This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Pennsylvania
Tax Free Fund
Annual Report
March 31, 1996
o For investors seeking double-tax-free income exempt from both Pennsylvania
and regular federal income taxes
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
22 Report of Independent Accountants
23 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
IN BRIEF
o Scudder Pennsylvania Tax Free Fund rewarded investors with a total return
of 7.45% for the fiscal year ended March 31, 1996. The Fund's share price
rose $0.18 to $13.31 at the end of the period, while investors received
tax-free income distributions totaling $0.71 and a taxable capital gain
distribution of $0.07 per share.
o During the period, the Fund's performance was on par with the 7.46% average
return of the 62 Pennsylvania tax free funds tracked by Lipper Analytical
Services, Inc.
o The Fund's 30-day net annualized SEC yield was 4.96% on March 31, 1996. For
Pennsylvania residents in the combined state and federal income tax bracket
of 41.29%, this tax-free yield translated to an 8.45% yield for a taxable
investment.
BAR CHART TITLE: Fund Yield vs. Taxable Equivalent Yield
The Fund's 30-Day Taxable Equivalent
SEC Yield Yield
--------- -----
CHART DATA:
3/31/96 4.96% 8.45%
9/30/95 4.84% 8.24%
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Widespread declines in U.S. interest rates helped create hospitable
conditions for bonds during the past 12 months. Scudder Pennsylvania Tax Free
Fund finished the fiscal year ended March 31, 1996, with a total return of
7.45%, reflecting appreciation in the Fund's share price and an attractive level
of double-tax-free income to investors. These results were in line with the
7.46% average return of the 62 Pennsylvania tax-free funds monitored by Lipper
Analytical Services, Inc.
As bond markets regained strength during 1995, taxable bonds led the
march back, while tax-free municipal bonds recovered more slowly. By the fall,
municipal bonds had become attractively valued compared to Treasuries, which
helped renew investor interest and resulted in modest outperformance versus
taxable bonds.
Recent economic indicators raised concerns that the economy may be
stronger than originally believed, which unsettled the market. Still, ample
evidence suggests the absence of mounting inflationary pressures. This scenario
would be beneficial for bonds. Given the current economic uncertainties, the
Fund's challenge is to stand ready to participate in potential price rallies but
provide a measure of price stability should the market weaken instead, while
also continuing to supply competitive levels of double-tax-free income.
In closing, we wish to take this opportunity to announce that a new
member joins the Scudder Family of Funds as of May 8 -- Scudder Emerging Markets
Growth Fund. The new Fund focuses on stocks in developing nations around the
globe. For more information about Scudder Emerging Markets Growth Fund and other
Scudder products and services, please see page 26. For questions about Scudder
Pennsylvania Tax Free Fund, please call a Scudder Investor Relations
representative at 1-800-225-2470.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Pennsylvania Tax Free Fund
3
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
PERFORMANCE UPDATE as of March 31, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER PENNSYLVANIA TAX FREE FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,745 7.45% 7.45%
5 Year $14,808 48.08% 8.17%
Life of
Fund* $19,896 98.96% 8.09%
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,838 8.38% 8.38%
5 Year $14,745 47.45% 8.07%
Life of
Fund* $20,703 107.03% 8.58%
*The Fund commenced operations on
May 28, 1987. Index comparisons begin
May 31, 1987.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED MARCH 31
Scudder Pennsylvania Tax Free Fund
Year Amount
- ----------------------
5/31/87 $10,000
'88 $10,399
'89 $11,484
'90 $12,489
'91 $13,436
'92 $14,874
'93 $16,835
'94 $17,289
'95 $18,516
'96 $19,896
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
5/31/87 $10,000
'88 $10,847
'89 $11,628
'90 $12,855
'91 $14,041
'92 $15,444
'93 $17,378
'94 $17,781
'95 $19,102
'96 $20,703
The unmanaged Lehman Brothers Municipal Bond Index is a market value-
weighted measure of municipal bonds issued across the United States.
