Scudder
Ohio
Tax Free Fund
Semiannual Report
September 30, 1997
Pure No-Load(TM) Funds
For investors seeking double-tax-free income exempt from both Ohio and regular
federal income taxes.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o Scudder Ohio Tax Free Fund received an overall four-star rating from
Morningstar, reflecting "above average" risk-adjusted performance through
September 30, 1997.*
o As of September 30, 1997, Scudder Ohio Tax Free Fund's 30-day net annualized
SEC yield was 4.54%, equivalent to an 8.08% taxable yield for Ohio investors
subject to the 43.83% combined federal and state income tax rate.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
30-Day Yield on September 30, 1997
BAR CHART DATA:
Scudder Taxable Yield
Ohio Tax Needed to Equal
Free Fund the Fund's Yield
--------- ----------------
4.54% 8.08%
o For the six-month period ended September 30, 1997, Scudder Ohio Tax Free Fund
posted a total return of 6.34%, compared with the 5.92% average return of 55
similar funds tracked by Lipper Analytical Services. In addition, the Fund
placed in the top 25% of similar funds over six-month, one-year, three-year, and
five-year periods. See page 6 for more information on the Fund's rankings.
* For your information, these ratings are subject to change every month and are
calculated from the Fund's five-year average annual return in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below T-bill returns. The Fund received four stars
for three-year performance, four stars for five-year performance, and three
stars for three-year performance, and was rated among 1,374, 668, and 326
municipal funds for the respective periods. Of the funds rated, 10% received
five stars, and 22.5% received four stars. Past performance is no guarantee of
future returns.
Table of Contents
3 Letter from the Fund's President 14 Financial Statements
4 Performance Update 17 Financial Highlights
5 Portfolio Summary 18 Notes to Financial Statements
6 Portfolio Management Discussion 20 Officers and Trustees
9 Glossary of Investment Terms 21 Investment Products and Services
10 Investment Portfolio 22 Scudder Solutions
2 - Scudder Ohio Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you concerning Scudder Ohio Tax Free Fund's
performance over its most recent six-month period ended September 30, 1997. In
addition to the Fund's four-star Morningstar rating as of September 30 (see "In
Brief" on page 2), the Fund placed in the top 25% of similar Ohio tax free funds
tracked by Lipper over six-month, and one-, three- and five-year periods as of
September 30. The Fund posted a 4.54% 30-day net annualized SEC yield as of
September 30, equivalent to an 8.08% taxable yield for investors in the top Ohio
tax bracket. The Fund's portfolio management team continues to focus on
intermediate-term noncallable bonds in pursuit of high yield and favorable total
return. Please read the discussion beginning on page 6 for more information.
For those interested in other offerings from Scudder, we would like to take
this opportunity to tell you about a recent addition to Scudder's family of
funds -- Scudder International Growth and Income Fund. The Fund employs a
yield-oriented approach to international investing and seeks to provide
long-term growth of capital plus current income. Investors who desire exposure
to overseas equities but who wish to take a more conservative approach to
international investing may appreciate the Fund's emphasis on the dividend
paying stocks of established companies listed on foreign exchanges. For a
complete listing of Scudder's mutual fund offerings, see page 21.
