Scudder
Ohio
Tax Free Fund
Semiannual Report
September 30, 1998
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>
Scudder Ohio Tax Free Fund
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Date of Inception: 5/28/87 Total Net Assets as of Ticker Symbol: SCOHX
9/30/98: $98.6 million
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o For its most recent semiannual period ended September 30, 1998, Scudder Ohio
Tax Free Fund posted a total return of 4.51%, compared with the 4.18% average
return of 52 similar funds tracked by Lipper Analytical Services. The Fund also
placed in the top one-third of similar funds for the six-month, 3-year, 5-year,
and 10-year periods ended September 30. Please see page 4 for additional
information on the Fund's rankings.
o As of September 30, 1998, Scudder Ohio Tax Free Fund's 30-day net annualized
SEC yield was 3.96%, equivalent to a 7.07% taxable yield for Ohio investors
subject to the 43.95% combined federal and state income tax rate.
o Scudder Ohio Tax Free Fund received a four-star overall rating from
Morningstar, reflecting "above average" risk-adjusted performance through
September 30, 1998.^1
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
CHART TITLE:
30-Day Yield on September 30, 1998
CHART DATA:
Scudder Taxable Yield
Ohio Tax Needed to Equal
Free Fund the Fund's Yield
--------- ----------------
3.96% 7.07%
Table of Contents
3 Letter from the Fund's President 15 Financial Statements
4 Performance Update 18 Financial Highlights
5 Portfolio Summary 19 Notes to Financial Statements
6 Portfolio Management Discussion 21 Investment Products and Services
9 Glossary of Investment Terms 22 Scudder Solutions
10 Investment Portfolio
^1 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- and five-year performance, and three stars
for ten-year performance, and was rated among 1581, 943, and 359 municipal
funds for the respective periods. Of the funds rated, the top 10% received
five stars, and the next 22.5% received four stars. Past performance is no
guarantee of future returns.
2 - Scudder Ohio Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
The municipal bond market has made a strong case for portfolio
diversification over the past several months. While volatility swept through
most global markets, including the U.S. stock market, municipal bonds posted
steady gains. We continue to see signs that investors, especially those in
higher tax brackets, are choosing to rebalance their portfolios with municipal
bond investments. Another positive sign for municipal bond investors: As shown
by the graph on page 8 of the Portfolio Management Discussion, intermediate-term
municipals (which make up most of Scudder Ohio Tax Free Fund's portfolio)
represent their most attractive value versus Treasury bonds in ten years.
Moreover, as outlined in the Portfolio Management Discussion that begins on page
6, Ohio municipal bonds are benefiting from the state's strong economy, which is
supported in turn by steady employment and an increasingly diversified
manufacturing sector.
Scudder Ohio Tax Free Fund's total return over its most recent semiannual
period was 4.51%, outpacing the average performance of its peers as tracked by
Lipper. The Fund's 30-day net annualized SEC yield was 3.96% as of September 30,
1998, equivalent to a 7.07% taxable yield for Ohio investors subject to the top
combined federal and state income tax rate.
For those of you interested in new Scudder funds, we recently introduced
two international funds: Scudder International Growth Fund -- which seeks to
invest in high growth opportunities in both developed and developing markets,
and Scudder International Value Fund -- which seeks to invest in undervalued
foreign securities.
Please call a Scudder Investor Information representative at
1-800-225-2470, or visit our Web site at www.scudder.com if you have questions
about your Fund. Thank you for choosing Scudder Ohio Tax Free Fund to help meet
your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Ohio Tax Free Fund
3 - Scudder Ohio Tax Free Fund
<PAGE>
Performance Update as of September 30, 1998
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Fund Index Comparisons
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Total Return
- -------------------------------------------
Period Ended Growth of Average
9/30/98 $10,000 Cumulative Annual
- -------------------------------------------
Scudder Ohio Tax Free Fund
- -------------------------------------------
1 Year $10,818 8.18% 8.18%
5 Year $13,329 33.29% 5.92%
10 Year $21,692 116.92% 8.05%
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Lehman Brothers Municipal Bond Index
- -------------------------------------------
1 Year $10,872 8.72% 8.72%
5 Year $13,635 36.35% 6.39%
10 Year $22,311 123.11% 8.35%
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Growth of a $10,000 Investment
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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
- -----------------------
'88 $10,000
'89 $10,888
'90 $11,403
'91 $12,981
'92 $14,307
'93 $16,275
'94 $15,714
'95 $17,376
'96 $18,461
'97 $20,051
'98 $21,692
Lehman Brothers Municipal
Bond Index
Year Amount
- ---------------------
'88 $10,000
'89 $10,868
'90 $11,608
'91 $13,138
'92 $14,514
'93 $16,363
'94 $15,964
'95 $17,750
'96 $18,821
'97 $20,522
'98 $22,311
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.
