsylvania Tax Free Fund
<PAGE>
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of September 30, 1996 (Unaudited)
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
SHORT-TERM MUNICIPAL INVESTMENTS 6.1%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PENNSYLVANIA
Delaware County, PA, Airport Facilities Revenue, United Parcel Service, Daily
Demand Note, 3.85%, 12/1/15* ....................................................... 2,900,000 AAA 2,900,000
Delaware County, PA, Industrial Development Authority, British Petroleum Project,
Daily Demand Note, 4%, 10/1/19* .................................................... 500,000 A1+ 500,000
Pennsylvania Educational Development Financing Authority, Adelphoi Project, Weekly
Demand Bond, Series 1996E, 3.85%, 8/1/12* .......................................... 1,000,000 A1 1,000,000
Pennsylvania Higher Educational Facilities Authority, Carnegie Institute, Series 1995D
Daily Demand Note, 4%, 11/1/30* .................................................... 200,000 A1+ 200,000
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (COST $4,600,000) 4,600,000
- ------------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL INVESTMENTS 93.9%
- ------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA
Allegheny County, PA, Sanitary Authority, Sewer Revenues, Series 1986B,
7.5%, 12/1/16, prerefunded 6/1/99 (c)*** ........................................... 500,000 AAA 539,250
Armstrong County, PA, Hospital Authority, St. Frances Medical Center, Series A,
6.25%, 6/1/13 (c) .................................................................. 1,000,000 AAA 1,040,620
Berks County, PA, Municipal Authority Hospital Revenue, Reading Hospital and
Medical Center Project:
5.5%, 10/1/08 (c) .................................................................. 2,000,000 AAA 2,019,260
5.7%, 10/1/14 (c) .................................................................. 1,000,000 AAA 1,006,050
Bethlehem, PA, Water Authority, Refunding:
4.875%, 11/15/14 (c) ............................................................... 1,000,000 AAA 906,410
Series 1992, 6.25%, 11/15/11, prerefunded 11/15/01 (c)*** .......................... 1,000,000 AAA 1,073,090
Blair County, PA, Hospital Authority, Altoona Hospital Project, 5.5%, 7/1/07 (c) ..... 1,000,000 AAA 1,016,960
Bucks County, PA, Water and Sewer Authority Revenue, ETM, 6.375%, 12/1/08** .......... 425,000 NR 452,468
Clearfield, PA, Hospital Authority Revenue, Clearfield Hospital, 6.875%, 6/1/16 ...... 1,450,000 BBB 1,471,054
Commonwealth of Pennsylvania, Certificate of Participation, Lease Revenue:
Series A, 5%, 7/1/15 (c) ........................................................... 1,000,000 AAA 917,750
Series A, 5.25%, 7/1/10 (c) ........................................................ 1,890,000 AAA 1,830,484
Delaware County Authority, Commonwealth of Pennsylvania, University Revenue,
Villanova University, 7.75%, 8/1/18, prerefunded 8/1/98*** ......................... 200,000 AAA 216,010
Delaware County, PA, Health Facilities Revenue, Mercy Health Corporation of
Southeastern Pennsylvania, Series B, 6%, 11/15/07 .................................. 1,500,000 BBB 1,477,545
Delaware County, PA, Hospital Revenue, Memorial Hospital, 5.5%, 8/15/13 .............. 1,750,000 AAA 1,714,108
Delaware County, Pennsylvania, White Horse Village, Series 1996A, 6.6%, 7/1/06 ....... 1,000,000 NR 998,370
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Pennsylvania Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Erie County, PA, Prison Authority, Commonwealth Lease Revenue, 6.25%, 11/1/11,
prerefunded 11/1/01 (c)*** ......................................................... 1,000,000 AAA 1,072,620
Erie, PA, Higher Education Building Authority, College Revenue, Mercyhurst College
Project, 5.75%, 3/15/20 ............................................................ 1,000,000 BBB 903,650
Harrisburg, PA, Water Authority Revenue, Series 1993B, Inverse Floater,
7.92%, 6/18/15 (c)**** ............................................................. 1,000,000 AAA 976,250
Indiana County, PA, Industrial Development Authority, Pennsylvania Electric Company,
