Scudder
Ohio
Tax Free Fund
Annual Report
March 31, 1999
No-Load Funds
For investors seeking double-tax-free income exempt from both Ohio and regular
federal income taxes.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Ohio Tax Free Fund
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Date of Inception: 5/28/87 Total Net Assets as of 3/31/99: $97.5 million
Ticker Symbol: SCOHX
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o For its most recent annual period ended March 31, 1999, Scudder Ohio Tax Free
Fund posted a total return of 5.18%, compared with the 4.98% average return of
51 similar funds tracked by Lipper Analytical Services.
o The Fund's performance placed it in the top one-third of its peers for the
three-, five- and ten-year periods ended March 31 as rated by Lipper. Please see
page 6 for additional information on the Fund's rankings.
o Scudder Ohio Tax Free Fund received an overall Morningstar Rating(TM) of four
stars out of 1578 tax free funds as of March 31, 1999.^1
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
CHART TITLE:
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30-Day Yield on March 31, 1999
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CHART DATA:
Scudder Ohio Tax Taxable Yield Needed to
Free Fund Equal the Fund's Yield
- --------- ----------------------
3.87% 6.88%
Table of Contents
3 Letter from the Fund's President 20 Notes to Financial Statements
4 Performance Update 23 Report of Independent Accountants
5 Portfolio Summary 24 Tax Information
6 Portfolio Management Discussion 25 Shareholder Meeting Results
10 Glossary of Investment Terms 28 Officers and Trustees
11 Investment Portfolio 29 Investment Products and Services
16 Financial Statements 30 Scudder Solutions
19 Financial Highlights
^1 Morningstar proprietary ratings reflect risk-adjusted performance as of March
31, 1999. The ratings are subject to change every month. Past performance is
no guarantee of future results. Morningstar ratings are calculated from the
Fund's three-, five-, and ten-year average annual returns 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 the three- and five-year periods, and three stars for the ten-year period.
The top 10% of funds in a broad asset class receive 5 stars, the next 22.5%
receive 4 stars, and the next 35% receive 3 stars. The Fund was rated among
1578, 1131, and 368 municipal funds for the three-, five-, and ten-year
periods, respectively.
2 - Scudder Ohio Tax Free Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report the results of Scudder Ohio Tax Free Fund's most
recent fiscal year. The Fund's total return for the twelve-month period ended
March 31, 1999, was 5.18%. The Fund has displayed solid long-term performance,
placing it in the top third of similar Ohio tax-free funds over three-, five-,
and ten-year periods for total return.
Investors concerned about the increased volatility of the financial markets
during the past 12 months should find the chart on page 7 of interest. The chart
shows that over the 12-month period ended March 31, long-term municipal bonds
displayed considerably less price volatility than comparable Treasury
securities. For more information concerning Scudder Ohio Tax Free Fund's market
performance, strategy, and outlook, please see the Portfolio Management
Discussion that begins on page 6.
For those of you interested in new Scudder products, we are pleased to
introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of pursuing long-term outperformance compared to
their benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Please call a Scudder Investor Information representative at 1-800-225-2470
if you have questions about your Fund. Or, visit our Web site at
www.scudder.com. 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 March 31, 1999
Fund Index Comparison
Total Return
------------------------------------------------
Period
Ended Growth of Average
3/31/99 $10,000 Cumulative Annual
------------------------------------------------
Scudder Ohio Tax Free Fund
------------------------------------------------
1 Year $ 10,518 5.18% 5.18%
5 Year $ 14,083 40.83% 7.09%
10 Year $ 20,909 109.09% 7.66%
------------------------------------------------
Lehman Brothers Municipal Bond Index
------------------------------------------------
1 Year $ 10,620 6.20% 6.20%
5 Year $ 14,440 44.40% 7.62%
10 Year $ 22,083 120.83% 8.24%
------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART TITLE:
Growth of a $10,000 Investment
CHART DATA:
<TABLE>
<CAPTION>
Yearly periods Lehman Brothers Yearly periods
ended March 31 Municipal Bond Index ended March 31 Scudder Ohio Tax Free Fund
- -------------- -------------------- -------------- --------------------------
<S> <C> <C> <C>
'89 10000 '89 10000
'90 11056 '90 10780
'91 12075 '91 11724
'92 13283 '92 12816
'93 14947 '93 14488
'94 15293 '94 14847
'95 16430 '95 15860
'96 17807 '96 17105
'97 18779 '97 18059
'98 20793 '98 19879
'99 22803 '99 20909
</TABLE>
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.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
CHART TITLE:
Returns and Per Share Information
Yearly periods ended March 31
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $11.97 $12.14 $12.47 $13.13 $12.68 $12.77 $12.95 $12.94 $13.51 $13.44
- -----------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .82 $ .78 $ .75 $ .72 $ .70 $ .70 $ .69 $ .68 $ .68 $ .65
- -----------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ .07 $ .06 $ .03 $ .19 $ .10 $ .04 $ .12 $ .04 $ .03 $ .11
- -----------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 7.80 8.75 9.33 13.04 2.48 6.82 7.85 5.58 10.08 5.18
- -----------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 10.56 9.22 10.02 12.52 2.32 7.43 8.38 5.45 10.73 6.20
- -----------------------------------------------------------------------------------------------------------------------------
</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
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Portfolio Summary as of March 31, 1999
THE PRINTED DOCUMENT CONTAINS A PIE CHART HERE
CHART TITLE:
Diversification
CHART DATA:
Hospital/Health Revenue 16%
Sales/Special Tax 11%
Water/Sewer Revenue 10%
Higher Education 10%
State General Obligation/Lease 9%
County General Obligation/Lease 9%
Electric Utility Revenue 8%
School District/Lease 8%
Core Cities/Lease 5%
Miscellaneous Municipal 14%
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100%
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The Fund invests in a broad selection of Ohio municipal bonds.
