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, 1995
o Offers opportunity for tax-free income
by investing primarily in high-grade, long-term municipal securities.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
CONTENTS
2 In Brief
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
28 Report of Independent Accountants
29 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
IN BRIEF
o Scudder Managed Municipal Bonds posted a strong total return of 17.12% for
the 12-month period ended December 31, 1995, as the municipal bond market
made a dramatic recovery after disappointing investors in 1994.
o The Fund's 30-day net annualized SEC yield was 4.71% on December 31, 1995.
For investors in the top federal tax brackets of 36% and 39.6%, the Fund's
yield was equivalent to a 7.36% and 7.80% taxable yield, respectively.
BAR CHART TITLE: The Fund's 30-Day Net Annualized SEC Yield and
Taxable Equivalent Yields
as of December 31, 1995
CHART DATA:
Taxable-Equivalent Taxable-Equivalent
The Fund's 30-Day Net Yield at 36% Tax Yield at 39.6% Tax
Annualized SEC Yield Bracket Bracket
-------------------- ------- -------
4.71% 7.36% 7.80%
o The Fund continues to outpace the average performance of similar funds over
one-, two-, three-, four-, five-, and ten-year periods, according to Lipper
Analytical Services. Please see page 6 for additional Lipper performance
information.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Scudder Managed Municipal Bonds' objective is to provide a high level
of tax-free income by investing in high-grade, long-term municipal issues. The
Fund's managers work to sort through the municipal marketplace to find
attractively valued individual bonds or classes of bonds. They seek to achieve
better total returns than might an unmanaged portfolio of similar bonds.
Your Fund performed well in 1995, as you'll see in the Portfolio
Management Discussion beginning on page 6. How did the municipal market overall
perform last year? Very well, considering the continued low level of demand from
individual investors for tax-free bonds. While individual investors focused
primarily on the stock market, insurance companies and other institutional
buyers purchased short- and intermediate-term municipals. Tax-free bonds made
gains in 1995, but still represent appreciable value versus U.S. Treasuries.
Consider the relative yields of AAA municipal bonds versus Treasuries of the
same maturity as of the close of 1995: 10-year municipals yielded 4.65%, while
10-year Treasuries yielded 3.88% if taxed at the 31% rate and only 3.39% at the
39.6% level. We believe that demand for municipals will rise as investors
continue to recognize this disparity. We also continue to believe that when
budget and taxation matters are resolved in Washington, municipal bonds will
remain attractive to investors in higher tax brackets.
If you have any questions concerning your Scudder Managed Municipal
Bonds investment, please call a Scudder Investor Relations representative at
1-800-225-2470. Thank you for investing with Scudder.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Managed Municipal Bonds
3
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
PERFORMANCE UPDATE as of December 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER MANAGED MUNICIPAL BONDS
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,712 17.12% 17.12%
5 Year $15,251 52.51% 8.81%
10 Year $23,831 138.31% 9.07%
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,746 17.46% 17.46%
5 Year $15,262 52.62% 8.82%
10 Year $24,202 142.02% 9.24%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED DECEMBER 31
Scudder Managed Municipal Bonds
Year Amount
- ----------------------
85 $10,000
86 $11,684
87 $11,723
88 $13,162
89 $14,635
90 $15,626
91 $17,536
92 $19,112
93 $21,657
94 $20,348
95 $23,831
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
85 $10,000
86 $11,931
87 $12,111
88 $13,342
89 $14,781
90 $15,858
91 $17,784
92 $19,352
93 $21,729
94 $20,606
95 $24,202
Lehman Brothers Municipal Bond Index is an unmanaged 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.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
NET ASSET VALUE... $ 8.93 $ 8.24 $ 8.60 $ 8.54 $ 8.45 $ 8.80 $ 8.72 $ 9.09 $ 8.07 $ 8.94
INCOME DIVIDENDS.. $ .61 $ .61 $ .60 $ .59 $ .55 $ .53 $ .51 $ .47 $ .46 $ .48
CAPITAL GAINS
DISTRIBUTIONS..... $ .24 $ .11 $ .02 $ .39 $ .09 $ .12 $ .33 $ .29 $ .02 $ --
FUND TOTAL
RETURN (%)........ 16.84 0.34 12.27 11.19 6.77 12.23 8.98 13.32 -6.04 17.12
INDEX TOTAL
RETURN (%)........ 19.31 1.51 10.16 10.79 7.29 12.14 8.82 12.28 -5.17 17.46
</TABLE>
Performance is historical and 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.
4
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1995
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Electric Utility
Revenue 27%
Core Cities/Lease 12% As of the close of 1995, the
Hospital/Health 8% Fund held securities issued
Other General in 31 states plus the
Obligation/Lease 7% District of Columbia.
Higher Education 6%
Housing Finance
Authority 6%
State General Obligation 6%
Water/Sewer Revenue 6%
Pollution Control/
Industrial Development 5%
Miscellaneous Municipal 17%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- ---------------------------------------------------------------------------
QUALITY
- ---------------------------------------------------------------------------
Short-Term Notes 2%
AAA 51% Portfolio quality remains
AA 18% high, with 71% of the Fund's
A 19% assets rated AAA, AA, or the
BBB 9% equivalent.
Not Rated 1%
----
100%
====
Weighed averaged quality: AA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Less than 1 year 4% During the past 12-month
1 - 5 years 10% period, we kept the Fund's
5 - 10 years 31% average effective maturity
10 - 20 years 47% on par with that of our
Greater than 20 years 8% benchmark index.
----
100%
====
Weighted average effective maturity: 11 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 10.
