This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Managed Municipal Bonds
Annual Report
December 31, 1994
* Offers opportunity for tax-free income by investing primarily in
high-grade, long-term municipal securities.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
20 Financial Statements
23 Financial Highlights
24 Notes to Financial Statements
27 Report of Independent Accountants
28 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
HIGHLIGHTS
* Reflecting steadily rising interest rates, the federally tax-free
(30-day net annualized) yield of Scudder Managed Municipal Bonds
increased to 5.79% on December 31, 1994, from 4.66% on December 31,
1993.
The Fund's Yield and Taxable Equivalent Yields as of December 31, 1994
Taxable-Equivalent
Tax-Free Yield at 36% Tax Taxable-Equivalent Yield at
Yield Bracket 39.6% Tax Bracket
------ ------------------ ---------------------------
5.79% 9.05% 9.59%
* For investors in the top federal tax brackets of 39.6% and 36%, the
Fund's 5.79% tax-free yield as of December 31, 1994, was equivalent to
a 9.59% and 9.05% taxable yield, respectively.
* Following 12 consecutive years of positive performance, the Fund's
total return for 1994 was -6.04%, during a year of negative returns
for most fixed-income investments.
* Worthy of mention, the Fund outpaced its peer group average over the
one-, two-, three-, four-, five-, and 10-year periods through December
31, 1994, according to Lipper Analytical Services. Please see page 6
for additional Lipper performance information.
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
In 1994, United States bonds posted their worst returns in over sixty
years. Bond investors faced a number of obstacles during the year. Chief
among them was a nagging fear of inflation due to a strong economy and a
weak dollar, which spurred the Federal Reserve to hike short-term rates
repeatedly and caused rates to rise significantly on longer-term
investments as well. Other market hurdles included political and economic
uncertainties in many regions of the world, including municipal bankruptcy
in Orange County, California, and Mexico's peso devaluation crisis.
After such a year, it's fair to ask where municipal bond funds go from
here. While we will probably not see the double-digit returns of the early
1990s for some time, we believe this year will bring greater stability to
the bond market as well as the opportunity to earn solid income returns.
Fortunately, despite strong economic growth, inflation has remained
relatively quiescent. Continued low inflation should favor bondholders by
taking much of the pressure off of the Fed to raise interest rates in the
future.
But current global economic trends also will bring occasional episodes
of difficult adjustment for the financial markets. At times like these, it
is essential to have a sound investment plan in place that can weather
market storms. For many investors, such a plan includes current income free
from state and/or federal taxes, in addition to the traditional benefits of
mutual funds--diversification, liquidity, dividend reinvestment, and
professional management.
If you have questions about your Scudder fund, please call Scudder
Investor Relations at 1-800-225-2470. Page 31 provides more information on
how to contact Scudder. Thank you for choosing Scudder Managed Municipal
Bonds to help meet your investing needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Managed Municipal Bonds
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
During a difficult period for bond investors, Scudder Managed
Municipal Bonds posted a -6.04% total return for its fiscal year ended
December 31, 1994. By comparison, the total return of the unmanaged Lehman
Brothers Municipal Bond Index was -5.17%. The Fund's total return includes
price change and reinvested distributions. Consistent with the weakness in
the overall municipal market, the Fund's share price fell to $8.07 at year
end, from $9.09 on December 31, 1993. Offsetting this decline somewhat, the
Fund distributed per share $0.46 in income and $0.02 in capital gain
distributions to shareholders. Reflecting the year's rise in interest
rates, Scudder Managed Municipal Bonds provided a 30-day net annualized
yield of 5.79% as of December 31, 1994, versus 4.66% at the close of 1993.
For investors in the 36% federal income tax bracket, the Fund's yield was
equivalent to a 9.05% taxable yield.
Though Scudder Managed Municipal Bonds' recent performance is well
below returns you have enjoyed in the past, the Fund has consistently
outpaced the average performance of similar funds, as compiled by Lipper
Analytical Services. Please turn to the Performance Update on page 4 for
more information on the Fund's long-term progress, including comparisons to
the Lehman Brothers Municipal Bond Index.
Scudder Managed Municipal Bonds' Average Annual Return Versus That of All
General Municipal Bond Funds
(Returns for periods ended December 31, 1994)
<TABLE>
<CAPTION>
Scudder
Managed
Municipal Number of Funds
Period Bonds Lipper Average Tracked
- -------- --------- ---------------- ---------------
<S> <C> <C> <C>
1 year -6.04% -6.53% 184
2 years 3.19 2.58 127
3 years 5.08 4.59 110
4 years 6.82 6.43 100
5 years 6.81 6.33 88
10 years 9.10 8.95 51
</TABLE>
Source: Lipper Analytical Services, Inc. Lipper is an independent analyst
of investment performance. Performance is historical and not indicative of
future results.
Mixed Market Influences
For municipal bond investors, the market environment in 1994 was
overlaid with a mix of favorable and unfavorable developments. The
favorable news came in two forms: higher income from tax-free investments
and a shrinking supply of bonds. While the 1993 municipal market featured
declining interest rates and a heavy supply of bonds due to a record number
of refinancings, last year's market saw a significant reduction in
refinancing activity due to rising rates. New-issue volume dropped from
$292 billion in 1993 to $163 billion in 1994--a 44% decrease. The low
relative supply of new issues helped support municipal bond prices in an
otherwise challenging year. We expect 1995's supply to be even lower than
last year's, some $135 billion, which should also help bolster prices.
(BAR CHART TITLE) Supply of New Municipal Issues (in billions)
(CHART DATA)
<TABLE>
<CAPTION>
<S> <C>
1993 292
1994 163
1995 135*
</TABLE>
*Estimated
On the unfavorable list of developments was the Orange County,
California, financial crisis, which occurred after the county's investment
fund sustained significant losses. In short, Orange County's investment
fund managers had borrowed heavily in recent years to purchase bonds in the
belief that long-term interest rates would continue to decline--even
during 1994 when rates were on the rise. We are pleased to report that
Scudder Managed Municipal Bonds held no direct or indirect investments in
Orange County when the County declared bankruptcy. The crisis therefore had
no major impact on the Fund, other than temporarily pushing down the prices
of California municipal bonds in general.
Another challenge for the municipal market in 1994 was the impact of a
recent tax law provision that caused municipal bond funds to owe income
taxes on certain bonds purchased at prices below par (or face value).
Municipal bonds priced at par or at a discount to par have since become
less attractive to tax-wary investors. On the other hand, bonds priced at a
premium are now more attractive to many investors than they were
previously. We are currently working to keep the provision's impact on
Scudder's tax-free portfolios to a minimum.
