SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND/TAX FREE
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Scudder Ohio
Tax Free Fund
Fund #013
Semiannual Report
September 30, 1999
The fund seeks income that is exempt from Ohio personal and regular federal
income taxes.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
13 Glossary of Investment Terms
14 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
26 Officers and Trustees
27 Investment Products and Services
29 Scudder Solutions
2
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Scudder Ohio Tax Free Fund
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ticker symbol SCOHX fund number 013
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Date of o For its most recent semiannual period ended
Inception: September 30, 1999, Scudder Ohio Tax Free Fund
5/28/87 posted a total return of -1.86%, outpacing the
-3.10% average return of 50 similar funds tracked
by Lipper Analytical Services.^1
Total Net o The fund ranked in the top 20% of similar Ohio
Assets as of tax-free funds over the one-, three-, five-, and
9/30/99: ten-year periods ended September 30 as rated by
$92.8 million Lipper. Please see page 10 for additional
information on the fund's rankings.
o Scudder Ohio Tax Free Fund received a four-star
Morningstar Rating(TM), reflecting "above average"
risk-adjusted performance through September 30,
1999.^2
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30-Day Yield on September 30, 1999
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
Scudder Taxable Yield
Ohio Needed to Equal
Tax Free Fund the Fund's Yield
4.25% 7.55%
^1 Lipper Analytical Services, Inc., is an independent analyst of investment
performance. Performance includes reinvestment of dividends and capital
gains.
^2 For your information, these ratings are subject to change every month and
are calculated from the fund's five-year average annual return in excess
of 90-day Treasury bill returns with appropriate fee adjustments, and a
risk factor that reflects fund performance below T-bill returns. The fund
received four stars for three-year performance, four stars for five-year
performance, and three stars for 10-year performance, and was rated among
1611, 1241, and 375 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.
3
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Letter from the Fund's President
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Dear Shareholders,
Recent months have witnessed a nearly continuous rise in Treasury and municipal
bond rates across all maturity levels. A year ago, financial markets were in the
grip of a "flight to quality": Nervous investors poured their assets into
Treasury bonds to escape financial uncertainty in Asia, Latin America, and
Russia, driving 30-year Treasury bond rates below 5% for the first time in
recent memory. Following the U.S. Federal Reserve's three interest rate cuts
during the last quarter of 1998, however, the Fed, and some investors, worried
that too much liquidity may have been injected into the financial system, and
that inflation might once again pose a threat. Thus, investors, and the Fed,
have combined to gradually push rates up this year.
Despite a difficult environment for bonds, municipal bonds have held up well
compared to other high-quality fixed-income securities. Municipals have
benefited from significantly lower supply (20% less than 12 months ago) and the
relative attractiveness of municipal yields compared with Treasuries. And though
it posted a negative return of -1.86% for the six months ended September 30,
1999, Scudder Ohio Tax Free Fund outperformed most of its peers during that
time, ranking 2nd out of 50 similar funds for total return as tracked by Lipper
Analytical Services. The fund also ranked in the top 20% of similar Ohio
tax-free funds over the one-, three-, five-, and ten-year periods ended
September 30. For more information
4
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about the fund's market environment, strategy, and outlook, please read the
Portfolio Management Discussion that begins on page 9.
It should be noted that Daniel Pierce retired in June of this year as President
of Scudder Ohio Tax Free Fund, at which time I assumed that role and its
responsibilities. We are fortunate that Dan's longstanding affiliation with
Scudder is ongoing, and that we will continue to benefit from his counsel going
forward. I am pleased to join the Ohio Tax Free Fund's team in this capacity,
and look forward to serving your interests.