As always, please call a Scudder Investor Information representative at
1-800-225-2470 if you have questions about your Fund. Page 23 provides more
information on how to contact Scudder. Thank you for choosing Scudder Ohio Tax
Free Fund to help meet your investment needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Ohio Tax Free Fund
3 - Scudder Ohio Tax Free Fund
<PAGE>
Performance Update as of September 30, 1997
- -------------------------------------------
Fund Index Comparisons
- -------------------------------------------
Total Return
- -------------------------------------------
Period Ended Growth of Average
9/30/97 $10,000 Cumulative Annual
- -------------------------------------------
Scudder Ohio Tax Free Fund
Ticker Symbol: SCOHX
- -------------------------------------------
1 Year $10,861 8.61% 8.61%
5 Year $14,015 40.15% 6.98%
10 Year $23,009 130.09% 8.69%
- -------------------------------------------
Lehman Brothers Municipal Bond Index
- -------------------------------------------
1 Year $10,904 9.04% 9.04%
5 Year $14,140 41.40% 7.17%
10 Year $23,182 131.82% 8.76%
- -------------------------------------------
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 September 30
Scudder Ohio Tax Free Fund
Year Amount
- ---------------------
'87 $10,000
'88 $11,475
'89 $12,495
'90 $13,085
'91 $14,896
'92 $16,417
'93 $18,675
'94 $18,032
'95 $19,940
'96 $21,185
'97 $23,009
Lehman Brothers Municipal
Bond Index
Year Amount
- ---------------------
'87 $10,000
'88 $11,296
'89 $12,277
'90 $13,113
'91 $14,842
'92 $16,395
'93 $18,484
'94 $18,033
'95 $20,051
'96 $21,260
'97 $23,182
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>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
--------------------------------------------------------------------------------
Net Asset Value $11.86 $12.00 $11.71 $12.46 $12.93 $13.72 $12.46 $13.02 $13.04 $13.41
Income Dividends $ .76 $ .84 $ .79 $ .77 $ .74 $ .71 $ .70 $ .69 $ .68 $ .68
Capital Gains
Distributions $ .01 $ .05 $ .06 $ .06 $ .02 $ .21 $ .10 $ .03 $ .09 $ .04
Fund Total
Return (%) 14.75 8.88 4.72 13.84 10.21 13.76 -3.44 10.58 6.25 8.61
Index Total
Return (%) 12.98 8.68 6.80 13.19 10.45 12.74 -2.44 11.18 6.04 9.04
</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
ten year periods would have been lower.
4 - Scudder Ohio Tax Free Fund
<PAGE>
Portfolio Summary as of September 30, 1997
- -------------------------------
Diversification
- -------------------------------
Hospital/Health 18%
Higher Education 13%
Water/Sewer Revenue 11%
State General Obligation 11%
Sales/Special Tax 10%
Core Cities/Lease 7%
Electric Utility Revenue 6%
Other General
Obligation/Lease 6%
School District/Lease 6%
Miscellaneous Municipal 12%
- -------------------------------
100%
- -------------------------------
The Fund invests in a broad
selection of Ohio municipal bonds,
including hospital/healthcare
bonds, higher education bonds,
and water/sewer revenue bonds.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- ------------------------------
Quality
- ------------------------------
AAA 53%
AA 13%
A 16%
BBB 8%
Not Rated 10%
- ------------------------------
100%
- ------------------------------
Weighted average quality: AA
Overall quality remains high,
with over 80% of portfolio
securities rated A or better.
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 3%
1-5 years 26%
5-10 years 30%
10-15 years 27%
Greater than 15 years 14%
- ------------------------------
100%
- ------------------------------
Weighted average effective maturity:
9.07 years
As a means of locking in a substantial
income stream for the Fund over time,
we are currently focusing on the purchase
of 10- to 15-year noncallable bonds.
For more complete details about the Fund's investment portfolio, see page 10.
5 - Scudder Ohio Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For the six months ended September 30, 1997, Scudder Ohio Tax Free Fund posted a
strong 6.34% total return as bonds continued to rack up solid gains. As some
analysts proclaimed a "New Era" of noninflationary growth, the bond market
inched its way upward, as any one statistical announcement that might imply a
resurgence of inflation was met by two others that more than allayed such fears.
The Fund's 6.34% total return for the period consisted of a $0.47 increase in
net asset value to $13.41 and income distributions of $0.34 per share. This
return outpaced the 5.92% average of 55 similar funds tracked by Lipper over the
six-month period. In addition, the Fund's return placed it in the top 25% of
similar funds over one-, three-, and five-year periods ended September 30, 1997.
On September 30, 1997, the Fund's 30-day net annualized SEC yield was 4.54%,
equivalent to a taxable yield of 8.08% for shareholders subject to the 43.83%
maximum combined state and federal income tax rate. The Fund's tax equivalent
yield is significantly higher than current yields available from taxable
investments of similar maturity and credit quality.