5
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Municipal bonds--especially bonds with intermediate- to longer-term
maturities--performed extremely well in 1995 as inflation fears eased and
interest rates declined. Scudder Managed Municipal Bonds fully participated in
the market's price recovery, posting a total return of 17.12% for the 12-month
period ended December 31, and exceeding the 16.84% average return for similar
funds compiled by Lipper Analytical Services, Inc. The Fund's net asset value
rose 10.78% from $8.07 per share on December 31, 1994, to $8.94 on December 31,
1995. The Fund's total return also included reinvestment of income distributions
to shareholders totaling $0.48 per share. Scudder Managed Municipal Bonds
provided a 30-day net annualized SEC yield of 4.71% as of December 31, 1995,
equivalent to a 7.36% taxable yield for investors in the 36% federal income tax
bracket.
The Fund's solid 1995 performance versus the competition matches its
longer-term record; Scudder Managed Municipal Bonds has consistently
outperformed the Lipper average of similar municipal bond funds over longer
periods, as shown in the chart below. Please turn to the Performance Update on
page 4 for more information on the Fund's long-term progress, including
comparisons with the unmanaged Lehman Brothers Municipal Bond Index.
Scudder Managed Municipal Bonds' Total Return
Versus the Average of Similar Funds
(Average annual returns for periods ended December 31, 1995)
Scudder
Managed
Municipal Number of
Period Bonds Lipper Average Funds Tracked
------ ----- -------------- -------------
1 year 17.12% 16.84% 225
2 years 4.90 4.52 175
3 years 7.63 7.18 121
4 years 7.97 7.58 107
5 years 8.81 8.47 98
10 years 9.07 8.60 56
Performance statistics compiled by Lipper Analytical Services, Inc.
6
<PAGE>
A Solid Comeback in 1995
Following one of the worst years in history for fixed-income
securities, municipal money managers and other institutional investors put cash
to work beginning in the first quarter of 1995 as interest rates began to turn
down, buying bonds they felt were significantly oversold. The rally in municipal
bonds continued during most of the rest of year, posting gains in every month
except July. Discount bonds and noncallable bonds performed best, favored by
investors because of their greater upside potential versus bonds of equivalent
maturity.
BAR CHART TITLE: Supply of New
Municipal Issues:
(in billions)
CHART DATA:
1994 1995 1996
---- ---- ----
$163 $156 $150*
*Estimated
As encouraging as the performance of tax-free bonds was, returns did
not match those of U.S. Treasuries. For example, while yields of long-term
Treasury bonds declined almost two percentage points and their prices rose
25.10% during 1995, yields of municipal bonds of similar maturity declined 1.4
percentage points, with prices rising only 10.45%. Demand for municipals was
held back by several factors, including the outstanding performance of the stock
market, continued reluctance to invest in bonds due to the negative impact of
1994's interest rate increases, and concerns over the Orange County, California,
bankruptcy.
While weak demand for municipals has been a hindrance, the continued
limited supply of newly-issued bonds was a bright spot. New issue volume for
1995 was $156 billion, down 4.3% from the $163 billion of new issues sold in
1994. With refinancing activity diminished, we expect the supply of tax-exempt
bonds to remain relatively low in the near term. In fact, we expect that in
1996, for the second year running, the net supply of municipal bonds outstanding
will actually decline as the number of maturities and calls will amount to
approximately $190 billion.
Portfolio Review
Our strategy during the past calendar year was to keep the Fund's
average effective maturity on par with that of our benchmark index. In
actuality, this requires us to extend the Fund's maturity slightly from time to
time, because bonds the Fund already holds gradually shorten as they approach
7
<PAGE>
their maturity dates. The Fund's average effective maturity was 11 years as of
December 31, 1995. Our philosophy amid the current uncertainty over the course
of the U.S. economy is to buy municipal bonds based on careful credit analysis
and our estimation of a bond's relative value, rather than on the basis of
interest rate forecasts. As such, we intend to maintain a neutral maturity
stance and hope to add value through a careful structuring of the portfolio,
seeking individual bonds which are undervalued.
Our long-term investment strategy remains the same as in the past. In
conjunction with our primary goals of maximizing the Fund's yield while
maintaining as much price stability as possible, we continue to purchase
high-grade, longer-term municipal bonds. On December 31, bonds with effective
maturities between 10 and 20 years represented approximately 47% of the Fund's
portfolio. Bonds in this maturity range continue to offer attractive value --
providing nearly as much yield as bonds with longer (30-year) maturities, but
with less price volatility.
Diversification remains an important investment strategy for Scudder
Managed Municipal Bonds, allowing us to spread the portfolio's risk over a large
number of geographic areas, bond sectors, and maturities. The Fund held
securities issued in 31 states plus the District of Columbia as of the close of
1995. In addition, Fund assets were distributed among electric utility revenue
bonds, lease rentals, hospital/healthcare bonds, general obligation bonds, and
several other categories.
Portfolio credit quality remains high, with approximately 71% of Fund
assets rated AAA, AA, or the equivalent. Securities are rated by Standard &
Poor's, Moody's Investor 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.
Lastly, purchasing bonds with call protection remains a fundamental
part of our investment strategy. When long-term interest rates on municipal
bonds are declining, as happened in 1995, we believe it is important to protect
a significant portion of the Fund's bonds from being called in by their issuers
8
<PAGE>
before maturity. (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 than would exist if the portfolio held significant
amounts of bonds that could be called in before their stated maturities.
Outlook
Our view of the municipal bond market has not changed significantly
from six months ago. We expect the present economic environment of slow growth
and low inflation--which has been with us for some time--to continue in the near
term, with the possibility of a brief economic slowdown occurring in the second
half of 1996. We believe the municipal bond market and bonds in general would
benefit from either environment, but we expect more modest declines in interest
rates this year than last year. Though municipals staged a rally in the latter
half of 1995, municipal bond yields remain at historical highs relative to
Treasury bonds. Because of this relationship, large institutions that pay no
taxes continue to purchase tax-free securities for their price appreciation
potential. Our ongoing strategy as portfolio managers will reflect our
commitment to seek relatively high tax-free income and competitive total returns
for our shareholders.