If you have any questions regarding Scudder Ohio Tax Free Fund or any other
Scudder fund, please call 1-800-SCUDDER (1-800-728-3337). Or visit Scudder's Web
site at www.scudder.com.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President
Scudder Ohio Tax Free Fund
5
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Performance Update
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September 30, 1999
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Ohio Tax Free Fund Lehman Brothers Municipal Bond Index*
'89 10000 10000
'90 10472 10681
'91 11922 12089
'92 13139 13355
'93 14947 15056
'94 14432 14688
'95 15958 16332
'96 16955 17317
'97 18415 18883
'98 19922 20528
'99 19678 20384
Yearly periods ended September 30
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 9/30/1999 $10,000 Cumulative Annual
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Scudder Ohio Tax Free Fund
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1 year $ 9,877 -1.23% -1.23%
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5 year $ 13,635 36.35% 6.40%
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10 year $ 19,678 96.78% 7.00%
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Lehman Brothers Municipal Bond Index*
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1 year $ 9,930 -0.70% -0.70%
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5 year $ 13,878 38.78% 6.77%
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10 year $ 20,384 103.84% 7.38%
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* 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.
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.
6
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Returns and Per Share Information
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Yearly periods ended September 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER OHIO TAX FREE FUND TOTAL RETURN (%) AND
LEHMAN BROTHERS MUNICIPAL BOND INDEX TOTAL RETURN (%)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 4.72 13.84 10.21 13.76 -3.44 10.58 6.25 8.61 8.18 -1.23
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Index Total
Return (%) 6.80 13.19 10.45 12.74 -2.44 11.18 6.04 9.04 8.72 -0.70
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Net Asset
Value ($) 11.7 12.46 12.93 13.72 12.46 13.02 13.04 13.41 13.78 12.88
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Income
Dividends ($) .79 .77 .74 .71 .70 .69 .68 .68 .67 .63
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Capital Gains
Distributions
($) .06 .06 .02 .21 .10 .03 .09 .04 .03 .11
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</TABLE>
7
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Portfolio Summary
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September 30, 1999
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Diversification
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Sales/Special Tax 13% The fund invests in a
Other General Obligation/ broad selection of Ohio
Lease 11% municipal bonds.
Higher Education 10%
Water/Sewer Revenue 9%
Hospital/Health 8%
School District/Lease 7%
State General Obligation 6%
Electric Utility Revenue 6%
Toll Revenue/Transportation 3%
Miscellaneous Municipal 27%
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100%
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Quality
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
AAA* 63% Overall portfolio
AA 19% quality remains high,
A 6% with over 85% of
BBB 3% portfolio securities
SKI** 9% rated A or better as of
- ------------------------------------ September 30.
100%
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Weighted average quality: AA
* Includes cash equivalents
** Scudder Kemper Investments (SKI) have
been determined to be of comparable
quality to rated eligible securities.
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Effective Maturity
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Less than 1 year 6% In an environment of
1-5 years 28% rising interest rates,
5-8 years 17% our strategy was to
8-15 years 35% maintain a shorter
Greater than 15 years 14% portfolio duration
- ------------------------------------ compared to most other
100% Ohio municipal bond
- ------------------------------------ funds.
Weighted average effective
maturity: 7.9 years
For more complete details about the Fund's investment portfolio, see page 14. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
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September 30, 1999
Dear Shareholders,
During a difficult period for most fixed-income securities, Scudder Ohio Tax
Free Fund posted a negative return but displayed strong competitive performance.
The fund's total return for its most recent fiscal year ended September 30,
1999, was -1.86%, outpacing the -3.10% average return of 50 similar funds as
tracked by Lipper Analytical Services, Inc. The fund's 30-day SEC yield as of
September 30 was 4.25%, equivalent to a 7.55% taxable yield for Ohio investors
subject to the 43.71% combined federal and state income tax rate.
In addition, the fund's total returns over the one-, three-, five-, and ten-year
periods ended September 30, 1999, placed it in the top 20% of similar Ohio
tax-free funds. Please see the table below for additional information concerning
the fund's returns.
Ohio Update
Ohio continues to benefit from economic growth in and around the state, and its
debt burden is low. The State's projected capital plan for the 1999 and 2000
fiscal years calls for capital spending to be maintained at current levels, with
approximately $1.8 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. Although planned
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Scudder Ohio Tax Free Fund:
Top-Tier Performance
(Average annual returns for periods ended September 30, 1999)
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<TABLE>
<CAPTION>
Scudder
Ohio
Tax Free Fund Lipper Number of Percentile
Period Return Average Rank Funds Tracked Rank
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<S> <C> <C> <C> <C> <C>
1 Year -1.23% 2.36% 5 of 49 Top 10%
3 Years 5.09% 4.43% 5 of 45 Top 11%
5 Years 6.40% 5.80% 7 of 36 Top 19%
10 Years 7.00% 6.68% 2 of 10 Top 19%
</TABLE>
Past performance does not guarantee future results.