Ohio Update
The State of Ohio enjoyed stronger than expected economic growth during the last
six months. The State's General Fund benefited from a surge in income tax
receipts as a result of its strong economy and record low unemployment levels,
and finished the 1997 fiscal year with a $835 million surplus. As the State
begins the second quarter of its 1998 fiscal year, it is already projected to
THE PRINTED DOCUMENT HAS A TABLE HERE
TABLE TITLE:
Scudder Ohio Tax Free Fund:
Performance Exceeding the Averages
(Average annual returns for periods ended September 30, 1997)
Scudder
Ohio Tax
Free Fund Lipper Number Percentile
Period Return Average Rank of Funds Rank
------ ------ ------- ---- -------- ----------
1 Year 8.61% 7.97% 10 of 53 Top 19%
3 Years 8.47% 7.88% 9 of 43 Top 21%
5 Years 6.98% 6.57% 5 of 23 Top 22%
10 Years 8.69% 8.37% 4 of 12 Top 33%
Past performance does not guarantee future results.
6 - Scudder Ohio Tax Free Fund
<PAGE>
finish the year with another General Fund surplus, as both sales tax and
personal income tax receipts are ahead of projections. In addition, Ohio's debt
burden is low. Direct debt per capita in fiscal year 1996 was $469, 74% of the
national average.
The strength of Ohio's economy has been supported by employment growth in the
service and trade sectors as well as by product diversification in the
manufacturing sector. While the services sector is increasingly gaining market
share, the State's decline in manufacturing jobs has stabilized. Ohio's
unemployment rate -- 3.8% as of August, 1997 -- continues to be lower than the
national average.
The issue that continues to challenge the State is education. Ohio currently
faces a lawsuit claiming that the State's education spending plan is
inequitable. Since education is financed primarily with property tax revenues,
administered at the local level, there is a disparity between wealthy and poor
districts. The State has until March 1998 to develop a more equitable plan. The
likely scenario will be increased funding for education at the State level,
which could put pressure on the State's budget. In spite of this anticipated
strain, given the strength of Ohio's economy and its strong financial position,
we believe the State's economic and credit prospects are steady and should
improve in the near future.
Noncallable Bonds
Still a Focus
As a means of locking in a substantial income stream for Scudder Ohio Tax Free
Fund over time, we are currently focusing on the purchase of 10- to 15-year
noncallable bonds. As of September 30, over 25% of the Fund's securities had
maturities in this range. We also continue to look for opportunities to add high
yielding BBB-rated and non-rated bonds to the portfolio. Higher yielding 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 the end of September. (For a summary of the Fund's
quality, diversification, and maturity structure, see page 5.) Lastly, our
continuing goal is to have an average effective maturity similar to that of
other Ohio tax-free bond funds. As of September 30, the Fund's average effective
maturity was approximately 9 years.
Overall portfolio quality remains high, with over 80% of portfolio securities
rated A or better at the close of the period. We continue to invest in a broad
selection of Ohio municipal bonds, including hospital/healthcare bonds, higher
education bonds, and water/sewer revenue bonds.
Over the long-term, we seek to provide a competitive level of federal and state
tax-exempt income for Fund investors -- with total return as an additional
objective -- by concentrating on three broad categories of Ohio 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 existing "callable" 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. As of September 30, 50% of
bonds the Fund held were noncallable.
7 - Scudder Ohio Tax Free Fund
<PAGE>
o Steeply discounted callable bonds, which are less likely to be subject to
early redemption at par value by their issuers than bonds issued at par.
o "Cushion" bonds. We balance the Fund's long-maturity bonds by purchasing
so-called cushion bonds -- bonds that carry high coupons and are less volatile
than longer-term bonds with lower coupons.
Outlook
As a rising stock market continued to shatter records, the past six months also
witnessed increased activity in the bond market, as large and small investors
seeking additional diversification rebalanced their portfolios by adding bonds.
Amid Federal Reserve Chairman Greenspan's warnings about wage pressures, the
shrinking supply of labor, and the possible runout of the "peace dividend," it's
difficult to predict whether the Fed will continue to refrain from raising
interest rates in the near future and whether the currently favorable economic
and market conditions will prevail over the coming months. We do know, however,
that yields and prices of municipal bonds are currently attractive compared with
Treasuries, and that the continued low level of U.S. inflation -- aided by
business' strong investment in technological advances as well as subdued
economic activity in much of the rest of the world -- is a boon to investors.
