Scudder
Managed
Municipal
Bonds
Semiannual Report
June 30, 1996
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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<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
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
IN BRIEF
o Scudder Managed Municipal Bonds' 30-day net annualized SEC yield was 5.11%
as of June 30, 1996. For investors in the top federal tax brackets of 36%
and 39.6%, the Fund's yield was equivalent to a 7.98% and 8.46% taxable
yield, respectively.
BAR CHART TITLE:
The Fund's 30-Day Net Annualized SEC Yield and
Taxable Equivalent Yields
(as of June 30, 1996)
BARC CHART DATA:
The Fund's 30-Day Net Annualized SEC Yield 5.11%
Taxable-Equivalent Yield at 36% Tax Bracket 7.98%
Taxable-Equivalent Yield at 39.6% Tax Bracket 8.46%
o The Fund's semiannual period was characterized by stronger-than-expected
economic growth, bringing about increases in bond yields and declines in
their prices. At the close of the period, the Fund posted a total return of
-1.17%.
o The Fund continues to outpace the average performance of similar funds over
all periods tracked by Lipper Analytical Services: six-months, and one,
two, three, four, five, and ten years. Please see page 6 for additional
Lipper performance information.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
For two years through the end of June, the U.S. stock market has been a
stellar performer and bonds have been overshadowed by stocks. Many people have
emphasized stocks in their investment portfolio given their effectiveness in
delivering growth over the past several years. As long-term investors, we are
committed to stocks as a primary way to achieve growth. Even so, perhaps it's
now time to take a step back and reemphasize one of the most important
principles for any investor -- diversification.
Since markets move in cycles which tend to recur, it's worth repeating
that though stock and bond markets can move in tandem, over time they have often
diverged. The question is not one of picking the right time to invest in one
market or the other, but how to structure an overall portfolio that can weather
the markets' ups and downs. In the 12 asset allocation charts listed in
Scudder's Investor Series booklet, "Investing -- the Basics," for example, the
model portfolios listed suggest holding between 10% and 55% in bond funds,
depending on an investor's risk profile and time horizon. For the long-term, and
for investing peace of mind, it can be useful to include bond funds and money
market funds in a diversified portfolio.
One of the most exciting new tools from Scudder to help you with your
investment decisions is our new Web site, at http://funds.scudder.com. The new
site provides instant access to fund prospectuses and a versatile way to gain
access to up-to-the-minute information from Scudder. The Web site has five basic
sections -- "About Scudder," "Global Investing," "Fund Information," "Planning
Resources," and "News and Events" -- with hundreds of pages of in-depth
investment, product, and service information. It also gives you the chance to
create your own personal page which can display content such as performance
information for funds you are particularly interested in, any way you like it.
We believe we have one of the most creative and extensive Web sites available
for mutual fund investors. Please visit Scudder's new site soon.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Managed Municipal Bonds
3
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
PERFORMANCE UPDATE as of June 30, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER MANAGED MUNICIPAL BONDS
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,643 6.43% 6.43%
5 Year $14,507 45.07% 7.73%
10 Year $22,045 120.45% 8.23%
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,664 6.64% 6.64%
5 Year $14,547 45.47% 7.77%
10 Year $22,014 120.14% 8.20%
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 JUNE 30
Scudder
Year Amount
- ----------------------
'86 $10,000
'87 $10,753
'88 $11,608
'89 $13,221
'90 $13,925
'91 $15,196
'92 $17,085
'93 $19,317
'94 $19,164
'95 $20,713
'96 $22,045
Index
Year Amount
- ----------------------
'86 $10,000
'87 $10,863
'88 $11,668
'89 $12,998
'90 $13,883
'91 $15,134
'92 $16,915
'93 $18,938
'94 $18,970
'95 $20,643
'96 $22,014
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 JUNE 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $8.43 $8.41 $8.82 $8.36 $8.47 $8.86 $9.17 $8.35 $8.52 $8.61
INCOME DIVIDENDS.. $ .62 $ .61 $ .60 $ .57 $ .54 $ .47 $ .50 $ .46 $ .48 $ .45
CAPITAL GAINS
DISTRIBUTIONS..... $ .30 $ .05 $ .12 $ .33 $ .09 $ .12 $ .29 $ .31 $ - $ -
FUND TOTAL
RETURN (%)........ 7.53 7.95 13.90 5.32 9.13 12.43 13.06 -.80 8.09 6.43
INDEX TOTAL
RETURN (%)........ 8.63 7.42 11.39 6.81 9.01 11.77 11.96 .20 8.82 6.64
</TABLE>
Performance is historical, assumes reinvestment of all dividends and
capital gains and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Electric Utility Revenue 25%
Core Cities/Lease 12%
Hospital/Health 7% As of June 30, the Fund
State General Obligation 7% held securities issued in 33
Water/Sewer Revenue 7% states plus the District of
Pollution Control/ Columbia.
Industrial Development 6%
Higher Education 6%
Housing Finance Authority 5%
Other General Obligation/
Lease 5%
Miscellaneous Municipal 20%
----
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 1%
AAA 52% Credit quality remains high,
AA 17% with 70% of Fund assets
A 18% rated AAA, AA, or the equivalent.
BBB 11%
Not Rated 1%
----
100%
====
Weighted average 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 3%
1-5 years 11% TO try to benefit from
5-10 years 33% higher rates while
10-20 years 47% remaining cautious about
Greater than 20 years 6% future interest rate increases
---- we maintained a neutral average
100% effective maturity during the
==== period.