Index issues have a credit rating of at least Baa and a maturity of
at least two years. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED MARCH 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988* 1989 1990 1991 1992 1993 1994 1995 1996
-----------------------------------------------------------------------
NET ASSET VALUE... $11.80 $12.08 $12.27 $12.35 $12.80 $13.46 $13.01 $13.13 $13.31
INCOME DIVIDENDS.. $ .59 $ .85 $ .84 $ .82 $ .77 $ .76 $ .75 $ .73 $ .71
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .06 $ .01 $ -- $ .07 $ .21 $ .09 $ .03 $ .07
FUND TOTAL
RETURN (%)........ 3.39 11.00 8.75 7.58 10.70 13.19 2.70 7.09 7.45
INDEX TOTAL
RETURN (%)........ 8.48 7.21 10.56 9.22 10.02 12.52 2.32 7.43 8.38
</TABLE>
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased. If
the Adviser had not temporarily capped expenses, the average annual
total returns for the Fund for the one year, five year and life of Fund
periods would have been lower.
4
<PAGE>
PORTFOLIO SUMMARY as of March 31, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
General Obligation 28%
Hospital/Health 21%
Water/Sewer Revenue 17%
Electric Utility Revenue 6% The Fund remained well
Pollution Control/ diversified across carefully
Industrial Development 5% selected revenue and general
Housing Finance Authority 5% obligation bonds.
School District/Lease 4%
Core Cities/Lease 4%
State Agency/Lease 4%
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 74%
AA 7% Attention to credit quality
A 5% continued to be a central part
BBB 11% of Fund strategy.
Not Rated 3%
----
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 4% As interest rates declined,
1 - 5 years 11% the Fund slightly increased
5 - 10 years 30% its investments in bonds with
10 - 20 years 46% longer-term effective
Greater than 20 years 9% maturities, though the bulk
---- of the portfolio remained
100% focused on intermediate-term
==== bonds.
Weighted average effective maturity: 11 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 10.
5
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Pennsylvania Tax Free Fund performed well during the fiscal
year ended March 31, 1996. In addition to providing investors a healthy stream
of income free from Pennsylvania state and federal income taxes, the Fund posted
an $0.18 gain in share price. Combined, the increase in share price to $13.31 on
March 31, 1996, from $13.13 a year ago and the reinvestment of tax-free dividend
distributions totaling $0.71 and taxable capital gains of $0.07 per share,
helped the Fund generate a 7.45% total return for the year. This performance was
in line with the 7.46% average return for the 62 Pennsylvania tax free funds
tracked by Lipper Analytical Services, Inc.
For bonds, the downward path of interest rates boosted prices, more
than making up for the corresponding drop in yields. The Fund ended the period
with a 4.96% 30-day net annualized SEC yield, down slightly from its 5.29% yield
at the beginning of the period. Yet, the Fund's yield remains attractive versus
comparable taxable investments. Pennsylvania residents in the highest combined
federal and state tax bracket of 41.29% would have to earn an 8.45% yield from a
comparable taxable investment to match your Fund's double-tax-free yield.
Slower Economic Growth Fosters Recovery in Bond Markets
The confluence of slower, more sustainable economic growth, tame levels
of inflation, and weak consumer spending put a decisive end to 1994's faltering
bond prices. As bond markets began to recover, Treasury securities led the way.
During periods of falling interest rates, Treasuries often have an edge over
municipal bonds: Treasuries are not callable (which means they cannot be retired
in advance of their stated maturity dates) whereas most municipal bonds can be
called by their issuers. Lower rates increase the likelihood of calls as
municipal issuers take advantage of opportunities to refinance as a way to lower
debt costs.
Proposed flat tax legislation -- which threatened to eliminate the tax
advantages of owning municipal bonds -- also hampered the performance of
municipal bonds for much of 1995. Other factors detracted from municipal demand
as well, including the impressive performance of stocks, investors' reluctance
to reenter bond markets, and the lingering effects of Orange County,
California's financial problems, which made headlines as 1994 was drawing to a
close. Towards the end of the period, the presidential primaries once again put
the spotlight on the flat tax, negatively affecting municipals. Since then,
6
<PAGE>
however, discussions about the flat tax have disappeared along with the
presidential aspirations of Steve Forbes. Municipal demand, meanwhile, has begun
to improve in recent months, as more money flows into tax-exempt mutual funds.
Balancing Opportunities for Price Appreciation
and Income Preservation
The Fund's basic goal of blending a healthy level of double-tax-free
income with strong price performance remained in place during the fiscal year.