In the near term, we will continue our focus on 10-15 year noncallable municipal
bonds as we seek to boost yield and long-term returns for our investors. At the
same time, we will attempt to limit volatility by maintaining a neutral average
maturity and high overall credit quality as we pursue double-tax-free income and
competitive total return for Scudder Ohio 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 Ohio Tax Free Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the
federal, state, or local government or a
corporation that obligates the issuer to pay the
bondholder a specified amount of interest for a
stated period -- usually a number of years -- and
to repay the face amount of the bond at its
maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith and
credit" (including the taxing and further
borrowing power) of the city, state, or agency
that issues the bond. A general obligation bond is
repaid with the issuer's general revenue and
borrowings.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace -- in other words,
when too much money is chasing too few goods. High
inflation has a negative impact on the prices of
fixed-income securities.
MUNICIPAL BOND An interest-bearing debt security issued by a
state or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund based on the
sum of the market value of all the securities
owned by the fund divided by the number of
outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument
would have to provide to equal that of a tax-free
municipal bond on an after-tax basis.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This
annualized yield calculation reflects the 30-day
average of the income earnings of every holding in
a given fund's portfolio, net of expenses,
assuming each is held to maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return -- annualized
or compound -- is based on a combination of share
price changes plus income and capital gain
distributions, if any, expressed as a percentage
gain or loss in value.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
9 - Scudder Ohio Tax Free Fund
<PAGE>
Investment Portfolio as of September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Municipal Investments 3.1%
- ------------------------------------------------------------------------------------------------------------------------------
Ohio
Cuyahoga County, OH, Health & Education, University Hospital of Cleveland,
Daily Demand Note, 3.85%, 1/01/16* ............................................ 1,400,000 MIG1 1,400,000
Franklin County, OH, Health System, St. Anthony's Medical Center, Daily Demand
Note, 4.5%, 7/01/15* .......................................................... 300,000 MIG1 300,000
Hamilton County, OH, Franciscan Sisters of the Poor Health System, Series A,
Daily Demand Note, 3.95%, 3/01/17* ............................................ 200,000 MIG1 200,000
Ohio State Air Quality Development Authority, Daily Demand Note, 3.8%,
10/01/01* ..................................................................... 200,000 MIG1 200,000
Ohio State Air Quality Development Authority Revenue Cincinnati Gas and
Electric, Daily Demand Note, 3.75%, 9/01/30* .................................. 400,000 A1+ 400,000
Ohio State University Revenue, General Receipts Bonds, Weekly Variable Rate
Demand Bond, Series 1986 B, 3.9%, 12/01/06* ................................... 200,000 A1+ 200,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $2,700,000) 2,700,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 96.9%
- ------------------------------------------------------------------------------------------------------------------------------
Ohio
Beavercreek, OH, Local School District, General Obligation, 6.6%, 12/01/15 (c) .. 1,000,000 AAA 1,176,230
Cleveland, OH, Waterworks Improvement, First Mortgage Revenue, Series 1992 F,
6.25%, 1/01/07 (c) ............................................................ 1,000,000 AAA 1,079,880
Cleveland, OH, Public Power System Improvement Revenue, Series 1994 A,
Capital Appreciation, Zero Coupon, 11/15/09 (c) ............................... 2,250,000 AAA 1,234,845
Cleveland, OH, Urban Renewal Tax Increment Rock & Roll Hall of Fame and
Museum Project, 6.75%, 3/15/18 ................................................ 1,000,000 NR 1,030,010
Cleveland, OH, General Obligation:
5.3%, 9/01/08 (c) ............................................................. 2,000,000 AAA 2,099,760
Series 1993, 5.375%, 9/01/09 (c) .............................................. 1,700,000 AAA 1,787,873
Series A, 6.3%, 7/01/06 (c) ................................................... 1,000,000 AAA 1,102,310