Weighted average effective maturity: 10 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,
Stronger-than-expected economic growth, especially during the second
quarter of the year, pushed municipal bond yields higher and prices lower during
Scudder Managed Municipal Bonds' semiannual period ended June 30, 1996. In the
midst of a somewhat volatile market, the Fund finished the period with a total
return of -1.17%. During the semiannual period, the Fund's net asset value
declined slightly, from $8.94 on December 31, 1995, to $8.61 as of June 30,
1996. The Fund also paid income distributions of $0.23 per share over the
six-month period. The Fund's return outpaced the -1.38% total return of the
average performance of 239 similar funds over the same period as measured by
Lipper Analytical Services, Inc. As the chart below shows, Scudder Managed
Municipal Bonds continues to surpass the average performance of its peers over
all measured time periods. 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
(for periods ended June 30, 1996)
--------------------------------------------------------------------
Scudder Managed Number of
Period Municipal Bonds* Lipper Average* Funds Tracked
-------------------------------------------------------------------
Six months -1.17% -1.38% 239
1 year 6.43 5.67 229
2 years 7.26 6.71 187
3 years 4.50 4.12 145
4 years 6.58 6.10 111
5 years 7.73 7.34 101
10 years 8.23 7.59 60
-------------------------------------------------------------------
Performance statistics compiled by Lipper Analytical Services, Inc.
*Average annual return
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Slower Growth, Faster Growth
At the start of 1996, bond prices drifted lower in reaction to mixed
economic signals despite the fact that the U.S. economy seemed to be following a
slow growth pattern, one generally beneficial for bonds. Beginning in March,
statistics indicating strong job growth and consumers' continued willingness to
spend to their debt limits and beyond propelled the bond market on a state of
heightened alert for a resurgence of inflation and a new round of interest rate
increases by the Federal Reserve. Throughout the six-month period, however,
inflation has remained restrained -- at a 3% or less annual rate -- and the Fed
has chosen not to raise or lower interest rates.
As a consequence of this uncertainty over the economy's direction,
yields of both municipal and Treasury bonds rose during the Fund's semiannual
period, and prices declined. Municipals -- aided by a declining supply of
tax-free bonds and steady demand from retail buyers -- outperformed Treasuries.
While long-term Treasury yields rose almost a full percentage point and prices
declined 12.2% during the period, long-term municipal yields rose only half a
point while their prices declined 7.1%.
A Cautious Strategy
To try to benefit from higher rates while remaining cautious about
future interest rate increases we maintained a neutral average effective
maturity during the period. The Fund's average effective maturity was 10 years
as of June 30, 1996. During the period we purchased noncallable longer-term
bonds as well as premium bonds, and sold bonds priced close to par. Purchasing
bonds with call protection remains a fundamental part of our investment
strategy, protecting a significant portion of the Fund's bonds 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.) Our call
protection strategy provides a more reliable income stream than would exist if
the Fund's portfolio held significant amounts of bonds that could be called in
before their stated maturities.
Premium bonds can offer better liquidity, more upside potential, and less
volatility than other similar bonds. Purchasing these bonds -- and selling bonds
priced close to par -- also helps the Fund avoid accruing taxable income under
7
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
the "market discount" rule. In the case of market discount, a relatively new tax
law provision, if a municipal bond declines in price and is purchased at a
discount, the difference between its discount price and its eventual value at
maturity can be considered taxable income. We constantly work to keep this
provision's impact on Scudder's tax-free portfolios to a minimum.
Overall, we continue to purchase high-grade, longer-maturity municipal
bonds as part of our primary investment goal: to maximize the Fund's yield while
maintaining as much price stability as possible. On June 30, bonds with
effective maturities between 10 and 20 years represented 47% of the Fund's
portfolio. Bonds in this maturity range offer attractive value -- they provide
nearly as much yield as bonds with the longest (30-year) maturities, but with
measurably less price volatility.
Diversification remains an important strategy for the Fund, allowing us
to spread risk over a large number of sectors, maturities, and geographic areas.
As of June 30, 1996, the Fund held securities issued in 33 states plus the
District of Columbia. In terms of regional highlights, we added some New York
City bonds during the period. These general obligation bonds should benefit from
New York City's improving budget situation and from the bonds' expected decline
in supply.
Lastly, the Fund's credit quality remains high, with 70% 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.
Cooling Down
Despite the "growth surprise" of 1996's second quarter, we believe brisk
economic growth is living on borrowed time. Faster-than-expected growth has been
fueled by a high level of borrowing, especially by consumers. Though the Fed has
declined to raise rates itself, recent interest rate increases in the bond
market should eventually reduce purchases of durable goods and housing -- the
biggest drivers of the recent surge. Overall, bonds should benefit as interest
8
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
rates decline following any slowdown. Prices of municipal bonds in particular
should also benefit from a decline in supply: Wall Street firms are projecting
that as many as $30-$50 billion more in tax-exempt bonds will be redeemed by the
end of 1996 than are newly issued.
Until the timing of any pullback in economic growth becomes clear, we
expect to maintain a neutral average effective maturity for the Fund. We will
also continue to emphasize diversification, noncallable bonds, and high quality
overall as we purchase bonds for the Scudder Managed Municipal Bonds portfolio.