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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>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
--------------------------------------------------------------------------------
Net Asset Value $12.00 $11.71 $12.46 $12.93 $13.72 $12.46 $13.02 $13.04 $13.41 $13.78
Income Dividends $ .84 $ .79 $ .77 $ .74 $ .71 $ .70 $ .69 $ .68 $ .68 $ .67
Capital Gains
Distributions $ .05 $ .06 $ .06 $ .02 $ .21 $ .10 $ .03 $ .09 $ .04 $ .03
Fund Total
Return (%) 8.88 4.72 13.84 10.21 13.76 -3.44 10.58 6.25 8.61 8.18
Index Total
Return (%) 8.68 6.80 13.19 10.45 12.74 -2.44 11.18 6.04 9.04 8.72
</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, 1998
Diversification
- ---------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the above table.
Hospital/Health 15%
Water/Sewer Revenue 14%
Higher Education 12%
Sales/Special Tax 12%
State General Obligation 8%
Electric Utility Revenue 7%
School District/Lease 7%
Other General Obligation/Lease 5%
Toll Revenue/Transportation 4%
Miscellaneous Municipal 16%
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100%
--------------------------------------
The Fund invests in a broad selection of Ohio tax-free bonds, with a majority
of the portfolio invested in local general obligation bonds (hospital/health
and schools) and revenue bonds (water/sewer).
Quality
- -------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the above table.
AAA* 51%
AA 13%
A 11%
BBB 11%
SKI 14%
--------------------------------------
100%
--------------------------------------
Weighted average quality: AA
*Includes cash equivalents
Overall portfolio quality remains high, with 75% of portfolio securities rated
A or better as of September 30.
Effective Maturity
- ------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the above table.
Less than 1 year 2%
1-5 years 35%
5-8 years 12%
8-15 years 42%
Greater than 15 years 9%
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100%
--------------------------------------
Weighted average effective maturity:
8.61 years
As a means of locking in a substantial income stream for the Fund over time, we
are currently focusing on the purchase of 15- to 20-year municipal bonds.
For more complete details about the Fund's investment portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Ohio Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Municipal bonds registered gains in the wake of a strong U.S. Treasury bond
rally during Scudder Ohio Tax Free Fund's most recent semiannual period ended
September 30, 1998. During the six-month period, the Fund posted a total return
of 4.51%, compared with the 4.18% average return of 52 Ohio tax-exempt funds as
tracked by Lipper Analytical Services, Inc. The Fund also placed in the top
one-third of similar funds for the six-month, 3-year, 5-year, and 10-year
periods ended September 30.
Ohio Update
The state of Ohio has enjoyed stronger than expected economic growth over the
past six months. The state's general fund benefited from a surge in income tax
receipts as a result of Ohio's strong economy and record low unemployment
levels. The state's general fund finished its 1998 fiscal year with a fifth
consecutive budget surplus, due primarily to personal income tax receipts that
exceeded projections and lower than projected disbursements, particularly for
Medicaid and welfare programs.
Ohio's projected capital plan for the 1999 and 2000 fiscal years calls for
capital spending to be maintained at current levels, with approximately $1.6
billion of debt financing. The plan will finance various projects throughout the
State, with specific attention to the areas of primary and secondary education
and corrections.
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. And
Scudder Ohio Tax Free Fund:
Competitive Long-Term Performance
(Average annual returns for periods ended September 30, 1998)
Scudder
Ohio Tax
Free Fund Lipper Number Percentile
Period Return Average Rank of Funds Rank
------ ------ ------- ---- -------- ----
1 year 8.18% 7.93% 21 of 52 Top 40%
3 years 7.68% 7.19% 11 of 48 Top 23%
5 years 5.92% 5.55% 6 of 33 Top 18%
10 years 8.05% 7.71% 4 of 12 Top 33%
Past performance does not guarantee future results.