THE PRINTED DOCUMENT CONTAINS A PIE CHART HERE
CHART TITLE:
Quality
CHART DATA:
AAA* 60%
AA 18%
A 8%
BBB 5%
SKI 9%
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100%
- ------------------------------------
Weighted average quality: AA
* Includes cash equivalents
Overall portfolio quality remains high, with over 85% of portfolio securities
rated A or better as of March 31.
THE PRINTED DOCUMENT CONTAINS A PIE CHART HERE
CHART TITLE:
Effective Maturity
CHART DATA:
Less than 1 year 1%
1-5 years 33%
5-10 years 23%
10-15 years 31%
15 years or greater 12%
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100%
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Weighted average effective maturity: 8.76 years
Our continuing goal is to have an average effective maturity similar to that of
the Lehman Brothers Municipal Bond Index, the Fund's benchmark, but with a
superior, call-protected structure.
For more complete details about the Fund's investment portfolio, see page 11. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Ohio Tax Free Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Following a series of overseas and domestic financial crises that prompted
uncertainty, volatility, and a "flight to quality," bond yields plummeted, then
returned to July 1998 levels at the close of Scudder Ohio Tax Free Fund's most
recent fiscal year. During the 12-month period ended March 31, 1999, the Fund
returned 5.18%, outpacing the 4.98% average return of Ohio tax-exempt funds as
tracked by Lipper Analytical Services, Inc. The Fund's total returns over
three-, five- and ten-year periods placed it in the top one-third of similar
Ohio tax-free funds. Please see the accompanying table for additional
information concerning the Fund's returns.
Ohio Update
Ohio is enjoying strong economic growth. The State expects to close its 1999
fiscal year with a sixth consecutive General Fund operating surplus. Ohio's
economy has been strengthened by employment growth in the service and trade
sectors as well as by product diversification in the manufacturing sector. In
addition, the State's unemployment rate continues to be lower than the national
average -- 4.3% in 1998, versus the national average of 4.9%.
The State's 1999-2000 fiscal year capital plan will finance various projects
throughout the State, with specific attention to the areas of higher education
and primary and secondary education. The plan will add to the State's debt
burden; however, we believe this debt burden will still be manageable given
scheduled debt retirement.
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Scudder Ohio Tax Free Fund:
Solid Competitive Performance
(Average annual returns for periods ended
March 31, 1999)
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Scudder Lipper Number
Ohio Tax Average of
Free Fund Annual Funds Percentile
Period Return Return Rank Tracked Ranking
1 year 5.18% 4.98% 18 of 51 Top 35%
3 years 6.92% 6.58% 13 of 47 Top 28%
5 years 7.09% 6.70% 8 of 35 Top 23%
10 years 7.66% 7.42% 4 of 12 Top 33%
Source : Lipper Analytical Services, Inc., an independent analyst of investment
performance. Performance includes reinvestment of capital gains, and is no
guarantee of future results.
