SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND/TAX FREE
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Scudder Ohio
Tax Free Fund
Fund #013
Annual Report
March 31, 2000
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.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
14 Glossary of Investment Terms
15 Investment Portfolio
20 Financial Statements
23 Financial Highlights
24 Notes to Financial Statements
28 Report of Independent Accountants
29 Tax Information
30 Officers and Trustees
31 Investment Products and Services
33 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 In a difficult environment for all fixed-income
Inception: instruments, including municipal bonds, Scudder Ohio
5/28/87 Tax Free Fund posted a total return of -0.13% for its
most recent fiscal year ended March 31, 2000. While
negative, the fund's return outpaced the -2.02% average
return of 52 similar funds tracked by Lipper Analytical
Total Net Services, Inc.
Assets as of
3/31/00
$87.9 million
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30-Day Yield on March 31, 2000
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
4.45% 7.91%
Scudder Taxable Yield
Ohio Needed to Equal
Tax Free Fund the Fund's Yield
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o Scudder Ohio Tax Free Fund received a four-star
Morningstar rating(TM), reflecting "above average"
risk-adjusted performance through March 31, 2000.*
* Morningstar proprietary rankings reflect historical risk-adjusted
performance as of March 31, 2000. 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 five stars for the
three-year period, four stars for the five-year period, and three stars for
the 10-year period, and was rated among 1682, 1394, and 403 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 does not
guarantee future returns.
3
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Letter from the Fund's President
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Dear Shareholders,
Municipal bonds endured a challenging investment environment during Scudder Ohio
Tax Free Fund's most recent fiscal year ended March 31, 2000. The fund posted a
- -0.13% total return during the period, but outperformed the -2.02% average
performance of its peers as compiled by Lipper. To match the fund's tax-free
4.45% 30-day SEC yield on March 31, a taxable investment would have had to yield
7.91%. Over the period, municipal bonds were negatively affected by significant
interest rate increases across all fixed-income markets as the Federal Reserve
attempted to restrain surging U.S. economic growth and head off a major increase
in inflation by gradually raising the federal funds rate to 6%.
Following this period of relative underperformance, we nevertheless believe the
municipal market offers attractive return potential: Adjusted for inflation,
municipal yields are high by historical standards and are attractive when
compared to yields of comparable Treasury bonds. As of March 31, yields of
10-year AAA-rated municipal bonds were 84% of comparable Treasuries. Second, a
recent reduction in the supply of municipal bonds should provide strong support
for bond prices. And third, fixed-income markets could be primed for a strong
rally once a consensus is reached that the Fed has completed its current cycle
of interest rate increases.
On a related note, we'd like to point out some of the advantages of owning a
municipal bond fund compared with holding individual municipal bonds. First and
foremost, municipal bond
4
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funds offer professional management: While many investors believe that
purchasing an individual bond is a relatively simple process, knowing what price
to pay for a municipal bond and what structure and characteristics to seek can
be confusing, and can make a dramatic difference in how a bond will perform on a
total return basis. Though investors understandably value income and coupon
level, they are not the only factors that determine whether a bond will prove to
be a worthwhile investment. Other important advantages offered by municipal bond
funds include portfolio diversification, dividend reinvestment, and quarterly
statements that display performance information clearly and concisely.
