Scudder
Massachusetts
Limited Term
Tax Free Fund
Annual Report
October 31, 1997
Pure No-Load(TM) Funds
A fund designed to seek double-tax-free income, exempt from both Massachusetts
and regular federal income taxes consistent with a high degree of principal
stability.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o For the 12 months ended October 31, 1997, Scudder Massachusetts Limited Term
Tax Free Fund posted a total return of 5.44%. This return outpaced the average
performance of the Fund's peers according to Lipper. The Fund's total return
performance also placed it in the top 15% of similar funds over one-and
three-year periods.
o As of October 31, 1997, Scudder Massachusetts Limited Term Tax Free Fund's
30-day net annualized SEC yield was 3.90%, equivalent to an 7.36% taxable yield
for Massachusetts investors subject to the 46.85% combined federal and state
income tax rate.
o Scudder Massachusetts Limited Term Tax Free Fund received a four-star rating
from Morningstar, reflecting an "above-average" rating for risk-adjusted
performance through October 31, 1997.*
* 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, and was rated among 1,448 and 676 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 17 Notes to Financial Statements
4 Performance Update 19 Report of Independent Accountants
5 Portfolio Summary 20 Tax Information
6 Portfolio Management Discussion 21 Shareholder Meeting Results
9 Glossary of Investment Terms 24 Officers and Trustees
10 Investment Portfolio 25 Investment Products and Services
13 Financial Statements 26 Scudder Solutions
16 Financial Highlights
2 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Massachusetts Limited Term Tax
Free Fund's performance over its most recent fiscal year. As of October 31,
1997, the Fund posted a 7.36% tax equivalent yield for investors in the highest
state and federal tax brackets, significantly higher than current CD rates. The
Fund earned a 5.44% total return over the 12-month period. In addition, the Fund
earned a four-star Morningstar rating (see "In Brief" on page two for more
information). Lastly, the Massachusetts economy is strong, its debt burden is
manageable, and the State has recently received a credit upgrade from a major
ratings agency. Please read the discussion beginning on page 8 for more
information.
The past year saw volatile interest rates. Over the period, bond prices
inched upward. Leading to the volatility was the fact that as one statistic
which might imply a resurgence of inflation was announced, it was soon followed
by two others that more than allayed such fears. We would not be surprised if
the coming year saw a similar pattern.
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
international exposure 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.
Please see pages 25 through 27 for more information on Scudder products and
services. As always, please call a Scudder Investor Information representative
at 1-800-225-2470 if you have questions about your account or any Scudder fund.
Thank you for investing with Scudder.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Massachusetts Limited Term Tax Free Fund
3 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/97 $10,000 Cumulative Annual
- ------------------------------------------------
SCUDDER MASSACHUSETTS LIMITED TERM
TAX FREE FUND
TICKER SYMBOL: SMLFX
- ------------------------------------------------
1 Year $ 10,544 5.44% 5.44%
Life of Fund* $ 11,849 18.49% 4.68%
- ------------------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
(3 YEAR)
- ------------------------------------------------
1 Year $ 10,551 5.51% 5.51%
Life of Fund* $ 11,978 19.78% 5.04%
- ------------------------------------------------
*The Fund commenced operations on February 15, 1994.
Index comparisons begin February 28, 1994
- ----------------------------------------------------------------
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:
SCUDDER MASSACHUSETTS LIMITED TERM TAX FREE FUND
Year Amount
- ----------------------
2/94* $10,000
4/94 $ 9,912
10/94 $10,030
4/95 $10,414
10/95 $10,840
4/96 $10,997
10/96 $11,271
4/97 $11,425
10/97 $11,885
LEHMAN BROTHERS MUNICIPAL BOND INDEX
(3 year)
Year Amount
- ----------------------
2/94* $10,000
4/94 $ 9,938
10/94 $10,058
4/95 $10,401
10/95 $10,862
4/96 $11,051
10/96 $11,352
4/97 $11,561
10/97 $11,978
The 3-year Lehman Brothers Municipal Bond Index is an unmanaged,
market-value-weighted measure of the short-term municipal bond market and
includes bonds with maturities of two to three years. Index returns assume
reinvested dividends and, unlike Fund returns, do not reflect 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 OCTOBER 31
1994* 1995 1996 1997
----------------------------------------------
NET ASSET VALUE......... $ 11.64 $ 12.02 $ 11.99 $ 12.10
INCOME DIVIDENDS........ $ .36 $ .54 $ .50 $ .53
FUND TOTAL RETURN (%)... .00 8.08 3.98 5.44
INDEX TOTAL RETURN (%).. .56 8.01 4.51 5.51
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than when purchased. If the Adviser had not maintained the
Fund's expenses, the total return for the one year and life of Fund periods
would have been lower.