The State is in the midst of a lawsuit that challenges the adequacy and equity
of school funding. Since education is financed primarily with property tax
revenues generated at the local level, there is a disparity between wealthy and
poor districts. In May 1998, Ohio voters soundly defeated an attempt to raise
the sales tax in order to finance an increase in per-pupil spending. After the
sales tax vote the Supreme Court of Ohio ordered the local Circuit Court to
review the case again. Although the State has been increasing spending on
education, the Circuit Court ruled that the State has not adequately addressed
school funding. The State has appealed the Circuit Court's ruling to the State's
Supreme Court. A decision is not expected until 2000 at the earliest. We will be
monitoring the education lawsuit and its potential effects on the State's
finances.
6 - Scudder Ohio Tax Free Fund
<PAGE>
A Market Roller Coaster
Market turmoil hit a peak in the wake of the Russian currency devaluation on
August 17, followed by the near collapse of the Long Term Capital Management
hedge fund. Volatility in the U.S. stock market increased greatly while a
massive reallocation to U.S. Treasury bonds led to substantially lower yields.
Although presidential impeachment proceedings distracted the financial markets
through the fall and beyond, the Federal Reserve's three consecutive interest
rate cuts in September, October, and November helped to gradually restore market
stability. During this period, the U.S. economy continued to grow beyond all
expectations, recording a dramatic 6% annualized increase in GDP for the fourth
quarter of 1998. This show of strength, in turn, worried bond investors, who
responded by sending 30-year Treasury bond yields back up to July 1998 levels.
Over the Fund's most recent fiscal year, yields of 30-year Treasury bonds ended
slightly lower, beginning the period at 5.84% and ending it at 5.67%. Over the
same time frame, yields of 30-year AAA insured municipal bonds declined from
5.10% to 5.05%.
In addition to high tax free yields, municipal bonds have historically offered
greater price stability over time than Treasury bonds of comparable maturity.
The accompanying chart demonstrates the record over the past 12 months, when
most financial markets were at a peak of volatility.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART TITLE:
- -------------------------------------------------------
Municipals Provided Greater Stability
Monthly prices of 30-year AAA-rated municipal bonds
compared with prices of 30-year U.S. Treasury Bonds,
3/31/98-3/31/99
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CHART DATA:
30-year U.S. Treasury Bonds 30-year AAA-rated municipal bonds
--------------------------- ---------------------------------
3/31/98 100.00 100.00
98.47 98.49
5/31/98 100.14 100.77
103.47 100.00
7/31/98 101.57 100.00
107.12 102.33
9/30/98 114.87 105.57
111.47 102.33
11/30/98 109.83 102.33
111.47 102.33
1/31/99 111.14 103.13
103.32 101.55
3/31/99 102.11 100.77
Source: Scudder Kemper Investments, Inc.
Emphasizing High
Coupon Bonds
Over the past 12 months, Scudder Ohio Tax Free Fund pursued a two-part strategy:
First, the Fund emphasized 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. Second, the Fund continues to hold a
substantial position in noncallable bonds (56% of assets) to provide a
relatively stable income stream along with long-term price appreciation
potential. In terms of maturity, we focused on 13- to 15-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. Lastly, our continuing goal is to
7 - Scudder Ohio Tax Free Fund
<PAGE>
have an average effective maturity similar to that of the Lehman Brothers
Municipal Bond Index, but with a superior, call-protected structure. As of March
31, the Fund's average duration was 6.65 years. (Duration gives relative weight
to both principal and interest payments through the life of a bond and has
replaced average maturity as the standard measure of interest rate sensitivity
among professional investors. Generally, the shorter the duration, the less
sensitive a portfolio will be to changes in interest rates.)
Overall portfolio quality remains high, with over 85% 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 issues, including hospital/health revenue,
sales/special tax, and water/sewer revenue bonds.
Outlook
Because the powerful market forces that have brought the United States close to
price stability -- including technology, deregulation, globalization, and
vigilant central banks -- are still in full effect, we believe that inflation
will remain restrained over the next several years. At the same time, we believe
that higher oil prices could prompt a "gentle slowdown" in U.S. economic
activity. This would relieve some of the financial imbalances (vigorous
individual and corporate spending contrasting with shrinking savings and profit
levels, for example) that we are currently observing in the economy.
Low inflation, and any slowing of the economy, in turn, would benefit municipal
bonds, which continue to be attractively priced versus Treasuries. At the same
time, we are mindful that the U.S.
8 - Scudder Ohio Tax Free Fund
<PAGE>
economy is nearing "full employment," and that an economic rebound in Asia could
cause the U.S. economy to overheat. We will therefore pursue a cautious strategy
over the coming months, keeping the Fund's duration at a moderate level in an
attempt to limit share price volatility. We plan to focus on 10-15 year premium
coupon bonds as the Fund seeks to benefit from the yield and capital
appreciation opportunities afforded by the Ohio tax-exempt bond market. In
addition to a cautious average duration, we will maintain high overall credit
quality as we seek double-tax-free income and competitive returns for our
shareholders. Thank you for investing with Scudder.