6 - Scudder Ohio Tax Free Fund
<PAGE>
the state's unemployment rate continues to be lower than the national average:
As of August, 1998, Ohio's unemployment rate was 4.3%, compared with the
national average of 4.5%. In addition, Ohio's debt burden is low. Direct debt
per capita for the state's 1997 fiscal year was $538, or 81% of the national
average. Although future debt issuance is expected to be significant, the
state's debt burden should be manageable as Ohio's scheduled amortization plan
calls for 77% of current debt to be retired in ten years.
Bonds Provided a Safe Haven
Investors worldwide went in search of a relative "safe haven" in the form of
U.S. Treasury bonds during the period, as a series of dramatic financial crises
rocked the global markets, most notably in Russia, Japan, and Brazil. The
Federal Reserve lowered interest rates by one-quarter of a percentage point on
September 29 in an attempt to restore order. Initial reaction from market
participants was that the Fed's action was insufficient, driving even more
investors to Treasury bonds. On the domestic front, the U.S. stock market
continually advanced to new highs until late July, when it succumbed to pressure
from overseas, as well as a series of domestic earnings disappointments. The
near collapse of the Long Term Capital Management hedge fund also contributed to
a sharp rise in Treasury bond prices near the close of the period.
As is typically true during a strong Treasury bond rally, prices of municipal
bonds did not keep up. During the six-month period, 10-year Treasury bond yields
declined one percentage point and their prices rose 9%. Over the same time
frame, 10-year AAA-rated municipal bond yields declined less than one half of a
percentage point, and their prices rose 3.3%. Two factors were most responsible
for the disparity in performance between the Treasury and municipal markets:
first, the "flight to quality" into Treasuries; second, the heavy supply of new
tax-exempt issues from January through September 1998. Municipal supply is
expected to reach approximately $285 billion in 1998, which would be second only
to 1993's total of $292 billion over the past ten years.
A Slight Shift in Focus
Over the past several years, the Fund's primary strategy has been to purchase
noncallable bonds to provide a relatively stable income stream along with
long-term price appreciation potential. While we plan to retain and take full
advantage of the Fund's large existing position in noncallable bonds, we have
recently felt that most noncallable bonds available for purchase did not
represent attractive value. Therefore, over the course of the most recent
semiannual period, the Fund shifted its emphasis toward the purchase of premium
"cushion" bonds -- bonds with high coupons that compensate investors for the
fact that they can be redeemed by their issuer in a relatively short period of
time. In terms of maturity, we focused on 15- to 20-year bonds, because we
believe they offer the best total return potential, based on our outlook for
interest rates and the yield differentials among bonds across the maturity
spectrum. Another shift in strategy has been to de-emphasize lower quality
bonds, because differences in yield between higher and lower quality municipal
bonds have shrunk to the point that investors in lower-quality bonds are not
7 - Scudder Ohio Tax Free Fund
<PAGE>
rewarded for taking on additional credit risk. Lastly, our continuing goal is to
have an average effective maturity similar to that of the Lehman Brothers
Municipal Bond Index, but with a superior, call-protected structure. As of
September 30, the Fund's average effective maturity was 8.6 years.
Overall portfolio quality remains at a high level, with 75% of portfolio
securities rated A or better at the close of the period. We continue to invest
in a broad selection of Ohio tax-exempt bonds, including hospital/health,
water/sewer revenue, and general obligation.
Outlook
There are several factors that -- taken together or separately -- could boost
bond prices over the next several months: First, the Fed may choose to continue
its recent series of interest rate reductions, which could cause short-term as
well as intermediate-term municipal bond yields to decline further. Second, we
view the selling off of leveraged holdings by the large hedge funds that began
in late September as a "wild card" that could continue to drive investors to
"safe haven" fixed income securities. Third, we expect inflation -- at 1.8% as
of September 30 -- to remain low and U.S. economic growth to slow significantly
in 1999.