9
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future debt issuance is large, we believe the debt burden will still be
manageable given scheduled debt retirement. 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. The State is currently contesting a
lawsuit that challenges the adequacy and equity of school funding. Since
education is financed primarily with property tax revenues administered at the
local level, there is a disparity between wealthy and poor districts.
Overall, given the strength of Ohio's economy and its strong financial position,
we believe the state's credit status is solid to improving. We will continue to
monitor the education lawsuit and its potential effects on the State's finances.
A Cautious Strategy
During the fund's most recent semiannual period, fixed income investors reacted
negatively to news of tightening U.S. labor markets, the worldwide economic
revival, a weakening dollar, and economic statistics that some worried could
presage a revival of inflation. Yields on 10-year Treasury bonds rose just over
one half of a percentage point and their prices declined 4.6% over the 12-month
period, while municipal bond yields rose nearly the same amount as Treasury
yields, and their prices declined 4.5%. Over the period, the fund's average
effective maturity declined from 8.8 years to 7.9 years.
During the six-month period, we maintained three key elements of our longer-term
strategy: First, we focused on premium "cushion" bonds -- high coupon bonds
trading at a premium to face value that can be redeemed prior to maturity. We
believe that the extra yield provided by cushion bonds adequately compensates
the fund for the call feature in the current environment. Second, we continued
the fund's strong emphasis on call protection. (Generally a bond is called in by
its issuer so that it can be refinanced at a lower prevailing rate.) Our
call-protection strategy provides a more reliable income stream for the
10
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fund than would exist if the portfolio held a significant proportion of bonds
that could be called in before their stated maturities. Third, our emphasis on
purchasing premium bonds rather than par bonds (which can more easily decline to
a discount) helped the fund by avoiding "market discount," a provision that
subjects municipal bonds sold at a discount to taxation.
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 sales and special tax revenue,
higher education revenue, and school district general obligation bonds.
Outlook
Because some worry that excess financial liquidity, high-flying consumer
spending, and worker shortages could spell renewed inflation, the Federal
Reserve, with the help of many bond market participants, is striving to cool the
burgeoning U.S. economy. The Fed has raised interest rates twice in recent
months, and warned of further increases in the near future. Meanwhile, market
rates, such as those for mortgages and corporate bonds, have risen even faster
than the Fed funds rate. Such rate increases, along with a volatile stock
market, could significantly slow the U.S. economy in 2000.
In a slightly weaker economy, municipal bonds should look attractive. Though
they would be negatively affected by further interest rate increases in the
short run, municipals should continue to benefit from steady demand from
institutional purchasers. Three other factors favor municipal bonds: First,
municipals currently yield more than 80% of similar maturity Treasuries. Second,
strong state and city finances across the country have boosted the
creditworthiness of tax-exempt bonds, and third, the reduced supply of municipal
bonds lends important support to their prices. Over the coming months, we will
look to extend the fund's duration to take advantage of higher yields and
capital appreciation opportunities. We
11
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believe Scudder Ohio Tax Free Fund remains an attractive investment option for
investors seeking a high level of income free from federal and Ohio income
taxes.
Sincerely,
Your Portfolio Management Team
/s/Eleanor R. Brennan /s/Rebecca L. Wilson
Eleanor R. Brennan Rebecca L. Wilson
12
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Glossary of Investment Terms
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<TABLE>
<S> <C> <C>
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 (including the taxing and further borrowing power) of the
Bond 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 The price per share of a mutual fund based on the sum of the
Value (NAV) market value of all the securities owned by the fund divided
by the number of outstanding shares.
Taxable The level of yield a fully taxable instrument would have to
Equivalent provide to equal that of a tax-free municipal bond on an
Yield after-tax basis.
30-Day SEC The standard yield reference for bond funds, based on a
Yield 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.