Sincerely,
Your Portfolio Management Team
/s/Eleanor R. Brennan /s/Rebecca L. Wilson
Eleanor R. Brennan Rebecca L. Wilson
Scudder Ohio Tax Free Fund:
A Team
Approach to Investing
Scudder Ohio Tax Free Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals, each of whom plays an important role in the
Fund's management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are supported by
the Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in our offices across the United States and
abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging our extensive resources.
Lead Portfolio Manager Eleanor R. Brennan assumed responsibility for the Fund's
day-to-day management in 1999. Ms. Brennan joined the Adviser in 1995 and has 13
years of experience in municipal investing and portfolio management. Rebecca L.
Wilson, Portfolio Manager, became a member of the team in 1998. Ms. Wilson, who
joined the Adviser in 1986, has 13 years of experience in municipal investing.
9 - 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 A municipal bond backed by the "full faith and credit"
OBLIGATION BOND (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 The price per share of a mutual fund based on the sum of the
(NAV) market value of all the securities owned by the fund divided
by the number of outstanding shares.
TAXABLE EQUIVALENT The level of yield a fully taxable instrument would have to
YIELD 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)
10 - Scudder Ohio Tax Free Fund
<PAGE>
Investment Portfolio as of March 31, 1999
<TABLE>
<CAPTION>
Credit
Principal Rating(b) Market
Amount ($) (Unaudited) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Municipal Investments 1.1%
Ohio
Ohio Water Development Authority, Environmental Mead Corporation, Series 1986 B,
Daily Demand Note, 3%, 11/1/2015* 1,100,000 AAA 1,100,000
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Total Short-Term Municipal Investments (Cost $1,100,000) 1,100,000
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Long-Term Municipal Investments 98.9%
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Ohio
Beavercreek, OH, Local School District, General Obligation, Series 1996, 6.6%,
12/1/2015 (c) 1,000,000 AAA 1,207,400
Butler County, OH, Hospital Facilities Revenue, Middletown Hospital, 4.75%,
11/15/2018 1,000,000 A 935,670
Butler County, OH, Series 1997A, Revenue Bond, 5.125%, 4/1/2017 (c) 1,400,000 AAA 1,419,642
Butler County, OH, Transportation Improvement District, Series 1997A, 6%,
4/1/2010 (c) 1,500,000 AAA 1,688,685
Cleveland, OH, General Obligation:
Series 1993, 5.375%, 9/1/2009 (c) 1,700,000 AAA 1,826,939
Series A, 6.3%, 7/1/2006 (c) 1,000,000 AAA 1,096,610
Cleveland, OH, Parking Facility Revenue, 6%, 9/15/2009 (c) 1,385,000 AAA 1,574,066
Cleveland, OH, Public Power System Improvement Revenue:
5.25%, 11/15/2014 (c) 500,000 AAA 518,935
Capital Appreciation, First Mortgage, Series 1994A, Zero Coupon, 11/15/2012 (c) 2,250,000 AAA 1,168,223
Series 1994A, Zero Coupon, 11/15/2009 (c) 2,250,000 AAA 1,387,980
Series 1996-1, 6%, 11/15/2011 (c) 1,050,000 AAA 1,192,748
Series B, 7%, 11/15/2017 (c) 750,000 AAA 817,110
Cleveland, OH, Urban Renewal Tax Increment Rock & Roll Hall of Fame and Museum
Project, 6.75%, 3/15/2018 1,000,000 SKI 1,055,240
Cleveland, OH, Waterworks Improvement, First Mortgage Revenue, Series F 1992A,
Unrefunded, 6.25%, 1/1/2007 50,000 AAA 53,945
Cleveland, OH, Waterworks Revenue:
Prerefunded 1/1/2002, First Mortgage Revenue, Series F 1992A, 6.25%,
1/1/2007 (c)** 950,000 AAA 1,030,161
Series 1998 I, 5%, 1/1/2017 (c) 1,000,000 AAA 1,000,750
Columbus, OH, General Obligation, Unlimited Tax, Sewer Improvement, 6%,
5/1/2013 1,000,000 AAA 1,100,000
Cuyahoga County, OH, General Obligation, Jail Facilities, Series 1991, ETM,
Zero Coupon, 10/1/2002*** 1,500,000 AAA 1,306,605