Cleveland, OH, Public Power System Improvement Revenue:
Series 1996-1, 6%, 11/15/11 (c) ............................................... 1,050,000 AAA 1,163,274
Series B, 7%, 11/15/17 ........................................................ 750,000 A 802,373
Cleveland, OH, Parking Facility Revenue, 6%, 9/15/09 (c) ........................ 1,385,000 AAA 1,540,189
Columbus, OH, General Obligation, Unlimited Tax, Sewer Improvement,
6%, 5/01/13 ................................................................... 1,000,000 AAA 1,081,680
Cuyahoga County, OH, General Obligation, Jail Facilities, Series 1991, ETM,
Zero Coupon, 10/01/02*** ...................................................... 1,500,000 NR 1,195,350
Cuyahoga County, OH, Hospital Facilities Revenue, Health Cleveland Inc.,
Series 1993, 6.25%, 8/15/10 ................................................... 1,000,000 A 1,062,310
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Ohio Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cuyahoga County, OH, Port Authority Revenue, Port Revenue Docks PS-1,
Series 1997, 6%, 3/01/07 ...................................................... 1,000,000 NR 1,007,810
Fairfield, OH, City School District, 7.2%, 12/01/09 (c) ......................... 1,000,000 AAA 1,183,890
Franklin County, OH, Riverside United Methodist Hospital, Series A, 5.75%,
5/15/12 ....................................................................... 1,950,000 AA 2,011,718
Gateway Economic Development Corporation of Cleveland, OH, Stadium Revenue,
6.5%, 9/15/14 ................................................................. 4,000,000 NR 4,139,000
Gateway Economic Development Corporation of Cuyahoga County, OH, Excise Tax:
Series 1990, 7.5%, 9/01/05 .................................................... 1,000,000 A 1,107,050
Series 1990, 7.2%, 9/01/01 .................................................... 2,550,000 A 2,687,063
Hamilton County, OH, Sewer System Revenue:
Improvement and Refunding, 5.45%, 12/01/09 (c) ................................ 1,000,000 AAA 1,063,110
Series 1991 A, 6.4%, 12/01/05 ................................................. 530,000 AA 571,552
Series 1991 A, Prerefunded 6/01/01, 6.4%, 12/01/05** .......................... 220,000 AAA 239,906
Hamilton County, OH, Health System Revenue, Franciscan Sisters of the Poor
Health System, Providence Hospital, Series 1992, 6.8%, 7/01/08 ................ 2,000,000 BBB 2,134,060
Hamilton County, OH, Hospital Facilities Revenue, Christ Hospital, Series
1991 B, 6.625%, 1/01/06 (c) ................................................... 1,000,000 AAA 1,069,480
Hilliard, OH, School District, Series 1996A, Capital Appreciation, Zero Coupon,
12/01/12 (c) .................................................................. 1,655,000 AAA 756,269
Huber Heights, OH, Water System Revenue, Capital Appreciation, Zero Coupon,
12/01/12 ...................................................................... 1,005,000 AAA 459,245
Lorain County, OH, Hospital Refunding Revenue:
EMH Regional Medical Center, 5%, 11/01/07 (c) ................................. 1,000,000 AAA 1,027,880
Humility of Mary Health Care System, Series A, 5.9%, 12/15/08 ................. 1,000,000 A 1,089,390
Lorain, OH, Hospital Authority Refunding Revenue, Lakeland Community
Hospital Inc., 6.5%, 11/15/12 ................................................. 1,000,000 A 1,118,920
Lucas County, OH, Hospital Revenue:
Flower Hospital, Series 1993, 6.125%, 12/01/13 ................................ 1,375,000 BBB 1,518,028
St. Vincent Medical Center, 5.25%, 8/15/20 (c) ................................ 1,900,000 AAA 1,840,872
Mahoning County, OH, General Obligation, Limited Tax, 6.6%, 12/01/06 (c) ........ 1,100,000 AAA 1,213,531
Miami County, OH, Hospital Facilities, Revenue Refunding, Hospital Upper Valley,
Series 1996 C, 6.25%, 5/15/13 ................................................. 1,000,000 BBB 1,033,240
North Olmstead, OH, General Obligation:
6.2%, 12/01/11 (c) ............................................................ 1,000,000 AAA 1,131,610
6.25%, 12/15/12 (c) ........................................................... 1,500,000 AAA 1,630,455
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Ohio Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Northeast Ohio Regional Sewer District, Wastewater Improvement
Revenue Refunding:
5.5%, 11/15/12 (c) ........................................................... 1,550,000 AAA 1,604,653
5.6%, 11/15/13 (c) ........................................................... 1,000,000 AAA 1,042,070
Ohio Air Quality Development Authority, Pollution Control Revenue, Cleveland