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
other Scudder funds. 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, as
well as other Scudder tax free funds.
9
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
INVESTMENT PORTFOLIO as of December 31, 1995
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
1.5% SHORT-TERM MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------
CALIFORNIA California Community College Finance Authority,
Pooled Tax and Revenue Anticipation Notes,
Series B, 5%, 8/30/96 .................................. 1,000,000 SP1+ 1,008,700
FLORIDA Halifax Hospital Medical Center, FL, Hospital
Revenue, Auction Reset Security, Series A,
4.1%, 10/1/19 (d)* ..................................... 6,000,000 AAA 6,000,000
KENTUCKY Jefferson County, KY, Hospital Revenue, Variable
Auction Rate Security, 4%, 10/23/14 (d)* ............... 4,500,000 AAA 4,500,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $11,503,163) ..................................... 11,508,700
----------
-------------------------------------------------------------------------------------------------
98.5% LONG-TERM MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------
ALASKA North Slope Borough, AK, General Obligation:
Capital Appreciation:
Series A, Zero Coupon, 6/30/06 (d) .................... 7,000,000 AAA 4,136,510
Series B, Zero Coupon, 6/30/04 (d) .................... 15,000,000 AAA 9,938,700
Series B, Zero Coupon, 6/30/05 (d) .................... 18,200,000 AAA 11,385,192
Series I, 6.6%, 6/30/96 (d) ........................... 1,000,000 AAA 1,014,610
Series B, Zero Coupon, 1/1/03 (d) 8,000,000 AAA 5,761,040
ARIZONA Maricopa County, AZ, School District #28, Kyrene
Elementary School, Series B, Zero Coupon,
1/1/06 (d) ............................................. 4,905,000 AAA 3,034,331
Maricopa County, AZ, Unified School District #69,
Paradise Valley, Zero Coupon, 7/1/02 (d) ............... 2,100,000 AAA 1,563,051
ARKANSAS Arkansas Development Finance Authority, Single
Family Mortgage Revenue, Series B, 7.7%, 12/1/14 ....... 2,555,000 A 2,681,266
CALIFORNIA California General Obligation:
6.4%, 2/1/06 (d) ....................................... 3,500,000 AAA 3,955,175
6.25%, 10/1/07 (d) ..................................... 4,000,000 AAA 4,470,240
6.25%, 4/1/08 (d) ...................................... 5,000,000 AAA 5,557,400
6.6%, 2/1/09 (d) ....................................... 15,600,000 AAA 17,862,156
California Housing Finance Agency, Multi-Unit Rental
Housing Revenue, Series A, 7.7%, 8/1/10 ................ 1,000,000 A 1,109,490
California State Public Works Board, Lease Revenue,
Department of Corrections, Del Norte/Imperial,
Series C, 4.875%, 12/1/06 (d) .......................... 6,250,000 AAA 6,264,438
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Statewide Community Development
Authority, Certificate of Participation, Lutheran
Homes, 5.5%, 11/15/08 .................................. 2,250,000 A 2,353,568
Foothill Eastern Transportation Corridor Agency, CA,
Toll Road Revenue, Senior Lien, Series A,
Zero Coupon:
1/1/09 ................................................ 5,000,000 BBB 2,980,600
1/1/11 ................................................ 4,000,000 BBB 2,403,120
1/1/12 ................................................ 4,000,000 BBB 2,399,240
1/1/14 ................................................ 6,250,000 BBB 3,758,875
1/1/15 ................................................ 11,000,000 BBB 3,396,360
Los Angeles County, CA, Public Works Financing
Authority, Capital Construction, 5%, 3/1/06 ............ 5,850,000 AA 5,861,525
Los Angeles County, CA, Certificate of Participation,
Disney Parking Project, Zero Coupon:
9/1/07 ................................................ 4,030,000 A 1,947,135
9/1/09 ................................................ 5,425,000 A 2,283,545
Roseville, CA, Unified High School District, General
Obligation, Series B, Zero Coupon:
8/1/10 (d) ............................................ 1,830,000 AAA 842,294
8/1/12 (d) ............................................ 2,015,000 AAA 827,158
8/1/15 (d) ............................................ 1,000,000 AAA 345,800
San Joaquin, CA, Certificate of Participation, County
Public Facilities Project, 5.5%,
11/15/13 (d) ........................................... 3,895,000 AAA 4,052,786
San Jose, CA, Redevelopment Agency, Merged Area
Redevelopment Project, Tax Allocation Bonds, 6%,
8/1/08 (d) ............................................. 1,500,000 AAA 1,641,750
COLORADO Colorado Housing Finance Authority Revenue:
Series A, 8.1%, 10/1/05 ................................ 2,030,000 AA 2,372,441
Series A, 8.15%, 10/1/06 ............................... 2,145,000 AA 2,506,197
Series A, 8.25%, 10/1/10 (b) ........................... 1,940,000 AA 2,241,631
Series A, 8.25%, 10/1/11 ............................... 1,680,000 AA 1,930,975
Series A, 8.25%, 10/1/12 ............................... 1,945,000 AA 2,223,796
Multi-Family Mortgage:
Series A, 8.15%, 10/1/07 .............................. 2,320,000 AA 2,710,665
Series A, 8.2%, 10/1/08 ............................... 2,510,000 AA 2,924,125
Series A, 8.2%, 10/1/09 ............................... 2,725,000 AA 3,157,812
CONNECTICUT Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Series A, 5.8%, 10/1/97 ........... 3,000,000 A 3,044,670
DISTRICT OF
COLUMBIA District of Columbia, Certificate of Participation:
Series 1993, 6.875%, 1/1/03 ............................ 2,500,000 B 2,543,650
7.3%, 1/1/13 ........................................... 1,000,000 B 1,044,880
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
District of Columbia, General Obligation:
Series A, 5.875%, 6/1/05 (d) ........................... 3,300,000 AAA 3,507,075
Series B, Zero Coupon, 6/1/03 (d) ...................... 2,000,000 AAA 1,389,260
Series B3, 5.3%, 6/1/05 (d) ............................ 1,350,000 AAA 1,377,027
Series B3, 5.5%, 6/1/07 (d) ............................ 1,000,000 AAA 1,022,950