4 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Hospital/Health 31%
Other General Obligation/
Lease 22%
Housing Finance Authority 9%
Higher Education 8%
Student Loans 5%
Water/Sewer Revenue 4%
Electric Utility Revenue 4%
Pollution Control/Industrial
Development 4%
State General Obligation 3%
Miscellaneous Municipal 10%
- --------------------------------------
100%
- --------------------------------------
The Fund is broadly diversified, with
holdings in several categories of
Massachusetts revenue and general
obligation bonds.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
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QUALITY
- --------------------------------------------------------------------------
AAA 71%
AA 10%
A 7%
BBB 10%
BB 1%
Not Rated 1%
- --------------------------------------
100%
- --------------------------------------
Weighted average quality: AA
Overall quality remains high, with
over 80% of the bonds in the Fund's
portfolio rated AAA or 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 11%
1 - 5 years 55%
5 - 10 years 34%
- ----------------------------------------------
100%
- ----------------------------------------------
Weighted average effective maturity: 4.32 years
We continued to maintain a longer-than-neutral
average maturity to capitalize on the favorable
outlook for five- to 10-year Massachusetts
municipal bonds.
For more complete details about the Fund's investment portfolio, see page 10.
5 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For its most recent fiscal year ended October 31, 1997, Scudder Massachusetts
Limited Term Tax Free Fund earned a solid 5.44% total return. This consisted of
a $0.11 increase in net asset value to $12.10 and income distributions of $0.53
per share. This return outpaced the Lipper average of similar funds over one-
and three-year periods, and the Fund placed in the top 15% of similar funds over
these two time periods.
On October 31, 1997, the Fund's 30-day net annualized SEC yield was 3.90%,
equivalent to a taxable yield of 7.36% for shareholders subject to the 46.85%
maximum combined state and federal income tax rate. As shown in the accompanying
graph, the Fund's tax-equivalent yield has consistently exceeded the average
yield of two-year CDs tracked nationally.
========================================================
Scudder Massachusetts Limited Term Tax Free Fund:
Outpacing the Averages
(Average annual returns for periods ended
October 31, 1997)
========================================================
Number
Scudder of
MALTTFF Lipper Funds Percentile
Period return average Rank tracked Ranking
1 year 5.44% 4.67% 5 of 38 Top 13%
3 years* 5.82% 5.10% 4 of 33 Top 12%
Past performance does not guarantee future results.
PRINTED DOCUMENT CONTAINS A LINE CHART HERE:
LINE CHART TITLE:
Scudder Massachusetts Limited Term Tax Free
Fund's Tax-Equivalent Yield vs. National Two-
Year CD Rates
November 1996 through October 1997
LINE CHART DATA:
SMALTTFF National average
tax-equivalent of two-year CD
yield yields
-------------------------------------------------
11/96 5.20 7.28
5.15 7.38
1/997 5.17 7.71
5.18 7.53
3/097 5.21 7.81
5.37 8.15
5/97 5.35 8.11
5.39 7.81
7/97 5.36 7.26
5.32 7.54
5.32 7.51
10/97 5.29 7.34
Source of CD data: BanxQuote.
Tax equivalent yields are for the 46.85% maximum federal and state tax rate.
Massachusetts Update
The Massachusetts economy continues to lead growth in the New England region.