In addition to these positive signs for bonds overall, municipal bonds are
currently attractively valued, as indicated by the fact that the ratio of
municipal yields to Treasury yields on bonds of similar maturity is by far the
highest it has been in 10 years. If, as we expect, Treasury yields remain low,
the tendency would be for municipals yields to decline and prices to rise,
restoring a more typical relationship between municipals and Treasuries.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Yields of 10-year AAA-Municipal Bonds Compared With 10-year Treasury Bonds
January 1, 1988 - September 30, 1998
10-year 10-year
AAA-Municipal Bonds Treasury Bonds
------------------- --------------
1/88 6.60% 8.80%
6.70 8.80
6.70 9.21
6.50 8.12
1/90 6.40 7.89
6.60 8.44
6.40 8.09
6.30 8.30
1/92 5.60 6.84
5.55 7.13
5.30 6.68
4.75 5.85
1/94 4.40 5.78
5.50 7.32
5.80 7.81
5.05 6.26
1/96 4.65 5.62
5.15 6.82
4.85 6.34
4.80 6.48
1/98 4.40 5.74
4.40 5.46
9/98 4.00 4.42
(Chart indicates a 0.42% spread between the 10-year Treasury Bonds at 4.42%
(9/98) and the 10-year AAA-Municipal Bonds at 4.00% (9/98).)
CHART CAPTION:
The "spread" between yields of 10-year municipal bonds and 10-year Treasuries is
at its narrowest point in 10 years.
Source: Scudder Kemper Investments, Inc.
------
Over the long term, we will seek to boost yield and achieve returns for our
investors by concentrating on high-quality, 15- to 20-year municipal bonds. 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/Christopher Mier /s/Rebecca L. Wilson
Christopher Mier Rebecca L. Wilson
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 Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
9 - Scudder Ohio Tax Free Fund
<PAGE>
Investment Portfolio as of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 0.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ohio
Ohio Air Quality Development Authority, Cincinnati Gas and Electric, Daily ---------
Demand Note, 4%, 12/1/2015* (Cost $600,000) .................................. 600,000 A1+ 600,000
---------
Long-Term Municipal Investments 99.4%
- ------------------------------------------------------------------------------------------------------------------------------
Ohio
Beavercreek, OH, Local School District, General Obligation, Series 1996, 6.6%,
12/1/2015 (c) ................................................................ 1,000,000 AAA 1,235,560
Butler County, OH, Hospital Facilities Revenue, Middletown Hospital, 4.75%,
11/15/2018 ................................................................... 1,000,000 A 957,440
Butler County, OH, Series 1998A, Revenue Bond, 5.125%, 4/1/2017 (c) ............ 1,400,000 AAA 1,449,000
Butler County, OH, Transportation Improvement District, Series 1997A, 6%,
4/1/2010 (c) ................................................................. 1,500,000 AAA 1,731,252
Cleveland, OH, General Obligation:
Series 1993, 5.375%, 9/1/2009 (c) ............................................ 1,700,000 AAA 1,870,323
Series A, 6.3%, 7/1/2006 (c) ................................................. 1,000,000 AAA 1,106,560
Cleveland, OH, Parking Facility Revenue, 6%, 9/15/1909 (c) ..................... 1,385,000 AAA 1,603,456
Cleveland, OH, Public Power System Improvement Revenue:
Series 1994A, Zero Coupon, 11/15/2009 (c) .................................... 2,250,000 AAA 1,398,555
Series B, 7%, 11/15/2017 ..................................................... 750,000 A 824,955
Cleveland, OH, Public Power System Revenue:
Capital Appreciation, First Mortgage, Series 1994A, Zero Coupon,
11/15/2012 (c) ............................................................. 2,250,000 AAA 1,188,495
Series 1996-1, 6%, 11/15/2011 (c) ............................................ 1,050,000 AAA 1,221,812
Cleveland, OH, Urban Renewal Tax Increment Rock & Roll Hall of Fame and Museum
Project, 6.75%, 3/15/2018 .................................................... 1,000,000 SKI 1,066,140
Cleveland, OH, Waterworks Revenue:
Prerefunded 1/1/2002, First Mortgage Revenue, Series F 1992A, 6.25%,
1/1/2007 (c)** ............................................................ 950,000 AAA 1,039,481
Series I, 5%, 1/1/2017 (c) ................................................... 1,000,000 AAA 1,019,780
Unrefunded, First Mortgage Revenue, Series F 1992A, 6.25%, 1/1/2007 (c) ...... 50,000 AAA 54,387
Columbus, OH, General Obligation, Unlimited Tax, Sewer Improvement, 6%,
5/1/2013 ..................................................................... 1,000,000 AAA 1,107,690