Series B3, 5.5%, 6/1/08 (d) ............................ 3,225,000 AAA 3,274,181
District of Columbia, Georgetown University, Series A,
7.25%, 4/1/11 .......................................... 2,965,000 A 3,187,405
FLORIDA Florida Housing Finance Revenue, Home Ownership
Mortgage Revenue, GNMA Backed, "A", 8.595%,
11/1/17 ................................................ 860,000 AAA 888,655
GEORGIA Burke County, GA, Development Authority, Pollution
Control Revenue, Ogelthorpe Power Corp., Vogtle
Project, 7.7%, 1/1/06 (d) .............................. 11,000,000 AAA 13,115,630
Monroe County, GA, Development Authority,
Pollution Control Revenue, Ogelthorpe Power
Corporation, Scherer Project, 6.7%, 1/1/09 ............. 3,255,000 A 3,712,328
Municipal Electric Authority of Georgia:
Power Revenue, Series V, 6.5%, 1/1/12 (d) .............. 5,000,000 AAA 5,729,850
Special Obligation, 4th Crossover, Series X,
Project #1, 6.5%, 1/1/12 (d) .......................... 3,500,000 AAA 4,010,895
ILLINOIS Central Lake County, IL, Joint Action Water Agency,
Refunding Revenue, Zero Coupon, 5/1/04 (d) ............. 2,445,000 AAA 1,632,918
Chicago, IL, Motor Fuel Tax Revenue,
5.375%, 1/1/14 (d) ..................................... 5,000,000 AAA 5,054,750
Chicago, IL, General Obligation, Emergency
Telephone System, 5.6%, 1/1/09 (d) ..................... 7,200,000 AAA 7,546,176
Chicago, IL, General Obligation Lease,
Board of Education, Series A, 6.25%, 1/1/15 (d) ........ 2,725,000 AAA 3,057,232
Chicago, IL, Public Building Commission, Building
Revenue:
Series A, 5.25%, 12/1/07 (d) .......................... 5,000,000 AAA 5,165,550
Series A, 5.25%, 12/1/08 (d) .......................... 2,655,000 AAA 2,722,596
Chicago, IL, Wastewater Transmission Revenue,
5.375%, 1/1/13 (d) ..................................... 2,000,000 AAA 2,049,420
Du-Page, IL, Industrial Development Revenue,
Weyerhaeuser Company Project, Series 1983,
8.65%, 11/1/08 ......................................... 3,600,000 NR 3,685,752
Illinois Development Finance Authority Refunding
Revenue, Commonwealth Edison Company, 5.85%,
1/15/14 ................................................ 5,000,000 BBB 4,837,650
Illinois Educational Facilities Authority, Loyola
University, Zero Coupon, 7/1/05 (d) .................... 3,100,000 AAA 1,947,978
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois Health Facilities Authority:
Delnor Community Hospital, 5.5%, 5/15/13 (d) ........... 1,500,000 AAA 1,513,020
Memorial Medical Center - Springfield,
5.25%, 10/1/09 (d) ..................................... 1,725,000 AAA 1,728,209
Illinois State Sales Tax Revenue, Series P, 6.5%,
6/15/13 ................................................ 2,100,000 AAA 2,405,466
Northern Illinois University, Board of Regents,
Series 1992, Zero Coupon:
4/1/05 (d) ............................................ 1,865,000 AAA 1,181,533
4/1/06 (d) ............................................ 1,865,000 AAA 1,111,036
4/1/07 (d) ............................................ 1,865,000 AAA 1,044,214
10/1/05 (d) ........................................... 1,865,000 AAA 1,151,656
10/1/06 (d) ........................................... 1,865,000 AAA 1,081,625
10/1/07 (d) ........................................... 1,865,000 AAA 1,017,637
Northwest Suburban Municipal Joint Action Water
Agency, IL, ETM, 6.5%, 5/1/15** ........................ 2,000,000 AAA 2,272,240
Oak Lawn, IL, Water and Sewer Revenue:
Series A, Zero Coupon, 10/1/03 (d) ..................... 1,295,000 AAA 897,085
Series A, Zero Coupon, 10/1/04 (d) ..................... 1,295,000 AAA 847,603
Series A, Zero Coupon, 10/1/05 (d) ..................... 1,295,000 AAA 803,483
Series A, Zero Coupon, 10/1/06 (d) ..................... 1,295,000 AAA 754,998
Rosemont, IL, Zero Coupon:
Tax Increment, 12/1/04 (d) ............................. 6,000,000 AAA 3,895,560
Tax Increment-3, Series C, 12/1/05 (d) ................. 7,060,000 AAA 4,343,171
State University Retirement System, IL, Special
Revenue, Zero Coupon, 10/1/05 (d) ...................... 7,000,000 AAA 4,343,150
University of Chicago, IL, Hospital Refunding,
5.5%, 8/15/08 (d) ...................................... 2,500,000 AAA 2,550,375
Will County, IL, School District #201#U, Crete Monee,
Zero Coupon, 12/15/06 (d) .............................. 3,725,000 AAA 2,148,021
Winnebago County, IL, School District #122:
6.55%, 6/1/09 (d) ...................................... 1,675,000 AAA 1,921,225
6.55%, 6/1/10 (d) ...................................... 1,825,000 AAA 2,100,301
INDIANA Indiana Health Facilities Finance Authority, Hospital
Revenue, Ancilla Systems Inc., Series A,
6%, 7/1/18 (d) ......................................... 3,965,000 AAA 4,310,827
Indiana Transportation Finance Authority, Highway
Revenue:
Series A, 5.75%, 6/1/12 (d) ........................... 5,000,000 AAA 5,341,050
Series B, 6%, 1/1/12 (d) .............................. 1,750,000 AAA 1,922,918
Series B, 5.5%, 1/1/16 (d) ............................ 24,860,000 AAA 25,592,873
Rockport, IN, Pollution Control Revenue, Series B,
Refunding Bonds, 7.6%, 3/1/16 .......................... 4,500,000 BBB 4,953,645
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<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 Co. Project,
6.9%, 3/1/07 ........................................... 10,250,000 A 11,291,093
New Orleans, LA, General Obligation, Zero Coupon,
9/1/05 (d) ............................................. 2,500,000 AAA 1,564,975
MAINE Maine Housing Authority, Mortgage Purchase
Revenue, 1987 Series A2, 7.65%, 11/15/15 ............... 1,670,000 AA 1,754,669
MARYLAND Northeast Maryland Waste Disposal Authority,
Southwest Resource Recovery System Revenue:
6.9%, 1/1/00 (d) ...................................... 1,595,000 AAA 1,742,426
7.2%, 1/1/06 (d) ...................................... 3,440,000 AAA 3,969,726
7.2%, 1/1/07 (d) ...................................... 3,390,000 AAA 3,888,296
MASSACHUSETTS Massachusetts Bay Transportation Authority, General