This total return approach meant that when interest rates were rising in 1994,
the Fund maintained a shorter than average maturity to help protect share price
while its current yield rose. In 1995, the Fund benefited from its position in
non-callable and discount bonds which improved in price as yields declined.
In an environment of falling interest rates, noncallable bonds can add
more value than their callable counterparts, offering both price appreciation
potential and a more reliable income stream, since they are not at risk of being
repaid prematurely. Because noncallable bonds are a scarce commodity in the
municipal realm, portfolios owning a sizable amount of these bonds have an
advantage.
During the period, nearly 80% of the portfolio was invested in bonds
maturing between five and 20 years. In our estimation, this segment of the
maturity spectrum offered the most compelling tradeoff between risk and reward.
With rates generally declining, we pushed maturities slightly further out along
the intermediate-maturity spectrum, where the Fund was able to capture most of
the yield and much of the price gain of longer-term bonds. In particular, we
increased the weighting of bonds maturing between 15 and 20 years. These bonds
contributed heavily to the Fund's performance over the period. Generally, we
avoided securities with more than 20 years to maturity, believing that they did
not offer enough extra yield to justify their additional price sensitivity to
changes in the direction of interest rates.
Credit quality, as usual, remained an important focus, with around 82%
of the portfolio invested in bonds rated AA or better at the period's close. In
addition, we maintained approximately 65% in insured bonds, which afford a
degree of safety as well as liquidity, since they are protected against default
by various bond insurance companies.
7
<PAGE>
Pennsylvania Review
The state of Pennsylvania's improved fiscal environment reflects its
successful efforts to control expenditures. Since 1992, the commonwealth has
managed to balance its budget, with small operating surpluses each year. The
commonwealth's favorable financial performance has lessened the need for
short-term borrowing, and Pennsylvania remains committed to reducing its current
debt burden, which happens to be moderate relative to the rest of the country.
The lion's share of Pennsylvania's broad revenue base consists of sales taxes,
personal income taxes, and corporate taxes.
The combination of a broad revenue base and a more diverse economy has
diminished Pennsylvania's vulnerability to shifting economic cycles. During the
past year, economic activity in Pennsylvania has been moderate. Job growth in
the services sector has offset declines in manufacturing, placing the
unemployment level on a par with the national average of 5.5%.
Within the municipal marketplace, Pennsylvania's bonds have performed
well, reflecting the relatively strong market demand for its tax-exempt debt.
Outlook
We believe the key catalysts for attractive bond market conditions --
slow economic growth, low inflation, and therefore the potential for
stable-to-lower interest rates -- remain in place, despite short-term
uncertainty. Municipal bonds also stand to benefit from relatively light new
issuance and a more favorable demand environment now that the flat tax proposal
is more or less tabled.
Positives aside, conflicting reports about the economy's future
direction have added a degree of uncertainty to the bond markets. In addition,
bonds may find it difficult to stage a real recovery without robust foreign
demand, which was so instrumental last year in pushing yields down and prices
up. We will continue to scrutinize this economic data to help us shape
investment strategy through the year. Until more definitive signs of the
economy's direction emerge, we have become a bit more cautious, allowing cash
reserves to build up more than usual. This affords us the flexibility to move
quickly when attractive investment opportunities come our way while helping to
reduce fluctuations in the Fund's value during periods of market declines.
8
<PAGE>
In the months ahead, the Fund's share price and income will vary in
response to changes in interest rates and other economic factors. In our view,
Scudder Pennsylvania Tax Free Fund remains well positioned to continue to
provide investors with a healthy stream of income exempt from state and federal
income taxes while seeking to reduce share price volatility. Thank you for your
continued interest in Scudder Pennsylvania Tax Free Fund.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/Philip G. Condon
Donald C. Carleton Philip G. Condon
Scudder Pennsylvania
Tax Free Fund:
A Team Approach to Investing
Scudder Pennsylvania Tax Free Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment strategies
and select securities for the Fund. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in our offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Donald C. Carleton assumed responsibilities for the
Fund's day-to-day management and investment strategies in January 1995. Don has
over 25 years of investment management experience and has worked at Scudder
since 1983. Philip G. Condon, portfolio manager, became a member of the team in
1987 and has worked at Scudder since 1983. Phil has 16 years of experience in
municipal investing and portfolio management.