Cuyahoga County, OH, General Obligation, Jail Facilities, Series 1991, ETM,
Zero Coupon, 10/1/2002*** .................................................... 1,500,000 SKI 1,279,095
Cuyahoga County, OH, Hospital Facilities Revenue, Health Cleveland Inc.,
Series 1993, 6.25%, 8/15/2010 ................................................ 1,000,000 A 1,097,350
</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, Port Authority Revenue, Port Revenue Docks PS-1, Series 1997,
6%, 3/1/2007 ................................................................. 1,000,000 SKI 1,040,800
Dublin, OH, City School District, Capital Appreciation, Series 1998,
Zero Coupon, 12/1/2011 (c) ................................................... 1,000,000 AAA 555,090
Fairfield, OH, City School District, 7.2%, 12/1/2009 (c) ....................... 1,000,000 AAA 1,214,630
Franklin County, OH, Health Care Facilities, Revenue Refunding, Ohio
Presbyterian Services:
Series 1997, 5.25%, 7/1/2008 ................................................ 500,000 SKI 522,075
Series 1997, 5.5%, 7/1/2017 ................................................. 1,000,000 SKI 1,008,610
Franklin County, OH, Riverside United Methodist Hospital, Series A, 5.75%,
5/15/2012 .................................................................... 1,950,000 AA 2,076,477
Gateway Economic Development Corporation of Greater Cleveland, OH:
Excise Tax, Series 1990, 7.2%, 9/1/2001 ...................................... 2,550,000 BBB 2,670,896
Stadium Revenue, 6.5%, 9/15/2014 ............................................. 4,000,000 SKI 4,242,800
Gateway Economic Development Corporation of Cuyahoga County, OH, Excise Tax,
Series 1990, 7.5%, 9/1/2005 .................................................. 1,500,000 BBB 1,655,055
Hamilton County, OH, Health System Revenue, Franciscan Sisters of the Poor
Health System, Providence Hospital, Series 1992, 6.8%, 7/1/2008 .............. 2,000,000 BBB 2,163,780
Hamilton County, OH, Hospital Facilities Revenue:
Childrens Hospital Medical Center, Series G, 4.75%, 5/15/2028 (c) ............ 1,000,000 AAA 962,270
Christ Hospital, Series 1991B, 6.625%, 1/1/2006 (c) .......................... 1,000,000 AAA 1,061,920
Hamilton County, OH, Sewer System Revenue:
Improvement and Refunding, 5.45%, 12/1/2009 (c) .............................. 1,000,000 AAA 1,111,420
Unrefunded Balance, Series 1991A, 6.4%, 12/1/2005 ............................ 530,000 AA 573,513
Series 1991A, Prerefunded, 6/1/01, 6.4%, 12/1/2005** ......................... 220,000 AAA 239,296
Hilliard, OH, School District, Series 1996A, Zero Coupon, 12/1/2012 (c) ........ 1,655,000 AAA 872,450
Huber Heights, OH, Water System Revenue, Capital Appreciation, Zero Coupon,
12/1/2012 .................................................................... 1,005,000 AAA 529,796
Lorain County, OH, Hospital Refunding Revenue, Humility of Mary Health Care
System, Series A, 5.9%, 12/15/2008 ........................................... 1,000,000 A 1,108,970
Lorain, OH, Hospital Authority Refunding Revenue, Lakeland Community Hospital
Inc., 6.5%, 11/15/2012 ....................................................... 1,000,000 A 1,152,530
Lucas County, OH, Hospital Revenue, Flower Hospital, Series 1993, 6.125%,
12/1/2013 .................................................................... 1,375,000 BBB 1,547,233
Mahoning County, OH, General Obligation, Limited Tax, 6.6%, 12/1/2006 (c) ...... 1,100,000 AAA 1,210,605
</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>
Miami County, OH, Hospital Facilities, Revenue Refunding, Upper Valley Medical
Center, Series 1996 C, 6.25%, 5/15/2013 ...................................... 1,000,000 BBB 1,076,300
North Olmstead, OH, General Obligation:
6.2%, 12/1/2011 (c) .......................................................... 2,000,000 AAA 2,326,240
6.25%, 12/15/2012 (c) ........................................................ 1,500,000 AAA 1,656,045
Northeast Ohio Regional Sewer District, Wastewater Improvement Revenue
Refunding:
5.5%, 11/15/2012 (c) ......................................................... 1,550,000 AAA 1,672,497
5.6%, 11/15/2013 (c) ......................................................... 1,000,000 AAA 1,081,650
Ohio Air Quality Development Authority, Pollution Control Revenue, Cleveland
Electric Company, 8%, 12/1/2013 (c) .......................................... 1,250,000 AAA 1,443,925
Ohio General Obligation, Series 1994, 6%, 8/1/2010 ............................. 1,000,000 AA 1,162,400
Ohio Higher Education Facilities Revenue:
Case Western Reserve University, Series B, 6.5%, 10/1/2020 ................... 2,250,000 AA 2,755,733
Oberlin College Project, Prerefunded 10/1/99, 7.1%, 10/1/2012** .............. 480,000 AAA 506,794
Ohio Higher Educational Facility Commission, Refunding Revenue, Case Western
Reserve University, 6%, 10/1/2014 ............................................ 1,000,000 AA 1,168,550
Ohio Housing Finance Agency, Single-Family Mortgage Revenue, Series 1990F,
7.6%, 9/1/2016 ............................................................... 1,050,000 AAA 1,111,467
Ohio Liquor Profits Refunding Bonds, Economic Development Revenue, Series
1989, 6.85%, 3/1/2000 (c) .................................................... 1,000,000 AAA 1,044,710
Ohio Public Facilities Commission, Higher Educational Capital Facilities
Revenue, Series 2B, 5.4%, 11/1/2007 (c) ...................................... 2,000,000 AAA 2,135,400
Ohio State Building Authority:
Correctional Facilities Revenue, Series 1991 A, 6.5%, 10/1/2004 .............. 1,000,000 AA 1,092,310
Juvenile Correction Facilities, 6%, 10/1/2006 ................................ 1,555,000 A 1,765,049
Toledo Government Office Building, Series A, 8%, 10/1/2007 ................... 500,000 AAA 585,260
Worker's Compensation Facilities, William Green Building, Series 1993A,
4.75%, 4/1/2014 ............................................................. 1,000,000 A 1,000,400
Ohio State Higher Education Facility:
Prerefunded on 12/1/00, Series 1989, 7.25%, 12/1/2012 (c)** .................. 800,000 AAA 875,200
Series 1997 A, Step-up Coupon 0% to 7/1/00, 6.5% to 7/1/2008 ................. 2,325,000 AA 2,467,941
Unrefunded, 7.25%, 12/1/2012 (c) ............................................. 200,000 AAA 218,800
Ohio Water Development Authority:
5.875%, 9/1/2020 ............................................................. 2,000,000 SKI 2,052,860
Pollution Control Revenue, Ohio Edison Company Project, Series 1989 A,
7.625%, 7/1/2023 ............................................................ 1,140,000 BBB 1,184,927
</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>
Olmsted Falls, OH, City School District, General Obligation, Series 1991,
7.05%, 12/15/2011 (c) ........................................................ 1,000,000 AAA 1,120,770
Ontario County, OH, Local School District, General Obligation, Series 1998,
5.125%, 12/1/2018 (c) ........................................................ 1,000,000 AAA 1,030,740
Parma, OH, Hospital Revenue, Parma Community General Hospital Association,
5.375%, 11/1/2029 ............................................................ 1,000,000 A 1,023,180
Rocky River, OH, City School District, School Improvement, Series 1998,
5.375%, 12/1/2017 ............................................................ 1,000,000 AA 1,081,960
Strongsville, OH, City School District, General Obligation, 5.35%,
12/1/2011 (c) ................................................................ 1,000,000 AAA 1,100,440
Summit County, OH, General Obligation, 6.4%, 12/1/2014 (c) ..................... 1,000,000 AAA 1,153,990
Warren County, OH, Water Improvement, General Obligation, The P&G Project,
Series 1995, 5.25%, 12/1/2016 ................................................ 1,720,000 AA 1,792,928
Puerto Rico
Puerto Rico Aqueduct and Sewer Authority, Revenue Refunding, 6%, 7/1/2009 ...... 1,000,000 A 1,137,660
Puerto Rico Commonwealth, Highway & Transportation Authority, Series 1993W,
5.5%, 7/1/2013 (c) ........................................................... 1,000,000 AAA 1,120,690
Puerto Rico Electric Power Authority, Series 1994S, 6.125%, 7/1/2009 (c) ....... 2,000,000 AAA 2,347,280
Puerto Rico, General Obligation, Public Improvement, Prerefunded 7/1/02,
6.6%, 7/1/2013 (c)** ......................................................... 1,000,000 AAA 1,116,730
University of Puerto Rico, University Systems, Series N, 6.25%, 6/1/2008 (c) ... 1,000,000 AAA 1,176,260
Virgin Islands
Virgin Islands Public Finance Authority:
General Obligation, Matching Fund Loan Notes, Series A, 7.25%, 10/1/2018 ..... 1,000,000 SKI 1,146,810
Revenue, 5.875%, 10/1/2018 ................................................... 1,000,000 SKI 1,043,360
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $88,528,493) 96,548,803
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $89,128,493) (a) 97,148,803
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $89,128,493. At September 30,
1998, net unrealized appreciation for all securities based on tax cost was
$8,020,310. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $8,020,310.