Portfolio Review
Scudder Managed Municipal Bonds' overall investment strategy hasn't
changed, despite the challenges of the past year. In conjunction with our
primary goals--maximizing the Fund's yield while maintaining as much price
stability as possible--we have continued to purchase high-grade,
longer-term municipal bonds. On December 31, bonds with effective
maturities between 10 and 20 years represented approximately 56% of the
Fund's portfolio. We believe bonds in this maturity range offer attractive
value, providing nearly as much yield as bonds with longer (30-year)
maturities--and with less price volatility. Also, we are in the process of
making some shifts in maturity structure to de-emphasize shorter-term bonds
in the coming months, especially those in the three- to seven-year range.
If interest rates do rise further in 1995, these bonds will be impacted
most strongly.
Diversification among our holdings remains an important strategy for
Scudder Managed Municipal Bonds, because it allows us to spread the
portfolio's risk over a large number of geographic areas, bond sectors, and
maturities. The Fund held securities issued in 29 states plus the District
of Columbia as of December 31, 1994. In addition, Fund assets were
distributed among electric utility revenue bonds, general obligation bonds,
lease rentals, and several other sectors. And portfolio quality remains
high, with approximately 73% of Fund assets rated AAA, AA, or the
equivalent. In fact, the Fund does not hold any bonds rated below
investment grade. Securities are rated by Standard & Poor's, Moody's
Investors Service, Fitch Investors Service, or assigned an equivalent
rating by Scudder. The Portfolio Summary on page 5 provides more
information about the Fund's holdings, including quality, maturity, and
sector representation.
Call protection also remains part of our long-term strategy for the
Fund. When long-term interest rates on municipal bonds are declining, as
they were in the three years prior to 1994, we believe it is important that
a significant portion of the Fund's bonds be protected from being called in
by their issuers before maturity. (Generally, a bond is called in by its
issuer so that it can be refinanced at a lower prevailing rate.) We feel
our call-protection strategy provides a more reliable income stream than
would exist if the portfolio held significant amounts of high-yielding
bonds that could be called in before their stated maturity date. In the
current environment of rising rates, we continue to rely on call-protected
bonds for their more stable characteristics, and because at present we
believe they represent good value.
Outlook for 1995
We believe a combination of continued economic growth and restrained
inflation will characterize 1995. Even so, the Federal Reserve will be
watching carefully for economic statistics that carry additional
inflationary warning signs. As of this writing, the Fed seems prepared to
increase short-term interest rates one or two more times in 1995 as needed.
Additional Fed actions increase the likelihood that economic growth will be
subdued as early as 1996--a scenario that historically has boded well for
bonds. Though there is room in 1995 for short- and intermediate-term rates
to rise further, we believe long-term interest rates will stabilize and
remain within a fairly tight range for most of this year. Such an
environment would enable the Fund to capture higher long-term tax-free bond
yields with less share price volatility than was the case last year. Our
strategy reflects our ongoing commitment to seek high relative tax-free
income and competitive total returns.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/Philip G. Condon
Donald C. Carleton Philip G. Condon
Scudder Managed Municipal Bonds: A Team Approach to Investing
Scudder Managed Municipal Bonds is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are
supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across
the United States and abroad. We believe our team approach benefits Fund
investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager Donald C. Carleton has had responsibility for
Scudder Managed Municipal Bonds' day-to-day operations since 1986 and
joined Scudder in 1983. Don, who has more than 25 years of experience in
the investment industry, also serves as Lead Portfolio Manager for Scudder
Medium Term Tax Free Fund and as a Portfolio Manager of Scudder California
and New York Tax Free Funds and Scudder Tax Free Money Fund. Philip G.
Condon, Portfolio Manager, became a member of the team in 1988 and has
worked at Scudder since 1983. Phil, who has more than 15 years of
experience in municipal investing, also is Lead Portfolio Manager of
Scudder High Yield Tax Free Fund and Scudder Massachusetts Tax Free Fund,
and is a Portfolio Manager of Scudder Ohio and Pennsylvania Tax Free Funds.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
INVESTMENT PORTFOLIO as of December 31, 1994
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.5% SHORT-TERM MUNICIPAL INVESTMENTS
-----------------------------------------------------------------------------------------
CALIFORNIA Southern California Public Power Authority,
Power Project Revenue Refunding, Palo Verde,
Auction Reset, 3.5%, 7/1/12* (b) (d)