Pollution Control Revenue, 5.35%, 11/1/10 (c) ...................................... 1,000,000 AAA 989,430
Lebanon County, PA, Good Samaritan Hospital Authority Revenue, Series 1989B,
8.25%, 11/1/18, prerefunded 11/1/99*** ............................................. 600,000 AAA 672,732
Lehigh County, PA, Hospital Revenue, Healtheast, Series B, 9%, 7/1/15,
prerefunded 7/1/97*** .............................................................. 200,000 AAA 211,370
Montgomery County, PA, Holy Redeemer Hospital, 6.75%, 2/1/09 (c) ..................... 500,000 AAA 522,050
Montgomery County, PA, Redevelopment Authority, Multi-Family Housing Revenue
Refunding, KBF Associates, LP Project, 6.375%, 7/1/12 .............................. 1,500,000 BBB 1,485,870
Pennsylvania Convention Center Authority, Funding Revenue, 6%, 9/1/09 (c) ............ 2,200,000 AAA 2,290,068
Pennsylvania Economical Development Financing Authority, Resource Recovery Revenue
Series 1994D, 7.125%, 12/1/15 ...................................................... 2,700,000 BBB 2,823,795
Pennsylvania General Obligation:
10%, 4/15/02 (c) ................................................................... 2,500,000 AAA 3,123,150
6.25%, 7/1/10 ...................................................................... 1,000,000 AA 1,078,630
Zero Coupon, 12/15/02, prerefunded 12/15/98*** ..................................... 2,040,000 AAA 1,359,395
Pennsylvania Higher Education Facilities Authority, Health Services Series 1996A,
5.6%, 11/15/10 (c) ................................................................. 2,480,000 AAA 2,499,592
Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue:
Series 1991-32, 7.15%, 4/1/15 ...................................................... 900,000 AA 955,143
Series 1992-33, 6.85%, 10/1/09 ..................................................... 840,000 AA 893,567
Pennsylvania Industrial Authority, Economic Development Revenue Series 1996,
6%, 7/1/08 (c) ..................................................................... 1,000,000 AAA 1,062,360
Pennsylvania Industrial Development Authority, Economic Development Revenue,
5.8%, 1/1/08 (c) ................................................................... 1,000,000 AAA 1,042,220
Pennsylvania Intergovernmental Cooperation Authority, Special Tax Revenue,
City of Philadelphia, 6.8%, 6/15/12, prerefunded 6/15/02*** ........................ 1,000,000 AAA 1,103,980
Philadelphia, PA, General Obligation:
11.5%, 8/1/98 (c) .................................................................. 500,000 AAA 563,315
Refunding Revenue, Series A, 11.5%, 8/1/99 (c) ..................................... 710,000 AAA 839,603
School District, Series A 6.25%, 9/1/09 (c) ........................................ 1,000,000 AAA 1,078,270
Philadelphia, PA, Airport Revenue, Philadelphia Airport System, 9%, 6/15/15 .......... 100,000 BBB 102,418
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Pennsylvania Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philadelphia, PA, Gas Works Revenue, Series A, 7.3%, 7/1/99, prerefunded 7/1/97*** .... 1,000,000 AAA 1,044,380
Philadelphia, PA, Hospital and Higher Education Facilities Authority, Hospital Revenue:
Children's Seashore House, Series A, 7%, 8/15/12 .................................... 1,000,000 A 1,060,650
Graduate Health System Obligation Group, 6.625%, 7/1/21 ............................. 500,000 BBB 486,605
Albert Einstein Medical Center, 7.5%, 4/1/99 ........................................ 775,000 A 796,491
Philadelphia, PA, Hospital and Higher Education Facilities Authority,
Temple University Hospital, Series 1993A, 6.625%, 11/15/23 .......................... 1,100,000 BBB 1,125,190
Philadelphia, PA, Municipal Authority, Lease Revenue Refunding, Series A,
5.625%, 11/15/14 (c) ................................................................ 1,000,000 AAA 990,400
Philadelphia, PA, Water & Wastewater Refunding Revenue, 5.625%, 6/15/09 (c) ........... 2,000,000 AAA 2,039,880
Philadelphia, PA, Water Revenue, 6.25%, 8/1/10 (c) .................................... 1,000,000 AAA 1,078,960
Philadelphia, PA, Port Authority Lease Revenue, Series 1993, 6.2%, 9/1/13 (c) ......... 2,000,000 AAA 2,041,280