As always, we are committed to seek high tax-free income along with competitive
total returns for our shareholders.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/Philip G. Condon
Donald C. Carleton Philip G. Condon
9
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
INVESTMENT PORTFOLIO as of June 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
1.4% SHORT-TERM MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA Phenix City, AL, Industrial Development Bond,
Mead Coated Board Project, Daily Demand
Note, 3.8%, 10/1/25* .................................. 1,550,000 A1 1,550,000
CALIFORNIA California Community College Finance Authority,
Pooled Tax and Revenue Anticipation Notes,
Series B, 5%, 8/30/96 ................................. 1,000,000 SP1+ 1,002,140
FLORIDA Halifax Hospital Medical Center, FL, Hospital Revenue,
Auction Reset Security, Series A, 3.72%,
10/1/19 (d)* .......................................... 6,000,000 AAA 6,000,000
MINNESOTA Rochester, MN, Health Care Facilities, Mayo Medical
Center, Auction Rate Securities, 3.69%,
11/15/15* ............................................. 1,500,000 AA 1,500,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $10,050,505) .................................... 10,052,140
----------
-------------------------------------------------------------------------------------------------
98.6% LONG-TERM MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------
ALASKA North Slope Borough, AK, General Obligation,
Capital Appreciation:
Series A, Zero Coupon, 6/30/06 (d) .................... 7,000,000 AAA 4,063,570
Series B, Zero Coupon, 1/1/03 (d) ..................... 8,000,000 AAA 5,742,400
Series B, Zero Coupon, 6/30/04 (d) .................... 15,000,000 AAA 9,821,700
Series B, Zero Coupon, 6/30/05 (d) .................... 18,200,000 AAA 11,204,466
ARIZONA Maricopa County, AZ, School District #28, Kyrene
Elementary School, Series B, Zero Coupon,
1/1/06 (d) ............................................ 4,905,00 AAA 2,952,614
Maricopa County, AZ, Unified School District #69,
Paradise Valley, Zero Coupon, 7/1/02 (d) .............. 2,100,00 AAA 1,550,787
ARKANSAS Arkansas Development Finance Authority, Single
Family Mortgage Revenue, Series B, 7.7%, 12/1/14 ...... 2,210,000 A 2,284,256
CALIFORNIA California General Obligation:
6.4%, 2/1/06 (d) ...................................... 3,500,000 AAA 3,828,230
6.25%, 10/1/07 (d) .................................... 4,000,000 AAA 4,347,040
6.25%, 4/1/08 (d) ..................................... 5,000,000 AAA 5,411,200
6.6%, 2/1/09 (d) ...................................... 15,600,000 AAA 17,293,380
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Housing Finance Agency, Multi-Unit Rental
Housing Revenue, Series A, 7.7%, 8/1/10 ............... 1,000,000 A 1,087,780
California Statewide Community Development
Authority, Certificate of Participation, Lutheran
Homes, 5.5%, 11/15/08 ................................. 2,250,000 A 2,269,980
Foothill Eastern Transportation Corridor Agency, CA,
Toll Road Revenue, Senior Lien: Series A:
Step-up Coupon, 0% to 1/1/05, 7.05% to 1/1/09 ....... 5,000,000 BBB 2,994,200
Step-up Coupon, 0% to 1/1/05, 7.1% to 1/1/11 ........ 4,000,000 BBB 2,360,480
Step-up Coupon, 0% to 1/1/05, 7.1% to 1/1/12 ........ 4,000,000 BBB 2,335,720
Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/14 ....... 6,250,000 BBB 3,609,688
Zero Coupon, 1/1/15 ................................. 11,000,000 BBB 3,248,410
Los Angeles County, CA, Certificate of Participation,
Disney Parking Project, Zero Coupon:
9/1/07 .............................................. 4,030,000 A 1,944,274
9/1/09 .............................................. 5,425,000 A 2,268,084
Los Angeles County, CA, Public Works Financing
Authority, Capital Construction, 5%, 3/1/06 ........... 3,350,000 AA 3,239,986
Roseville, CA, Unified High School District, General
Obligation, Series B, Zero Coupon:
8/1/10 (d) .......................................... 1,830,000 AAA 819,858
8/1/12 (d) .......................................... 2,015,000 AAA 782,283
8/1/15 (d) .......................................... 1,000,000 AAA 320,480
San Joaquin, CA, Certificate of Participation, County
Public Facilities Project, 5.5%, 11/15/13 (d) ......... 3,895,000 AAA 3,817,918
San Jose, CA, Redevelopment Agency, Merged Area
Redevelopment Project, Tax Allocation Bonds,
6%, 8/1/08 (d) ........................................ 1,500,000 AAA 1,590,030
COLORADO Castle Rock Ranch Colorado Public Improvements
Authority Public Facilities Revenue, Series 1996,
6.25%, 12/1/17 ........................................ 4,820,000 AA 4,865,212
Colorado Housing Finance Authority Revenue:
Multi-Family Mortgage:
Series A, 8.15%, 10/1/07 ............................ 2,320,000 AA 2,646,702
Series A, 8.2%, 10/1/08 ............................. 2,510,000 AA 2,862,831
Series A, 8.2%, 10/1/09 ............................. 2,725,000 AA 3,092,657
Series A, 8.1%, 10/1/05 ............................. 2,030,000 AA 2,322,137
Series A, 8.15%, 10/1/06 .............................. 2,145,000 AA 2,453,151
Series A, 8.25%, 10/1/10 (b) .......................... 1,940,000 AA 2,194,741
Series A, 8.25%, 10/1/11 .............................. 1,680,000 AA 1,892,150
Series A, 8.25%, 10/1/12 .............................. 1,945,000 AA 2,179,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONNECTICUT Connecticut Development Authority, Airport Facilities,
Windsor Locks Hotel, Series A, Mandatory Tender,
5.8%, 10/1/97 ......................................... 3,000,000 A 3,053,940
DISTRICT OF COLUMBIA District of Columbia, Certificate of Participation:
6.875%, 1/1/03 ........................................ 2,500,000 BB 2,489,000