Job creation is still strong, and unemployment is at its lowest level since
1989. The Commonwealth finished its 1997 fiscal year with an operating surplus
of $182 million in its General Fund. Massachusetts had anticipated issuing $900
million per year in bonds for the next five years, a total of $4.5 billion, to
finance transportation-related capital projects. Due to changes in federal
funding for the Central Artery Project, the Commonwealth increased its debt
limits for the 1998 and 1999 fiscal years to allow for additional bond issuance
of up to $1 billion. The pending legislative approval of a convention center
6 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
will also require debt financing, secured by a hotel tax. Although
Massachusetts' future debt issuance will be large, the burden should still be
manageable, given the Commonwealth's high wealth levels and scheduled debt
retirement. Lastly, Massachusetts and its bondholders stand to benefit from the
State's recent credit upgrade by a major ratings agency.
Portfolio Strategy
Scudder Massachusetts Limited Term Tax Free Fund is designed to deliver double
tax-free income through investments primarily in a portfolio of municipal bonds
with effective maturities between one and five years. The Fund's management team
pursues higher income than is typically available from tax-free money market
investments and less share price fluctuation than is found in intermediate- and
long-term tax free bonds. The Fund's professional management, economies of
scale, liquidity, and ability to diversify its assets continue to offer
advantages compared with the holding of individual municipal bonds.
Over the most recent fiscal year, the Fund continued to maintain a
longer-than-neutral average maturity (4.3 years at the close of the period) to
capitalize on the favorable outlook for the five- to 10-year segment of the
municipal bond market. Yields of 10-year municipal bonds, for example, declined
on average one third of a percentage point (and prices rose 2.3%) during the 12
months while two-year municipal bond yields and prices were essentially
unchanged. The Fund also continued to emphasize premium noncallable bonds, which
generally exhibit less price sensitivity than bonds priced at par.
The Fund has substantial holdings of Massachusetts general obligation (G.O.)
bonds. These bonds offer attractive value, high overall quality, and relative
stability. In addition, we hold a large percentage (29% as of October 31) of
pre-refunded bonds in the Fund's portfolio. Bonds are pre-refunded when issuers
sell new debt at lower prevailing rates and use the proceeds to establish an
escrow account of U.S. Treasury bonds designated to retire the original
municipal bonds on their future call dates. These bonds offer the highest
quality available in the municipal marketplace, yet are typically priced lower
than similar bonds of slightly lower quality. The Fund's overall credit quality
remains high, with over 80% of the bonds in the Fund's portfolio rated AAA or
AA.
Outlook
As a rising but volatile stock market continued to break records, the past year
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
7 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
well as subdued economic activity in much of the rest of the world -- is a boon
to investors.
We will continue to maintain a conservative investment strategy, including
holding premium coupon bonds, diversifying broadly, and keeping the Fund's
credit quality high. In addition, the Fund will seek to purchase select 10-year
municipal bonds, which are currently priced at attractive levels. We will also
search for value by weighing the maturity characteristics, call features, credit
quality, and income potential of each bond we consider adding to the Fund's
portfolio. Thank you for investing with Scudder Massachusetts Limited Term Tax
Free Fund.
Sincerely,
Your Portfolio Management Team
/s/Philip G. Condon /s/Kathleen A. Meany
Philip G. Condon Kathleen A. Meany
Scudder Massachusetts Limited
Term Tax Free Fund: A Team
Approach to Investing
Scudder Massachusetts Limited Term Tax Free Fund is run by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund. They are supported by Scudder's
large staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Philip G. Condon, Lead Portfolio Manager, joined Scudder in 1983 and has 17
years of experience as a portfolio manager and in municipal research. Phil has
managed Scudder Massachusetts Limited Term Tax Free Fund since its inception
and Scudder Massachusetts Tax Free Fund since 1989. Kathleen A. Meany,
Portfolio Manager, joined Scudder in 1988 and has 20 years of municipal sales
and portfolio management experience. Kate has managed Scudder Massachusetts
Limited Term Tax Free Fund since its inception and Scudder Massachusetts Tax
Free Fund since 1988.
8 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Glossary of Investment Terms
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.
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. Most municipal
bonds are exempt from federal income taxes, and
many are exempt from state and local income taxes
as well.
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.