9
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
INVESTMENT PORTFOLIO as of March 31, 1996
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3.0% SHORT-TERM MUNICIPAL INVESTMENTS
Pennsylvania Bucks County, PA, Oxford Falls Plaza, Series 1984,
Weekly Demand Note, 3.675%, 10/1/14* .................... 100,000 MIG1 100,000
Delaware County, PA:
Airport Facilities Revenue, United Parcel Service,
Daily Demand Note, 3.7%, 12/1/15* ..................... 900,000 AAA 900,000
Industrial Development Authority, British Petroleum
Project, Daily Demand Note, 3.85%, 10/1/19* ........... 500,000 A1+ 500,000
Langhorne, PA, Franciscan Health System Pooled
Financing, Saint Mary Hospital:
Series A, Daily Demand Note, 3.7%, 12/1/24* ........... 200,000 A1+ 200,000
Series C, Daily Demand Note, 3.7%, 12/1/24* ........... 500,000 A1+ 500,000
Total Short-term Municipal Investments ---------
(Cost $2,200,000) ....................................... 2,200,000
---------
97.0% LONG-TERM MUNICIPAL INVESTMENTS
Pennsylvania Allegheny County, PA:
Hospital Development Authority, Hospital Revenue,
Magee Women's Hospital, 5.3%, 10/1/07 (c) ............. 1,260,000 AAA 1,261,499
Sanitary Authority, Sewer Revenues, Series 1986 B,
7.5%, 12/1/16, prerefunded 6/1/99 (c)*** .............. 500,000 AAA 546,930
Armstrong County, PA, Hospital Authority, St. Frances
Medical Center, Series A, 6.25%, 6/1/13 (c) ............. 1,000,000 AAA 1,036,760
Berks County, PA, Municipal Authority Hospital
Revenue, Reading Hospital and Medical
Center Project:
5.5%, 10/1/08 (c) ..................................... 2,000,000 AAA 2,036,220
5.7%, 10/1/14 (c) ..................................... 1,000,000 AAA 996,600
Bethlehem, PA, Water Authority, Refunding,
4.875%, 11/15/14 (c) .................................... 1,000,000 AAA 893,330
Bethlehem, PA, Water Revenue, Series 1992,
6.25%, 11/15/11, prerefunded 11/15/01 (c)*** ............ 1,000,000 AAA 1,082,990
Blair County, PA, Hospital Authority, Altoona Hospital
Project, 5.5%, 7/1/07 (c) ............................... 1,000,000 AAA 1,015,850
Bristol Township, PA, School District, Series A,
5.25%, 2/15/12 (c) ...................................... 1,920,000 AAA 1,847,846
Bucks County, PA, Water and Sewer Authority
Revenue, ETM, 6.375%, 12/1/08** ......................... 425,000 NR 440,912
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Clearfield, PA, Hospital Authority Revenue,
Clearfield Hospital, 6.875%, 6/1/16 ..................... 1,455,000 BBB 1,423,033
Commonwealth of Pennsylvania, Certificate of
Participation, Lease Revenue, Series A:
5.25%, 7/1/10 (c) ..................................... 1,890,000 AAA 1,827,252
5%, 7/1/15 (c) ........................................ 1,000,000 AAA 901,410
Delaware County, PA:
Health Facilities Revenue, Mercy Health
Corporation of Southeastern Pennsylvania,
Series B, 6%, 11/15/07 ................................ 1,500,000 BBB 1,448,805
Hospital Revenue, Memorial Hospital,
5.5%, 8/15/13 ......................................... 1,750,000 AAA 1,692,863
Delaware County Authority, Commonwealth of
Pennsylvania, University Revenue, Villanova
University, 7.75%, 8/1/18, prerefunded 8/1/98*** ........ 200,000 AAA 219,320
Erie, PA, Higher Education Building Authority,
College Revenue, Mercyhurst College Project,
5.75%, 3/15/20 .......................................... 1,000,000 BBB 867,150