7.3%, 1/1/13 .......................................... 1,000,000 B 1,025,410
District of Columbia, General Obligation:
Series A, 5.875%, 6/1/05 (d) .......................... 3,300,000 AAA 3,397,911
Series B, Zero Coupon, 6/1/03 (d) ..................... 2,000,000 AAA 1,377,280
Series B2, 5.5%, 6/1/08 (d) ........................... 3,225,000 AAA 3,155,953
Series B3, 5.3%, 6/1/05 (d) ........................... 1,350,000 AAA 1,333,530
Series B3, 5.5%, 6/1/07 (d) ........................... 1,000,000 AAA 987,850
District of Columbia, Georgetown University, Series A,
7.25%, 4/1/11 ......................................... 2,965,000 A 3,132,582
GEORGIA Burke County, GA, Development Authority, Pollution
Control Revenue, Ogelthorpe Power Corp., Vogtle
Project, 7.7%, 1/1/06 (d) ............................. 11,000,000 AAA 12,698,400
Monroe County, GA, Development Authority, Pollution
Control Revenue, Ogelthorpe Power Corporation,
Scherer Project, 6.7%, 1/1/09 ......................... 3,255,000 A 3,489,035
Municipal Electric Authority of Georgia:
Power Revenue, Series V, 6.5% 1/1/12 (d) .............. 5,000,000 AAA 5,429,750
Special Obligation, 4th Crossover, Series X,
Project #1, 6.5%, 1/1/12 (d) ......................... 3,500,000 AAA 3,819,795
ILLINOIS Central Lake County, IL, Joint Action Water Agency,
Refunding Revenue, Zero Coupon, 5/1/04 (d) ............ 2,445,000 AAA 1,612,429
Chicago, IL, Motor Fuel Tax Revenue,
5.375%, 1/1/14 (d) .................................... 5,000,000 AAA 4,768,250
Chicago, IL, General Obligation, Emergency
Telephone System, 5.6%, 1/1/09 (d) .................... 7,200,000 AAA 7,167,960
Chicago, IL, General Obligation Lease, Board of
Education, Series A, 6.25%, 1/1/15 (d) ................ 2,725,000 AAA 2,859,860
Chicago, IL, Public Building Commission, Building
Revenue:
Series A, 5.25%, 12/1/07 (d) ......................... 5,000,000 AAA 4,923,900
Series A, 5.25%, 12/1/08 (d) ......................... 2,655,000 AAA 2,586,368
Chicago, IL, Wastewater Transmission Revenue,
5.375%, 1/1/13 (d) .................................... 2,000,000 AAA 1,924,840
Du-Page, IL, Industrial Development Revenue,
Weyerhaeuser Company Project, Series 1983,
8.65%, 11/1/08 ........................................ 3,600,000 NR 3,683,448
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois Development Finance Authority Refunding
Revenue, Commonwealth Edison Company,
5.85%, 1/15/14 ........................................ 5,000,000 BBB 4,652,650
Illinois Educational Facilities Authority, Loyola
University, Zero Coupon, 7/1/05 (d) ................... 3,100,000 AAA 1,904,826
Illinois Health Facilities Authority:
Delnor Community Hospital, 5.5%, 5/15/13 (d) .......... 1,500,000 AAA 1,428,615
Memorial Medical Center-Springfield,
5.25%, 10/1/09 (d) ................................... 1,725,000 AAA 1,651,757
Illinois State Sales Tax Revenue, Series P,
6.5%, 6/15/13 ......................................... 2,100,000 AAA 2,269,134
Northern Illinois University, Board of Regents,
Series 1992, Zero Coupon:
4/1/06 (d) ........................................... 1,865,000 AAA 1,090,037
10/1/06 (d) .......................................... 1,865,000 AAA 1,060,439
4/1/07(d) ............................................ 1,865,000 AAA 1,020,920
10/1/07 (d) .......................................... 1,865,000 AAA 992,721
4/1/05 (d) ........................................... 1,865,000 AAA 1,161,559
10/1/05 (d) .......................................... 1,865,000 AAA 1,130,582
Northwest Suburban Municipal Joint Action Water
Agency, IL, ETM, 6.5%, 5/1/15** ....................... 2,000,000 AAA 2,109,180
Oak Lawn, IL, Water and Sewer Revenue, Series A,
Zero Coupon:
10/1/03 (d) .......................................... 1,295,000 AAA 887,140
10/1/04 (d) .......................................... 1,295,000 AAA 835,340
10/1/05 (d) .......................................... 1,295,000 AAA 785,042
10/1/06 (d) .......................................... 1,295,000 AAA 736,337
Rosemont, IL, Zero Coupon:
Tax Increment, 12/1/04 (d) ............................ 6,000,000 AAA 3,836,220
Tax Increment-3, Series C, 12/1/05 (d) ................ 7,060,000 AAA 4,241,436
State University Retirement System, IL, Special
Revenue, Zero Coupon, 10/1/05 (d) ..................... 7,000,000 AAA 4,224,360
University of Chicago, IL, Hospital Refunding,
5.5%, 8/15/08 (d) ..................................... 2,500,000 AAA 2,465,050
Will County, IL, School District #201-U, Crete Monee,
Zero Coupon, 12/15/06 (d) ............................. 3,725,000 AAA 2,139,938
Winnebago County, IL, School District #122:
6.55% 6/1/09 (d) ...................................... 1,675,000 AAA 1,842,617
6.55% 6/1/10 (d) ...................................... 1,825,000 AAA 2,007,774
INDIANA Indiana Health Facilities Finance Authority, Hospital
Revenue, Ancilla Systems Inc., Series A,
6%, 7/1/18 (d) ........................................ 3,965,000 AAA 4,092,871
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana Municipal Power Agency, Power Supply
System:
Series B, 6%, 1/1/12 (d) ............................. 1,750,000 AAA 1,820,070
Series B, 5.5%, 1/1/16 (d) ........................... 15,860,000 AAA 15,219,097
Indiana Transportation Finance Authority, Highway
Revenue, Series A, 5.75% 6/1/12 (d) ................... 5,000,000 AAA 5,057,050
Rockport, IN, Pollution Control Revenue, Series B,
Refunding Bonds, 7.6%, 3/1/16 ......................... 4,500,000 BBB 4,823,550
LOUISIANA Bastrop, LA, Industrial Development Board Pollution
Control Revenue, International Paper Co. Project,
6.9%, 3/1/07 .......................................... 10,250,000 A 11,006,348
Louisiana State General Obligation, Series 1996 A,
6%, 8/1/02 (d) ........................................ 5,000,000 AAA 5,294,500