REVENUE BOND A municipal bond that uses either the revenues
generated by the enterprise being financed or a
dedicated revenue stream to pay principal and
interest to the bondholder. Municipal projects that
issue revenue bonds include airports, hospitals, and
water and sewer facilities.
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 cumulative
-- 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 Massachusetts Limited Term Tax Free Fund
<PAGE>
Investment Portfolio as of October 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Municipal Investments 6.9%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts
Massachusetts, General Obligation, Dedicated Income Tax:
Series B, Daily Demand Note, 4%, 12/1/97* ................................... 400,000 MIG1 400,000
Series E, Daily Demand Note, 4%, 12/1/97* ................................... 100,000 MIG1 100,000
Massachusetts Health & Educational Facilities Authority:
Capital Assets Program, Series 1989 G-1, Weekly Demand
Note, 3.4%, 1/1/19 (c)* ..................................................... 1,000,000 AAA 1,000,000
Series D, Weekly Demand Note, 3.5%, 8/1/17* ................................. 389,000 MIG1 389,000
Series D, Weekly Demand Note, 3.85%, 1/1/35 (c)* ............................ 3,200,000 SP1+ 3,200,000
Massachusetts Industrial Finance Agency, Merritt Care, Daily Demand Note,
4%, 4/1/09* ................................................................... 600,000 MIG1 600,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $5,689,000) 5,689,000
- ------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Municipal Investments 93.1%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts
Lowell, MA, General Obligation:
6%, 12/15/04 (c) ............................................................ 2,025,000 AAA 2,206,946
Prerefunded 2/15/01, 8.3%, 2/15/05** ........................................ 1,635,000 AAA 1,883,242
Series 1992, 6.375%, 8/15/01 ................................................ 1,000,000 BBB 1,064,206
Malden, MA, Government Obligation, Series 1997, 5.5%, 8/1/05 (c) .............. 1,570,000 AAA 1,666,382
Massachusetts Bay Transportation Authority General Obligation, Series 1997C,
5%, 3/1/04 .................................................................. 500,000 A 513,335
Massachusetts Educational Loan Authority, Issue E, Series A, 6.7%, 1/1/02 ..... 415,000 AAA 440,722
Massachusetts General Obligation:
Series C, Prerefunded 12/1/00, 7.5%, 12/1/07** .............................. 750,000 AAA 837,053
Series C, Prerefunded 12/1/00, 7%, 12/1/10** ................................ 775,000 AAA 840,139
Series A, 5.25%, 2/1/01 (c) ................................................. 3,000,000 AAA 3,099,180
Massachusetts Health & Educational Facilities Authority:
Berkshire Health System, Series C, 5.9%, 10/1/11 ............................ 1,000,000 BBB 1,015,840
Berkshire Health System, Series D, 5.3%, 10/1/03 (c) ........................ 1,350,000 AAA 1,411,925
Central Massachusetts Medical Center, Series B, 6%, 7/1/02 (c) .............. 500,000 AAA 535,340
Daughters of Charity, Carney Hospital, Prerefunded 7/1/00, 7.5%, 7/1/05** ... 1,000,000 AAA 1,102,390
Daughters of Charity, Series D, 4.9%, 7/1/00 ................................ 550,000 AA 559,587
Fairview Extended Care, 1997B, 4.55%, 1/1/21 (c) ............................ 1,750,000 AAA 1,762,425
Massachusetts Eye and Ear Infirmary Series A, 7%, 7/1/01 .................... 2,120,000 BBB 2,195,642
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Medical, Academic & Scientific, Series A:
5.9%, 1/1/00 ............................................................... 500,000 A 514,055
6%, 1/1/01 ................................................................. 1,000,000 A 1,039,250
6.1%, 1/1/02 ............................................................... 500,000 A 524,820
Newton-Wellesley Hospital, Series D, Prerefunded 7/1/01, 7%, 7/1/15 (c)** ... 1,500,000 AAA 1,665,375
St. Joseph's Hospital, Series C, Prerefunded 10/1/99, 9.5%, 10/1/20** ....... 3,375,000 AAA 3,771,630
Valley Regional Health System, Series C, 5.3%, 7/1/00 ....................... 1,500,000 AAA 1,537,695
Wheaton College, Series B, Prerefunded 7/1/99, 7.2%, 7/1/09** ............... 590,000 AAA 631,648
Massachusetts Housing Finance Agency:
Housing Project Revenue, Series A, 5.2%, 10/1/00 ............................ 575,000 A 587,851
Multi-Family Housing Project 1988, Series A, Prerefunded 4/1/98,
8.7%, 4/1/14** .............................................................. 1,430,000 AAA 1,500,742
Multi-Family Housing Project, Series A, 8.8%, 8/1/21 ........................ 665,000 A 682,230
Single-Family Mortgage Revenue, Series 3, 7.875%, 6/1/14 .................... 4,000,000 AA 4,081,880
Massachusetts Industrial Finance Agency:
Boston Museum of Fine Arts, Series 1996, 5.125%, 1/1/04 (c) ................. 1,000,000 AAA 1,037,080
Cape Cod Health Systems, Series 1990, Prerefunded 11/15/00, 8.5%,
11/15/20** .................................................................. 2,150,000 AAA 2,453,344