The accompanying notes are an integral part of the financial statements
11 - Scudder Ohio Tax Free Fund
<PAGE>
Credit
Principal Rating(b) Market
Amount ($) (Unaudited) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Cuyahoga County, OH, Hospital Facilities Revenue, Health Cleveland Inc.,
Series 1993, 6.25%, 8/15/2010 1,000,000 AA 1,088,210
Cuyahoga County, Port Authority Revenue, Port Revenue Docks PS-1, Series 1997,
6%, AMT, 3/1/2007 1,000,000 SKI 1,022,040
Cuyahoga County, OH, Revenue Bond, Cleveland Clinic Health Center, Series B,
5.125%, 1/1/2029 500,000 AA 486,200
Dayton, OH, General Obligation, 5.125%, 12/1/2015 1,750,000 AAA 1,789,393
Dublin, OH, City School District, Capital Appreciation, Series 1998, Zero Coupon,
12/1/2011 (c) 1,000,000 AAA 549,720
Fairfield, OH, City School District, 7.2%, 12/1/2009 (c) 1,000,000 AAA 1,196,830
Franklin County, OH, Health Care Facilities, Revenue Refunding, Ohio Presbyterian
Services:
Series 1997, 5.25%, 7/1/2008 500,000 SKI 513,750
Series 1997, 5.5%, 7/1/2017 1,000,000 SKI 986,320
Franklin County, OH, Riverside United Methodist Hospital, Series A, 5.75%,
5/15/2012 1,950,000 AA 2,058,752
Gateway Economic Development Corporation of Cleveland, OH, Stadium Revenue,
6.5%, AMT, 9/15/2014 4,000,000 SKI 4,175,080
Gateway Economic Development Corporation of Greater Cleveland, OH, Excise Tax,
Series 1990, 7.2%, AMT, 9/1/2001 2,550,000 A 2,690,199
Gateway Economic Development Corporation of Cuyahoga County, OH, Excise Tax,
Series 1990, 7.5%, AMT, 9/1/2005 1,500,000 A 1,630,620
Hamilton County, OH, Sewer System Revenue:
Improvement and Refunding, 5.45%, 12/1/2009 (c) 1,000,000 AAA 1,092,120
Series 1991 A, 6.4%, 12/1/2005 530,000 AA 568,483
Series 1991 A, Prerefunded, 6/1/2001, 6.4%, 12/1/2005** 220,000 AAA 236,885
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 2,130,680
Hamilton County, OH, Hospital Facilities Revenue, Christ Hospital, Series 1991 B,
6.625%, 1/1/2006 (c) 1,000,000 AAA 1,051,830
Hilliard, OH, School District, Series 1996A, Zero Coupon, 12/1/2012 (c) 1,655,000 AAA 857,456
Huber Heights, OH, Water System Revenue, Capital Appreciation, Zero Coupon,
12/1/2012 1,005,000 AAA 520,691
Lorain County, OH, Hospital Refunding Revenue, Humility of Mary Health Care
System, Series A, 5.9%, 12/15/2008 (c) 1,000,000 AAA 1,094,970
Lorain, OH, Hospital Authority Refunding Revenue, Lakeland Community
Hospital Inc., 6.5%, 11/15/2012 1,000,000 AAA 1,133,360
The accompanying notes are an integral part of the financial statements
12 - Scudder Ohio Tax Free Fund
<PAGE>
Credit
Principal Rating(b) Market
Amount ($) (Unaudited) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Lucas County, OH, Hospital Revenue, Flower Hospital, Series 1993, Prerefunded
12/1/2004, 6.125%, 12/1/2013** 1,375,000 AAA 1,528,299
Lucas County, OH, Toledo Port Authority Development, Revenue Bond, Northwest
Ohio Bond Fund, Series A, 5.4%, 5/15/2019 (d) 500,000 SKI 495,970
Mahoning County, OH, General Obligation, Limited Tax, 6.6%, 12/1/2006 (c) 1,100,000 AAA 1,199,583
Miami County, OH, Revenue Refunding, Hospital Upper Valley, Series 1996 C,
6.25%, 5/15/2013 1,000,000 BBB 1,052,060
North Olmstead, OH, General Obligation:
6.2%, 12/1/2011 (c) 2,000,000 AAA 2,281,500
6.25%, 12/15/2012 (c) 1,500,000 AAA 1,638,240
Northeast Ohio Regional Sewer District, Wastewater Improvement Revenue Refunding:
5.5%, 11/15/2012 (c) 1,550,000 AAA 1,639,327
5.6%, 11/15/2013 (c) 1,000,000 AAA 1,062,810
Ohio Air Quality Development Authority, Pollution Control Revenue, Cleveland
Electric Company, 8%, 12/1/2013 (c) 1,250,000 AAA 1,422,638
Ohio General Obligation, Series 1994, 6%, 8/1/2010 1,000,000 AA 1,140,560
Ohio Higher Education Facilities Revenue:
Case Western Reserve University, Series B, 6.5%, 10/1/2020 2,250,000 AA 2,671,650