New Orleans, LA, General Obligation, Zero Coupon,
9/1/05 (d) ............................................ 2,500,000 AAA 1,531,925
MAINE Maine Housing Authority, Mortgage Purchase
Revenue, 1987 Series A2, 7.65%, 11/15/15 .............. 1,580,000 AA 1,638,602
MARYLAND Northeast Maryland Waste Disposal Authority,
Southwest Resource Recovery System Revenue:
6.9%, 1/1/00 (d) ..................................... 1,595,000 AAA 1,701,323
7.2%, 1/1/06 (d) ..................................... 3,440,000 AAA 3,850,564
7.2%, 1/1/07 (d) ..................................... 3,390,000 AAA 3,774,596
MASSACHUSETTS Massachusetts Bay Transportation Authority, General
Transportation System, Series B, 6.2%, 3/1/16 ......... 2,500,000 A 2,625,225
Massachusetts College Building Authority Project:
Series A, 7.5%, 5/1/10 ................................ 4,110,000 A 4,815,564
Series A, 7.5%, 5/1/14 ................................ 3,750,000 A 4,475,775
Massachusetts General Obligation, Series B,
5.3%, 11/1/06 (d) ..................................... 3,000,000 AAA 3,023,550
Massachusetts Water Resource Authority:
General Revenue, Series C, 6%, 12/1/11 ................ 10,000,000 A 10,335,800
Series A, 6.5%, 7/15/09 ............................... 2,625,000 A 2,869,598
Series A, 6.5%, 7/15/19 ............................... 13,445,000 A 14,507,155
New England Education Loan Marketing Corporation,
Student Loan Revenue Refunding, Series F,
4.75%, 7/1/98 ......................................... 5,000,000 A 5,029,450
MICHIGAN Michigan State Hospital Finance Authority, Hospital
Revenue, Sinai Hospital, Series 1995, 6%, 1/1/08 ...... 3,000,000 BBB 2,844,870
MONTANA Montana Board Housing Revenue, Capital
Appreciation, Single-Family Revenue, Series A,
Zero Coupon, 6/1/10 ................................... 20,775,000 AA 4,390,173
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEVADA Nevada State Housing Division, Single Family
Mortgage Revenue, Series R, 5.95%, 10/1/11 ............. 8,130,000 AA 8,211,950
NEW YORK Metropolitan Transportation Authority of New York,
Transit Facilities Revenue:
7%, 7/1/02 ............................................ 1,595,000 BBB 1,722,760
Service Contract, Series O, 5.75%, 7/1/13 ............. 6,775,000 BBB 6,512,266
New York City, General Obligation:
Series 1995E, 6.5%, 2/15/05 ............................ 7,000,000 BBB 7,185,080
Series 1995E, 6.6%, 8/1/04 ............................. 7,500,000 A 7,784,625
Series 1996G, 6.75%, 2/1/09 ............................ 5,000,000 A 5,224,200
Series A, 6.375%, 8/1/04 ............................... 5,000,000 A 5,118,450
Series B, 7.1%, 2/1/97 ................................. 2,695,000 A 2,745,100
Series B, 6.75%, 8/15/03 ............................... 3,000,000 A 3,149,970
Series B, 6%, 8/15/04 .................................. 3,425,000 A 3,424,692
Series B, 6.1%, 8/15/05 ................................ 3,510,000 A 3,509,684
Series D, 7%, 8/1/02 (d) ............................... 2,500,000 AAA 2,681,800
Series D, 7%, 8/1/02 (d) ............................... 3,000,000 AAA 3,176,490
Series D, 7%, 8/1/02 (d) ............................... 750,000 AAA 804,540
Series H, 7.2%, 8/1/01 (d) ............................. 2,260,000 AAA 2,473,886
Series H, 7%, 2/1/05 ................................... 4,000,000 A 4,267,760
New York State Dormitory Authority:
City University System, Consolidated Revenue:
Series A, 5.75%, 7/1/06 ............................... 4,000,000 BBB 3,972,960
Series A, 5.75%, 7/1/06 (d) ........................... 5,000,000 AAA 5,204,550
Series E, 5.75%, 7/1/06 ............................... 5,255,000 BBB 5,219,476
Series F, 5.375%, 7/1/07 .............................. 5,000,000 BBB 4,813,100
College and University Pooled Capital Program,
7.8%, 12/1/05 (d) ...................................... 4,155,000 AAA 4,490,766
State University Educational Facility Revenue,
Series B, 5.25%, 5/15/10 (d) ........................... 5,000,000 AAA 4,869,950
New York State Medical Care Facility Financing
Agency, Mount Sinai Hospital, 5.95%, 8/15/09 ........... 4,755,000 AAA 4,837,309
New York State Urban Development Corporation,
Lease Revenue Series 1994, 5.5%, 1/1/08 ................ 1,600,000 BBB 1,544,480
New York State Urban Development Corporation
Revenue, Correctional Facilities:
Series A, 5.4%, 1/1/06 ................................ 1,000,000 BBB 955,740
Series A, 5.4%, 1/1/06 ................................ 5,000,000 BBB 4,778,700
Series A, 5.45%, 1/1/07 ............................... 6,475,000 BBB 6,227,590
Series A, 5.1%, 1/1/08 (d) ............................ 6,735,000 AAA 6,578,681
NORTH CAROLINA North Carolina Eastern Municipal Power Agency
Series C, 7%, 1/1/07 ................................... 7,965,000 A 8,476,911
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Carolina Municipal Power Agency #1,
Catawba Electric Refunding Revenue:
7.25%, 1/1/07 ......................................... 6,500,000 A 7,282,795
5.25%, 1/1/09 ......................................... 8,500,000 AAA 8,317,080
OHIO Ohio Water Development Authority, Pollution Control
Revenue, Ohio Edison Company Project,
Series 1989A, 7.625%, 7/1/23 .......................... 4,890,000 BBB 5,127,263
PENNSYLVANIA Philadelphia, PA, Hospital and Higher Education
Facilities Authority, Temple University Hospital,
Series A, 6.5%, 11/15/08 .............................. 2,800,000 A 2,891,168
RHODE ISLAND Convention Center Authority Rhode Island Revenue,
5%, 5/15/20 (d) ....................................... 19,685,000 AAA 17,112,564
Rhode Island Housing and Mortgage Finance Corp.,
Home Ownership Opportunity Bond, Series 2, 7.5%,
10/1/21 ............................................... 1,290,000 AA 1,340,310