College of the Holy Cross, Series 1996, 5.5%, 3/1/06 (c) .................... 1,000,000 AAA 1,060,940
East Boston Neighborhood Project, 7.25%, 7/1/06 ............................. 930,000 BB 960,011
Leominister Hospital, Series 1989A, Prerefunded 8/1/99, 8.625%, 8/1/09** .... 2,000,000 AAA 2,188,060
Merrimack College, Series 1997, 5.5%, 7/1/06 (c) ............................ 1,055,000 AAA 1,121,391
Milton Academy, Revenue Refunding, Series A, Prerefunded 9/1/99,
7.25%, 9/1/19 (c)** ...................................................... 700,000 AAA 753,445
North Andover Solid Waste, Series A, 6.3%, 7/1/05 ........................... 2,750,000 BBB 2,960,623
Resource Recovery, North Andover Solid Waste, Series A, 6.15%, 7/1/02 ....... 750,000 BBB 785,858
Worcester Polytechnic, Series 1997II, 5.25%, 9/1/04 (c) ..................... 1,065,000 AAA 1,112,744
Massachusetts Municipal Wholesale Electric Company, Power Supply System Revenue:
Prerefunded 7/1/02, 6.75%, 7/1/17** ......................................... 1,720,000 AAA 1,927,656
Series B, 6.3%, 7/1/00 ...................................................... 345,000 A 362,360
Series B, 6.375%, 7/1/01 .................................................... 1,000,000 A 1,066,480
Massachusetts Port Authority Revenue:
Series 1997A, 6%, 7/1/04 .................................................... 1,140,000 AA 1,238,838
USAIR, 5.5%, 9/1/06 (c) ..................................................... 640,000 AAA 673,786
Massachusetts Turnpike Authority:
Series 1996, 5%, 6/1/99 ..................................................... 785,000 NR 797,984
Series 1996A, 5%, 6/1/99 .................................................... 215,000 NR 218,358
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts, Special Obligation:
Series 1997A, Prerefunded 12/1/01, 5.5%, 6/1/05** ........................... 1,000,000 AA 1,060,310
Series A, Prerefunded 8/1/01, 5.2%, 6/1/04** ................................ 1,000,000 AA 1,040,620
Massachusetts Water Resource Authority
Series 1991A, Prerefunded 12/01/01, 6.875%, 12/1/11** ....................... 1,000,000 AAA 1,117,050
Series A, Prerefunded 7/15/02, 6.75%, 7/15/12** ............................. 1,000,000 AAA 1,121,480
Nantucket, MA, General Obligation, 6.25%, 12/1/02 ............................. 250,000 AAA 273,455
New England Education Loan Marketing Corp., Massachusetts Student Loan
Revenue Refunding, Issue A, 5.8%, 3/1/02 .................................... 3,150,000 AAA 3,305,579
North Attleboro, MA, General Obligation, 6%, 3/1/07 (c) ....................... 1,000,000 AAA 1,105,190
South Essex, MA, Sewer District, Series B, Prerefunded 6/1/04, 6.75%,
6/1/13 (c)** ................................................................ 1,000,000 AAA 1,146,790
Southeastern Massachusetts University Building, Series A, 5.5%, 5/1/04 (c) .... 1,010,000 AAA 1,067,540
Springfield, MA, Municipal Purpose Loan, General Obligation, Series 1996,
6.25%, 8/1/06 (c) ........................................................... 1,000,000 AAA 1,116,910
Worcester, MA, General Obligation, Revenue Refunding, Series G, 6%,
7/1/01 (c) .................................................................... 2,000,000 AAA 2,122,420
Worcester, MA, Government Obligation, Series 1997, 5.75%, 8/1/07 (c) .......... 1,000,000 AAA 1,084,550
Puerto Rico
Puerto Rico Public Building Authority, 6.75%, 7/1/04 (c) ...................... 2,250,000 AAA 2,555,258
- ------------------------------------------------------------------------------------------------------------------------------
Total Intermediate-Term Municipal Investments (Cost $74,780,747) 76,507,640
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $80,469,747) (a) 82,196,640
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $80,481,354. At October 31,
1997, net unrealized appreciation for all securities was $1,715,286. This
consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of $1,728,587 and
aggregate gross unrealized depreciation for all investment securities in
which there was an excess of tax cost over market value of $13,301.
(b) All of the securities held have been determined to be of appropriate
credit quality as required by the Fund's investment objectives. Credit
ratings are either Standard & Poor's Ratings Group, Moody's Investors
Service, Inc. or Fitch Investors Services, 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, HIBI, or MBIA.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such as
the coupon-equivalent of the Treasury bill rate. Variable rate demand
notes are securities whose yields are periodically reset at levels that
are generally comparable to tax-exempt commercial paper. These securities
are payable on demand within seven calendar days and normally incorporate
an irrevocable letter of credit or line of credit from a major bank. These
notes are carried, for purposes of calculating average weighted maturity,
at the longer of the period remaining until the next rate change or to the
extent of the demand period.
** Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay principal
and interest on tax-exempt issue and to retire the bonds in full at the
earliest refunding date.
The accompanying notes are an integral part of the financial statements.
12 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1997
<TABLE>
<S> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $80,469,747) ................... $ 82,196,640
Cash ................................................................... 57,801
Interest receivable .................................................... 1,339,139
Receivable for Fund shares sold ........................................ 110,649
Deferred organization expenses ......................................... 7,250
Other assets ........................................................... 963
----------------
Total assets ........................................................... 83,712,442
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 3,905,699
Dividends payable ...................................................... 92,577
Payable for Fund shares redeemed ....................................... 100,368
Accrued management fee ................................................. 28,068
Other payables and accrued expenses .................................... 59,074
----------------
Total liabilities ...................................................... 4,185,786
---------------------------------------------------------------------------------------------
Net assets, at market value $ 79,526,656
---------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Unrealized appreciation on investments ................................. 1,726,893
Accumulated net realized loss .......................................... (147,537)
Paid-in capital ........................................................ 77,947,300
---------------------------------------------------------------------------------------------
Net assets, at market value $ 79,526,656
---------------------------------------------------------------------------------------------
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($79,526,656/
6,573,339 outstanding shares of beneficial interest, $.01 par ----------------
value, unlimited number of shares authorized) ....................... $12.10
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Statement of Operations
year ended October 31, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Interest ............................................................... $ 3,557,500
-----------------
Expenses:
Management fee ......................................................... 424,432
Custodian and accounting fees .......................................... 53,743
Services to shareholders ............................................... 61,641
Trustees' fees and expenses ............................................ 14,916
Auditing ............................................................... 35,511
Legal .................................................................. 6,819
Reports to shareholders ................................................ 22,856
Registration fees ...................................................... 7,406
Amortization of organization expenses .................................. 5,625
Other .................................................................. 7,522
-----------------
Total expenses before reductions ....................................... 640,471
Expense reductions ..................................................... (121,977)
-----------------
Expenses, net .......................................................... 518,494
---------------------------------------------------------------------------------------------
Net investment income 3,039,006
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments ..................................... 8,891
Net unrealized appreciation on investments during the period ........... 676,307
---------------------------------------------------------------------------------------------
Net gain on investments 685,198
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 3,724,204
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 3,039,006 $ 2,561,928
Net realized gain (loss) on investments ..................... 8,891 (112,182)
Net unrealized appreciation (depreciation) on investments
during the .................................................. 676,307 (97,803)
period
-------------- --------------
Net increase in net assets resulting from operations ........ 3,724,204 2,351,943
-------------- --------------
Distributions to shareholders from net investment income .... (3,039,006) (2,561,928)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................... 34,983,831 39,513,439
Net asset value of shares issued to shareholders in
reinvestment of ............................................. 1,974,195 1,674,479
distributions
Cost of shares redeemed ..................................... (23,621,656) (30,966,008)
-------------- --------------
Net increase in net assets from Fund share transactions ..... 13,336,370 10,221,910
-------------- --------------