Erie County, PA:
General Obligation, 5.25%, 9/1/12 (c) ................... 1,000,000 AAA 947,270
Prison Authority, Commonwealth Lease Revenue,
6.25%, 11/1/11, prerefunded 11/1/01 (c)*** ............ 1,000,000 AAA 1,082,500
Harrisburg, PA, Water Authority Revenue, Series
1993 B, Inverse Floater, 7.97%, 6/18/15 (c)**** ......... 1,000,000 AAA 972,500
Indiana County, PA, Industrial Development Authority,
Pennsylvania Electric Company, Pollution Control
Revenue, 5.35%, 11/1/10 (c) ............................. 1,000,000 AAA 986,810
Lebanon County, PA, Good Samaritan Hospital
Authority Revenue, Series 1989 B, 8.25%,11/1/18,
prerefunded 11/1/99*** .................................. 600,000 AAA 683,562
Lehigh County, PA, Hospital Revenue, Healtheast,
Series B, 9%, 7/1/15, prerefunded 7/1/97*** ............. 200,000 AAA 216,662
Montgomery County, PA:
Holy Redeemer Hospital, 6.75%, 2/1/09 (c) ............... 500,000 AAA 526,225
Redevelopment Authority, Multi-Family Housing
Revenue Refunding, KBF Associates,
6.375%, 7/1/12 ........................................ 1,500,000 BBB 1,473,795
Pennsylvania Convention Center Authority,
Funding Revenue, 6%, 9/1/19 (c) ......................... 2,200,000 AAA 2,313,916
Pennsylvania General Obligation:
10%, 4/15/02 (c) ........................................ 2,500,000 AAA 3,178,000
6.25%, 7/1/10 ........................................... 1,000,000 AA 1,088,870
5.375%, 5/1/13 .......................................... 1,500,000 AA 1,443,960
Zero Coupon, 12/15/02, prerefunded 12/15/98*** .......... 2,040,000 AAA 1,329,223
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania Housing Finance Agency,
Single Family Mortgage Revenue:
Series 1991-32, 7.15%, 4/1/15 ......................... 1,000,000 AA 1,065,260
Series 1992-33, 6.85%, 10/1/09 ........................ 840,000 AA 891,979
Pennsylvania Industrial Development Authority,
Economic Development Revenue, 5.8%, 1/1/08 (c) .......... 1,000,000 AAA 1,048,420
Pennsylvania Intergovernmental Cooperation
Authority, Special Tax Revenue, City of
Philadelphia, 6.8%, 6/15/12,
prerefunded 6/15/02*** .................................. 1,000,000 AAA 1,114,170
Philadelphia, PA, Airport Revenue, Philadelphia
Airport System, 9%, 6/15/15 ............................. 100,000 BBB 103,336
Philadelphia, PA, Gas Works Revenue,
Series A, 7.3%, 7/1/99, prerefunded 7/1/97*** ........... 1,000,000 AAA 1,062,660
Philadelphia, PA, General Obligation:
11.5%, 8/1/98 (c) ..................................... 500,000 AAA 579,350
Refunding Revenue, Series A, 11.5%, 8/1/99 (c) ........ 710,000 AAA 861,905
School District, Series A, 6.25%, 9/1/09 (c) .......... 1,000,000 AAA 1,090,370
Philadelphia, PA, Hospital and Higher Education
Facilities Authority, Hospital Revenue:
Albert Einstein Medical Center, 7.5%, 4/1/99 .......... 775,000 A 805,140
Children's Seashore House, Series A,
7%, 8/15/12 (c) ..................................... 1,000,000 A 1,054,240
Graduate Health System Obligation Group,
6.625%, 7/1/21 ...................................... 500,000 BBB 495,395
Temple University Hospital, Series 1993 A,
6.625%, 11/15/23 .................................... 1,100,000 BBB 1,133,407
Philadelphia, PA, Municipal Authority, Lease
Revenue Refunding:
Series A, 5.625%, 11/15/14 (c) ........................ 1,000,000 AAA 976,820