(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) and securities rated by Scudder Kemper Investments (SKI)
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.
The accompanying notes are an integral part of the financial statements.
13 - Scudder Ohio Tax Free Fund
<PAGE>
- --------------------------------------------------------------------------------
* 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.
14 - Scudder Ohio Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1998 (Unaudited)
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $89,128,493) ................. $ 97,148,803
Cash ................................................................. 860,480
Receivable for investments shares sold ............................... 5,000
Interest receivable .................................................. 1,382,953
Receivable for Fund shares sold ...................................... 357,191
Other assets ......................................................... 824
----------------
Total assets ......................................................... 99,755,251
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 956,066
Dividends payable .................................................... 129,789
Accrued management fee ............................................... 27,236
Other payables and accrued expenses .................................. 37,257
----------------
Total liabilities .................................................... 1,150,348
--------------------------------------------------------------------------------------------
Net assets, at market value $ 98,604,903
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments ........................... 8,020,310
Accumulated net realized gain (loss) ................................. 350,373
Paid-in capital ...................................................... 90,234,220
--------------------------------------------------------------------------------------------
Net assets, at market value $ 98,604,903
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($98,604,903
/ 7,157,857 outstanding shares of beneficial interest, $.01 par ----------------
value, unlimited number of shares authorized) ..................... $13.78
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Ohio Tax Free Fund
<PAGE>
Statement of Operations
six months ended September 30, 1998 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................... $ 2,627,015
-----------------
Expenses:
Management fee ......................................................... 287,861
Services to shareholders ............................................... 40,586
Custodian and accounting fees .......................................... 25,894
Trustees' fees and expenses ............................................ 15,146
Auditing ............................................................... 11,998
Reports to shareholders ................................................ 10,630
Legal .................................................................. 10,047
Registration fees ...................................................... 3,952
Other .................................................................. 4,305
-----------------
Total expenses before reductions ....................................... 410,419
Expense reductions ..................................................... (122,558)
-----------------
Expenses, net .......................................................... 287,861
---------------------------------------------------------------------------------------------
Net investment income 2,339,154
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions .................. 397,973
Net unrealized appreciation (depreciation) on investments during the
period .............................................................. 1,475,490
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,873,463
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 4,212,617
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Ohio Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended September
30, 1998 Year Ended
Increase (Decrease) in Net Assets (Unaudited) March 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 2,339,154 $ 4,526,780
Net realized gain (loss) from investment transactions ..... 397,973 306,818
Net unrealized appreciation (depreciation) on investment
transactions during the period ......................... 1,475,490 3,652,599
---------------- ---------------
Net increase (decrease) in net assets resulting from
operations ............................................. 4,212,617 8,486,197
---------------- ---------------
Distributions to shareholders:
From net investment income ................................ (2,339,154) (4,526,780)
---------------- ---------------
From net realized gains from investment transactions ...... -- (199,673)
---------------- ---------------
Fund share transactions:
Proceeds from shares sold ................................. 8,782,009 16,384,923
Net asset value of shares issued to shareholders in
reinvestment of distributions .......................... 1,523,886 3,073,201
Cost of shares redeemed ................................... (8,025,237) (12,876,095)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................... 2,280,658 6,582,029
---------------- ---------------
Increase (decrease) in net assets ......................... 4,154,121 10,341,773
Net assets at beginning of period ......................... 94,450,782 84,109,009
---------------- ---------------