Electric Company, 8%, 12/01/13 (c) ............................................ 1,250,000 AAA 1,450,113
Ohio General Obligation, 6%, 8/01/10 ............................................ 1,000,000 AA 1,111,900
Ohio Higher Education Facilities Revenue:
Case Western Reserve University, Refunding, Series B, 6.5%, 10/01/20 .......... 2,250,000 AA 2,646,540
Oberlin College Project, Prerefunded 10/01/99, 7.1%, 10/01/12** ............... 485,000 AAA 519,488
Ohio Higher Educational Facility Commission Refunding Revenue, Case Western
Reserve University, 6%, 10/01/14 .............................................. 1,000,000 AA 1,111,190
Ohio Housing Finance Agency, Single-Family Mortgage Revenue, Series 1990 F,
7.6%, 9/01/16 ................................................................. 1,325,000 AAA 1,400,287
Ohio Liquor Profits Refunding Bonds, Economic Development Revenue, Series 1989,
6.85%, 3/01/00 (c) ............................................................ 1,000,000 AAA 1,063,400
Ohio Public Facilities Commission, Higher Educational Capital Facilities
Revenue, Series 2B, 5.4%, 11/01/07 (c) ........................................ 2,000,000 AAA 2,098,800
Ohio State Building Authority:
Correctional Facilities Revenue, Series 1991 A, 6.5%, 10/01/04 ................ 1,000,000 A 1,096,980
Juvenile Correction Facilities, 6%, 10/01/06 .................................. 1,555,000 A 1,715,212
Toledo Government Office Building, Series A, 8%, 10/01/27 ..................... 500,000 AAA 588,995
Worker's Compensation Facilities, William Green Building, Series 1993 A,
4.75%, 4/01/14 ................................................................ 1,000,000 A 936,860
Ohio State Higher Education Facility:
Prerefunded on 12/01/00 7.25%, 12/01/12 (c) ................................... 800,000 AAA 887,936
Unrefunded, 7.25%, 12/01/12 (c) ............................................... 200,000 AAA 221,038
Series 1997A, Step-up Coupon 0% to 7/1/2000, 6.5% to 7/01/08 .................. 2,325,000 AA 2,254,646
Ohio Water Development Authority, Pollution Control Revenue, Ohio Edison
Company Project, Series 1989 A, 7.625%, 7/01/23 ............................... 1,140,000 BBB 1,201,332
Olmsted Falls, OH, City School District, General Obligation, Series 1991,
7.05%, 12/15/11 (c) ........................................................... 1,000,000 AAA 1,116,950
Solon, OH, School District, Series 1993, 5.3%, 12/01/13 ......................... 1,000,000 AAA 1,004,970
Strongsville, OH, City School District, General Obligation, Series 1996, 5.35%,
12/01/11 (c) .................................................................. 1,000,000 AAA 1,045,510
Summit County, OH, General Obligation, 6.4%, 12/01/14 (c) ....................... 1,000,000 AAA 1,111,530
Warren County, OH, Water Improvement, General Obligation, The P&G Project,
Series 1995, 5.25%, 12/01/16 .................................................. 1,720,000 AA 1,707,543
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Ohio Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Puerto Rico
Puerto Rico Aqueduct and Sewer Authority, Revenue Refunding, 6%, 7/01/09 ........ 1,000,000 A 1,099,190
Puerto Rico Commonwealth, Highway & Transportation Authority, Series W,
5.5%, 7/01/13 (c) ............................................................. 1,000,000 AAA 1,060,720
Puerto Rico Electric Power Authority, Power Revenue, Series 1994S, 6.125%,
7/01/09 (c) ................................................................... 2,000,000 AAA 2,256,880
Puerto Rico, General Obligation, Public Improvement:
6.6%, 7/01/13 (c) ............................................................. 1,000,000 AAA 1,117,410
Refunding, 5.4%, 7/01/07 ...................................................... 1,500,000 A 1,570,515
University of Puerto Rico, University Systems, Series N, 6.25%, 6/01/08 (c) ..... 1,000,000 AAA 1,132,400
Virgin Islands
Virgin Islands Public Finance Authority, General Obligation, Matching Fund Loan
Notes, Series A, 7.25%, 10/01/18 .............................................. 1,000,000 NR 1,116,010
Virgin Islands Public Finance Authority, Highway Revenue, Series 1989, 7.7%,
10/01/04 ...................................................................... 1,000,000 BBB 1,067,980
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $79,755,587) 85,749,211
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $82,455,587) (a) 88,449,211
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $82,455,587. At September 30,
1997, net unrealized appreciation for all securities based on tax cost was
$5,993,624. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $6,018,047 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$24,423.