SOUTH CAROLINA Piedmont Municipal Power Agency, SC, Electric
Revenue, 5.5%, 1/1/10 (d) ............................. 2,600,000 AAA 2,590,172
TENNESSEE Knox County, TN, Health, Education and Housing
Facilities Board, Fort Sanders Alliance,
7.25%, 1/1/09 (d) ..................................... 3,250,000 AAA 3,770,065
TEXAS Austin, TX, Utility Systems Revenue Refunding,
Series A, Zero Coupon, 5/15/03 (d) .................... 2,890,000 AAA 2,025,919
Dallas-Fort Worth, TX, International Airport Revenue:
Series A, 7.375%, 11/1/09 (d) ......................... 4,500,000 AAA 5,120,865
Series A, 7.8%, 11/1/07 (d) ........................... 2,390,000 AAA 2,792,380
Harris County, TX, Toll and Sub Lien, Series A,
Zero Coupon, 8/15/04 (d) .............................. 4,050,000 AAA 2,640,681
Houston, TX, Water Conveyance System Contract,
Certificate of Participation, Series J, 6.125%,
12/15/05 (d) .......................................... 2,500,000 AAA 2,673,000
Houston, TX, Water and Sewer System Authority:
Series C, Zero Coupon, 12/1/05 (d) .................... 15,000,000 AAA 9,052,950
Series C, Zero Coupon, 12/1/07 (d) .................... 3,400,000 AAA 1,802,986
Lower Colorado River Authority, TX, Revenue
Refunding, Zero Coupon, 1/1/03 (d) .................... 8,900,000 AAA 6,400,524
San Antonio, TX, Airport Systems Revenue Refunding,
7%, 7/1/02 (d) ........................................ 1,695,000 AAA 1,880,179
San Antonio, TX, Electric and Gas, Revenue
Refunding:
Series A, Zero Coupon, 2/1/05 (d) .................... 7,000,000 AAA 4,417,630
Series A, Zero Coupon, 2/1/05 (d) .................... 5,000,000 AAA 3,155,450
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
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 3,756,120
Special Obligation, 2nd Crossover, 7.5%,
7/1/16 (d) (f) ........................................ 3,000,000 AAA 3,060,930
Salt Lake City, UT, Hospital Revenue, Intermountain
Health Care, Series 1992, Inversed Inflow, 7.5%,
2/15/12*** ............................................ 1,500,000 AA 1,508,520
Utah Associated Municipal Power System, Hunter
Project Refunding Revenue, Zero Coupon,
7/1/03 (d) ............................................ 5,700,000 AAA 3,947,877
VIRGINIA Virginia Beach, VA, Development Authority, Virginia
Beach General Hospital Project, 5.125%, 2/15/18 (d) ... 3,000,000 AAA 2,769,390
WASHINGTON Washington Health Care Facilities Authority:
Empire Health Services-Spokane, 5.8%, 11/1/08 (d) ..... 4,865,000 AAA 5,032,064
Franciscan Health System # St. Joseph's/Tacoma:
5.4%, 1/1/07 (d) ..................................... 2,000,000 AAA 1,995,240
5.4%, 1/1/08 (d) ..................................... 2,645,000 AAA 2,640,504
Sisters of St. Joseph of Peace, 5.3%, 3/1/09 (d) ...... 4,315,000 AAA 4,228,916
Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue:
6.875%, 7/1/17 ....................................... 6,000,000 AA 6,286,260
Series A, 7.15%, 7/1/02 (d) .......................... 2,550,000 AAA 2,735,105
Series A, Zero Coupon, 7/1/07 (d) .................... 8,570,000 AAA 4,562,154
Series A, 7%, 7/1/11 ................................. 4,725,000 AA 4,998,578
Series B, 5.5%, 7/1/06 ............................... 4,915,000 AA 4,760,767
Series B, 7.25%, 7/1/09 .............................. 11,350,000 AA 12,761,032
Nuclear Project #2, Refunding Revenue:
Series A, 7.25%, 7/1/06 .............................. 7,000,000 AA 7,688,240
Series A, 6%, 7/1/07 ................................. 7,000,000 AA 6,994,400
Series B, 5.5%, 7/1/06 ............................... 4,000,000 AA 3,874,480
Series B, 7%, 7/1/12 ................................. 14,385,000 AA 15,217,892
Nuclear Project #3, Refunding Revenue:
Series A, Zero Coupon, 7/1/06 (d) .................... 1,380,000 AAA 785,537
Series B, Prerefunded 1/1/00, 7.25%, 7/1/15 (e) ...... 5,000,000 AAA 5,499,750
Series B, Zero Coupon, 7/1/02 (d) .................... 11,925,000 AAA 8,703,819
Series B, 7.375%, 7/1/04 ............................. 750,000 AA 817,411
Series B, Zero Coupon, 7/1/06 (d) .................... 5,555,000 AAA 3,162,073
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER MANAGED MUNICIPAL BONDS
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B, 5.65%, 7/1/08 .............................. 3,000,000 AAA 3,076,830
Series C, 5%, 7/1/06 ................................. 10,000,000 AA 9,213,100
West Virginia West Virginia, School Building Authority Revenue,
Series B, 6.75%, 7/1/10 (d) ........................... 1,600,000 AAA 1,704,544
Wisconsin Green Bay, WI, Industrial Development Revenue,
Weyerhaeuser Company Project, Series A,
9%, 9/1/06 ............................................ 1,700,000 NR 1,716,609
Wisconsin Health & Educational Facilities Authority:
Hospital Sisters Services Inc., Obligated Group,
5.375%, 6/1/13 (d) ................................... 1,500,000 AAA 1,408,710
Lutheran Hospital, Lacrosse, L. Benevolent,
5.6%, 2/15/09 (d) .................................... 2,000,000 AAA 1,989,120
Wyoming Wyoming Community Development Authority, Single
Family Mortgage, Series A, 5.85%, 6/1/13 .............. 3,000,000 B 2,964,960
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $687,851,192) ................................... 720,035,395
-----------
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $697,901,697) (a) 730,087,535
===========
<FN>
(a) The cost for federal income tax purposes was $697,901,697. At June 30, 1996, net unrealized appreciation
for all securities based on tax cost was $32,185,838. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value over tax cost of $35,727,847
and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost
over market value of $3,542,009.
(b) At June 30, 1996 this security, in part, has been pledged to cover initial margin requirements for open