</TABLE>
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
13
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Investment Portfolio as of September 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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Short-Term Municipal Investments 4.6%
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<S> <C> <C> <C> <C> <C>
Ohio
Ohio Air Quality Development Authority, Cincinnati Gas
and Electric, Daily Demand Note, 4.15%, 12/1/2015* ...... 1,200,000 1,200,000
Ohio Air Quality Development Authority Revenue,
Cincinnati Gas and Electric, Daily Demand Note, 3.7%,
9/1/2030* ............................................... 2,500,000 2,500,000
Ohio Water Development Authority, Environmental Mead
Corporation, Series 1986 B, Daily Demand Note, 3.75%,
11/1/2015* .............................................. 500,000 500,000
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Total Short-Term Municipal Investments (Cost $4,200,000) 4,200,000
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Long-Term Municipal Investments 95.4%
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Ohio
Beavercreek, OH, Local School District, General Obligation,
Series 1996, 6.6%, 12/1/2015 (b) ........................ 1,000,000 1,125,460
Butler County, OH, Transportation Improvement District,
Series 1997 A, 6%, 4/1/2010 (b) ......................... 1,500,000 1,608,735
Cleveland, OH, General Obligation:
Series A, Prerefunded 7/1/2002, 6.3%, 7/1/2006** ........ 1,000,000 1,069,920
Series 1993, 5.375%, 9/1/2009 (b) ....................... 1,700,000 1,743,962
Cleveland, OH, Non Taxable Revenue Bond, Cleveland
Stadium, Series A, Zero Coupon, 12/1/2011 (b) ........... 820,000 411,336
Cleveland, OH, Parking Facility Revenue, 6%,
9/15/2009 (b) ........................................... 1,385,000 1,492,572
Cleveland, OH, Public Power System Improvement Revenue:
Capital Appreciation, First Mortgage, Series 1994A,
Zero Coupon, 11/15/2012 (b) ........................... 2,250,000 1,105,267
Series 1994 A, Zero Coupon, 11/15/2009 (b) .............. 2,250,000 1,337,985
Series 1996-1, 6%, 11/15/2011 (b) ....................... 1,050,000 1,128,698
Series B Prerefunded 11/15/2001, 7%, 11/15/2017** ....... 750,000 798,127
Cleveland, OH, Revenue Bond, Cleveland Stadium:
Series A, Zero Coupon, 12/1/2014 (b) .................... 820,000 341,431
Series A, Zero Coupon, 12/1/2017 (b) .................... 820,000 281,096
Series B, Zero Coupon, 12/1/2009 (b) .................... 810,000 455,163
Series B, Zero Coupon, 12/1/2015 (b) .................... 815,000 317,801
Series B, Zero Coupon, 12/1/2018 (b) .................... 815,000 262,414
Cleveland, OH, Urban Renewal Tax Increment Rock & Roll
Hall of Fame and Museum Project, 6.75%, 3/15/2018 ......... 1,000,000 1,018,630
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
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<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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<S> <C> <C>
Cleveland, OH, Waterworks Revenue:
First Mortgage Revenue, Prerefunded 1/1/2002,
Series F 1992A, 6.25%, 1/1/2007 (b)** ................. 950,000 1,007,827
Series I, 5%, 1/1/2017 (b) .............................. 1,000,000 922,640
Unrefunded, First Mortgage Revenue, Series F 1992A,
6.25%, 1/1/2007 (b) ................................... 50,000 52,788
Cleveland-Cuyahoga County, OH, Port Development,
C&P Docks Project, 6%, 3/1/2007 (b) ..................... 1,000,000 988,770
Columbus, OH, General Obligation, Unlimited Tax, Sewer
Improvement, Prerefunded 5/1/2003, 6%, 5/1/2013** ....... 1,000,000 1,069,610
Cuyahoga County, OH, General Obligation, Jail Facilities,
Series 1991, ETM, Zero Coupon, 10/1/2002*** ............. 1,500,000 1,310,445
Cuyahoga County, OH, Hospital Facilities Revenue, Health
Cleveland Inc., Series 1993, 6.25%, 8/15/2010 ........... 1,000,000 1,061,020
Dublin, OH, City School District, Capital Appreciation,