Increase in net assets ...................................... 14,021,568 10,011,925
Net assets at beginning of period ........................... 65,505,088 55,493,163
-------------- --------------
Net assets at end of period ................................. $ 79,526,656 $ 65,505,088
-------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 5,463,378 4,615,167
-------------- --------------
Shares sold ................................................. 2,911,596 3,294,988
Shares issued to shareholders in reinvestment of ............ 164,273 139,573
distributions
Shares redeemed ............................................. (1,965,908) (2,586,350)
-------------- --------------
Net increase in Fund shares ................................. 1,109,961 848,211
-------------- --------------
Shares outstanding at end of period ......................... 6,573,339 5,463,378
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Massachusetts Limited Term 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>
For the Period
February 15, 1994
(commencement of
operations) to
Years Ended October 31, October 31,
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of period ............ $11.99 $12.02 $11.64 $12.00
----------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................... .53 .50 .54 .36
Net realized and unrealized gain (loss) on
investment transactions ...................... .11 (.03) .38 (.36)
----------------------------------------------------------------------------
Total from investment operations ................ .64 .47 .92 .00
----------------------------------------------------------------------------
Less distributions from net investment income ... (.53) (.50) (.54) (.36)
----------------------------------------------------------------------------
Net asset value, end of period .................. $12.10 $11.99 $12.02 $11.64
----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................ 5.44 3.98 8.08 0.00**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .......... 80 66 55 36
Ratio of operating expenses, net to average ..... .75 .67 .24 --
daily net
assets (%)
Ratio of operating expenses before expense ...... .93 .90 .92 1.44*
reductions,
to average daily net assets (%)
Ratio of net investment income to average ....... 4.40 4.16 4.56 4.45*
daily net
assets (%)
Portfolio turnover rate (%) ..................... 9.77 12.4 27.4 26.3*
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
16 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Massachusetts Limited Term Tax Free Fund (the "Fund") is a
non-diversified series of Scudder State Tax Free Trust, a Massachusetts business
trust (the "Trust"), which is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. There are
currently six series in the Trust.
The 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 other than money market securities
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.
Money market instruments purchased with an original 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, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
At October 31, 1997, the Fund had a net tax basis capital loss carryforward of
approximately $136,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2002, ($21,000) and October 31, 2004 ($115,000), the respective expiration
dates, whichever occurs first.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed and, therefore,
will be distributed to shareholders. An additional distribution may be made to
the extent necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Organization Cost. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
17 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Other. Investment transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the call
or maturity date.
B. Purchases and Sales of Securities
For the year ended October 31, 1997, purchases and sales of investments
(excluding short-term) aggregated $23,410,737 and $6,279,490, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a fee
equal to an annual rate of 0.60% of the Fund's average daily net assets,
computed and accrued daily and payable monthly. As manager of the assets of the
Fund, the Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Agreement. The Adviser agreed to maintain the annualized expenses at
0.75% of average daily net assets until February 28, 1998. For the year ended
October 31, 1997, the Adviser imposed fees amounting to $302,455 and the portion
not imposed amounted to $121,977, of which $28,068 was unpaid at October 31,
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 by the end of 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
year ended October 31, 1997, the amount charged to the Fund by SSC aggregated
$41,127 of which $3,557 was unpaid at October 31, 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 year ended
October 31, 1997, the amount charged to the Fund by SFAC aggregated $36,000, of
which $6,000 was unpaid at October 31, 1997.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the year ended October 31, 1997,
Trustees' fees aggregated $14,916.