Series C, 5%, 4/1/07 (c) .............................. 2,000,000 AAA 1,975,020
Philadelphia, PA, Port Authority Lease Revenue,
Series 1993, 6.2%, 9/1/13 (c) ........................... 2,000,000 AAA 2,054,240
Philadelphia, PA, Water & Wastewater Refunding
Revenue, 5.625%, 6/15/09 (c) ............................ 2,000,000 AAA 2,046,680
Philadelphia, PA, Water Revenue, 6.25%, 8/1/10 (c) ....... 1,000,000 AAA 1,089,230
Pittsburgh, PA, General Obligation, Series 1993 A,
5.5%, 9/1/14 (c) ........................................ 1,500,000 AAA 1,474,365
Pittsburgh, PA, Water and Sewer System Revenue:
Series A, 6.5%, 9/1/14, prerefunded 9/1/01 (c)*** ....... 1,250,000 AAA 1,384,863
ETM, 7.25%, 9/1/14 (c)** ................................ 150,000 AAA 169,458
Series A, 4.75%, 9/1/16 (c) ............................. 2,000,000 AAA 1,733,240
Pottsville, PA, Hospital Authority, Warne Clinic,
7.25%, 7/1/24 ........................................... 1,000,000 BBB 1,025,130
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Somerset County, PA, General Authority,
Commonwealth Lease Revenue,
6.25%, 10/15/11, prerefunded 10/15/01 (c)*** ............ 1,000,000 AAA 1,081,950
Union County, PA, Higher Education Facilities
Authority, University Revenue, Bucknell University,
6.2%, 4/1/07 (c) ........................................ 1,000,000 AAA 1,058,360
University Area, PA, Sewer Revenue,
5.25%, 11/1/14 (c) ...................................... 1,750,000 AAA 1,658,423
Upper Merion County, PA:
General Authority, Lease Revenue,
7.2%, 8/15/16, crossover refunded 8/15/96***** ........ 350,000 AA 361,074
Municipal Utility Authority, Sewer Revenue,
7.2%, 8/15/16, crossover refunded 8/15/96***** ........ 150,000 AA 154,746
Washington County, PA, Lease Revenue,
Shadyside Hospital Project, 7.375%, 12/15/09,
prerefunded 6/15/00 (c)*** .............................. 1,000,000 AAA 1,136,030
York County, PA, Resource Recovery Solid Waste
Authority, General Obligation, Series C,
8.2%, 12/1/14 ........................................... 315,000 A 336,924
Puerto Rico Puerto Rico Public Building Authority, Government
Facilities Revenue, 6.25%, 7/1/13 (c) ................... 1,000,000 AAA 1,089,820
Puerto Rico Electric Power Authority, Power Revenue
Refunding, Series N, Zero Coupon, 7/1/03 (c) ............ 1,500,000 AAA 1,063,230
Puerto Rico, General Obligation, Public Improvement
Refunding, 5.4%, 7/1/07 ................................. 1,500,000 A 1,493,610
Virgin Islands Virgin Islands Public Finance Authority,
General Obligation, Matching Fund Loan Notes,
Series A, 7.25%, 10/1/18 ................................ 1,500,000 NR 1,591,710
Total Long-term Municipal Investments ----------
(Cost $69,387,194) ...................................... 72,042,618
----------
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0%
(Cost $71,587,194) (a) .................................. 74,242,618
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
(a) The cost for federal income tax purposes was $71,587,194. At March 31,
1996, net unrealized appreciation for all securities based on tax cost
was $2,655,424. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $3,088,032 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$432,608.
(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 March 31, 1996.