Oberlin College Project, Prerefunded 10/1/1999, 7.1%, 10/1/2012** 480,000 AAA 498,874
Ohio Higher Educational Facility Commission, Refunding Revenue, Case Western
Reserve University, 6%, 10/1/2014 1,000,000 AA 1,136,040
Ohio Housing Financial Agency Mortgage, Revenue Bonds, 5.25%, AMT,
Series 1999 A, 9/1/2030 (c) 2,000,000 AAA 1,995,940
Ohio Housing Finance Agency, Single-Family Mortgage Revenue, Series 1990 F,
7.6%, 9/1/2016 875,000 AAA 916,598
Ohio Public Facilities Commission, Higher Educational Capital Facilities Revenue,
Series IIB, 5.4%, 11/1/2007 (c) 1,500,000 AAA 1,582,005
Ohio State Building Authority:
Correctional Facilities Revenue, Series 1991A, 6.5%, 10/1/2004 1,000,000 AA 1,082,770
State Facilities Juvenile Correctional Revenue Bonds, 5.125%, 10/1/2018 1,000,000 AA 1,009,470
Toledo Government Office Building, Series A, 8%, 10/1/2007 500,000 AAA 577,050
Ohio State Higher Education Facility:
Prerefunded on 12/1/2000, Series 1989, 7.25%, 12/1/2012 (c)** 800,000 AAA 865,840
Series 1997 A, Step-up Coupon 0% to 7/1/2000, 6.5% to 7/1/2008 (e) 2,325,000 AA 2,493,214
Unrefunded, 7.25%, 12/1/2012 (c) 200,000 AAA 216,460
Ohio State Higher Educational Facilities Commission, Higher Educational
Facilities-Oberlin College-Revenue Bonds, 5.25%, 10/1/2014 1,000,000 AA 1,055,540
The accompanying notes are an integral part of the financial statements
13 - Scudder Ohio Tax Free Fund
<PAGE>
Credit
Principal Rating(b) Market
Amount ($) (Unaudited) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Ohio University, Revenue Bond, General Receipts, 5.25%, 12/1/2019 (d) 1,000,000 AAA 1,020,400
Ohio Water Development Authority:
Pollution Control Revenue, Ohio Edison Company Project, Series 1989A,
7.625%, 7/1/2023 1,140,000 BBB 1,169,173
Solid Waste, Bay Shore Power Project, Series A, AMT, 5.875%, 9/1/2020 500,000 SKI 509,050
Olmsted Falls, OH, City School District, General Obligation, Series 1991, 7.05%,
12/15/2011 (c) 1,000,000 AAA 1,108,140
Ontario County, OH, Local School District, General Obligation, Series 1998,
5.125%, 12/1/2018 (c) 1,000,000 AAA 1,010,970
Parma, OH, Hospital Revenue, Parma Community General Hospital Association,
5.375%, 11/1/2029 1,000,000 A 1,002,950
Rocky River, OH, City School District, School Improvement, Series 1998, 5.375%,
12/1/2017 1,000,000 AA 1,048,820
Strongsville, OH, City School District, General Obligation, 5.35%, 12/1/2011 (c) 1,000,000 AAA 1,077,310
Summit County, OH, General Obligation, 6.4%, 12/1/2014 (c) 1,000,000 AAA 1,141,460
Warren County, OH, Water Improvement, General Obligation, The P&G Project,
Series 1995, 5.25%, 12/1/2016 1,720,000 AA 1,759,078
Puerto Rico
Puerto Rico Aqueduct and Sewer Authority, Revenue Refunding, 6%, 7/1/2009 1,000,000 A 1,122,880
Puerto Rico Commonwealth, Highway & Transportation Authority, Series 1993W,
5.5%, 7/1/2013 (c) 1,000,000 AAA 1,089,950
Puerto Rico Electric Power Authority, Series 1994S, 6.125%, 7/1/2009 (c) 2,000,000 AAA 2,299,840
Puerto Rico, General Obligation, Public Improvement, Prerefunded 7/1/2002, 6.6%,
7/1/2013 (c)** 1,000,000 AAA 1,103,870
University of Puerto Rico, University Systems, Series N, 6.25%, 6/1/2008 (c) 1,000,000 AAA 1,154,570
Virgin Islands
Virgin Islands, Public Finance Authority, Matching Fund Loan Notes, Series A,
7.25%, 10/1/2018 1,000,000 AAA 1,133,125
- ----------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $89,521,796) 95,568,322
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $90,621,796) (a) 96,668,322
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements
14 - Scudder Ohio Tax Free Fund
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $90,621,796. At March 31,
1999, net unrealized appreciation for all securities based on tax cost
was $6,046,526. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $6,152,078 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $105,552.