Transportation System:
5.25%, 3/1/06 (d) ..................................... 7,500,000 AAA 7,780,800
Series B, 6.2%, 3/1/16 ................................ 2,500,000 A 2,786,450
Massachusetts College Building Authority Project:
Series A, 7.5%, 5/1/10 ................................. 4,110,000 A 5,049,176
Series A, 7.5%, 5/1/14 ................................. 3,750,000 A 4,725,150
Massachusetts General Obligation:
Prerefunded, 6.5%, 5/1/96 (d) (e) ...................... 1,000,000 AAA 1,034,630
Series B, 5.3%, 11/1/06 (d) ............................ 4,000,000 AAA 4,174,080
Massachusetts Water Resource Authority:
Series A, 6.5%, 7/15/09 ................................ 2,625,000 A 2,989,508
Series A, 6.5%, 7/15/19 ................................ 13,445,000 A 15,461,212
Series C, 6%, 12/1/11 .................................. 10,000,000 A 10,904,100
New England Education Loan Marketing Corporation,
Student Loan Revenue Refunding, Series F, 4.75%,
7/1/98 ................................................. 5,000,000 A 5,052,900
MICHIGAN Michigan State Hospital Finance Authority, Hospital
Revenue, Sinai Hospital, Series 1995, 6%, 1/1/08 ....... 3,000,000 NR 2,947,230
MONTANA Montana Board Housing Revenue, Capital
Appreciation, Single-Family Revenue, Series A,
Zero Coupon, 6/1/10 .................................... 24,015,000 AA 4,820,531
NEVADA Nevada State Housing Division, Single Family
Mortgage Revenue:
Series A, Zero Coupon, 10/1/15 ........................ 13,975,000 AA 1,514,750
Series R, 5.95%, 10/1/11 .............................. 8,750,000 AA 9,196,950
NEW YORK Metropolitan Transportation Authority of New York,
Transit Facilities Revenue:
7%, 7/1/02 ............................................ 1,595,000 BBB 1,780,180
Service Contract, Series O, 5.75%, 7/1/13 ............. 6,775,000 BBB 6,925,473
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City, General Obligation:
Series A, 6.375%, 8/1/04 ............................... 5,000,000 A 5,268,000
Series B, 7.1%, 2/1/97 ................................. 2,695,000 A 2,785,902
Series B, 6%, 8/15/04 .................................. 3,425,000 A 3,522,167
Series B, 6.1%, 8/15/05 ................................ 3,655,000 A 3,767,355
Series D, 7%, 8/1/02 (d) ............................... 2,500,000 AAA 2,745,575
Series D, 7%, 8/1/02 (d) ............................... 3,000,000 A 3,242,670
Series D, 7%, 8/1/02 (d) ............................... 750,000 AAA 823,673
Series D, 5.5%, 2/15/04 ................................ 6,990,000 A 6,953,372
Series E, 5.5%, 8/1/05 ................................. 6,000,000 A 5,885,940
Series H, 7.2%, 8/1/01 (d) ............................. 2,260,000 AAA 2,542,975
Series H, 5.8%, 8/1/04 ................................. 5,000,000 A 5,073,950
Series H, 7%, 2/1/05 ................................... 4,000,000 A 4,402,120
Series 1996 G, 6.75%, 2/1/09 ........................... 5,000,000 BBB 5,421,550
New York State Dormitory Authority:
City University System, Consolidated Revenue:
Series A, 5.75%, 7/1/06 ............................... 4,000,000 BBB 4,095,000
Series A, 5.75%, 7/1/06 (d) ........................... 5,000,000 AAA 5,379,800
Series E, 5.75%, 7/1/06 ............................... 5,255,000 BBB 5,379,806
Series F, 5.375%, 7/1/07 .............................. 5,000,000 BBB 4,980,900
College and University Pooled Capital Program,
7.8%, 12/1/05 (d) ...................................... 4,570,000 AAA 5,046,331
State University Educational Facility Revenue,
Series B, 5.25%, 5/15/10 (d) ........................... 5,000,000 AAA 5,060,200
New York State Medical Care Facilities, Financing
Agency Revenue, Mount Sinai Hospital, 5.95%,
8/15/09 ................................................ 5,140,000 AAA 5,339,740
New York State Urban Development Corporation
Revenue Correctional Facilities, Series A:
5.45%, 1/1/07 ........................................ 6,475,000 BBB 6,485,619
Series A, 5.3%, 1/1/05 ............................... 2,625,000 BBB 2,606,468
Series A, 5.4%, 1/1/06 ............................... 1,000,000 BBB 996,180
Series A, 5.4%, 1/1/06 ............................... 5,000,000 BBB 4,980,900
Series A, 5.1%, 1/1/08 (d) ........................... 6,735,000 AAA 6,807,334
NORTH CAROLINA North Carolina Eastern Municipal Power Agency,
Series C, 7%, 1/1/07 ................................... 7,965,000 A 9,090,295
North Carolina Municipal Power Agency #1, Catawba
Electric Refunding Revenue:
7.25%, 1/1/07 ......................................... 6,500,000 A 7,585,175
5.25%, 1/1/09 ......................................... 8,500,000 A 8,515,895
5%, 1/1/18 (d) ........................................ 7,805,000 AAA 7,454,165
PENNSYLVANIA Philadelphia, PA, Hospital and Higher Education
Facilities Authority, Temple University Hospital,
Series A, 6.5%, 11/15/08 ............................... 2,800,000 A 3,034,164
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RHODE ISLAND Rhode Island Convention Center Authority, Refunding
Revenue, 1993 Series B, 5.25%, 5/15/15 (d) ............. 2,250,000 AAA 2,255,310
Rhode Island Housing and Mortgage Finance Corp.,
Home Ownership Opportunity Bond, Series 2, 7.5%,
10/1/21 ................................................ 1,540,000 AA 1,619,510
SOUTH CAROLINA Piedmont Municipal Power Agency, SC, Electric
Revenue, 5.5%, 1/1/10 (d) .............................. 2,600,000 AAA 2,716,454
TENNESSEE Knox County, TN, Health, Education and Housing
Facilities Board, Fort Sanders Alliance,
7.25%, 1/1/09 (d) ...................................... 3,250,000 AAA 3,932,630
TEXAS Austin TX, Utility System Revenue Refunding,
Series A, Zero Coupon, 5/15/03 (d) ..................... 2,890,000 AAA 2,035,629
Dallas-Fort Worth, TX, International Airport Revenue:
Series A, 7.8%, 11/1/07 (d) ............................ 2,390,000 AAA 2,895,174
Series A, 7.375%, 11/1/09 (d) .......................... 4,500,000 AAA 5,304,420
Harris County, TX, Toll and Sub Lien, Series A,