Series 1998, Zero Coupon, 12/1/2011 (b) ................. 1,000,000 523,480
Fairfield, OH, City School District, 7.2%, 12/1/2009 (b) .. 1,000,000 1,149,730
Franklin County, OH, Health Care Facilities, Revenue
Refunding, Ohio Presbyterian Services:
Series 1997, 5.25%, 7/2/2008 ............................ 500,000 486,765
Series 1997, 5.5%, 7/1/2017 ............................. 1,000,000 917,130
Franklin County, OH, Riverside United Methodist Hospital,
Series A, 5.75%, 5/15/2012 .............................. 1,950,000 1,966,614
Gateway Economic Development Corporation of
Cleveland, OH, Stadium Revenue, 6.5%, AMT,
9/15/2014 ............................................... 4,000,000 4,023,320
Gateway Economic Development Corporation of Greater
Cleveland, OH, Excise Tax, Series 1990, 7.2%, AMT
9/1/2001 ................................................ 2,550,000 2,630,300
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 2,153,060
Hamilton County, OH, Hospital Facilities Revenue, Christ
Hospital, Series 1991 B, Prerefunded 1/1/2001, 6.625%,
1/1/2006** .............................................. 1,000,000 1,030,690
Hamilton County, OH, Sewer System Revenue:
Improvement and Refunding, 5.45%, 12/1/2009 (b) ......... 1,000,000 1,035,460
Series 1991 A, 6.4%, 12/1/2005 .......................... 530,000 557,226
Series 1991 A, Prerefunded 6/1/2001, 6.4%,
12/1/2005** ............................................. 220,000 232,034
Hilliard, OH, School District, Series 1996A, Zero Coupon,
12/1/2012 (b) ........................................... 1,655,000 811,033
Huber Heights, OH, Water System Revenue, Capital
Appreciation, Zero Coupon, 12/1/2012 .................... 1,005,000 492,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Lorain County, OH, Hospital Refunding Revenue, Humility
of Mary Health Care System, Series A, Prerefunded
12/15/2005, 5.9%, 12/15/2008** ........................... 1,000,000 1,058,060
Lorain, OH, Hospital Authority Refunding Revenue,
Lakeland Community Hospital Inc., 6.5%, 11/15/2012 ....... 1,000,000 1,086,700
Lucas County, OH, Toledo Port Authority Development,
Revenue Bond, Northwest Ohio Bond Fund, Series A,
5.4%, 5/15/2019 .......................................... 500,000 452,020
Lucas County, OH, Hospital Revenue, Flower Hospital,
Series 1993, Prerefunded 12/1/2004, 6.125%,
12/1/2013** .............................................. 1,375,000 1,480,078
Mahoning County, OH, General Obligation, Limited Tax,
6.6%, 12/1/2006 (b) ...................................... 1,100,000 1,171,896
Medina, OH, City School District, General Obligation, Zero
Coupon, 12/1/2006 (b) .................................... 1,500,000 1,052,010
Miami County, OH, Revenue Refunding, Hospital Upper
Valley, Series 1996 C, 6.25%, 5/15/2013 .................. 1,000,000 982,040
North Olmstead, OH, General Obligation:
6.2%, 12/1/2011 (b) ...................................... 2,000,000 2,152,320
6.25%, 12/15/2012 (b) .................................... 1,500,000 1,595,595
Northeast Ohio Regional Sewer District, Wastewater
Improvement Revenue Refunding:
5.5%, 11/15/2012 (b) ..................................... 1,550,000 1,572,196
5.6%, 11/15/2013 (b) ..................................... 1,000,000 1,015,440
Ohio Air Quality Development Authority, Pollution Control
Revenue, Cleveland Electric Company, 8%,
12/1/2013 (b) ............................................ 1,250,000 1,382,013
Ohio Gateway Economic Development Corp., Revenue,
Cuyahoga County Annual Gateway, 7.5%, 9/1/2005 ........... 1,500,000 1,589,910
Ohio General Obligation, Series 1994, 6%, 8/1/2010 ......... 1,000,000 1,080,190
Ohio Higher Education Facilities Revenue:
Oberlin College Project, Prerefunded 10/1/1999, 7.1%,
10/1/2012** ............................................ 475,000 484,543
Case Western Reserve University, Series B, 6.5%,
10/1/2020 .............................................. 2,250,000 2,493,270
Ohio Higher Educational Facility Commission, Refunding
Revenue, Case Western Reserve University, 6%,