Thank you for investing with Scudder Ohio Tax Free Fund. If you have any
questions regarding the fund, please call 1-800-SCUDDER, or visit Scudder's Web
site at www.scudder.com.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President,
Scudder Ohio Tax Free Fund
5
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Performance Update
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March 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
Scudder Ohio Lehman Brothers
Tax Free Fund Municipal Bond Index*
'90 10000 10000
'91 10875 10922
'92 11889 12015
'93 13439 13520
'94 13773 13833
'95 14712 14861
'96 15868 16107
'97 16752 16985
'98 18441 18808
'99 19397 19974
'00 19371 19954
Yearly periods ended March 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 3/31/2000 $10,000 Cumulative Annual
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Scudder Ohio Tax Free Fund
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1 year $ 9,987 -0.13% -0.13%
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5 year $ 13,167 31.67% 5.66%
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10 year $ 19,371 93.71% 6.84%
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Lehman Brothers Municipal Bond Index*
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1 year $ 9,990 -0.10% -0.10%
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5 year $ 13,427 34.27% 6.06%
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10 year $ 19,954 99.54% 7.15%
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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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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Yearly periods ended March 31
Scudder Ohio Lehman Brothers
Tax Free Fund Municipal Bond Index
1991 8.75 9.22
1992 9.33 10.02
1993 13.04 12.52
1994 2.48 2.32
1995 6.82 7.43
1996 7.85 8.38
1997 5.58 5.45
1998 10.08 10.73
1999 5.18 6.20
2000 -0.7 -0.5
<TABLE>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 8.75 9.33 13.04 2.48 6.82 7.85 5.58 10.08 5.18 -0.13
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Index Total
Return (%) 9.22 10.02 12.52 2.32 7.43 8.38 5.45 10.73 6.20 -0.10
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Net Asset
Value ($) 12.14 12.47 13.13 12.68 12.77 12.95 12.94 13.51 13.44 12.76
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Income
Dividends ($) .78 .75 .72 .70 .70 .69 .68 .68 .65 0.62
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Capital Gains
Distributions($) .06 .03 .19 .10 .04 .12 .04 .03 .11 0.03
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</TABLE>
7
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Portfolio Summary
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March 31, 2000
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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 15%
Higher Education 13%
Other General Obligation/
Lease 8%
Water/Sewer Revenue 8%
Hospital/Health 8%
Electric Utility Revenue 8%
School District/Lease 7%
State General Obligation/
Lease 5%
Industrial Development
Revenue 3%
Miscellaneous Municipal 25%
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100%
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The fund invests in a broad selection of Ohio municipal bonds.
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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* 58%
AA 20%
A 9%
BBB 4%
SKI** 9%
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100%
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Weighted average quality: AA
* Includes cash equivalents
** Scudder Kemper Investments
(SKI) has been determined to be of comparable quality to rated eligible
securities.
Overall portfolio quality remains high, with 85% of portfolio securities rated A
or better as of March 31.
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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 5%
1-5 years 31%
5-8 years 14%
8-15 years 38%
Greater than 15 years 12%
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100%
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Weighted average effective
maturity: 8.05 years
In a rising interest rate environment, we emphasized longer-maturity bonds while
the yield curve remained steep and then resumed our usual strategy of
concentrating on intermediate maturities when the yield curve flattened.
For more complete details about the Fund's investment portfolio, see page 15. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
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March 31, 2000
Dear Shareholders,
Municipal bonds faced a difficult environment during Scudder Ohio Tax Free
Fund's most recent fiscal year as the Federal Reserve repeatedly raised interest
rates in an attempt to forestall inflationary pressures arising from the strong
U.S. economy. The fund's total return for its most recent fiscal year ended
March 31, 2000, was -0.13%, outpacing the -2.02% average return of 52 similar
funds as tracked by Lipper Analytical Services, Inc.* The fund's 30-day SEC
yield as of March 31 was 4.45%, equivalent to a 7.94% taxable yield for Ohio
investors subject to the 43.97% combined federal and state income tax rate.
Despite the negative posting over the most recent fiscal year, the fund's total
returns over one-, three-, five-, and ten-year periods placed it in the top 15%
of similar Ohio tax-free funds. Please see the accompanying table for additional
information concerning the fund's returns.
Premium Bonds Aided Our Defensive Posture
During the fund's most recent fiscal year, the Federal Reserve began to raise
interest rates to head off inflationary pressures as commodity prices rebounded,
the nation's unemployment index reached 30-year lows, and consumer spending
proceeded at a brisk pace. The Fed's
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Scudder Ohio Tax Free Fund:
Consistent Top-Tier Performance
(Average annual returns for periods ended March 31, 2000)
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Scudder
Ohio Number of
Tax Free Fund Lipper Funds Percentile
Period Return Average Rank Tracked Rank
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1 Year -0.13% -2.02% 2 of 52 Top 4%
3 Years 4.96% 4.14% 4 of 49 Top 8%
5 Years 5.66% 4.86% 3 of 44 Top 7%
10 Years 6.84% 6.44% 2 of 13 Top 15%
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Past performance does not guarantee future results.
*Lipper Analytical Services, Inc., is an independent analyst of investment
services.
9
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latest action, in March, raised its short-term interest rate target to 6%.