***** Bonds which are crossover refunded are secured by an escrow of securities
which is used to pay principal on the tax exempt issue and retire the
bonds in full at the earliest refunding date, except in the case of
default by the issuer or inadequacy in the escrow account.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
- --------------------------------------------------------------------------------
Assets
Investments, at market (identified cost $71,587,194)
(Note A) .............................................. $ 74,242,618
Cash ...................................................... 66,536
Receivables:
Investments sold ...................................... 225,000
Interest .............................................. 1,351,345
Fund shares sold ...................................... 650
------------
Total assets ....................................... 75,886,149
Liabilities
Payables:
Dividends ............................................. $ 126,932
Fund shares redeemed .................................. 176,227
Accrued management fee (Note C) ....................... 11,794
Other accrued expenses (Note C) ....................... 52,962
---------
Total liabilities .................................. 367,915
------------
Net assets, at market value ............................... $ 75,518,234
============
Net Assets
Net assets consist of:
Unrealized appreciation on investments ................ $ 2,655,424
Accumulated net realized gain ......................... 29,734
Shares of beneficial interest ......................... 56,741
Additional paid-in capital ............................ 72,776,335
------------
Net assets, at market value ............................... $ 75,518,234
============
Net asset value, offering and redemption price per share
($75,518,234 DIVIDED BY 5,674,116 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) ................................. $13.31
============
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
STATEMENT OF OPERATIONS
Year Ended March 31, 1996
- --------------------------------------------------------------------------------
Investment income
Interest .................................................. $ 4,385,932
Expenses:
Management fee (Note C) ................................... $ 453,712
Services to shareholders (Note C) ......................... 83,745
Custodian and accounting fees (Note C) .................... 66,024
Trustees' fees (Note C) ................................... 14,176
Auditing .................................................. 32,137
Reports to shareholders ................................... 20,321
State registration ........................................ 6,218
Legal ..................................................... 2,437
Other ..................................................... 8,078
---------
Total expenses before reductions .......................... 686,848
Expense reductions (Note C) ............................... (308,030)
---------
Expenses, net ............................................. 378,818
-----------
Net investment income ..................................... 4,007,114
-----------
Net realized and unrealized gain
on investment transactions
Net realized gain from investment transactions ............ 268,513
Net unrealized appreciation on investments
during the period ..................................... 1,138,390
-----------
Net gain on investments ................................... 1,406,903
-----------
Net increase in net assets resulting from operations ...... $ 5,414,017
===========
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended March 31,
---------------------
Increase (Decrease) in Net Assets 1996 1995
- --------------------------------------------------------------------------------
Operations:
Net investment income ........................ $ 4,007,114 $ 4,086,809
Net realized gain from investment
transactions ............................. 268,513 181,781
Net unrealized appreciation on
investments during the period ............ 1,138,390 452,741
------------ ------------
Net increase in net assets resulting from
operations ............................... 5,414,017 4,721,331
------------ ------------
Distributions to shareholders:
From net investment income ($.71 and $.73 per
share, respectively) ..................... (4,007,114) (4,086,809)
------------ ------------
From net realized gains from investment
transactions ($.07 and $.03 per share,
respectively) ............................ (406,975) (157,473)
------------ ------------
Fund share transactions:
Proceeds from shares sold .................... 13,628,858 15,679,635
Net asset value of shares issued to
shareholders in reinvestment
of distributions ......................... 2,848,989 2,980,880
Cost of shares redeemed ...................... (14,251,658) (20,409,846)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions .................. 2,226,189 (1,749,331)
------------ ------------
Increase (decrease) in net assets ............ 3,226,117 (1,272,282)
Net assets at beginning of period ............ 72,292,117 73,564,399
------------ ------------
Net assets at end of period .................. $ 75,518,234 $ 72,292,117
============ ============
Other Information
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .... 5,507,084 5,653,359
------------ ------------
Shares sold .................................. 1,013,230 1,242,877
Shares issued to shareholders in
reinvestment of distributions ............ 212,399 232,520
Shares redeemed .............................. (1,058,597) (1,621,672)
------------ ------------
Net increase (decrease) in Fund shares ....... 167,032 (146,275)
------------ ------------
Shares outstanding at end of period .......... 5,674,116 5,507,084
============ ============
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the
Period
May 20, 1987
(commencement
Years Ended March 31, of operations)
----------------------------------------------------------------------------- to March 31
1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............... $13.13 $13.01 $13.46 $12.80 $12.35 $12.27 $12.08 $11.80 $ 12.00
------ ------ ------ ------ ------ ------ ------ ------ -------
Income from investment operations:
Net investment income (a) ......... .71 .73 .75 .76 .77 .82 .84 .79 .65