(Cost $3,350,000) . . . . . . . . . . . . . . . 3,350,000 AAA 3,350,000
-----------
99.5% LONG-TERM MUNICIPAL INVESTMENTS
-----------------------------------------------------------------------------------------
ALASKA North Slope Borough, AK, General Obligation:
Series B, Zero Coupon, 1/1/03 (d) . . . . . . . 8,000,000 AAA 4,878,085
Series B, Zero Coupon, 6/30/04 (d) . . . . . . 15,000,000 AAA 8,230,948
Series B, Zero Coupon, 6/30/05 (d) . . . . . . 18,200,000 AAA 9,341,878
Series I, 6.6%, 6/30/96 (d) . . . . . . . . . . 1,000,000 AAA 1,017,320
ARIZONA Maricopa County, AZ, School District #28,
Kyrene Elementary School, Series B,
Zero Coupon, 1/1/06 (d) . . . . . . . . . . . . 4,905,000 AAA 2,434,695
Paradise Valley, AZ, Unified School District #69,
Maricopa County, Zero Coupon, 7/1/02 (d) . . . 2,100,000 AAA 1,344,966
ARKANSAS Arkansas Development Finance Authority,
Single Family Mortgage Revenue, Series B,
7.7%, 12/1/14 . . . . . . . . . . . . . . . . . 2,870,000 A 2,909,175
CALIFORNIA California General Obligation:
6.25%, 10/1/07 (d) . . . . . . . . . . . . . . 4,000,000 AAA 4,027,440
6.25%, 4/1/08 (d) . . . . . . . . . . . . . . . 5,000,000 AAA 4,999,300
6.6%, 2/1/09 (d) . . . . . . . . . . . . . . . 15,600,000 AAA 15,972,996
California Housing Finance Agency, Multi-Unit
Rental Housing, Series A, 7.7%, 8/1/10 . . . . 1,000,000 A 1,053,890
California State Public Works Board Lease Revenue:
Department of Corrections, Del Norte/Imperial,
Series C, 4.875%, 12/1/06 (d) . . . . . . . . 10,250,000 AAA 8,805,980
Regents of The University of California,
Series A, 5.5%, 6/1/14 . . . . . . . . . . . . 9,350,000 A 7,829,036
California Statewide Community Development
Corporation, Certificate of Participation,
Lutheran Homes, 5.5%, 11/15/08 . . . . . . . . 2,250,000 A 1,953,247
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Los Angeles County, CA, Certificate of Participation,
Disney Package:
Zero Coupon, 9/1/07 . . . . . . . . . . . . . . . . 4,030,000 A 1,644,764
Zero Coupon, 9/1/09 . . . . . . . . . . . . . . . . 5,425,000 A 1,895,007
Los Angeles County, CA, Public Works Financing
Authority, Capital Construction, 5%, 3/1/06. . . . . . 5,850,000 AA 5,168,826
San Joaquin, CA, Certificate of Participation,
County Public Facilities Project, 5.5%, 11/15/13 (d) . 3,895,000 AAA 3,316,748
San Jose, CA, Redevelopment Agency, Merged
Area Redevelopment Project, Tax Allocation, 6%,
8/1/08 (d) . . . . . . . . . . . . . . . . . . . . . 1,500,000 AAA 1,461,870
COLORADO Colorado Housing Finance Authority Revenue,
Series A:
8.1%, 10/1/05 . . . . . . . . . . . . . . . . . . . 2,030,000 AA 2,252,346
8.15%, 10/1/06 . . . . . . . . . . . . . . . . . . . 2,145,000 AA 2,384,983
8.25%, 10/1/10 . . . . . . . . . . . . . . . . . . . 1,940,000 AA 2,141,197
8.25%, 10/1/11 . . . . . . . . . . . . . . . . . . . 1,680,000 AA 1,848,874
8.25%, 10/1/12 . . . . . . . . . . . . . . . . . . . 1,945,000 AA 2,134,307
Colorado Housing Finance Authority Revenue,
Multi-Family Mortgage, Series A:
8.2%, 10/1/08 . . . . . . . . . . . . . . . . . . . 2,510,000 AA 2,788,610
8.2%, 10/1/09 . . . . . . . . . . . . . . . . . . . 2,725,000 AA 3,008,209
8.15%, 10/1/07 . . . . . . . . . . . . . . . . . . . 2,320,000 AA 2,578,054
Colorado Tax and Revenue Anticipation Note,
4.5%, 6/27/95 . . . . . . . . . . . . . . . . . . . . 3,500,000 MIG1 3,495,765
Denver, CO, City and County Airport Revenue,
8.875%, 8/1/15 . . . . . . . . . . . . . . . . . . . 1,200,000 BBB 1,220,280
CONNECTICUT Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Series A, 5.8%, 10/1/25. . . . . 3,000,000 AA 2,990,430
DISTRICT OF COLUMBIA District of Columbia, Certificate of Participation,
Series 1993, 6.875%, 1/1/03 . . . . . . . . . . . . . 2,500,000 BBB 2,461,625
District of Columbia, General Obligation:
Series B, Zero Coupon, 6/1/03 (d) . . . . . . . . . . 2,000,000 AAA 1,183,680
5.3%, 6/1/05 (d) . . . . . . . . . . . . . . . . . . 1,350,000 AAA 1,207,939
Series A,5.875%, 6/1/05 (d) . . . . . . . . . . . . . 3,300,000 AAA 3,147,837
Series B, 5.5%, 6/1/07 (d) . . . . . . . . . . . . . 1,000,000 AAA 910,050
FLORIDA Dade County, FL, Aviation Department,
Series K, 9.6%, 10/1/05 . . . . . . . . . . . . . . . 2,500,000 A 2,506,800
Florida Housing Finance Revenue, Home
Ownership Mortgage Revenue, GNMA Backed, "A",
8.595%, 8/1/95 . . . . . . . . . . . . . . . . . . . 3,020,000 AAA 3,110,600
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA Burke County, GA, Development Authority, Pollution
Control Revenue, Ogelthorpe Power Corp.,
Vogtle Project, 7.7%, 1/1/06 (d) . . . . . . . . . 11,000,000 AAA 12,312,520
Monroe County, GA, Development Authority,
Pollution Control, Ogelthorpe Power Corporation,
Scherer Project, 6.7%, 1/1/09 . . . . . . . . . . . 3,255,000 AA 3,260,826
Municipal Electric Authority of Georgia,
Power Revenue:
Series V, 6.5%, 1/1/12 . . . . . . . . . . . . . . 5,000,000 AA 5,005,100
4th Crossover, Series X, Project #1, 6.5%, 1/1/12. 3,500,000 AA 3,408,790
HAWAII City and County of Honolulu, HI, General Obligation,
Series 1990 A,Refunding Bond, 7.25%, 7/1/02 . . . . 1,500,000 AA 1,629,810
ILLINOIS Central Lake County, IL, Joint Action Water System
Revenue, Zero Coupon, 5/1/04 (d) . . . . . . . . . 2,445,000 AAA 1,370,398
Chicago, IL, General Obligation, Emergency