During the year, yields on 10-year Treasury bonds rose nearly 72 basis points
and their prices declined 4.9%, while municipal bond yields rose 61 basis points
and their prices also declined 4.9%. Also during the period, the Treasury yield
curve inverted, causing short-term securities to yield more than longer term
securities. Our strategy in light of these market conditions was to emphasize
longer maturity bonds because of the relative steepness of the municipal yield
curve between 10 and 30 years, and sell intermediate and short maturities. As
the yield curve flattened, we then resumed our usual strategy of concentrating
on intermediate maturities. During the 12-month period, we also 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 fund than would exist if the portfolio held a significant
proportion of bonds that could be called in before their stated maturities.
Third, we sought to avoid "market discount," a provision that can subject
municipal bonds sold at a discount to ordinary income tax. Key to this strategy
was our emphasis on purchasing premium bonds rather than par bonds (which can
more easily decline to a discount). The table on page 12 illustrates this
element of our strategy, showing the difference in the performance over the
previous 12-month period of a type of premium bond we favored versus a type of
par bond we avoided. In a difficult municipal bond market the premium bond
posted positive performance, while the par bond posted negative performance
because of its exposure to the market discount tax.
10
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Premium Coupon Bonds Avoided "Market Discount"
(12-month returns as of March 31, 2000, following a 60 basis point
rise in interest rates)
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Starting price Ending price Total
Type of Bond 3/31/99 3/31/00 Return
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Premium bond with a
5.50% coupon due 2015 $105.92 $101.06 +0.68%
Par bond with a
5.0% coupon due 2020 $100.00 $91.92 -3.02%
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Result: the premium bond outperformed the par bond by 3.70%.
In addition, over the period, credit spreads for higher yielding securities
widened to historically high levels. Because of this, we chose to selectively
add to credits which we deemed to be appropriate credit risks. The fund's
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/special tax, higher
education, and general obligation bonds.
Ohio Update
The State of Ohio is enjoying stable economic growth. The State expects to close
its 2000 fiscal year with a seventh consecutive operating surplus in its General
Fund. The strength of Ohio's economy continues to foster job growth,
specifically in the service sector. The State has taken advantage of economic
growth by increasing reserves in its Budget Stabilization Fund, while boosting
spending in areas of need such as education. Ohio's debt burden is low. Direct
debt per capita during its 1999 fiscal year was 88% of the national average. 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.
11
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Outlook
Since it is widely expected that the Fed will continue to raise interest rates
into the summer, municipals will continue to face a challenging environment.
Still, we believe the municipal bond market represents attractive value, with
yields of longer maturity municipals approaching those of Treasury bonds, and
tax-equivalent yields near double-digit levels for investors in the highest tax
brackets (in January, municipal bond yields reached 6.35% on average*, the
highest level since August 1995). And the robust U.S. and Ohio economies should
continue to bolster the credit ratings of individual Ohio bond issues.
In addition to the long-term strategy outlined above, we will seek to take
advantage of newly widened credit spreads (differences in yield between higher
and lower quality bonds). Wider credit spreads make it worthwhile to invest in
bonds with slightly lower credit ratings in an effort to boost the fund's yield.
We 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
*Source: The Bond Buyer
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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 offices across the United States and abroad.
The Adviser believes that a team approach benefits fund investors by bringing
together many disciplines and leveraging the firm's 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.
Portfolio manager Rebecca L. Wilson became a member of the team in 1999. Ms.
Wilson, who joined the Adviser in 1986, has 14 years of experience in municipal
investing.
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Glossary of Investment Terms
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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
Obligation credit" (including the taxing and further borrowing
Bond 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 The price per share of a mutual fund based on the sum
the Value of (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
Equivalent have to provide to equal that of a tax-free municipal
Yield bond on an after-tax basis.