(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.
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, MBIA/BIG,
or Capital Guaranty.
(d) When-issued or forward delivery securities included.
(e) At March 31, 1999, these securities, in part or in whole, have been
segregated to cover when-issued or forward delivery securities.
AMT: Subject to alternative minimum tax
* 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.
</TABLE>
The accompanying notes are an integral part of the financial statements
15 - Scudder Ohio Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1999
<TABLE>
<CAPTION>
Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $90,621,796) $ 96,668,322
Cash 1,428,020
Interest receivable 1,374,599
Receivable for Fund shares sold 7,382
Other assets 1,157
----------------
Total assets 99,479,480
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payable for when-issued securities 1,526,973
Payable for Fund shares redeemed 225,000
Dividends payable 123,983
Accrued management fee 46,618
Other payables and accrued expenses 73,069
----------------
Total liabilities 1,995,643
--------------------------------------------------------------------------------------------
Net assets, at market value $ 97,483,837
--------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments 6,046,526
Accumulated net realized gain (loss) (75,741)
Paid-in capital 91,513,052
--------------------------------------------------------------------------------------------
Net assets, at market value $ 97,483,837
--------------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($97,483,837 /
7,251,068 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) ----------------
$13.44
----------------
The accompanying notes are an integral part of the financial statements
16 - Scudder Ohio Tax Free Fund
<PAGE>
Statement of Operations
year ended March 31, 1999
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Interest $ 5,288,610
-----------------
Expenses:
Management fee 583,428
Services to shareholders 86,945
Custodian and accounting fees 60,882
Trustees' fees and expenses 17,180
Auditing 27,498
Reports to shareholders 24,894
Legal 10,154
Registration fees 4,855
Other 11,764
-----------------
Total expenses before reductions 827,600
Expense reductions (220,252)
-----------------
Expenses, net 607,348
--------------------------------------------------------------------------------------------
Net investment income 4,681,262
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions 731,048
Net unrealized appreciation (depreciation) on investments during the
period (498,294)
--------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 232,754
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 4,914,016
--------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements
17 - Scudder Ohio Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
Years Ended March 31,
Increase (Decrease) in Net Assets 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income $ 4,681,262 $ 4,526,780
Net realized gain (loss) from investment transactions 731,048 306,818
Net unrealized appreciation (depreciation) on investment
transactions during the period
(498,294) 3,652,599
---------------- ---------------
Net increase (decrease) in net assets resulting from
operations 4,914,016 8,486,197
---------------- ---------------
Distributions to shareholders:
From net investment income (4,681,262) (4,526,780)
---------------- ---------------
From net realized gains from investment transactions (759,189) (199,673)
---------------- ---------------
Fund share transactions:
Proceeds from shares sold 22,088,926 16,384,923
Net asset value of shares issued to shareholders in
reinvestment of distributions
3,716,462 3,073,201
Cost of shares redeemed (22,245,898) (12,876,095)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions 3,559,490 6,582,029
---------------- ---------------
Increase (decrease) in net assets 3,033,055 10,341,773
Net assets at beginning of period 94,450,782 84,109,009
---------------- ---------------
Net assets at end of period $ 97,483,837 $ 94,450,782
---------------- ---------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period 6,989,251 6,502,200
---------------- ---------------
Shares sold 1,626,994 1,228,133
Shares issued to shareholders in reinvestment of
distributions 274,026 229,548
Shares redeemed (1,639,203) (970,630)
---------------- ---------------
Net increase (decrease) in Fund shares 261,817 487,051
---------------- ---------------
Shares outstanding at end of period 7,251,068 6,989,251
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements
18 - 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>
Years Ended March 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.51 $ 12.94 $ 12.95 $ 12.77 $ 12.68
Income from investment operations:
Net investment income .65 .68 .68 .69 .70
Net realized and unrealized gain (loss) on investment transactions .04 .60 .03 .30 .13
------------------------------------------------------------
Total from investment operations .69 1.28 .71 .99 .83
------------------------------------------------------------
Less distributions from:
Net investment income (.65) (.68) (.68) (.69) (.70)
Net realized gains on investment transactions (.11) (.03) (.04) (.12) --
In excess of net realized gains -- -- -- -- (.04)
------------------------------------------------------------
Total distributions (.76) (.71) (.72) (.81) (.74)
------------------------------------------------------------
Net asset value, end of period $ 13.44 $ 13.51 $ 12.94 $ 12.95 $ 12.77
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) 5.18 10.08 5.58 7.85 6.82
Ratios and Supplemental Data
Net assets, end of period ($ millions) 97 94 84 84 78
Ratio of operating expenses, net to average daily net assets (%) .62 .52 .50 .50 .50
Ratio of operating expenses before expense reductions, to average
daily net assets (%) .85 .86 .88 .89 .91
Ratio of net investment income to average daily net assets (%) 4.81 5.09 5.23 5.30 5.59
Portfolio turnover rate (%) 20.5 4.9 9.7 19.6 19.9
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
19 - Scudder Ohio Tax Free Fund
<PAGE>
Notes to Financial Statements
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 purchased 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. Money market instruments purchased with an original
maturity of sixty days or less are valued at amortized cost. All other debt
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
When-Issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price. The Fund will establish a segregated account in which it will
maintain cash and liquid debt securities equal in value to commitments for
when-issued or forward delivery securities.