Pittsburgh, PA, General Obligation, Series 1993A, 5.5%, 9/1/14 (c) .................... 1,500,000 AAA 1,496,535
Pittsburgh, PA, Water and Sewer System Revenue:
ETM, 7.25%, 9/1/14 (c)** ............................................................ 150,000 AAA 173,277
Series A, 6.5%, 9/1/14, prerefunded 9/1/01(c)*** .................................... 1,250,000 AAA 1,371,688
Series A, 4.75%, 9/1/16 (c) ......................................................... 2,000,000 AAA 1,762,380
Pottsville, PA, Hospital Authority, Warne Clinic, 7.25%, 7/1/24 ....................... 1,000,000 BBB 1,030,830
Somerset County, PA, General Authority, Commonwealth Lease Revenue, 6.25%,
10/15/11, prerefunded 10/15/01 (c)*** ............................................... 1,000,000 AAA 1,072,080
Union County, PA, Higher Education Facilities Authority, University Revenue, Bucknell
University, 6.2%, 4/1/07 (c) ........................................................ 1,000,000 AAA 1,052,410
University Area, PA, Sewer Revenue, 5.25%, 11/1/14 (c) ................................ 1,750,000 AAA 1,696,293
Washington County, PA, Lease Revenue, Shadyside Hospital Project, 7.375%,
12/15/09 prerefunded 6/15/00 (c) .................................................... 1,000,000 AAA 1,120,330
York County, PA, Resource Recovery Solid Waste Authority, General Obligation,
Series C, 8.2%, 12/1/14 ............................................................. 315,000 A 334,134
PUERTO RICO
Puerto Rico Electric Power Authority, Power Revenue Refunding, Series N, Zero Coupon,
7/1/03 (c) .......................................................................... 1,500,000 AAA 1,086,030
Puerto Rico, General Obligation, Public Improvement Refunding, 5.4%, 7/1/07 ........... 1,500,000 A 1,492,620
Puerto Rico Public Building Authority, Government Facilities Revenue, 6.25%, 7/1/13 (c) 1,000,000 AAA 1,085,900
VIRGIN ISLANDS
Virgin Islands Public Finance Authority, General Obligation, Matching Fund Loan Notes,
Series A, 7.25%, 10/1/18 ............................................................ 1,500,000 NR 1,602,630
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (COST $68,724,623) 71,369,880
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0% (COST $73,324,623)(a) 75,969,880
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Pennsylvania Tax Free Fund
<PAGE>
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $73,324,623. At September 30,
1996, net unrealized appreciation for all securities based on tax cost was
$2,645,257. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $2,949,299 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$304,042.
(b) All of the securities held have been determined to be of appropriate
credit quality as required by the Fund's investment objectives. Credit
ratings shown are assigned by either Standard & Poor's Ratings Group,
Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Unrated
securities (NR) have been determined to be of comparable quality to rated
eligible securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC or MBIA.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such as
the coupon-equivalent of the Treasury bill rate. Variable rate demand
notes are securities whose yields are periodically reset at levels that
are generally comparable to tax-exempt commercial paper. These securities
are payable on demand within seven calendar days and normally incorporate
an irrevocable letter of credit from a major bank. These notes are
carried, for purposes of calculating average weighted maturity, at the
longer of the period remaining until the next rate change or to the extent
of the demand period.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow by a
trustee and used to pay principal and interest on bonds so designated.
*** Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay principal
and interest on the tax exempt issue and to retire the bonds in full at
the earliest refunding date.
**** Inverse floating rate notes are instruments whose yields have an inverse
relationship to benchmark interest rates. These securities are shown at
their rate as of September 30, 1996.
The accompanying notes are an integral part of the financial statements.