30-Day SEC The standard yield reference for bond funds, based on
Yield 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.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
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Investment Portfolio as of March 31, 2000
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Principal
Amount ($) Value ($)
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Short-Term Municipal Investments 0.9%
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Ohio
Ohio State Air Quality Development Authority, Daily ----------
Demand Note, 3.95%, 10/1/2001* (Cost $800,000) .... 800,000 800,000
----------
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Long-Term Municipal Investments 99.1%
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Ohio
Akron Ohio Economic Development Revenue, 6%,
12/1/2012 (b) ..................................... 1,000,000 1,074,430
Beavercreek, OH, Local School District, General
Obligation, Series 1996, 6.6%, 12/1/2015 (b) ...... 1,000,000 1,140,560
Butler County, OH, Transportation Improvement
District, Series 1997A, 6%, 4/1/2010 (b) .......... 1,500,000 1,605,945
Cleveland, OH, General Obligation, Series 1992A,
Prerefunded 7/1/2002, 6.3%, 7/1/2006 (b)** ........ 1,000,000 1,052,330
Cleveland, OH, Parking Facility Revenue, 6%,
9/15/2009 (b) ..................................... 1,385,000 1,484,000
Cleveland, OH, Public Power System Improvement
Revenue, Series 1994A, Zero Coupon, 11/15/2009 (b) 2,250,000 1,358,865
Cleveland, OH, Public Power System Revenue:
Capital Appreciation, First Mortgage, Series 1994A,
Zero Coupon, 11/15/2012 (b) ..................... 2,250,000 1,139,963
Prerefunded, 11/15/2001, Series 1991B, 7%,
11/15/2017 (b)** ................................ 145,000 153,031
Series 1996-1, 6%, 11/15/2011 (b) ................. 1,050,000 1,130,115
Unrefunded, First Mortgage, Series 1991B, 7%,
11/15/2017 ...................................... 605,000 635,594
Cleveland, OH, Revenue Bond, Cleveland Stadium:
Series A, Zero Coupon, 12/1/2011 (b) .............. 820,000 423,227
Series A, Zero Coupon, 12/1/2014 (b) .............. 820,000 356,979
Series A, Zero Coupon, 12/1/2017 (b) .............. 820,000 294,052
Series B, Zero Coupon, 12/1/2009 (b) .............. 810,000 468,293
Series B, Zero Coupon, 12/1/2015 (b) .............. 815,000 333,783
Series B, Zero Coupon, 12/1/2018 (b) .............. 815,000 274,777
Cleveland, OH, Urban Renewal Tax Increment Rock &
Roll Hall of Fame and Museum Project, 6.75%,
3/15/2018 ......................................... 1,000,000 1,014,620
Cleveland, OH, Waterworks Revenue:
First Mortgage Revenue, Prerefunded 1/1/2002,
Series F 1992A, 6.25%, 1/1/2007 (b)** ........... 950,000 992,712
The accompanying notes are an integral part of the financial statements.
15
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Principal
Amount($) Value($)
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First Mortgage Revenue, Unrefunded, Series F 1992A,
6.25%, 1/1/2007 (b) ............................... 50,000 52,085
Series 1998I, 5%, 1/1/2017 (b) ...................... 1,000,000 925,010
Columbus, OH, General Obligation, Unlimited Tax,
Sewer Improvement, Prerefunded, 5/1/2003,
6%, 5/1/2013** ...................................... 1,000,000 1,052,930
Cuyahoga County, OH, General Obligation,
Jail Facilities, Series 1991, ETM, Zero Coupon,
10/1/2002 (b)*** .................................... 1,500,000 1,326,105
Cuyahoga County, OH, Hospital Facilities Revenue,
Health Cleveland Inc., Series 1993, 6.25%, 8/15/2010 1,000,000 1,041,120
Cuyahoga County, OH, Port Authority
Revenue, Port Development, C&P Docks Project,
6%, 3/1/2007 ........................................ 965,000 930,086
Dublin, OH , City School District, Capital Appreciation,
Series 1998, Zero Coupon, 12/1/2011 (b) ............. 1,000,000 532,200
Fairfield, OH, City School District, 7.2%, 12/1/2009 (b) 1,000,000 1,128,390
Franklin County, OH, Health Care Facilities, Revenue
Refunding, Ohio Presbyterian Services:
Series 1997, 5.25%, 7/1/2008 ...................... 500,000 461,660
Series 1997, 5.5%, 7/1/2017 ....................... 1,000,000 828,640
Franklin County, OH, Riverside United Methodist
Hospital, Series A, 5.75%, 5/15/2012 ................ 1,950,000 1,936,428
Gateway Economic Development Corporation of
Cleveland, OH, Stadium Revenue, AMT,
6.5%, 9/15/2014 ..................................... 4,000,000 4,012,560
Gateway Economic Development Corporation of
Greater Cleveland, OH, Excise Tax, Series 1990, AMT,
7.2%, 9/1/2001 ...................................... 2,550,000 2,597,099
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 2,115,260
Hamilton County, OH, Hospital Facilities Revenue,
Christ Hospital, Series 1991B, Prerefunded 1/1/2001,
6.625%, 1/1/2006** .................................. 1,000,000 1,017,930
Hamilton County, OH, Sewer System Revenue:
Improvement and Refunding, 5.45%, 12/1/2009 (b) ..... 1,000,000 1,030,990
Series 1991A, 6.4%, 12/1/2005 ....................... 530,000 551,052
Series 1991A, Prerefunded 6/1/2001, 6.4%,
12/1/2005** ....................................... 220,000 229,185
Hilliard, OH, School District, Series 1996A, Zero
Coupon, 12/1/2012 (b) ............................... 1,655,000 836,503
Huber Heights, OH, Water System Revenue,
Capital Appreciation, Zero Coupon, 12/1/2012 ........ 1,005,000 507,967
The accompanying notes are an integral part of the financial statements.