(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, FSA 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 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.
** 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.
*** 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.
The accompanying notes are an integral part of the financial statements.
13 - Scudder Ohio Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $82,455,587) ................ $ 88,449,211
Receivable for investments sold ..................................... 5,000
Interest receivable ................................................. 1,294,839
Receivable for Fund shares sold ..................................... 80,647
Other assets ........................................................ 1,400
----------------
Total assets ........................................................ 89,831,097
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Due to custodian bank ............................................... 79,459
Dividends payable ................................................... 128,703
Payable for Fund shares redeemed .................................... 7,000
Accrued management fee .............................................. 18,104
Other payables and accrued expenses ................................. 40,166
----------------
Total liabilities ................................................... 273,432
--------------------------------------------------------------------------------------------
Net assets, at market value $ 89,557,665
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Unrealized appreciation on investments .............................. 5,993,624
Accumulated net realized loss ....................................... (174,616)
Paid-in capital ..................................................... 83,738,657
--------------------------------------------------------------------------------------------
Net assets, at market value $ 89,557,665
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($89,557,665 / 6,679,265 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ....................................................... $13.41
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Ohio Tax Free Fund
<PAGE>
Statement of Operations
six months ended September 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................ $ 2,460,717
-----------------
Expenses:
Management fee ...................................................... 258,891
Services to shareholders ............................................ 42,577
Custodian and accounting fees ....................................... 30,002
Trustees' fees and expenses ......................................... 8,444
Auditing ............................................................ 15,347
Reports to shareholders ............................................. 12,156
Legal ............................................................... 1,981
Registration fees ................................................... 2,522
Other ............................................................... 4,466
-----------------
Total expenses before reductions .................................... 376,386
Expense reductions .................................................. (159,529)
-----------------
Expenses, net ....................................................... 216,857
---------------------------------------------------------------------------------------------
Net investment income 2,243,860
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions ............... (23,438)
Net unrealized appreciation (depreciation) on investments
during the period ................................................. 3,101,403
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 3,077,965
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 5,321,825
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Ohio Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1997 March 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................... $ 2,243,860 $ 4,446,028
Net realized gain (loss) from investment transactions .... (23,438) 192,252
Net unrealized appreciation (depreciation) on investments
during the period ..................................... 3,101,403 (39,047)
---------------- ---------------
Net increase (decrease) in net assets resulting from
operations ............................................ 5,321,825 4,599,233
---------------- ---------------
Distributions to shareholders:
From net investment income ............................... (2,243,860) (4,446,028)
---------------- ---------------
From net realized gains from investment transactions ..... -- (249,065)
---------------- ---------------
Fund share transactions:
Proceeds from shares sold ................................ 9,333,360 15,734,963
Net asset value of shares issued to shareholders in
reinvestment of distributions ......................... 1,428,839 3,010,355
Cost of shares redeemed .................................. (8,391,508) (18,190,160)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions .......................................... 2,370,691 555,158
---------------- ---------------
Increase (decrease) in net assets ........................ 5,448,656 459,298
Net assets at beginning of period ........................ 84,109,009 83,649,711
---------------- ---------------
---------------- ---------------
Net assets at end of period .............................. $ 89,557,665 $ 84,109,009