Telephone System, 5.6%, 1/1/09 (d) . . . . . . . . 7,200,000 AAA 6,505,920
Chicago, IL, General Obligation Lease, Board of
Education, Series A, 6.25%, 1/1/15 (d) . . . . . . 2,725,000 AAA 2,599,568
Chicago, IL, Motor Fuel Tax Revenue,
5.375%, 1/1/14 (d) . . . . . . . . . . . . . . . . 5,000,000 AAA 4,260,500
Chicago, IL, Public Building Commission, Building
Revenue, Series A:
5.25%, 12/1/07 (d) . . . . . . . . . . . . . . . . 5,000,000 AAA 4,467,050
5.25%, 12/1/08 (d) . . . . . . . . . . . . . . . . 2,655,000 AAA 2,336,134
Chicago, IL, Wastewater Transmission,
5.375%, 1/1/13 (d) . . . . . . . . . . . . . . . . 2,000,000 AAA 1,728,980
Du-Page, IL, Industrial Development Revenue,
Weyerhaeuser Company Project, Series 1983,
8.65%, 11/1/08 . . . . . . . . . . . . . . . . . . 3,600,000 NR 3,705,984
Illinois Development Finance Authority Refunding
Revenue, Commonwealth Edison Company,
5.85%, 1/15/14 . . . . . . . . . . . . . . . . . . 5,000,000 BBB 4,206,050
Illinois Educational Facilities Authority,
Loyola University, Zero Coupon, 7/1/05 (d) . . . . . 3,100,000 AAA 1,599,879
Illinois Health Facilities Authority:
Delnor Community Hospital, 5.5%, 5/15/13 (d) . . . . 1,500,000 AAA 1,297,020
Memorial Medical Center-Springfield,
5.25%, 10/1/09 (d) . . . . . . . . . . . . . . . . 1,000,000 AAA 859,450
Illinois State Sales Tax Revenue, Series P,
6.5%, 6/15/13 . . . . . . . . . . . . . . . . . . . 2,100,000 AAA 2,055,795
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
----------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Northern Illinois University, Board of Regents,
Series 1992, Zero Coupon:
4/1/05 (d) . . . . . . . . . . . . . . . . . . 1,865,000 AAA 977,782
10/1/05 (d) . . . . . . . . . . . . . . . . . 1,865,000 AAA 947,457
4/1/06 (d) . . . . . . . . . . . . . . . . . . 1,865,000 AAA 911,108
10/1/06 (d) . . . . . . . . . . . . . . . . . 1,865,000 AAA 882,555
4/1/07 (d) . . . . . . . . . . . . . . . . . . 1,865,000 AAA 847,829
10/1/07 (d) . . . . . . . . . . . . . . . . . 1,865,000 AAA 820,973
Northwest Suburban Municipal Joint Action Water
Agency, IL, ETM, 6.5%, 5/1/15** . . . . . . . . 2,000,000 AAA 1,966,560
Oak Lawn, IL, Water and Sewer Revenue,
Series A, Zero Coupon:
10/1/03 (d) . . . . . . . . . . . . . . . . . 1,295,000 AAA 758,352
10/1/04 (d) . . . . . . . . . . . . . . . . . 1,295,000 AAA 707,316
10/1/05 (d) . . . . . . . . . . . . . . . . . 1,295,000 AAA 657,886
10/1/06 (d) . . . . . . . . . . . . . . . . . 1,295,000 AAA 612,820
Rosemont, IL, Zero Coupon:
Tax Increment, 12/1/04 (d) . . . . . . . . . . 6,000,000 AAA 3,243,480
Tax Increment-3, Series C, 12/1/05 (d) . . . . 7,060,000 AAA 3,549,203
State University Retirement System, IL, Special
Revenue, Zero Coupon, 10/1/05 (d) . . . . . . . 7,000,000 AAA 3,556,140
University of Chicago, IL, Hospital Refunding,
5.5%, 8/15/08 (d) . . . . . . . . . . . . . . . 2,500,000 AAA 2,242,700
Will County, IL, School District #201-U, Crete
Monee, Zero Coupon, 12/15/06 (d) . . . . . . . . 3,725,000 AAA 1,739,799
Winnebago County, IL, School District #122:
6.55%, 6/1/09 (d) . . . . . . . . . . . . . . . 1,675,000 AAA 1,695,150
6.55%, 6/1/10 (d) . . . . . . . . . . . . . . . 1,825,000 AAA 1,837,173
INDIANA Indiana Health Facilities Finance Authority,
Hospital Revenue, Ancilla Systems Inc.,
Series A, 6%, 7/1/18 (d) . . . . . . . . . . . 3,965,000 AAA 3,591,100
Indiana Municipal Power Agency, Power Supply
System, Series B:
6%, 1/1/12 (d) . . . . . . . . . . . . . . . . 1,750,000 AAA 1,647,047
5.5%, 1/1/16 (d) . . . . . . . . . . . . . . . 24,860,000 AAA 21,447,717
Indiana Transportation Finance Authority, Highway
Revenue, Series A:
5.75%, 6/1/12 (d) . . . . . . . . . . . . . . 5,000,000 AAA 4,544,300
5.25%, 6/1/15 (d) . . . . . . . . . . . . . . 10,330,000 AAA 8,625,653
Porter County, IN, Hospital Authority, Porter
Memorial Hospital, Series 1993:
5.3%, 6/1/06 (d) . . . . . . . . . . . . . . . 1,570,000 AAA 1,437,445
5.4%, 6/1/07 (d) . . . . . . . . . . . . . . . 1,660,000 AAA 1,509,886
5.4%, 6/1/08 (d) . . . . . . . . . . . . . . . 1,750,000 AAA 1,569,155
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA Bastrop, LA, Industrial Development Board Pollution
Control Revenue, International Paper Company
Project, 6.9%, 3/1/07 . . . . . . . . . . . . . . . 16,750,000 A 17,204,931
New Orleans, LA, General Obligation, Zero Coupon:
9/1/05 (d) . . . . . . . . . . . . . . . . . . . . 7,500,000 AAA 3,862,050
9/1/06 (d) . . . . . . . . . . . . . . . . . . . . 15,775,000 AAA 7,572,947
West Feliciana Parish, LA, Pollution Control
Revenue, Gulf States Utility Project,
Series A, 10.625%, 5/1/14 . . . . . . . . . . . . . 6,500,000 AA 6,715,410
MAINE Maine Housing Authority, Mortgage Purchase
Revenue, 1987 Series A2, 7.65%, 11/15/15 . . . . . . 2,345,000 A 2,372,061
MARYLAND Northeast Maryland Waste Disposal Authority,
Southwest Resource Recovery System Revenue:
6.85%, 1/1/99 (d) . . . . . . . . . . . . . . . . 1,925,000 AAA 2,008,064
6.9%, 1/1/00 (d) . . . . . . . . . . . . . . . . . 3,195,000 AAA 3,345,708
7.2%, 1/1/06 (d) . . . . . . . . . . . . . . . . . 3,440,000 AAA 3,699,961
7.2%, 1/1/07 (d) . . . . . . . . . . . . . . . . . 3,390,000 AAA 3,618,350
MASSACHUSETTS Lowell, MA, Bond Anticipation Note,
4.625%, 3/1/95 . . . . . . . . . . . . . . . . . . . 2,550,000 AA 2,551,071