16
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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<S> <C> <C>
Lorain County, OH, Refunding Revenue,
Humility of Mary Health Care System, Series A,
Prerefunded 6/15/2005, 5.9%, 12/15/2008** ............. 1,000,000 1,039,560
Lorain County, OH, Hospital Revenue, Lakeland Community
Hospital Inc., ETM, 6.5%, 11/15/2012*** ............... 1,000,000 1,068,030
Lucas County, OH, Hospital Revenue, Flower Hospital,
Series 1993, Prerefunded 12/1/2004, 6.125%,
12/1/2013** ........................................... 1,375,000 1,449,484
Lucas County, OH, Toledo Port Authority Development,
Revenue Bond, Northwest Ohio Bond Fund, Series A,
5.4%, 5/15/2019 ....................................... 500,000 427,820
Mahoning County, OH, General Obligation, Limited
Tax, 6.6%, 12/1/2006 (b) .............................. 1,100,000 1,153,361
Medina, OH, City School District, General Obligation,
Zero Coupon, 12/1/2006 (b) ............................ 1,500,000 1,061,820
Miami County, OH, Revenue Refunding, Hospital Upper
Valley, Series 1996C, 6.25%, 5/15/2013 ................ 1,000,000 931,730
North Olmstead, OH, General Obligation:
6.2%, 12/1/2011 (b) ................................... 2,000,000 2,150,180
6.25%, 12/15/2012 (b) ................................. 1,500,000 1,570,290
Northeast Ohio Regional Sewer District, Wastewater
Improvement Revenue Refunding:
5.5%, 11/15/2012 (b) ................................ 1,550,000 1,577,885
5.6%, 11/15/2013 (b) ................................ 1,000,000 1,019,800
Ohio Air Quality Development Authority, Pollution
Control Revenue, Cleveland Electric Company, 8%,
12/1/2013 (b) ......................................... 1,250,000 1,356,963
Ohio Gateway Economic Development Corp., Revenue,
Cuyahoga County Annual Gateway, 7.5%, 9/1/2005 ........ 1,500,000 1,574,580
Ohio General Obligation, Series 1994, 6%, 8/1/2010 ....... 1,000,000 1,075,670
Ohio Higher Education Facilities Revenue, Case
Western Reserve University, Series B, 6.5%, 10/1/2020 . 2,250,000 2,489,445
Ohio Higher Educational Facility Commission, Refunding
Revenue, Case Western Reserve University, 6%,
10/1/2014 ............................................. 1,000,000 1,069,170
Ohio Housing Finance Agency, Single-Family Mortgage
Revenue, Series 1990F, 7.6%, 9/1/2016 ................. 675,000 691,889
Ohio Public Facilities Commission, Higher Educational
Capital Facilities Revenue, Series IIB, 5.4%,
11/1/2007 (b) ......................................... 1,500,000 1,527,915
Ohio State Building Authority:
State Facilities, Adult Correctional Facilities, Series
1999A, 5.25%, 10/1/2018 ............................... 1,000,000 954,460
The accompanying notes are an integral part of the financial statements.