Net realized and unrealized gain
(loss) on investment
transactions .................... .25 .15 (.36) .87 .52 .08 .20 .40 (.26)
------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations .... .96 .88 .39 1.63 1.29 .90 1.04 1.19 .39
------ ------ ------ ------ ------ ------ ------ ------ -------
Less distributions:
From net investment income ........ (.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 ................. (.78) (.76) (.84) (.97) (.84) (.82) (.85) (.91) (.59)
------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of period ...... $13.31 $13.13 $13.01 $13.46 $12.80 $12.35 $12.27 $12.08 $ 11.80
====== ====== ====== ====== ====== ====== ====== ====== =======
Total Return (%) (b) ................ 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 72 74 61 39 26 18 11 5
Ratio of operating expenses, net to
average daily net assets (%) (a) .. .50 .50 .50 .50 .50 .50 .50 .50 .50*
Ratio of net investment income to
average daily net assets (%) ...... 5.30 5.74 5.42 5.79 6.05 6.67 6.78 7.09 7.16*
Portfolio turnover rate (%) ......... 11.1 26.2 17.4 29.2 11.2 7.8 2.0 13.5 97.6*
<FN>
(a) Reflects a per share amount of
expenses, exclusive of
management fees, reimbursed
by the Adviser of ............. $ -- $ -- $ -- $ -- $ -- $ .02 $ .06 $ .15 $ .43
Reflects a per share amount of
management fees and other
fees not imposed of ........... $ .05 $ .06 $ .06 $ .07 $ .08 $ .07 $ .07 $ .07 $ .05
Operating expense ratio
before expense
reductions (%) ................ .91 .94 .95 1.02 1.13 1.43 1.84 2.43 5.75*
(b) Total returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</FN>
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. Significant Accounting Policies
- --------------------------------------------------------------------------------
Scudder 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.
19
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
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 year ended March 31, 1996, purchases and sales of municipal
securities (excluding short-term investments) aggregated $10,568,499 and
$7,860,991, respectively.
C. Related Parties
- --------------------------------------------------------------------------------
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a fee
equal to an annual rate of approximately 0.60% of the Fund's average daily net
assets, computed and accrued daily and payable monthly. The Adviser determines
the securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Agreement. The Adviser has agreed not to impose all or a portion of its
management fee until July 31, 1996, and during such period to maintain the
annualized expenses of the Fund at not more than 0.50% of average daily net
assets. For the year ended March 31, 1996, the Adviser imposed fees amounting to
$145,682 and the portion not imposed amounted to $308,030.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. For the
year ended March 31, 1996, the amount charged to the Fund by SCC aggregated
$62,311, of which $5,167 is unpaid at March 31, 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 year ended
March 31, 1996, the amount charged to the Fund by SFAC aggregated $36,000, of
which $3,000 is unpaid at March 31, 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 year ended March 31, 1996,
Trustees' fees charged to the Fund aggregated $14,176.
21
<PAGE>
SCUDDER PENNSYLVANIA TAX FREE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder State Tax Free Trust and the Shareholders of Scudder
Pennsylvania Tax Free Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Pennsylvania Tax Free Fund, including the investment portfolio, as of March 31,
1996, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the eight years in the period
then ended, and for the period May 28, 1987 (commencement of operations) to
March 31, 1988. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Pennsylvania Tax Free Fund as of March 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the eight years in the period then ended, and for the period May 28, 1987
(commencement of operations) to March 31, 1988, in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 10, 1996
22
<PAGE>
TAX INFORMATION
The Fund paid distributions of $.072 per share from net long-term capital gains
during its year ended March 31, 1996. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $255,698 as capital gain dividends for its
year ended March 31, 1996.
Of the dividends paid by the Fund from net investment income for the year ended
March 31, 1996, 100% constituted exempt interest dividends for regular federal
income tax and Pennsylvania personal income tax purposes.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
23
<PAGE>
(This page intentionally left blank.)
24
<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; Consultant 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
Jeremy L. Ragus*
Vice President
Rebecca Wilson*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
- --------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond 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 Emerging Markets Growth Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Fund
Scudder Massachusetts Tax Free Fund* Scudder Global Discovery Fund
Scudder Medium Term Tax Free Fund Scudder Gold Fund
Scudder New York Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Ohio Tax Free Fund* Scudder International Fund
Scudder Pennsylvania Tax Free Fund* Scudder Latin America Fund
Growth and Income Scudder Pacific Opportunities Fund
Scudder Balanced Fund Scudder Quality Growth Fund
Scudder Growth and Income Fund Scudder Small Company Value Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
- --------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
- --------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,^(TM) an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call 1-800-541-7703.
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<CAPTION>
<S> <C>
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
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.
* 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.
</TABLE>
27
<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 38 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.