Zero Coupon, 8/15/04 (d) ............................... 4,050,000 AAA 2,669,517
Houston, TX, Water Conveyance System Contract,
Certificate of Participation, Series J, 6.125%,
12/15/05 (d) ........................................... 2,500,000 AAA 2,753,550
Houston, TX, Water and Sewer System Authority:
Series C, Zero Coupon, 12/1/05 (d) ..................... 15,000,000 AAA 9,236,550
Series C, Zero Coupon, 12/1/07 (d) ..................... 3,400,000 AAA 1,852,218
Lower Colorado River Authority, TX, Revenue
Refunding, Zero Coupon, 1/1/03 (d) ..................... 8,900,000 AAA 6,413,518
San Antonio, TX, Airport Systems Revenue
Refunding, 7%, 7/1/02 (d) .............................. 1,695,000 AAA 1,934,775
San Antonio, TX, Electric and Gas, Revenue
Refunding:
Series A, Zero Coupon, 2/1/05 (d) ..................... 7,000,000 AAA 4,496,310
Series A, Zero Coupon, 2/1/05 (d) ..................... 5,000,000 AAA 3,211,650
UTAH Intermountain Power Agency, UT:
Power Supply Revenue, Series C, 5.25%, 7/1/14 .......... 4,000,000 AA 3,990,600
Special Obligation, Crossover Refunded,
7.5%, 7/1/16 (d) (f) ................................... 3,000,000 AA 3,108,360
Salt Lake City, UT, Hospital Revenue, Intermountain
Health Care, Series 1992, Inversed Inflow, 5.66%,
2/15/12*** ............................................. 1,500,000 AA 1,577,610
Utah Associated Municipal Power System, Hunter
Project, Refunding Revenue, Zero Coupon,
7/1/03 (d) ............................................. 5,700,000 AAA 3,985,326
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIRGINIA Virginia Beach, VA, Development Authority, Virginia
Beach General Hospital Project, 5.125%,
2/15/18 (d) ............................................ 3,000,000 AAA 2,962,680
WASHINGTON Washington Health Care Facilities Authority:
Empire Health Services-Spokane, 5.8%, 11/1/08 (d) ...... 3,865,000 AAA 4,162,682
Franciscan Health System # St. Joseph's/Tacoma:
5.4%, 1/1/07 (d) ...................................... 2,000,000 AAA 2,061,960
5.4%, 1/1/08 (d) ...................................... 2,645,000 AAA 2,744,478
Sisters of St. Joseph of Peace, 5.3%, 3/1/09 (d) ....... 4,315,000 AAA 4,422,961
Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue:
6.875%, 7/1/17 ........................................ 6,000,000 AA 6,557,220
Series A, 7.15%, 7/1/02 (d) ........................... 2,550,000 AAA 2,803,445
Series A, Zero Coupon, 7/1/07 (d) ..................... 8,570,000 AAA 4,736,896
Series A, 7%, 7/1/11 .................................. 4,725,000 AA 5,181,671
Series B, 5.5%, 7/1/06 ................................ 4,915,000 AA 5,049,229
Series B, 7.25%, 7/1/09 ............................... 11,350,000 AA 13,368,938
Nuclear Project #2, Refunding Revenue:
Series A, 7.25%, 7/1/06 ............................... 7,000,000 AA 8,165,780
Series A, 6%, 7/1/07 .................................. 7,000,000 AA 7,442,890
Series B, 5.5%, 7/1/06 ................................ 4,000,000 AA 4,109,240
Series B, 7%, 7/1/12 .................................. 14,385,000 AA 15,775,310
Nuclear Project #3, Refunding Revenue:
Series A, Zero Coupon, 7/1/06 (d) ..................... 1,380,000 AAA 815,373
Series B, Prerefunded, 7.25%, 1/1/00 (e) .............. 5,000,000 AAA 5,635,600
Series B, Zero Coupon, 7/1/02 (d) ..................... 11,925,000 AAA 8,791,706
Series B, 7.375%, 7/1/04 .............................. 750,000 AA 836,295
Series B, Zero Coupon, 7/1/06 (d) ..................... 5,555,000 AAA 3,282,172
Series B, 5.65%, 7/1/08 ............................... 3,000,000 AA 3,078,540
Series C, 5%, 7/1/06 .................................. 10,000,000 AA 9,871,500
WEST VIRGINIA West Virginia, School Building Authority Revenue,
Series B, 6.75%, 7/1/10 (d) ............................ 1,600,000 AAA 1,768,064
WISCONSIN Green Bay, WI, Industrial Development Revenue,
Weyerhaeuser Company Project, Series A, 9%,
9/1/06 ................................................. 1,700,000 NR 1,730,804
Wisconsin Health & Educational Facilities Authority:
Hospital Sisters Services Inc., Obligated Group:
5.25%, 6/1/10 (d) ..................................... 3,250,000 AAA 3,223,903
5.375%, 6/1/13 (d) .................................... 1,500,000 AAA 1,499,085
Lutheran Hospital, Lacrosse, L. Benevolent,
5.6%, 2/15/09 (d) ..................................... 2,000,000 AAA 2,057,420
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WYOMING Wyoming Community Development Authority, Single
Family Mortgage, Series A, 5.85%, 6/1/13 ................. 3,000,000 AA 3,043,200
TOTAL LONG-TERM MUNICIPAL INVESTMENTS -----------
(Cost $694,102,636) ...................................... 758,472,075
-----------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $705,605,799) (a) .................................. 769,980,775
===========
<FN>
(a) The cost for federal income tax purposes was $705,605,799. At December 31, 1995, net unrealized
appreciation for all securities based on tax cost was $64,374,976. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of market value over tax cost of
$64,661,106 and aggregate gross unrealized depreciation for all securities in which there was an excess
of tax cost over market value of $286,130.
(b) At December 31, 1995 this security, in part, has been pledged to cover initial margin requirements for
open futures contracts.
AT DECEMBER 31, 1995, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
30 Year U.S.
Treasury Bonds Mar. 1996 100 12,003,688 12,146,875
--- ---------- ----------
Total net unrealized depreciation on open futures contracts sold short .. (143,187)
==========
(c) All of the securities held have been determined to be of appropriate credit quality as required by the
Fund's investment 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.
(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.
(f) Bonds which are crossover refunded are secured by an escrow of securities which is used to pay principal
on the tax exempt issue and retire the bonds in full at the earliest refunding date, except in the case