10/1/2014 ................................................ 1,000,000 1,059,040
Ohio Housing Finance Agency, Single-Family Mortgage
Revenue, Series 1990 F, 7.6%, 9/1/2016 ................... 730,000 754,002
Ohio Public Facilities Commission, Higher Educational
Capital Facilities Revenue, Series 2B, 5.4%,
11/1/2007 (b) ............................................ 1,500,000 1,540,620
Ohio State Building Authority:
Administration Building, Series A, 5.375%, 10/1/2012 ..... 1,000,000 1,003,710
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Correctional Facilities Revenue, Series 1991 A, 6.5%,
10/1/2004 ................................................. 1,000,000 1,059,260
Revenue Bond, Adult Correctional Facilities, Series A,
5.5%, 10/1/2010 ........................................... 750,000 773,108
Toledo Government Office Building, Series A,
Prerefunded 4/1/2003, 8%, 10/1/2027** ..................... 500,000 557,330
Ohio State Higher Education Facility:
Series 1997 A, Step-up Coupon 0% to 7/1/2000,
6.5% to 7/1/2008 .......................................... 2,325,000 2,453,712
Prerefunded 12/1/2000, 7.25%, 12/1/2012 (b)** ............... 200,000 211,600
Prerefunded 12/1/2000, Series 1989, 7.25%,
12/1/2012 (b) ............................................. 800,000 846,400
Ohio State Higher Educational Facilities Commission,
Higher Educational Facilities-Oberlin College-Revenue
Bonds, 5.25%, 10/1/2014 ..................................... 1,000,000 985,720
Ohio Water Development Authority, 5.875%, 9/1/2020 ............ 500,000 471,030
Ohio Water Development Authority Revenue Bond, 5.25%,
12/1/2010 (b) ............................................... 1,000,000 1,011,330
Olmsted Falls, OH, City School District, General
Obligation, Series 1991, Prerefunded 12/15/2001,
7.05%, 12/15/2011** ......................................... 1,000,000 1,079,950
Rocky River, OH, City School District, School Improvement,
Series 1998, 5.375%, 12/1/2017 .............................. 1,000,000 973,910
Strongsville, OH, City School District, General Obligation,
5.35%, 12/1/2011 (b) ........................................ 1,000,000 1,018,750
Summit County, OH, General Obligation, Prerefunded
12/1/2004, 6.4%, 12/1/2014** ................................ 1,000,000 1,102,190
University of Akron, General Receipts, Revenue, 5.75%,
1/1/2013 (b) ................................................ 1,365,000 1,402,442
Warren County, OH, Water Improvement, General
Obligation, The P&G Project, Series 1995, 5.25%,
12/1/2016 ................................................... 1,720,000 1,654,004
Puerto Rico
Puerto Rico Aqueduct and Sewer Authority, Revenue
Refunding, 6%, 7/1/2009 ..................................... 1,000,000 1,068,390
Puerto Rico Commonwealth, Highway & Transportation
Authority, Series 1993W, 5.5%, 7/1/2013 (b) ................. 1,000,000 1,022,210
Puerto Rico Electric Power Authority, Series 1994S, 6.125%,
7/1/2009 (b) ................................................ 2,000,000 2,192,860
Puerto Rico, General Obligation, Public Improvement,
Prerefunded 7/1/2002, 6.6%, 7/1/2013 (b)** .................. 1,000,000 1,081,050
University of Puerto Rico, University Systems, Series N,
6.25%, 6/1/2008 (b) ......................................... 1,000,000 1,105,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Virgin Islands
Virgin Islands Public Financial Authority Revenue, Series A,
Prerefunded 10/1/2002, 7.25%, 10/1/2018** .................. 1,000,000 1,109,310
- -------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $84,575,561) 87,106,748
- -------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $88,775,561) (a) 91,306,748
- -------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $88,775,561. At September 30,
1999, net unrealized appreciation for all securities based on tax cost was
$2,531,187. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,261,279 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$730,092.