Massachusetts Bay Transportation Authority,
General Transportation System:
5.25%, 3/1/06 (d) . . . . . . . . . . . . . . . . 7,500,000 AAA 6,868,950
6.2%, 3/1/16 . . . . . . . . . . . . . . . . . . . 2,500,000 A 2,359,375
Massachusetts College Building Authority, Series A:
7.5%, 5/1/10 . . . . . . . . . . . . . . . . . . . 4,110,000 A 4,433,827
7.5%, 5/1/14 . . . . . . . . . . . . . . . . . . . 3,750,000 A 4,119,450
Massachusetts General Obligation:
6.5%, 5/1/05 (d) . . . . . . . . . . . . . . . . . 1,000,000 AAA 1,020,630
Series B, 5.3%, 11/1/06 (d) . . . . . . . . . . . . 4,000,000 AAA 3,663,200
Massachusetts Port Authority, Series B,
9.375%, 7/1/15 . . . . . . . . . . . . . . . . . . 1,155,000 AA 1,201,061
Massachusetts Water Resource Authority:
Series A, 6.5%, 7/15/09 . . . . . . . . . . . . . . 7,625,000 A 7,589,239
Series A, 6.5%, 7/15/19 . . . . . . . . . . . . . . 13,445,000 A 12,981,685
Series C, 6%, 12/1/11 . . . . . . . . . . . . . . . 10,000,000 A 9,344,900
New England Education Loan Marketing Corporation,
Student Loan Revenue Refunding,
Series F, 4.75%, 7/1/98 . . . . . . . . . . . . . . 5,000,000 A 4,744,500
MICHIGAN Michigan Strategic Fund, Limited Obligation,
Revenue Refunding, Ford Motor Company Project,
Series A, 7.1%, 2/1/06 . . . . . . . . . . . . . . . 3,000,000 A 3,104,430
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MONTANA Montana Board of Housing, Single-Family Program,
Federally Insured or Guaranteed Mortgage Loans,
Zero Coupon, 6/1/10 . . . . . . . . . . . . . . . 27,940,000 AA 5,484,902
NEVADA Nevada Housing Division:
Series A, Zero Coupon, 10/15/96 . . . . . . . . . 43,320,000 AA 4,151,356
Single Family Program, Series R, 5.95%, 4/1/05 . . 5,005,000 AA 4,760,155
NEW YORK Metropolitan Transportation Authority of New York,
Transit Facilities Revenue:
7%, 7/1/02 . . . . . . . . . . . . . . . . . . . 1,595,000 BBB 1,670,603
Service Contract, Series O, 5.75%, 7/1/13 . . . 6,775,000 BBB 5,903,667
New York City, General Obligation:
Series A, 6.37%, 8/1/04 . . . . . . . . . . . . . 5,000,000 A 4,886,050
Series B, 7.1%, 2/1/97 . . . . . . . . . . . . . 2,695,000 A 2,754,694
Series D, 7%, 8/1/02 . . . . . . . . . . . . . . 3,000,000 A 3,054,960
Series D, 7%, 8/1/02 (d) . . . . . . . . . . . . 3,250,000 AAA 3,450,330
Series E, 5.5%, 8/1/05 . . . . . . . . . . . . . 6,000,000 A 5,392,560
Series G, 5.25%, 8/1/03 . . . . . . . . . . . . . 1,250,000 A 1,115,000
Series H, 7.2%, 8/1/01 (d) . . . . . . . . . . . 2,260,000 AAA 2,453,230
Series H, 5.8%, 8/1/04 . . . . . . . . . . . . . 5,000,000 A 4,651,750
Series H, 7%, 2/1/05 . . . . . . . . . . . . . . 4,000,000 A 4,069,400
New York State Development Corporation,
Correctional Facilities Revenue Refunding,
Series A, 5.4%, 1/1/06 . . . . . . . . . . . . . 1,000,000 BBB 891,350
New York State Dormitory Authority:
City University System, Consolidated Revenue:
Series A, 5.75%, 7/1/06 . . . . . . . . . . . . 9,000,000 BBB 8,342,280
Series E, 5.75%, 7/1/06 . . . . . . . . . . . . 5,255,000 BBB 4,870,965
College and University Pooled Capital Program,
7.8%, 12/1/05 (d) . . . . . . . . . . . . . . . 4,955,000 AAA 5,344,067
State University Educational Facility Revenue:
Series A, 5.375%, 5/15/07 (d) . . . . . . . . . 5,000,000 AAA 4,576,100
Series B, 5.25%, 5/15/10 (d) . . . . . . . . . . 5,000,000 AAA 4,342,800
New York State Medical Care Facilities, Finance
Agency Revenue, Mount Sinai Hospital, Series 1983,
5.95%, 8/15/09 . . . . . . . . . . . . . . . . . 5,870,000 AAA 5,796,273
New York State Mortgage Agency Revenue, Home
Owner Mortgage, Series 00, 7.9%, 10/1/98 . . . . 415,000 AA 419,698
New York State Urban Development Corporation
Lease Revenue, Correctional Facilities, Series A:
5.3%, 1/1/05 . . . . . . . . . . . . . . . . . . 2,625,000 BBB 2,342,629
5.4%, 1/1/06 . . . . . . . . . . . . . . . . . . 5,000,000 BBB 4,456,750
5.45%, 1/1/07 . . . . . . . . . . . . . . . . . 6,475,000 BBB 5,736,526
5.1%, 1/1/08 . . . . . . . . . . . . . . . . . . 6,735,000 AAA 5,872,987
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NORTH CAROLINA North Carolina Eastern Municipal Power Agency:
Series A, 6.5%, 1/1/18 . . . . . . . . . . . . 4,000,000 A 3,645,840
Series C, 7%, 1/1/07 . . . . . . . . . . . . . 7,965,000 A 8,035,729
North Carolina Municipal Power Agency #1,
Catawba Electric Refunding Revenue:
5.25%, 1/1/09 . . . . . . . . . . . . . . . . 8,500,000 A 7,377,660
6.25%, 1/1/17 . . . . . . . . . . . . . . . . 2,700,000 A 2,502,819
5%, 1/1/18 (d) . . . . . . . . . . . . . . . . 7,805,000 AAA 6,220,975
RHODE ISLAND Rhode Island Convention Center Authority,
Refunding Revenue, 1993 Series B,
5.25%, 5/15/15 (d) . . . . . . . . . . . . . . 2,250,000 AAA 1,861,785
Rhode Island Housing and Mortgage Finance Corp.,
Home Ownership Opportunity Bond, Series 2,
7.5%, 9/1/95 . . . . . . . . . . . . . . . . . 2,690,000 AA 2,704,418
SOUTH CAROLINA Piedmont Municipal Power Agency, SC, Electric
Revenue, 5.5%, 1/1/10 (d) . . . . . . . . . . . 2,600,000 AAA 2,316,600
TENNESSEE Knox County, TN, Health, Education and Housing
Facilities Board, Fort Sanders Alliance,
7.25%, 1/1/09 (d) . . . . . . . . . . . . . . . 3,250,000 AAA 3,515,492
TEXAS Austin TX, Utility System Revenue Refunding,