17
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Principal
Amount ($) Value ($)
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Correctional Facilites Revenue, Series 1991A,
6.5%, 10/1/2004 ...................................... 1,000,000 1,044,510
State Facilities, Administrative Building, Series 1999A,
5.375%, 10/1/2013 .................................... 1,000,000 1,002,790
Toledo Government Office Building, Series A,
Prerefunded, 4/1/2003, 8%, 10/1/2007** ............... 500,000 544,650
Ohio State Higher Education Facility:
Prerefunded 12/1/2000, Series 1989, 7.25%,
12/1/2012 (b)** ...................................... 200,000 207,920
Prerefunded 12/1/2000, Series 1989, 7.25%,
12/1/2012 (b)** ...................................... 800,000 831,680
Series 1997A, Zero Coupon, 7/1/2008 .................... 2,325,000 2,494,234
Ohio State Higher Educational Facilities Commission,
Oberlin College, Revenue
Bonds, 5.25%, 10/1/2014 ................................ 1,000,000 993,990
Ohio State University, General Receipts:
Series 1999A, 6%, 12/1/2016 ............................ 1,000,000 1,046,000
Series 1999A, 6%, 12/1/2017 ............................ 500,000 520,835
Ohio State Water Development Authority, Solid Waste
Disposal Revenue, Bay Shore Project, Series 1998A,
AMT, 5.875%, 9/1/2020 .................................. 500,000 411,225
Olmsted Falls, OH, City School District, General
Obligation, Series 1991, Prerefunded 12/15/2001,
7.05%, 12/15/2011** .................................... 1,000,000 1,059,160
Rocky River, OH, City School District, School
Improvement, Series 1998, 5.375%, 12/1/2017 ............ 1,000,000 990,360
Summit County, OH, General Obligation, Prerefunded
12/1/2004, 6.4%, 12/1/2014** ........................... 1,000,000 1,081,000
University of Akron, OH, General Receipts, 5.75%,
1/1/2013 (b) ........................................... 1,365,000 1,413,594
Warren County, OH, Water Improvement, General
Obligation, The P&G Project, Series 1995, 5.25%,
12/1/2016 .............................................. 1,720,000 1,667,867
Puerto Rico
Puerto Rico Aqueduct and Sewer Authority, Revenue
Refunding, 6%, 7/1/2009 ................................ 1,000,000 1,064,860
Puerto Rico Commonwealth, Highway & Transportation
Authority, Series 1993W, 5.5%, 7/1/2013 (b) ............ 1,000,000 1,035,170
Puerto Rico Electric Power Authority, Series 1994S,
6.125%, 7/1/2009 (b) ................................... 2,000,000 2,174,100
Puerto Rico, General Obligation, Public Improvement,
Prerefunded 7/1/2002, 6.6%, 7/1/2013 (b)** ............. 1,000,000 1,059,050
University of Puerto Rico, University Systems, Series N,
6.25%, 6/1/2008 (b) .................................... 1,000,000 1,089,880
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Principal
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
Virgin Islands
Virgin Islands Public Financial Authority Revenue:
Series 1999A, 6.5%, 10/1/2024 ................. 600,000 605,802
Series 1992A, Prerefunded 10/1/2002,
7.25%, 10/1/2018** .......................... 1,000,000 1,083,850
- ------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $ 83,775,386) 85,659,055
- ------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $ 84,575,386) (a) 86,459,055
- ------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $84,575,386. At March 31,
2000, net unrealized appreciation for all securities based on tax cost was
$1,883,669. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$2,810,208 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $926,539.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC,
FSA, or MBIA/BIG.
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.