of default by the issuer or inadequacy in the escrow account.
* 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.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
** 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, 1995.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $705,605,799)
(Note A) .................................................... $769,980,775
Receivables:
Interest .................................................... 13,253,842
Fund shares sold ............................................ 51,649
Other assets ........................................................ 10,129
------------
Total assets ........................................ 783,296,395
LIABILITIES
Payables:
Investments purchased ....................................... $5,277,900
Dividends ................................................... 1,634,356
Fund shares redeemed ........................................ 360,378
Daily variation margin on open futures contracts
(Note A) ............................................ 34,375
Accrued management fee (Note C) ............................. 328,836
Other accrued expenses (Note C) ............................. 134,026
Other payables .............................................. 590,000
----------
Total liabilities ................................... 8,359,871
------------
Net assets, at market value ......................................... $774,936,524
============
NET ASSETS
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments ......................................... 64,374,976
Futures ............................................. (143,187)
Accumulated net realized loss ............................... (8,863,794)
Shares of beneficial interest ............................... 866,591
Additional paid-in capital .................................. 718,701,938
------------
Net assets, at market value ......................................... $774,936,524
============
NET ASSET VALUE, offering and redemption price per share
($774,936,524 -:- 86,659,129 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) ....................................... $8.94
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ............................................................ $ 46,656,634
Expenses:
Management fee (Note C) ............................................. $ 3,837,608
Services to shareholders (Note C) ................................... 465,327
Trustees' fees and expenses (Note C) ................................ 43,060
Custodian and accounting fees (Note C) .............................. 211,999
Reports to shareholders ............................................. 64,338
Legal ............................................................... 9,310
Auditing ............................................................ 57,518
State registration .................................................. 21,861
Other ............................................................... 41,632 4,752,653
----------- ------------
Net investment income ............................................... 41,903,981
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ................................................. 1,359,887
Futures ..................................................... (3,512,263) (2,152,376)
-----------
Net unrealized appreciation during the period on:
Investments ................................................. 78,646,685
Futures ..................................................... 320,249 78,966,934
----------- ------------
Net gain on investment transactions ................................. 76,814,558
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $118,718,539
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................. $ 41,903,981 $ 43,762,308
Net realized loss from investment
transactions .............................................. (2,152,376) (1,839,563)
Net unrealized appreciation (depreciation)
on investment transactions
during the period ......................................... 78,966,934 (95,987,397)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................................. 118,718,539 (54,064,652)
------------ ------------
Distributions to shareholders:
From net investment income ($.48 and $.46 per
share, respectively) ...................................... (41,903,981) (43,762,308)
------------ ------------
In excess of net realized gains ($.02 per share) .................. -- (1,966,549)
------------ ------------
Fund share transactions:
Proceeds from shares sold ......................................... 66,806,552 131,369,207
Net asset value of shares issued to
shareholders in reinvestment
of distributions .......................................... 21,004,076 25,132,815
Cost of shares redeemed ........................................... (98,237,351) (258,254,784)
------------ ------------
Net decrease in net assets from
Fund share transactions ................................... (10,426,723) (101,752,762)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ................................. 66,387,835 (201,546,271)
Net assets at beginning of period ................................. 708,548,689 910,094,960
------------ ------------
NET ASSETS AT END OF PERIOD ....................................... $774,936,524 $708,548,689
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ......................... 87,839,034 100,151,558
------------ ------------
Shares sold ....................................................... 7,853,077 15,825,513
Shares issued to shareholders in
reinvestment of distributions ............................. 2,444,465 2,768,673
Shares redeemed ................................................... (11,477,447) (30,906,710)
------------ ------------
Net decrease in Fund shares ....................................... (1,179,905) (12,312,524)
------------ ------------
Shares outstanding at end of period ............................... 86,659,129 87,839,034