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.
20 - Scudder Ohio Tax Free Fund
<PAGE>
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the call
or maturity date.
B. Purchases and Sales of Securities
For the year ended March 31, 1999, purchases and sales of long-term municipal
securities aggregated $23,438,900 and $19,546,326, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), 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 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 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, at not more than 0.60% of average daily
net assets for the period from February 1, 1998 to January 31, 1999, and at no
more than 0.75% of average daily net assets for the period from February 1, 1999
to July 31, 1999. For the year ended March 31, 1999, the Adviser imposed fees
amounting to $583,428, of which $46,618 was unpaid at March 31, 1999 and the
portion not imposed amounted to $220,252 for the year ended March 31, 1999.
Effective September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner
of the Adviser, entered into an agreement with B.A.T Industries plc ("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 Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. In December 1998, the Board of
Trustees of the Fund approved a new investment management agreement with Scudder
Kemper, which is substantially identical to the former Management Agreement,
except for the dates of execution and termination.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. For the
year ended March 31, 1999, the amount charged to the Fund by SSC aggregated
$56,539, of which $4,565 was unpaid at March 31, 1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
March 31, 1999, the amount charged to the Fund by SFAC aggregated $36,000, of
which $3,000 was unpaid at March 31, 1999.
21 - Scudder Ohio Tax Free Fund
<PAGE>
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 March 31, 1999,
Trustees' fees and expenses charged to the Fund aggregated $17,180.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement.
22 - Scudder Ohio Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder State Tax Free Trust and the Shareholders of Scudder
Ohio Tax Free Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Ohio Tax Free Fund (the
"Fund") at March 31, 1999, the results of its operations for the year then ended
and 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 five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
May 12, 1999
23 - Scudder Ohio Tax Free Fund
<PAGE>
Tax Information
The Fund paid distributions of $0.10 per share from net long-term capital gains
during its year ended March 31, 1999, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$753,000 as capital gain dividends for its year ended March 31, 1999, of which
100% represents 20% rate gains.
Of the dividends paid by the Fund from net investment income for the year ended
March 31, 1999, 100% constituted exempt interest dividends for regular federal
income tax and Ohio personal income tax purposes.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
24 - Scudder Ohio Tax Free Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Ohio Tax Free Fund
(the "Fund") was held on December 15, 1998, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
4,286,770 147,469 188,683 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
4,052,728 261,509 221,995 86,690
- --------------------------------------------------------------------------------
* 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.
25 - Scudder Ohio Tax Free Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder Ohio Tax Free Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder Ohio Tax Free Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll Associates; Executive Fellow, Bentley College
Peter B. Freeman
Trustee; Corporate Director and Trustee
George M. Lovejoy, Jr.
Trustee; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
Jean C. Tempel
Trustee; Venture Partner,
Venture Capital Group
Philip G. Condon*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Jeremy L. Ragus*
Vice President
Rebecca Wilson*
Vice President
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - 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 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 Select 500 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 Select 1000 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
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
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 or classes thereof 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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold 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.
29 - 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
Personal Investment Organizer: 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:
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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
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30 - Scudder Ohio Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
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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 transaction fee. 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
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Additional Information on How to Contact Scudder:
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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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31 - 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 $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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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