12 - Scudder Pennsylvania Tax Free Fund
<PAGE>
FINANCAIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities
as of September 30, 1996 (Unaudited)
<CAPTION>
ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $73,324,623) (Note A) .................. $75,969,880
Cash ........................................................................... 1,537
Receivable on investments sold ................................................. 100,000
Interest receivable ............................................................ 1,258,448
Receivable on Fund shares sold ................................................. 39,676
Other assets ................................................................... 99
-----------
Total assets ................................................................... 77,369,640
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Payable for Investments purchased .............................................. $ 1,059,824
Dividends payable .............................................................. 123,442
Payable for Fund shares redeemed ............................................... 417,328
Accrued management fee (Note C) ................................................ 8,920
Other accrued expenses (Note C) ................................................ 45,856
-----------
Total liabilities .............................................................. 1,655,370
-----------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE .................................................... $75,714,270
-----------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Net assets consist of:
Unrealized appreciation on investments ......................................... $ 2,645,257
Accumulated net realized gain .................................................. 115,081
Shares of beneficial interest .................................................. 56,829
Additional paid-in capital ..................................................... 72,897,103
-----------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE .................................................... $75,714,270
-----------------------------------------------------------------------------------------------
NET ASSET VALUE
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ($75,714,270 /
5,682,910 outstanding shares of beneficial interest, $.01 par value, unlimited -----------
number of shares authorized) ................................................. $13.32
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Pennsylvania Tax Free Fund
<PAGE>
<TABLE>
Statement of Operations
six months ended September 30, 1996 (Unaudited)
<CAPTION>
INVESTMENT INCOME
- -------------------------------------------------------------------------------------
<S> <C>
Income:
Interest ................................................... $2,181,695
----------
Expenses:
Management fee (Note C) .................................... 224,423
Services to shareholders (Note C) .......................... 42,784
Custodian and accounting fees (Note C) ..................... 30,417
Trustees' fees and expenses (Note C) ....................... 8,543
Auditing ................................................... 16,100
Reports to shareholders .................................... 13,118
Registration fees .......................................... 3,022
Legal ...................................................... 3,352
Other ...................................................... 2,765
----------
Total expenses before reductions ........................... 344,524
Expense reductions (Note C) ................................ (156,974)
----------
Expenses, net .............................................. 187,550
---------------------------------------------------------------------------
Net investment income ...................................... 1,994,145
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
- -------------------------------------------------------------------------------------
Net realized gain from investment transactions ............. 85,347
Net unrealized depreciation on investments during the period (10,167)
----------
Net gain on investments .................................... 75,180
---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $2,069,325
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Pennsylvania Tax Free Fund
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1996 MARCH 31,
(UNAUDITED) 1996
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................. $ 1,994,145 $ 4,007,114
Net realized gain from investment transactions .................... 85,347 268,513
Net unrealized appreciation (depreciation) on investments during
the period ...................................................... (10,167) 1,138,390
----------- ------------
Net increase in net assets resulting from operations .............. 2,069,325 5,414,017
----------- ------------
Distributions to shareholders:
From net investment income ........................................ (1,994,145) (4,007,114)
----------- ------------
From net realized gains from investment transactions .............. -- (406,975)
----------- ------------
Fund share transactions:
Proceeds from shares sold ......................................... 5,569,718 13,628,858
Net asset value of shares issued to shareholders in reinvestment of
distributions ................................................... 1,231,934 2,848,989
Cost of shares redeemed ........................................... (6,680,796) (14,251,658)
----------- ------------
Net increase in net assets from Fund share transactions ........... 120,856 2,226,189
----------- ------------
INCREASE IN NET ASSETS ............................................ 196,036 3,226,117
Net assets at beginning of period ................................. 75,518,234 72,292,117
----------- ------------
NET ASSETS AT END OF PERIOD ....................................... $75,714,270 $ 75,518,234
----------- ------------
OTHER INFORMATION
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ......................... 5,674,116 5,507,084
----------- ------------
Shares sold ....................................................... 421,292 1,013,230
Shares issued to shareholders in reinvestment of distributions .... 93,063 212,399
Shares redeemed ................................................... (505,561) (1,058,597)
----------- ------------
Net increase (decrease) in Fund shares ............................ 8,794 167,032
----------- ------------
Shares outstanding at end of period ............................... 5,682,910 5,674,116
----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Pennsylvania Tax Free Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table included selected data for a share outstanding throughout each period and other performance information derived
from the financial statements.