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<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,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......................... $8.07 $9.09 $8.72 $8.80 $8.45 $8.54 $8.60 $8.24 $8.93 $8.40
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from
investment
operations:
Net investment
income .......................... .48 .46 .47 .51 .53 .55 .59 .60 .61 .61
Net realized
and unrealized
gain (loss) on
investment
transactions .................... .87 (1.00) .66 .25 .47 -- .33 .38 (.58) .77
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from
investment
operations ....................... 1.35 (.54) 1.13 .76 1.00 .55 .92 .98 .03 1.38
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
From net
investment
income .......................... (.48) (.46) (.47) (.51) (.53) (.55) (.59) (.60) (.61) (.61)
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) (.48) (.76) (.84) (.65) (.64) (.98) (.62) (.72) (.85)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .................... $8.94 $8.07 $9.09 $8.72 $8.80 $8.45 $8.54 $8.60 $8.24 $8.93
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN (%) .................. 17.12 (6.04) 13.32 8.98 12.23 6.77 11.19 12.27 .34 16.84
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) .............. 775 709 910 830 796 719 691 635 592 663
Ratio of operating
expenses to average
daily net assets (%) ............. .63 .63 .63 .63 .64 .61 .62 .61 .63 .58
Ratio of net investment
income to average
daily net assets (%) ............. 5.59 5.41 5.21 5.76 6.16 6.61 6.78 7.13 7.20 6.88
Portfolio turnover
rate (%) ......................... 17.8 33.7 52.8 59.6 32.4 72.1 89.8 75.5 73.5 78.0
</TABLE>
23
<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. A futures contract is an agreement between a buyer or
seller and an established futures exchange or its clearinghouse in which the
buyer or seller agrees to take or make a delivery of a specific amount of an
item at a specified price on a specific date (settlement date). During the
period the Fund sold interest rate futures to hedge against declines in the
value of portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with
a financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value 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 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.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Certain risks may arise upon entering into futures contracts including the
risk that an illiquid secondary market will limit the Fund's ability to close
out a futures contract prior to the settlement date and that a change in the
value of a futures contract may not correlate exactly with changes in the value
of the securities hedged. When utilizing futures contracts to hedge the Fund
gives up the opportunity to profit from favorable price movements in the hedged
positions during the term of the contract.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code 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, 1995, the Fund had a net tax basis capital loss carryforward
of approximately $3,833,000 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.
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.
25
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------------------------------------------------
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.
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, 1995, purchases and sales of municipal
securities (excluding short-term investments) aggregated $127,457,249 and
$148,990,565, respectively.
The aggregate face value of futures contracts opened and closed during the
year ended December 31, 1995 was $45,200,838 and $55,385,275, 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, 1995,
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
the fee pursuant to the agreement amounted to $3,837,608, which was equivalent
to an annualized effective rate of .51% 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.
During the year ended December 31, 1995, the amount charged to the Fund by SSC
aggregated $345,994, of which $27,764 is unpaid at December 31, 1995.
Effective February 9, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, assumed responsibility for determining the daily
net asset value per share and maintaining the portfolio and general accounting
records of the Fund. For the year ended December 31, 1995, the amount charged
to the Fund by SFAC aggregated $89,034, of which $8,360 is unpaid at December
31, 1995.
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, 1995, Trustees' fees and expenses aggregated $43,060.
27
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
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, 1995, 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, 1995, 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, 1995, 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 8, 1996
28
<PAGE>
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,
1995, 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 $41,903,981 as exempt-interest dividends for the year ended December
31, 1995.
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.
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; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
College of Business Administration
Juris Padegs*
Trustee
Donald C. Carleton*
Vice President
Philip G. Condon*
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.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
<FN>
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.
</FN>
</TABLE>
30
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund
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 New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
<FN>
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.
</FN>
</TABLE>
31
<PAGE>
Celebrating Over 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 37 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 us 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 long-standing
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.