---------------- ---------------
Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................ 6,502,200 6,457,717
---------------- ---------------
Shares sold .............................................. 707,103 1,211,448
Shares issued to shareholders in reinvestment of
distributions ......................................... 107,752 230,889
Shares redeemed .......................................... (637,790) (1,397,854)
---------------- ---------------
Net increase (decrease) in Fund shares ................... 177,065 44,483
---------------- ---------------
---------------- ---------------
Shares outstanding at end of period ...................... 6,679,265 6,502,200
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Ohio Tax Free Fund
<PAGE>
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>
Six Months
Ended
September 30, Years Ended March 31,
1997
(Unaudited) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ----------------------------------------------------------------------------------------------------
of period ................ $12.94 $12.95 $12.77 $12.68 $13.13 $12.47 $12.14 $11.97 $11.94 $11.65 $12.00
----------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ....... .34 .68 .69 .70 .70 .72 .75 .78 .82 .79 .66
Net realized and
unrealized
gain (loss) on
investments .............. .47 .03 .30 .13 (.35) .85 .36 .23 .10 .36 (.40)
Total from investment ----------------------------------------------------------------------------------------------------
operations ............... .81 .71 .99 .83 .35 1.57 1.11 1.01 .92 1.15 .26
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income ....... (.34) (.68) (.69) (.70) (.70) (.72) (.75) (.78) (.82) (.84) (.61)
Net realized gains on
investment
transactions ............. -- (.04) (.12) -- (.08) (.19) (.03) (.06) (.07) (.02) --
In excess of net realized
gains .................... -- -- -- (.04) (.02) -- -- -- -- -- --
----------------------------------------------------------------------------------------------------
Total distributions ......... (.34) (.72) (.81) (.74) (.80) (.91) (.78) (.84) (.89) (.86) (.61)
----------------------------------------------------------------------------------------------------
Net asset value, end of ----------------------------------------------------------------------------------------------------
period ................... $13.41 $12.94 $12.95 $12.77 $12.68 $13.13 $12.47 $12.14 $11.97 $11.94 $11.65
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........ 6.34** 5.58 7.85 6.82 2.48 13.04 9.33 8.75 7.80 10.83 2.30**
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 90 84 84 78 80 69 51 37 25 12 6
Ratio of operating expenses,
net to average daily
net assets (%) (a) ....... .50* .50 .50 .50 .50 .50 .50 .50 .50 .50 .50*
Ratio of operating
expenses before expense
reductions, to average
daily net assets (%) ..... .87* .88 .89 .91 .90 .95 1.03 1.21 1.62 2.14 4.51*
Ratio of net investment
income to average daily
net assets (%) ........... 5.17* 5.23 5.30 5.59 5.23 5.61 6.05 6.50 6.74 7.13 7.17*
Portfolio turnover rate (%).. 2.85* 9.66 19.6 19.9 12.2 34.7 13.2 22.6 15.9 35.7 105.5*
</TABLE>
(a) Total returns are higher due to maintenance of the Fund's expenses.
(b) For the period May 28, 1987 (commencement of operations) to March 31, 1988.
* Annualized
** Not annualized
17 - Scudder Ohio Tax Free Fund
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Ohio 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, 1997, purchases and sales of municipal
securities (excluding short-term investments) aggregated $2,254,576 and
$1,195,230, respectively.
18 - Scudder Ohio 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 January 31, 1998 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, 1997, the Adviser imposed fees
amounting to $99,362 of which $18,104 was unpaid at September 30, 1997 and the
portion not imposed amounted to $159,529 at September 30, 1997.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
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, 1997, the amount charged to the Fund by SSC
aggregated $29,629 of which $4,886 is unpaid at September 30, 1997.
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, 1997, the amount charged to the Fund by SFAC aggregated
$18,000, of which $3,000 was unpaid at September 30, 1997.
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,
1997, Trustees' fees and expenses charged to the Fund aggregated $8,444.
19 - Scudder Ohio 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
E. Michael Brown*
Trustee
Dawn-Marie Driscoll
Trustee; Executive Fellow;
President, Driscoll Associates
Peter B. Freeman
Trustee; Corporate Director and
Trustee
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
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
*Scudder, Stevens & Clark, Inc.
20 - Scudder Ohio Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil 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 Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
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. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **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.
21 - Scudder Ohio Tax Free Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
22 - Scudder Ohio Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
23 - Scudder Ohio 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.
SCUDDER
[LOGO]