futures contracts.
</FN>
</TABLE>
<TABLE>
AT JUNE 30, 1996, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
30 Year U.S.
Treasury Bonds Sep. 1996 100 10,667,750 10,953,125
--- ---------- ----------
Total net unrealized depreciation on open futures contracts sold short .... (285,375)
<FN>
(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.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<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.
(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.
** 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 June 30, 1996.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------
JUNE 30, 1996 (UNAUDITED)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $697,901,697)
(Note A) .................................................... $730,087,535
Cash ........................................................... 33,643
Receivables:
Interest .................................................... 13,332,225
Investments sold ............................................ 1,033,000
Fund shares sold ............................................ 72,309
Other assets ................................................... 10,130
Total assets ............................................ 744,568,842
------------
LIABILITIES
Payables:
Investments purchased ....................................... $2,622,100
Dividends ................................................... 1,579,498
Fund shares redeemed ........................................ 459,748
Daily variation margin on open futures contracts
(Note A) ................................................ 112,500
Accrued management fee (Note C) ............................. 313,693
Other accrued expenses (Note C) ............................. 123,694
----------
Total liabilities ....................................... 5,211,233
------------
Net assets, at market value .................................... $739,357,609
============
NET ASSETS
Net assets consist of:
Net unrealized appreciation (depreciation) on
Investments ............................................. 32,185,838
Futures ................................................. (285,375)
Accumulated net realized loss ............................... (5,446,916)
Shares of beneficial interest ............................... 858,768
Additional paid-in capital .................................. 712,045,294
------------
Net assets, at market value .................................... $739,357,609
============
NET ASSET VALUE, offering and redemption price per share
($739,357,609 ]divided by] 85,876,827 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) ....................................... $8.61
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest .............................................. $ 21,931,199
Expenses:
Management fee (Note C) ............................... $ 1,929,370
Services to shareholders (Note C) ..................... 209,815
Trustees' fees and expenses (Note C) .................. 27,124
Custodian and accounting fees (Note C) ................ 112,254
Reports to shareholders ............................... 39,136
Legal ................................................. 2,765
Auditing .............................................. 23,595
State registration .................................... 25,575
Other ................................................. 18,595 2,388,229
--------------------------
Net investment income ................................. 19,542,970
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain from:
Investments ....................................... 2,180,697
Futures ........................................... 1,236,181 3,416,878
------------
Net unrealized depreciation during the period on:
Investments ....................................... (32,189,138)
Futures ........................................... (142,188) (32,331,326)
--------------------------
Net loss on investment transactions ................... (28,914,448)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ (9,371,478)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1996 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ...................... $ 19,542,970 $ 41,903,981
Net realized gain (loss) from investment
transactions ........................... 3,416,878 (2,152,376)
Net unrealized appreciation (depreciation)
on investment transactions
during the period ...................... (32,331,326) 78,966,934
------------ ------------
Net increase (decrease) in net assets
resulting from operations .............. (9,371,478) 118,718,539
Distributions to shareholders from net
investment income ($.23 and $.48 per
share, respectively) ................... (19,542,970) (41,903,981)
------------ ------------
Fund share transactions:
Proceeds from shares sold .................. 32,687,217 66,806,552
Net asset value of shares issued to
shareholders in reinvestment
of distributions ....................... 9,879,949 21,004,076
Cost of shares redeemed .................... (49,231,633) (98,237,351)
------------ ------------
Net decrease in net assets from
Fund share transactions ................ (6,664,467) (10,426,723)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS .......... (35,578,915) 66,387,835
Net assets at beginning of period .......... 774,936,524 708,548,689
------------ ------------
NET ASSETS AT END OF PERIOD ................ $739,357,609 $774,936,524
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .. 86,659,129 87,839,034
------------ ------------
Shares sold ................................ 3,719,346 7,853,077
Shares issued to shareholders in
reinvestment of distributions .......... 1,131,658 2,444,465
Shares redeemed ............................ (5,633,306) (11,477,447)