Net assets at end of period ............................... $ 98,604,903 $ 94,450,782
---------------- ---------------
Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................. 6,989,251 6,502,200
---------------- ---------------
Shares sold ............................................... 649,135 1,228,133
Shares issued to shareholders in reinvestment of
distributions .......................................... 112,354 229,548
Shares redeemed ........................................... (592,883) (970,630)
---------------- ---------------
Net increase (decrease) in Fund shares .................... 168,606 487,051
---------------- ---------------
Shares outstanding at end of period ....................... 7,157,857 6,989,251
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - 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,
1998 (Unaudited) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
Net asset value, beginning of period ........... $13.51 $ 12.94 $ 12.95 $ 12.77 $ 12.68 $ 13.13
---------------------------------------------------------------------------
Income from investment operations:
Net investment income .......................... .33 .68 .68 .69 .70 .70
Net realized and unrealized gain (loss) on
investment transactions ...................... .27 .60 .03 .30 .13 (.35)
---------------------------------------------------------------------------
Total from investment operations ............... .60 1.28 .71 .99 .83 .35
---------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (.33) (.68) (.68) (.69) (.70) (.70)
Net realized gains on investment transactions .. -- (.03) (.04) (.12) -- (.08)
In excess of net realized gains ................ -- -- -- -- (.04) (.02)
---------------------------------------------------------------------------
Total distributions ............................ (.33) (.71) (.72) (.81) (.74) (.80)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net asset value, end of period ................. $13.78 $ 13.51 $ 12.94 $ 12.95 $ 12.77 $ 12.68
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........................... 4.51** 10.08 5.58 7.85 6.82 2.48
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......... 99 94 84 84 78 80
Ratio of operating expenses, net to average
daily net assets (%) ......................... .60* .52 .50 .50 .50 .50
Ratio of operating expenses before expense
reductions, to average daily net assets (%) .. .86* .86 .88 .89 .91 .90
Ratio of net investment income to average daily
net assets (%) ............................... 4.88* 5.09 5.23 5.30 5.59 5.23
Portfolio turnover rate (%) .................... 17.4* 4.9 9.7 19.6 19.9 12.2
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
18 - 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.
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 of 1986, as amended, 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.
19 - Scudder Ohio Tax Free Fund
<PAGE>
B. Purchases and Sales of Securities
For the six months ended September 30, 1998, purchases and sales of long-term
municipal securities aggregated $11,543,770 and $8,161,387, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, 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 had agreed not to impose all or a portion of its
management fee and to maintain the annualized expenses of the Fund at not more
than 0.50% of average daily net assets until January 31, 1998 and at not more
than 0.60% of average daily net assets for the period from February 1, 1998 to
January 31, 1999. For the six months ended September 30, 1998, the Adviser
imposed fees amounting to $287,861 of which $27,236 was unpaid at September 30,
1998 and the portion not imposed amounted to $122,558 for the six months ended
September 30, 1998.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's investment management agreement with Scudder Kemper was
deemed to have been assigned and, therefore, terminated. The Board of Trustees
of the Fund has approved a new investment management agreement with Scudder
Kemper, which is substantially identical to the former investment management
agreement, except for the dates of execution and termination. The Board of
Trustees of the Fund will seek shareholder approval of the new investment
management agreement through a proxy solicitation that is currently scheduled to
conclude in mid-December.
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, 1998, the amount charged to the Fund by SSC
aggregated $28,517 of which $4,522 was unpaid at September 30, 1998.
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, 1998, the amount charged to the Fund by SFAC aggregated
$18,000 of which $3,000 was unpaid at September 30, 1998.
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 six months ended September 30,
1998, Trustees' fees and expenses charged to the Fund aggregated $15,146.
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--
Prime Reserve Shares*
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 Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 -- www.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 previously designated.
Distributions Direct
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 8,000 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
800 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 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
</TABLE>
23 - Scudder Ohio Tax Free Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
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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