Series A, Zero Coupon, 5/15/03 (d) . . . . . . 2,890,000 AAA 1,743,219
Dallas Fort Worth, International Airport, TX,
Revenue, Series A:
7.8%, 11/1/07 (d) . . . . . . . . . . . . . . 2,390,000 AAA 2,690,065
7.375%, 11/1/09 (d) . . . . . . . . . . . . . 4,500,000 AAA 4,837,905
7.375%, 11/1/11 (d) . . . . . . . . . . . . . 5,000,000 AAA 5,333,950
Harris County, TX, Toll and Sub Lien, Series A,
Zero Coupon, 8/15/04 (d) . . . . . . . . . . . 4,050,000 AAA 2,246,373
Harris County, Texas, Toll Road Revenue,
Subordinate Lien, General Obligation, Series A,
6.5%, 8/15/13 (d) . . . . . . . . . . . . . . . 4,000,000 AAA 3,982,520
Houston, TX, Water and Sewer System Authority,
Zero Coupon, 12/1/07 (d) . . . . . . . . . . . 3,400,000 AAA 1,495,626
Houston, TX, Water Conveyance System Contract,
Certificate of Participation, Series J, 6.125%,
12/15/05 (d) . . . . . . . . . . . . . . . . . 2,500,000 AAA 2,502,850
Lower Colorado River Authority, TX, Revenue
Refunding, Zero Coupon, 1/1/03 (d) . . . . . . 8,900,000 AAA 5,490,410
San Antonio, TX, Airport Systems Revenue
Refunding, 7%, 7/1/02 (d) . . . . . . . . . . . 1,695,000 AAA 1,811,972
San Antonio, TX, Electric and Gas, Revenue
Refunding, Series A, Zero Coupon, 2/1/05 (d) . . 7,000,000 AAA 3,763,480
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTAH Intermountain Power Agency, UT, Power Supply
Revenue:
Series C, 5.25%, 7/1/14 . . . . . . . . . . . . . 4,000,000 AA 3,320,640
Series I, Crossover Refunded, 9%, 7/1/19 . . . . . 2,175,000 AA 2,248,145
Salt Lake City, UT, Hospital Revenue,
Intermountain Health Care, Series 1992,
Inversed Inflow, 5.46%, 2/15/12*** . . . . . . . . 1,500,000 AA 1,318,440
VIRGINIA Virginia Beach, VA, Development Authority, Virginia
Beach General Hospital Project,
5.125%, 2/15/18 (d) . . . . . . . . . . . . . . . . 3,000,000 AAA 2,409,330
WASHINGTON Washington Healthcare Facilities Authority:
Empire Health Services-Spokane,
5.8%, 11/1/08 (d) . . . . . . . . . . . . . . . . 3,865,000 AAA 3,613,466
Franciscan Health System-St. Joseph's/Tacoma:
5.4%, 1/1/07 (d) . . . . . . . . . . . . . . . . . 2,000,000 AAA 1,831,080
5.4%, 1/1/08 (d) . . . . . . . . . . . . . . . . . 2,645,000 AAA 2,387,932
Sisters of St. Joseph of Peace, 5.3%, 3/1/09 (d) . . 4,315,000 AAA 3,778,085
Washington Public Power Supply System,
Nuclear Project #1, Revenue Refunding:
Series A, 7.15%, 7/1/02 (d) . . . . . . . . . . . 2,550,000 AAA 2,706,340
Series A, Zero Coupon, 7/1/07 (d) . . . . . . . . 8,570,000 AAA 3,833,704
Series A, 7%, 7/1/11 . . . . . . . . . . . . . . . 4,725,000 AA 4,765,966
Series B, 7.25%, 7/1/09 . . . . . . . . . . . . . 11,350,000 AA 11,763,026
Series B, 5.5%, 7/1/06 . . . . . . . . . . . . . . 4,915,000 AA 4,447,240
Washington Public Power Supply System,
Nuclear Project #2, Refunding Revenue:
Series A, 7.25%, 7/1/06 . . . . . . . . . . . . . 7,000,000 AA 7,420,630
Series A, 6%, 7/1/07 . . . . . . . . . . . . . . . 7,000,000 AA 6,646,220
Series B, 5.5%, 7/1/06 . . . . . . . . . . . . . . 4,000,000 AA 3,619,320
Series B, 7%, 7/1/12 . . . . . . . . . . . . . . . 11,385,000 AA 11,417,675
Series C, 7.2%, 7/1/99 . . . . . . . . . . . . . . 5,000,000 AA 5,239,550
Washington Public Power Supply System,
Nuclear Project #3, Refunding Revenue:
Series A, Zero Coupon, 7/1/06 (d) . . . . . . . . 1,380,000 AAA 663,518
Series B, 7.2%, 7/1/99 . . . . . . . . . . . . . . 1,000,000 AA 1,047,910
Series B, Prerefunded, 7.25%, 1/1/00 (e) . . . . . 5,000,000 AAA 5,417,600
Series B, Zero Coupon, 7/1/02 (d) . . . . . . . . 11,925,000 AAA 7,593,124
Series B, 7.375%, 7/1/04 . . . . . . . . . . . . . 750,000 AA 796,672
Series B, Zero Coupon, 7/1/06 (d) . . . . . . . . 5,555,000 AAA 2,666,511
Series B, 5.5%, 7/1/06 . . . . . . . . . . . . . . 10,160,000 AA 9,193,073
Series B, 5.65%, 7/1/08 . . . . . . . . . . . . . 3,000,000 AA 2,698,350
Series C, 5%, 7/1/06 . . . . . . . . . . . . . . . 10,000,000 AA 8,508,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WISCONSIN Green Bay, WI, Industrial Development Revenue,
Weyerhaeuser Company Project,
Series A, 9%, 9/1/06 . . . . . . . . . . . . . . . . . 1,700,000 A 1,731,008
Wisconsin Health and Educational Facilities Authority:
Lutheran Hospital, Lacrosse, L. Benevolent,
5.6%, 2/15/09 (d) . . . . . . . . . . . . . . . . . . 2,000,000 AAA 1,780,820
Hospital Sisters Services Inc., Obligated Group:
5.25%, 6/1/10 (d) . . . . . . . . . . . . . . . . . . 3,250,000 AAA 2,764,905
5.375%, 6/1/13 (d) . . . . . . . . . . . . . . . . . 1,500,000 AAA 1,275,885
WYOMING Wyoming Community Development Authority,
Single Family Mortgage, 5.85%, 6/1/13 . . . . . . . . 3,000,000 AA 2,681,280
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $705,704,341) . . . . . . . . . . . . . . . . . 691,432,632
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $709,054,341) (a) . . . . . . . . . . . . . . . 694,782,632
===========
(a) The cost for federal income tax purposes was $709,054,341. At December 31, 1994, net unrealized depreciation for all
securities based on tax cost was $14,271,709. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of $14,571,264 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over market value of $28,842,973.
(b) At December 31, 1994 these securities, in part, have been pledged to cover initial margin requirements for open
futures contracts.