(b) Bond is insured by one of these companies: AMBAC, FGIC, FSA, MBIA/BIG, or
Capital Guaranty.
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.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of September 30, 1999 (Unaudited)
- ---------------------------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $88,775,561) ......................... $ 91,306,748
Cash ......................................................................... 676,817
Interest receivable .......................................................... 1,294,034
Receivable for Fund shares sold .............................................. 45,629
Other assets ................................................................. 5,786
------------
Total assets ................................................................. 93,329,014
Liabilities
- ---------------------------------------------------------------------------------------------
Dividends payable ............................................................ 363,550
Payable for Fund shares redeemed ............................................. 3,000
Accrued management fee ....................................................... 86,234
Other payables and accrued expenses .......................................... 44,125
------------
Total liabilities ............................................................ 496,909
- ---------------------------------------------------------------------------------------------
Net assets, at market value $ 92,832,105
- ---------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments .................... 2,531,187
Accumulated net realized gain (loss) ......................................... (632,578)
Paid-in capital .............................................................. 90,933,496
- ---------------------------------------------------------------------------------------------
Net assets, at market value $ 92,832,105
- ---------------------------------------------------------------------------------------------
Net Asset Value
- ---------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($92,832,105 /
7,207,512 outstanding shares of beneficial interest, $.01 par value, unlimited ------------
number of shares authorized) ................................................. $ 12.88
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statement of Operations for the six months ended September 30, 1999 (Unaudited)
- ------------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest ..................................................................... $ 2,608,403
-----------
Expenses:
Management fee ............................................................... 284,677
Services to shareholders ..................................................... 37,132
Custodian and accounting fees ................................................ 24,677
Trustees' fees and expenses .................................................. 7,861
Auditing ..................................................................... 13,788
Reports to shareholders ...................................................... 4,054
Legal ........................................................................ 3,470
Registration fees ............................................................ 2,245
Other ........................................................................ 4,124
-----------
Total expenses before reductions ............................................. 382,028
Expense reductions ........................................................... (25,472)
-----------
Expenses, net ................................................................ 356,556
- --------------------------------------------------------------------------------------------
Net investment income 2,251,847
- --------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions ........................ (556,837)
Net unrealized appreciation (depreciation) on investments during the period .. (3,515,339)
- --------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,072,176)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(1,820,329)
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
September 30,
1999 Year Ended
Increase (Decrease) in Net Assets (Unaudited) March 31, 1999
- ---------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................ $ 2,251,847 $ 4,681,262
Net realized gain (loss) from investment
transactions ................................... (556,837) 731,048
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (3,515,339) (498,294)
------------ ------------
Net increase (decrease) in net assets resulting
from operations ................................ (1,820,329) 4,914,016
------------ ------------
Distributions to shareholders:
From net investment income ....................... (2,251,847) (4,681,262)
------------ ------------
From net realized gains on investment transactions -- (759,189)
------------ ------------
Fund share transactions:
Proceeds from shares sold ........................ 6,561,320 22,088,926
Net asset value of shares issued to shareholders
in reinvestment of distributions ............... 1,495,070 3,716,462
Cost of shares redeemed .......................... (8,635,946) (22,245,898)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (579,556) 3,559,490
------------ ------------
Increase (decrease) in net assets ................ (4,651,732) 3,033,055
Net assets at beginning of period ................ 97,483,837 94,450,782
------------ ------------
Net assets at end of period ...................... $ 92,832,105 $ 97,483,837
------------ ------------
Other Information
- ---------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........ 7,251,068 6,989,251
------------ ------------
Shares sold ...................................... 497,323 1,626,994
Shares issued to shareholders in reinvestment of
distributions .................................. 114,096 274,026
Shares redeemed .................................. (654,975) (1,639,203)
------------ ------------
Net increase (decrease) in Fund shares ........... (43,556) 261,817
------------ ------------
Shares outstanding at end of period .............. 7,207,512 7,251,068