------------ ------------
Net decrease in Fund shares ................ (782,302) (1,179,905)
------------ ------------
Shares outstanding at end of period ........ 85,876,827 86,659,129
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1996 ---------------------------------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---------- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 8.94 $ 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 ............... .23 .48 .46 .47 .51 .53 .55 .59 .60 .61 .61
Net realized and
unrealized gain
(loss) on investment
transactions ......... (.33) .87 (1.00) .66 .25 .47 -- .33 .38 (.58) .77
------ ------ ------ ------ ----- ------ ----- ------ ------ ----- ------
Total from investment
operations ............ (.10) 1.35 (.54) 1.13 .76 1.00 .55 .92 .98 .03 1.38
------ ------ ------ ------ ----- ------ ----- ------ ------ ----- ------
Less distributions:
From net investment
income ............... (.23) (.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 ... (.23) (.48) (.48) (.76) (.84) (.65) (.64) (.98) (.62) (.72) (.85)
------ ------ ------ ------ ----- ------ ----- ------ ------ ----- ------
Net asset value,
end of period ......... $ 8.61 $ 8.94 $ 8.07 $ 9.09 $8.72 $ 8.80 $8.45 $ 8.54 $ 8.60 $8.24 $ 8.93
====== ====== ====== ====== ===== ====== ===== ====== ====== ===== ======
TOTAL RETURN (%) ....... (1.17)** 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) ... 739 775 709 910 830 796 719 691 635 592 663
Ratio of operating
expenses to average
daily net assets (%) .. .64* .63 .63 .63 .63 .64 .61 .62 .61 .63 .58
Ratio of net investment
income to average
daily net assets (%) .. 5.21* 5.59 5.41 5.21 5.76 6.16 6.61 6.78 7.13 7.20 6.88
Portfolio turnover
rate (%) .............. 16.6* 17.8 33.7 52.8 59.6 32.4 72.1 89.8 75.5 73.5 78.0
<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
23
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio debt securities 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 six months
ended June 30, 1996, the Fund purchased interest rate futures to increase the
duration of the portfolio and 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.
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NOTES TO FINANCIAL STATEMENTS
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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.
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.
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SCUDDER MANAGED MUNICIPAL BONDS
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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
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During the six months ended June 30, 1996, purchases and sales of municipal
securities (excluding short-term investments) aggregated $61,111,349 and
$73,583,537, respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1996 was $26,647,676 and $27,983,614, respectively.
C. RELATED PARTIES
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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 six months ended June 30, 1996, the fee
pursuant to the agreement amounted to $1,929,370, 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
six months ended June 30, 1996, the amount charged to the Fund by SSC aggregated
$164,002, of which $26,796 is unpaid at June 30, 1996.
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NOTES TO FINANCIAL STATEMENTS
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Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 1996, the amount charged to the Fund by SFAC aggregated $50,244,
of which $16,499 is unpaid at June 30, 1996.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. During the six
months ended June 30, 1996, Trustees' fees and expenses aggregated $27,124.
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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; Executive Fellow, Center for Business Ethics; President, Driscoll
Associates
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.
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<TABLE>
<CAPTION>
INVESTMENT PRODUCTS AND SERVICES
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 High Yield Bond Fund
Scudder California Tax Free Money Fund* Scudder Income Fund
Scudder New York Tax Free Money Fund* Scudder International Bond Fund
Tax Free+ Scudder Short Term Bond Fund
Scudder California Tax Free Fund* Scudder Zero Coupon 2000 Fund
Scudder High Yield Tax Free Fund Growth
Scudder Limited Term Tax Free Fund Scudder Capital Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Emerging Markets Growth Fund
Scudder Massachusetts Tax Free Fund* Scudder Global Fund
Scudder Medium Term Tax Free Fund Scudder Global Discovery Fund
Scudder New York Tax Free Fund* Scudder Gold Fund
Scudder Ohio Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Pennsylvania Tax Free Fund* Scudder International Fund
Growth and Income Scudder Latin America Fund
Scudder Balanced Fund Scudder Micro Cap Fund
Scudder Growth and Income Fund Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value 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.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +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.
30
<PAGE>
HOW TO CONTACT SCUDDER
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
Visit the Scudder World Wide Web Site at:
http://funds.scudder.com
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 Treasurers Trust,(TM)
an institutional cash management service for
corporations, non-profit organizations and trusts
that uses 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.
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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 40 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.