19
<PAGE>
Financial Statements
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Statement of Assets and Liabilities as of March 31, 2000
- ------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------
Investments in securities, at value (cost $84,575,386) .. $ 86,459,055
Cash .................................................... 416,537
Interest receivable ..................................... 1,313,138
Receivable for Fund shares sold ......................... 136,257
Other assets ............................................ 524
------------
Total assets ............................................ 88,325,511
Liabilities
- ------------------------------------------------------------------------
Dividends payable ....................................... 114,040
Payable for Fund shares redeemed ........................ 105,544
Accrued management fee .................................. 116,227
Other accrued expenses and payables ..................... 61,574
------------
Total liabilities ....................................... 397,385
- ------------------------------------------------------------------------
Net assets, at value $ 87,928,126
- ------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments 1,883,669
Accumulated net realized gain (loss) .................... (888,961)
Paid-in capital ......................................... 86,933,418
- ------------------------------------------------------------------------
Net assets, at value $ 87,928,126
- ------------------------------------------------------------------------
Net Asset Value
- ------------------------------------------------------------------------
NetAsset Value, offering and redemption price
per share ($87,928,126 / 6,892,814 outstanding
shares of beneficial interest, $.01 par value, ------------
unlimited number of shares authorized) ............... $ 12.76
------------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- -----------------------------------------------------------------------------
Statement of Operations for the year ended March 31, 2000
- -----------------------------------------------------------------------------
Investment Income
- -----------------------------------------------------------------------------
Interest ...................................................... $ 5,164,267
-----------
Expenses:
Management fee ................................................ 554,208
Services to shareholders ...................................... 80,890
Custodian and accounting fees ................................. 47,613
Auditing ...................................................... 27,159
Legal ......................................................... 5,362
Trustees' fees and expenses ................................... 16,561
Reports to shareholders ....................................... 11,608
Registration fees ............................................. 4,980
Reorganization expense ........................................ 15,382
Other ......................................................... 7,725
-----------
Total expenses, before expense reductions ..................... 771,488
Expense reductions ............................................ (61,718)
-----------
Total expenses, after expense reductions ...................... 709,770
- -----------------------------------------------------------------------------
Net investment income 4,454,497
- -----------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------
Net realized gain (loss) from investment transactions ......... (614,658)
Net unrealized appreciation (depreciation) during the period on
investments ................................................ (4,162,857)
- -----------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,777,515)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (323,018)
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------
Years Ended March 31,
Increase (Decrease) in Net Assets 2000 1999
- ------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income ............................. $ 4,454,497 $ 4,681,262
Net realized gain (loss) on investment transactions (614,658) 731,048
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (4,162,857) (498,294)
------------ ------------
Net increase (decrease) in net assets resulting
from operations ................................ (323,018) 4,914,016
------------ ------------
Distributions to shareholders from:
Net investment income ............................. (4,454,497) (4,681,262)
------------ ------------
Net realized gains ................................ (214,270) (759,189)
------------ ------------
Fund share transactions:
Proceeds from shares sold ......................... 18,840,209 22,088,926
Reinvestment of distributions ..................... 3,147,240 3,716,462
Cost of shares redeemed ........................... (26,551,375) (22,245,898)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (4,563,926) 3,559,490
------------ ------------
Increase (decrease) in net assets ................. (9,555,711) 3,033,055
Net assets at beginning of period ................. 97,483,837 94,450,782
------------ ------------
Net assets at end of period ....................... $ 87,928,126 $ 97,483,837
------------ ------------
Other Information
- ------------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 7,251,068 6,989,251
------------ ------------
Shares sold ....................................... 1,467,476 1,626,994
Shares issued to shareholders in reinvestment of
distributions .................................. 244,335 274,026
Shares redeemed ................................... (2,070,065) (1,639,203)
------------ ------------
Net increase (decrease) in Fund shares ............ (358,254) 261,817
------------ ------------
Shares outstanding at end of period ............... 6,892,814 7,251,068
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<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.
- --------------------------------------------------------------------------------
Years ended March 31, 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------
Net asset value, beginning of period $13.44 $13.51 $12.94 $12.95 $12.77
------------------------------------------
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income .62 .65 .68 .68 .69
- --------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions (.65) .04 .60 .03 .30
------------------------------------------
- --------------------------------------------------------------------------------
Total from investment operations (.03) .69 1.28 .71 .99
- --------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------
Net investment income (.62) (.65) (.68) (.68) (.69)
- --------------------------------------------------------------------------------
Net realized gain (loss) on
investment transactions (.03) (.11) (.03) (.04) (.12)
------------------------------------------
- --------------------------------------------------------------------------------
Total distributions (.65) (.76) (.71) (.72) (.81)
- --------------------------------------------------------------------------------
Net asset value, end of period $12.76 $13.44 $13.51 $12.94 $12.95
------------------------------------------
- --------------------------------------------------------------------------------
Total Return (%) (a) (.13) 5.18 10.08 5.58 7.85
- --------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period ($ millions) 88 97 94 84 84
- --------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) .83(b) .85 .86 .88 .89
- --------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) .77(b) .62 .52 .50 .50
- --------------------------------------------------------------------------------
Ratio of net investment income (%) 4.82 4.81 5.09 5.23 5.30
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 16 21 5 10 20
- --------------------------------------------------------------------------------
(a) Total returns would have been lower had certain expenses not been reduced.