AT DECEMBER 31, 1994, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
</TABLE>
<TABLE>
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
Muni Bond Index Mar. 1995 150 12,248,500 12,735,936
30 Year U.S.
Treasury Bonds Mar. 1995 100 9,939,625 9,915,625
--- ---------- ----------
250 22,188,125 22,651,561
=== ========== ==========
Total net unrealized depreciation on open futures contracts sold short . . (463,436)
==========
(c) All of the securities held have been determined to be of appropriate credit quality as required by the Fund's
nvestment objectives. Credit ratings are either Standard & Poor's Ratings Group, Moody's Investors Service, Inc. or
Fitch Investors Service, Inc. Unrated securities (NR) have been determined to be of comparable quality to rated
eligible securities.
(d) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC, FSA or MBIA.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
(e) Prerefunded: Bonds which are prerefunded are collateralized
by U.S. Treasury securities which are held in escrow and are
used to pay principal and interest on tax-exempt issue and to
retire the bonds in full at the earliest refunding date.
* Floating rate and monthly, weekly, or daily demand notes are
securities whose yields vary with a designated market index or
market rate, such as the coupon-equivalent of the Treasury bill
rate. Variable rate demand notes are securities whose yields
are periodically reset at levels that are generally comparable
to tax-exempt commercial paper. These securities are payable on
demand within seven calendar days and normally incorporate an
irrevocable letter of credit or line of credit from a major bank.
These notes are carried, for purposes of calculating average
weighted maturity, at the longer of the period remaining until
the next rate change or to the extent of the demand period.
** 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.
*** Inverse floating rate notes are instruments whose yields have an
inverse relationship to benchmark interest rates. These securities
are shown at their rates as of December 31, 1994.
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $709,054,341)
(Note A) . . . . . . . . . . . . . . . . . . . . . . $ 694,782,632
Cash . . . . . . . . . . . . . . . . . . . . . . . . . 442,247
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . 13,951,764
Investments sold . . . . . . . . . . . . . . . . . . 18,272,500
Fund shares sold . . . . . . . . . . . . . . . . . . 629,036
Daily variation margin on open futures contracts
(Note A) . . . . . . . . . . . . . . . . . . . . 61,171
Other assets . . . . . . . . . . . . . . . . . . . . . 10,366
-------------
Total assets . . . . . . . . . . . . . . . . . . 728,149,716
LIABILITIES
Payables
Investments purchased . . . . . . . . . . . . . . . $ 15,687,240
Dividends . . . . . . . . . . . . . . . . . . . . . 1,623,992
Fund shares redeemed . . . . . . . . . . . . . . . . 1,889,824
Accrued management fee (Note C) . . . . . . . . . . 305,782
Other accrued expenses (Note C) . . . . . . . . . . 94,189
-----------
Total liabilities . . . . . . . . . . . . . . . . 19,601,027
--------------
Net assets, at market value . . . . . . . . . . . . . . $ 708,548,689
==============
NET ASSETS
Net assets consist of:
Unrealized depreciation on:
Investments . . . . . . . . . . . . . . . . . . . $ (14,271,709)
Futures . . . . . . . . . . . . . . . . . . . . . (463,436)
Accumulated net realized loss . . . . . . . . . . . (6,673,038)
Shares of beneficial interest . . . . . . . . . . . 878,390
Additional paid-in capital . . . . . . . . . . . . . 729,078,482
--------------
Net assets, at market value . . . . . . . . . . . . . . $ 708,548,689
==============
NET ASSET VALUE, offering and redemption price per
share ($708,548,689 -:- 87,839,034 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) . . . . . . . $8.07
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 48,874,765
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . $ 4,119,589
Services to shareholders (Note C) . . . . . . . . . . . . 520,157
Trustees' fees (Note C) . . . . . . . . . . . . . . . . . 46,491
Custodian fees . . . . . . . . . . . . . . . . . . . . . 192,276
Reports to shareholders . . . . . . . . . . . . . . . . . 79,956
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . 24,493
Auditing . . . . . . . . . . . . . . . . . . . . . . . . 53,368
State registration . . . . . . . . . . . . . . . . . . . 15,157
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 60,970 5,112,457
------------------------------------
Net investment income . . . . . . . . . . . . . . . . . . 43,762,308
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . (2,021,424)
Futures . . . . . . . . . . . . . . . . . . . . . . . 181,861 (1,839,563)
-------------
Net unrealized depreciation during
the period on:
Investments . . . . . . . . . . . . . . . . . . . . . (95,472,086)
Futures . . . . . . . . . . . . . . . . . . . . . . . (515,311) (95,987,397)
------------------------------------
Net loss on investment transactions . . . . . . . . . . . (97,826,960)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . $ (54,064,652)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- ----------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . $ 43,762,308 $ 46,552,598
Net realized gain (loss) from investment
transactions . . . . . . . . . . . . . . . . . (1,839,563) 27,884,563
Net unrealized appreciation (depreciation)
on investment transactions
during the period . . . . . . . . . . . . . . (95,987,397) 35,631,436
------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . . (54,064,652) 110,068,597
------------- -------------
Distributions to shareholders:
From net investment income ($.46 and $.47 per
share, respectively) . . . . . . . . . . . . . (43,762,308) (46,552,598)
------------- -------------
From net realized gains from investment
transactions ($.29 per share) . . . . . . . . -- (27,858,435)
------------- -------------
In excess of net realized gains ($.02 per share). (1,966,549) --
------------- -------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . 131,369,207 162,473,484
Net asset value of shares issued to
shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . 25,132,815 45,760,164
Cost of shares redeemed . . . . . . . . . . . . . (258,254,784) (163,363,165)
------------- -------------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . . (101,752,762) 44,870,483
------------- -------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . (201,546,271) 80,528,047
Net assets at beginning of period . . . . . . . . 910,094,960 829,566,913
------------- -------------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . $ 708,548,689 $ 910,094,960
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . 100,151,558 95,109,417
------------- -------------
Shares sold . . . . . . . . . . . . . . . . . . . 15,825,513 17,920,103
Shares issued to shareholders in
reinvestment of distributions . . . . . . . . 2,768,673 5,077,030
Shares redeemed . . . . . . . . . . . . . . . . . (30,906,710) (17,954,992)
------------- -------------
Net increase (decrease) in Fund shares. . . . . . (12,312,524) 5,042,141
------------- -------------
Shares outstanding at end of period . . . . . . . 87,839,034 100,151,558
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. . . . . $ 9.09 $ 8.72 $8.80 $ 8.45 $8.54 $ 8.60 $ 8.24 $8.93 $ 8.40 $ 7.69
------ ------ ----- ------ ----- ------ ------ ----- ------ ------
Income from investment
operations:
Net investment
income . . . . . . . . . . .46 .47 .51 .53 .55 .59 .60 .61 .61 .59
Net realized and
unrealized gain
(loss) on
investment
transactions . . . . . . . (1.00) .66 .25 .47 -- .33 .38 (.58) .77 .71
------ ------ ----- ------ ----- ------ ------ ----- ------ ------
Total from investment
operations . . . . . . . . (.54) 1.13 .76 1.00 .55 .92 .98 .03 1.38 1.30
------ ------ ----- ------ ----- ------ ------ ----- ------ ------