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<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(a) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $13.44 $13.51 $12.94 $12.95 $12.77 $12.68
----------------------------------------------------
- ------------------------------------------------------------------------------------
Income from investment
operations:
- ------------------------------------------------------------------------------------
Net investment income .31 .65 .68 .68 .69 .70
- ------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.56) .04 .60 .03 .30 .13
----------------------------------------------------
- ------------------------------------------------------------------------------------
Total from investment
operations (.25) .69 1.28 .71 .99 .83
- ------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------
From net investment income (.31) (.65) (.68) (.68) (.69) (.70)
- ------------------------------------------------------------------------------------
From net realized gains on
investment transactions -- (.11) (.03) (.04) (.12) --
- ------------------------------------------------------------------------------------
In excess of net realized gains -- -- -- -- -- (.04)
----------------------------------------------------
- ------------------------------------------------------------------------------------
Total distributions (.31) (.76) (.71) (.72) (.81) (.74)
- ------------------------------------------------------------------------------------
Net asset value, end of period $12.88 $13.44 $13.51 $12.94 $12.95 $12.77
----------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return (%) (b) (1.86)** 5.18 10.08 5.58 7.85 6.82
- ------------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 93 97 94 84 84 78
- ------------------------------------------------------------------------------------
Ratio of operating expenses,
net to average daily net
assets (%) .75* .62 .52 .50 .50 .50
- ------------------------------------------------------------------------------------
Ratio of operating expenses
before expense reductions, to
average daily net assets (%) .80* .85 .86 .88 .89 .91
- ------------------------------------------------------------------------------------
Ratio of net investment income
to average daily net assets (%) 4.74* 4.81 5.09 5.23 5.30 5.59
- ------------------------------------------------------------------------------------
Portfolio turnover rate (%) 18.0* 20.5 4.9 9.7 19.6 19.9
- ------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended September 30, 1999 (Unaudited).
(b) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
22
<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 Fund Trust (the "Trust") which is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company organized as a Massachusetts business 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 an original
maturity greater than sixty days are valued by pricing agents approved by the
officers of the Trust, whose 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 securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. Accordingly, the Fund paid no federal income taxes and no
federal income tax provision was required.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. 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 at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
23
<PAGE>
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the six months ended September 30, 1999, purchases and sales of long-term
municipal securities aggregated $8,334,105 and $12,916,657, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (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, 2000. For the six months ended September 30, 1999, the Adviser did not
impose a portion of its management fee amounting to $25,472 and the amount
imposed amounted to $259,205, of which $86,234 was unpaid at September 30, 1999.
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, 1999, the amount charged to the Fund by SSC
aggregated $27,695, of which $3,394 was unpaid at September 30, 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 six months
ended September 30, 1999, the amount charged to the Fund by SFAC aggregated
$15,000, of which $0 was unpaid at September 30, 1999.
24
<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 six months ended September 30,
1999, Trustees' fees and expenses charged to the Fund aggregated $7,861.
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.
25
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Eleanor R. Brennan*
o President and Trustee o Vice President
Henry P. Becton, Jr. Philip G. Condon*
o Trustee; President and General o Vice President
Manager, WGBH Educational
Foundation Ashton P. Goodfield*
o Vice President
Dawn-Marie Driscoll
o Trustee; President, Driscoll Ann M. McCreary*
Associates; Executive Fellow, o Vice President
Bentley College
Frank J. Rachwalski, Jr.*
Peter B. Freeman o Vice President
o Trustee; Corporate Director and
Trustee Rebecca L. Wilson*
o Vice President
George M. Lovejoy, Jr.
o Trustee; President and Director, John Millette*
Fifty Associates o Vice President and Secretary
Wesley W. Marple, Jr. John R. Hebble*
o Trustee; Professor of Business o Treasurer
Administration, Northeastern
University, College of Business Caroline Pearson*
Administration o Assistant Secretary
Kathryn L. Quirk*
o Trustee, Vice President and *Scudder Kemper Investments, Inc.
Assistant Secretary
Jean C. Tempel
o Trustee; Venture Partner, Internet
Capital Group
26
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Scudder Global High Income Fund, Inc.
The Brazil Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Montgomery Street Income Securities, Inc.
</TABLE>
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.
28
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
29
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
30
<PAGE>
Notes
- --------------------------------------------------------------------------------
31
<PAGE>
About the Fund's Adviser
SCUDDER INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations 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.