(b) The ratios of operating expenses excluding reorganization expenses before
and after expense reductions were .82% and .75%, respectively.
23
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
A. Description of the Fund
Scudder Ohio Tax Free Fund (the "Fund") is a non-diversified series of Scudder
State Tax Free 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.
B. Plan of Reorganization
On February 7, 2000 the Trustees of the Fund approved an Agreement and Plan of
Reorganization (the "Plan") between the Fund and Scudder Managed Municipal
Bonds, pursuant to which Scudder Managed Municipal Bonds would acquire all or
substantially all of the assets and liabilities of the Fund in exchange for
shares of Scudder Managed Municipal Bonds. The proposed transaction is part of
Scudder Kemper Investments, Inc.'s ("Scudder Kemper") initiative to restructure
and streamline the management and operations of the funds it advises. Costs
incurred in connection with this reorganization initiative are being borne
jointly by Scudder Kemper and certain funds and are included as reorganization
expense in the Statement of Operations of the Fund. These costs principally
include printing, proxy meeting expenses and professional fees. All funds under
the reorganization initiative are subject to an allocated charge of such costs
except for certain funds not expected to realize a reduction in the operating
expense ratio. The Plan can be consummated only if, among other things, it is
approved by a majority vote of the shareholders of the Fund. A special meeting
(the "Meeting") of the shareholders of the Fund to approve the Plan will be held
on or about July 13, 2000.
As a result of the Plan, each shareholder of Scudder Ohio Tax Free Fund will
become a shareholder of the shares of Scudder Managed Municipal Bonds and would
hold, immediately after the closing of the Plan (the "Closing"), that number of
full and fractional voting shares of Scudder Managed Municipal Bonds having an
aggregate net asset value equal to the aggregate net asset value of such
shareholder's shares held in the Fund as of the close of business on the
business day preceding the Closing. The Closing is expected to take place during
the third quarter of 2000. In the event the shareholders of the Fund fail to
approve the Plan, the Fund will continue to operate and the Fund's Board may
resubmit the Plan for shareholder approval or consider other proposals.
24
<PAGE>
C. Significant Accounting Policies
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.
At March 31, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $541,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until March 31,
2008, the expiration date. In addition, from November 1, 1999 through March 31,
2000 the Fund incurred approximately $97,000 of net realized capital losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the fiscal year ending March 31, 2001.
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.
25
<PAGE>
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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
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.
D. Purchases and Sales of Securities
For the year ended March 31, 2000, purchases and sales of long-term municipal
securities aggregated $14,348,250 and $19,911,069, respectively.
E. 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 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 until July 31, 2000, and to
maintain the annualized expenses of the Fund at no more than 0.75% of average
daily net assets. For the year ended March 31, 2000, the Adviser did not impose
a portion of its management fee amounting to $58,262 and the amount imposed
amounted to $495,946, which was equivalent to an annual effective rate 0.54% of
the Fund's average daily net assets.
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, 2000, the amount charged to the Fund by SSC aggregated
$54,579, of which $8,197 was unpaid at March 31, 2000.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and
26
<PAGE>
maintaining the portfolio and general accounting records of the Fund. For the
year ended March 31, 2000, the amount charged to the Fund by SFAC aggregated
$36,000, of which $3,000 was unpaid at March 31, 2000.
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, 2000,
Trustees' fees and expenses charged to the Fund aggregated $16,561.
F. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. For the year ended March 31, 2000, the
Fund's custodian and transfer agent fees were reduced by $810 and $2,646,
respectively, under these arrangements.
G. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
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 pro rata 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.
27
<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, 2000, the results of its operations, the changes in its net
assets, and the financial highlights for each of the periods indicated therein,
in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States,
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, 2000 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
May 9, 2000
28
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
The Fund paid distributions of $0.03 per share from net long-term capital gains
during its year ended March 31, 2000, of which 100% represents 20% rate gains.
Of the dividends paid by the Fund from net investment income for the year ended
March 31, 2000, 100% are designated as exempt interest dividends for regular
federal income tax and Ohio personal income tax purposes.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
29
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Linda C. Coughlin* 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* *Scudder Kemper Investments, Inc.
o Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
o Trustee; Venture Partner, Internet
Capital Group
30
<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 Health 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>
31
<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 IRA for Minors
Inherited 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. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, 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.
32
<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.
33
<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
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About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 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 over 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
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Services Group