Less distributions:
From net investment
income . . . . . . . . . . (.46) (.47) (.51) (.53) (.55) (.59) (.60) (.61) (.61) (.59)
From net realized
gains on investment
transactions . . . . . . . -- (.29) (.33) (.12) (.09) (.39) (.02) (.11) (.24) --
In excess of net
realized gains . . . . . . (.02) -- -- -- -- -- -- -- -- --
------ ------ ----- ------ ----- ------ ------ ----- ------ ------
Total distributions . . . . . (.48) (.76) (.84) (.65) (.64) (.98) (.62) (.72) (.85) (.59)
------ ------ ----- ------ ----- ------ ------ ----- ------ ------
Net asset value,
end of period . . . . . . . $ 8.07 $ 9.09 $8.72 $ 8.80 $8.45 $ 8.54 $ 8.60 $8.24 $ 8.93 $ 8.40
====== ====== ===== ====== ===== ====== ====== ===== ====== ======
TOTAL RETURN (%) . . . . . . (6.04) 13.32 8.98 12.23 6.77 11.19 12.27 .34 16.84 17.37
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions). . . . . 709 910 830 796 719 691 635 592 663 574
Ratio of operating
expenses to average
daily net assets (%) . . . . .63 .63 .63 .64 .61 .62 .61 .63 .58 .58
Ratio of net investment
income to average
daily net assets (%) . . . . 5.41 5.21 5.76 6.16 6.61 6.78 7.13 7.20 6.88 7.27
Portfolio turnover
rate (%) . . . . . . . . . 33.7 52.8 59.6 32.4 72.1 89.8 75.5 73.5 78.0 98.2
</TABLE>
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------------------------------
Scudder Managed Municipal Bonds (the "Fund") is organized as a diversified
series of Scudder Municipal Trust, a Massachusetts business trust, registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The policies described below are followed consistently by
the Fund in the preparation of its financial statements in conformity with
generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a 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.
FUTURES CONTRACTS. The Fund may enter into interest rate and securities index
futures contracts for bona fide hedging purposes. Upon entering into a futures
contract, the Fund is required to deposit with a broker an amount ("initial
margin") equal to a certain percentage of the purchase price indicated in the
futures contract. Subsequent payments ("variation margin") are made or received
by the Fund each day, dependent on the daily fluctuations in the value of the
underlying security, and are recorded for financial reporting purposes as
unrealized gains or losses by the Fund. When entering into a closing
transaction, the Fund will realize, for book purposes, a gain or loss equal to
the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price. Certain risks may arise upon entering into futures contracts
from the contingency of imperfect market conditions.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable and tax-exempt income to its
shareholders. The Fund accordingly paid no federal income taxes and no
provision for federal income taxes was required.
At December 31, 1994, the Fund had a net tax basis capital loss carryforward
of approximately $2,638,000 which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
December 31, 2002, the expiration date.
In addition, from November 1, 1994 through December 31, 1994, the Fund incurred
approximately $2,687,000 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 ended December 31, 1995.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Fund
is declared as a dividend to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital
loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders. An additional distribution may
be made to the extent necessary to avoid the payment of a four percent federal
excise tax. Distributions of net realized capital gains to shareholders are
recorded on the ex-dividend date.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. These differences
relate primarily to investments in futures contracts. As a result, net
investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax
reporting purposes.
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on a trade date basis.
Interest income is accrued pro rata to the earlier of call or maturity.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended December 31, 1994, purchases and sales of municipal
securities (excluding short-term investments) aggregated $262,289,663
and $350,515,283, respectively.
The aggregate face value of futures contracts opened and closed during the
year ended December 31, 1994 was $190,787,571 and $182,023,197, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, 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
management fee payable under the Agreement is equal to an annual rate of 0.55%
on the first $200,000,000 of average daily net assets, 0.50% on the next
$500,000,000 of such net assets and 0.475% on such net assets in excess of
$700,000,000, computed and accrued daily and payable monthly. The Agreement
also provides that if the Fund's expenses, exclusive of taxes, interest, and
extraordinary expenses, exceed specified limits, such excess, up to the amount
of the management fee, will be paid by the Adviser. For the year ended
December 31, 1994, the fee pursuant to the agreement amounted to $4,119,589,
which was equivalent to an annualized effective rate of .51% of the Fund's
average daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
During the year ended December 31, 1994, the amount charged to the Fund by SSC
aggregated $391,610, of which $30,382 is unpaid at December 31, 1994.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. During the year
ended December 31, 1994, Trustees' fees aggregated $46,491.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER MUNICIPAL TRUST AND TO THE SHAREHOLDERS OF
SCUDDER MANAGED MUNICIPAL BONDS:
- -------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of Scudder
Managed Municipal Bonds including the investment portfolio, as of December 31,
1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Scudder Managed Municipal Bonds as of December 31, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended in conformity
with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 10, 1995
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
TAX INFORMATION
- -----------------------------------------------------------------------------
By now shareholders to whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund. For corporate shareholders no amount of the dividends paid by the Fund
qualified for the dividends received deduction.
Of the dividends paid from net investment income for the year ended December
31, 1994, 100% are tax exempt for purposes of the federal alternative minimum
tax, if applicable. Pursuant to section 852 of the Internal Revenue Code, the
Fund designates $44,333,000 as exempt-interest dividends for the fiscal year
ended December 31, 1994.
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 Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
<PAGE>
OFFICERS AND TRUSTEES
David S. Lee*
President and Trustee
Daniel Pierce*
Vice President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
Peter B. Freeman
Trustee; Corporate Director and Trustee
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; Chairman Emeritus, Meredith & Grew, Incorporated
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
College of Business Administration
Juris Padegs*
Trustee
Donald C. Carleton*
Vice President
Cuyler W. Findlay*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
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. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment
counsel firm in the United States. Since its birth, Scudder's pioneering
spirit and commitment to professional long-term investment management have
helped shape the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 36 pure no load(tm) funds,
including the first international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our longstanding principles: managing money with integrity and
distinction, keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