<CAPTION>
FOR THE PERIOD
SIX MONTHS MAY 28, 1987
ENDED (COMMENCEMENT
SEPTEMBER 30, YEARS ENDED MARCH 31, OF OPERATIONS)
1996 TO MARCH 31,
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Net asset value, beginning of period .. $13.31 $13.13 $13.01 $13.46 $12.80 $12.35 $12.27 $12.08 $11.80 $12.00
------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ................. .35 .71 .73 .75 .76 .77 .82 .84 .79 .65
Net realized and unrealized gain (loss)
on investment transactions .......... .01 .25 .15 (.36) .87 .52 .08 .20 .40 (.26)
------------------------------------------------------------------------------------------
Total from investment operations ...... .36 .96 .88 .39 1.63 1.29 .90 1.04 1.19 .39
------------------------------------------------------------------------------------------
Less distributions:
From net investment income ............ (.35) (.71) (.73) (.75) (.76) (.77) (.82) (.84) (.85) (.59)
From net realized gains on
investment transactions ............. -- (.07) (.03) (.09) (.21) (.07) -- (.01) (.06) --
------------------------------------------------------------------------------------------
Total distributions ................... (.35) (.78) (.76) (.84) (.97) (.84) (.82) (.85) (.91) (.59)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net asset value, end of period ........ $13.32 $13.31 $13.13 $13.01 $13.46 $12.80 $12.35 $12.27 $12.08 $11.80
------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (a) .................. 2.77** 7.45 7.09 2.70 13.19 10.70 7.58 8.75 11.00 3.39**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 76 76 72 74 61 39 26 18 11 5
Ratio of operating expenses,
net to average daily net assets (%) . .50* .50 .50 .50 .50 .50 .50 .50 .50 .50*
Ratio of operating expenses before
expense reductions, to average daily
net assets (%) ...................... .92* .91 .94 .95 1.02 1.13 1.43 1.84 2.43 5.75*
Ratio of net investment income to
average daily net assets (%) ........ 5.32* 5.30 5.74 5.42 5.79 6.05 6.67 6.78 7.09 7.16*
Portfolio turnover rate (%) ........... 10.3* 11.1 26.2 17.4 29.2 11.2 7.8 2.0 13.5 97.6*
(a) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</TABLE>
16 - Scudder Pennsylvania Tax Free Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A. Significant Accounting Policies
Scudder Pennsylvania Tax Free Fund (the "Fund") is a non-diversified series of
Scudder State Tax Free Trust (the "Trust"). The Trust is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. There are
currently six series in the Trust.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, 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. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable and tax-exempt income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no provision for federal
income taxes was required.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed and, therefore,
will be distributed to shareholders. An additional distribution may be made to
the extent necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. As a result, net
investment income and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the call
or maturity date.
B. Purchases and Sales of Securities
During the six months ended September 30, 1996, purchases and sales of municipal
securities (excluding short-term investments) aggregated $7,313,321 and
$8,069,728, respectively.
17 - Scudder Pennsylvania Tax Free Fund
<PAGE>
C. Related Parties
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a fee
equal to an annual rate of approximately 0.60% of the Fund's average daily net
assets, computed and accrued daily and payable monthly. The Adviser determines
the securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Agreement. The Adviser has agreed not to impose all or a portion of its
management fee until July 31, 1997, and during such period to maintain the
annualized expenses of the Fund at not more than 0.50% of average daily net
assets. For the six months ended September 30, 1996, the Adviser imposed fees
amounting to $67,449 and the portion not imposed amounted to $156,974.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. For the
six months ended September 30, 1996, the amount charged to the Fund by SCC
aggregated $30,209, of which $4,993 is unpaid at September 30, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended September 30, 1996, the amount charged to the Fund by SFAC aggregated
$18,000, of which $3,000 is unpaid at September 30, 1996.
The Trust pays each Trustee not affiliated with the Adviser $12,000 annually,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the six months ended September 30,
1996, Trustees' fees charged to the Fund aggregated $8,543.
18 - Scudder Pennsylvania Tax Free Fund
<PAGE>
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19 - Scudder Pennsylvania Tax Free Fund
<PAGE>
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20 - Scudder Pennsylvania Tax Free Fund
<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; General Partner,
TL Ventures
Donald C. Carleton*
Vice President
Philip G. Condon*
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
Jeremy L. Ragus*
Vice President
Rebecca Wilson*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
21 - Scudder Pennsylvania Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds
- --------------------------------------------------------------------------------
Money Market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase
Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia 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.
22 - Scudder Pennsylvania Tax Free Fund
<PAGE>
How to Contact Scudder
Account Service and Information
- --------------------------------------------------------------------------------
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
To receive information about the Scudder funds, for
additional applications and prospectuses, or for investment
questions
Scudder Investor Relations
1-800-225-2470
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services
1-800-323-6105
Please address all correspondence to
- --------------------------------------------------------------------------------
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Visit the Scudder World Wide Web Site at:
- --------------------------------------------------------------------------------
http://funds.scudder.com
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 which utilizes 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.
23 - Scudder Pennsylvania Tax Free Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
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