18 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder State Tax Free Trust and to the Shareholders of
Scudder Massachusetts Limited Term Tax Free Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Massachusetts Limited Term Tax Free Fund, including the investment portfolio, as
of October 31, 1997, 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 three years in
the period then ended, and for the period February 15, 1994 (commencement of
operations) to October 31, 1994. 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
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Massachusetts Limited Term Tax Free Fund as of October 31, 1997, 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 three years in the period then ended, and for the period
February 15, 1994 (commencement of operations) to October 31, 1994 in conformity
with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 12, 1997
19 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid by the Scudder Massachusetts Limited Term Tax Free Fund
from net investment income for the taxable year ended October 31, 1997, 100%
constituted exempt interest dividends for regular federal income tax and
Massachusetts state 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.
20 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Massachusetts
Limited Term Tax Free Fund (the "Fund") was held on October 24, 1997, at the
offices of Scudder, Stevens & Clark, Inc., Two International Place, Boston,
Massachusetts 02110. At the Meeting, as adjourned and reconvened, the following
matters were voted upon by the shareholders (the resulting votes for each matter
are presented below.) With regard to certain proposals, it was recommended that
the Meeting be reconvened in order to provide shareholders with an additional
opportunity to return their proxies. The date of the reconvened meeting at which
the matters were decided is noted after the proposed matter.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
4,185,753 33,479 75,897 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 4,241,066 54,064
Dawn-Marie Driscoll 4,250,455 44,675
Peter B. Freeman 4,250,455 44,675
George M. Lovejoy, Jr. 4,250,455 44,675
Dr. Wesley W. Marple, Jr. 4,248,187 48,942
Daniel Pierce 4,248,612 46,518
Kathryn L. Quirk 4,248,612 46,518
Jean C. Tempel 4,250,455 44,675
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
3,925,286 129,294 103,224 137,326
21 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997, to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.
Number of Votes:
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
3,983,319 105,822 92,880 117,713
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
5.1 Diversification N/A N/A N/A N/A
5.2 Borrowing 3,894,547 135,006 128,251 137,326
5.3 Senior securities 3,886,942 134,051 136,811 137,326
5.4 Concentration 3,886,942 134,051 136,811 137,326
5.5 Loans 3,886,942 134,051 136,811 137,326
5.6 Underwriting of securities 3,886,942 134,051 136,811 137,326
5.7 Investment in real estate 3,886,017 134,976 136,811 137,326
5.8 Purchase of physical 3,886,017 134,976 136,811 137,326
commodities
5.9 Investment in California N/A N/A N/A N/A
municipal securities
5.10 Investment in municipal N/A N/A N/A N/A
securities
5.11 Investment in 3,895,502 134,051 128,251 137,326
Massachusetts municipal
securities
5.12 Investment in New York N/A N/A N/A N/A
municipal securities
5.13 Investment in Ohio N/A N/A N/A N/A
municipal securities
22 - Scudder Massachusetts Limited Term Tax Free Fund
<PAGE>
5.14 Investment in Pennsylvania N/A N/A N/A N/A
municipal securities
5.15 Investment in short-term N/A N/A N/A N/A
municipal securities
5.16 Elimination of tax 3,895,502 134,051 128,251 137,326
diversification
5.17 Purchases of voting N/A N/A N/A N/A
securities
5.18 Affiliated transactions N/A N/A N/A N/A
5.19 Disclosed practices N/A N/A N/A N/A
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
4,198,748 19,700 76,682
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
23 - Scudder Massachusetts Limited Term 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
Kathryn L. Quirk*
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.
24 - Scudder Massachusetts Limited Term 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.
25 - Scudder Massachusetts Limited Term 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
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Massachusetts Limited Term 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
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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.
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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>
27 - Scudder Massachusetts Limited Term 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
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