Scudder
Managed
Municipal
Bonds
Annual Report
December 31, 1996
Pure No-Load(TM) Funds
Offers opportunity for tax-free income by investing primarily in high-grade,
long-term municipal securities.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
26 Report of Independent Accountants
27 Tax Information
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 4.73% as
of December 31, 1996. For investors in the two highest federal tax brackets of
36% and 39.6%, the Fund's yield was equivalent to a fully taxable 7.39% and
7.83%, respectively.
o The Fund received four stars from Morningstar, reflecting an "above-average"
rating for risk-adjusted performance through December 31, 1996.*
o For one-, three-, five-, and ten-year periods, the Fund's total returns placed
it in the top quartile of total return performance among similar municipal bond
funds as tracked by Lipper Analytical Services. Please see page 6 for additional
Lipper performance information.
* For your information, these ratings are subject to change every month and are
calculated from the Fund's three-, five-, and ten-year average annual returns
in excess of 90-day Treasury bill returns with appropriate fee adjustments,
and a risk factor that reflects fund performance below T-bill returns. In all,
1,129 municipal funds were rated. 10% received five stars, 22.5% received four
stars, 35% three stars, 22.5% two stars, and the bottom 10% one star. The Fund
received four stars for three-year performance and three stars for five-year
performance. Past performance is no guarantee of future returns.
2-Scudder Managed Municipal Bonds
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We hope you enjoy our newly redesigned shareholder report. The new format,
which is being gradually introduced for all Scudder funds, is designed to
enhance the attractiveness and readability of the reports. Let us know what you
think.
This annual report for Scudder Managed Municipal Bonds covers a year of
large swings of opinion concerning the direction of the U.S. economy and
interest rates. Despite the market uncertainty, the Fund posted a 4.15% total
return for the 12-month period as well as a 4.73% 30-day net annualized SEC
yield and a 7.39% tax equivalent yield at the close of the year based on the 36%
federal tax rate. Please read the portfolio management discussion beginning on
page 6 for more information.
As part of Scudder's ongoing efforts to meet the needs of investors, we
recently launched an innovative new product called Scudder Pathway Series. A
"fund of funds," Pathway Series is a collection of four distinct portfolios --
Conservative, Growth, Balanced, and International -- that offers flexibility,
diversification, and simplicity. Each portfolio invests in a diverse mix of
Scudder funds, and each is geared toward people with different investment goals
and risk tolerances -- a team of Scudder's investment professionals makes
allocation decisions accordingly.
We'd like to remind you that new legislation passed last summer
significantly raised IRA contribution limits for many married couples. Beginning
with the 1997 tax year, married couples with one income may contribute up to
$4,000 jointly per year -- an increase of $1,750 from the previous limit. This
change may enhance your ability to use an IRA to defer taxes and let your
retirement assets grow over time. For more information on Scudder products and
services, please turn to page 30. If you have questions about Scudder Managed
Municipal Bonds, please contact a Scudder Investor Information representative at
1-800-225-2470, or visit Scudder's Web site at funds.scudder.com.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder Managed Municipal Bonds
3-Scudder Managed Municipal Bonds
<PAGE>
PERFORMANCE UPDATE as of December 31, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------
1 Year $10,415 4.15% 4.15%
5 Year $14,153 41.53% 7.19%
10 Year $21,243 112.43% 7.83%
- --------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
1 Year $10,443 4.43% 4.43%
5 Year $14,212 42.12% 7.27%
10 Year $21,184 111.84% 7.79%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
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
- ----------------------
'86 $10,000
'87 $10,034
'88 $11,266
'89 $12,526
'90 $13,374
'91 $15,009
'92 $16,357
'93 $18,536
'94 $17,416
'95 $20,397
'96 $21,243
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- ----------------------
'86 $10,000
'87 $10,151
'88 $11,183
'89 $12,389
'90 $13,292
'91 $14,906
'92 $16,220
'93 $18,212
'94 $17,271
'95 $20,285
'96 $21,184
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>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $8.24 $8.60 $8.54 $8.45 $8.80 $8.72 $9.09 $8.07 $8.94 $8.84
INCOME DIVIDENDS.. $ .61 $ .60 $ .59 $ .55 $ .53 $ .51 $ .47 $ .46 $ .48 $ .45
CAPITAL GAINS
DISTRIBUTIONS..... $ .11 $ .02 $ .39 $ .09 $ .12 $ .33 $ .29 $ .02 $ -- $ --
FUND TOTAL
RETURN (%)........ 0.34 12.27 11.19 6.77 12.23 8.98 13.32 -6.04 17.12 4.15
INDEX TOTAL
RETURN (%)........ 1.51 10.16 10.79 7.29 12.14 8.82 12.28 -5.17 17.46 4.43
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4-Scudder Managed Municipal Bonds
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1996
- --------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------
Electric Utility Revenue 25%
Core Cities/Lease 12%
State General Obligation 9%
Water/Sewer Revenue 8%
Hospital/Health 7%
Pollution Control/
Industrial Development 6%
Higher Education 6%
Toll Revenue/Transportation 5%
Other General Obligation/Lease 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.
Diversification remains an important
strategy for the Fund, allowing us to
spread risk over a large number of
sectors, maturities, and geographic
areas.
- ---------------------------------------------------------------------------
QUALITY
- ---------------------------------------------------------------------------
Cash Equivalents 1%
AAA 63%
AA 9%
A 17%
BBB 9%
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.
The Fund has maintained high credit
quality, with 73% of Fund assets
rated AAA, AA, or the equivalent as
of December 31, 1996.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Less than 1 year 2%
1 - 5 11%
5 - 10 40%
10 - 20 40%
Greater than 20 years 7%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 10.4 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
To strike a balance between benefiting
from slightly higher rates and providing
a measure of protection from potential
future interest rate increases, we
maintained an average effective maturity
comparable to the Fund's competitive
universe during the most recent fiscal
year.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 9.
5-Scudder Managed Municipal Bonds
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
In the face of shifting bond market sentiment during 1996, we held to our
long-term strategy as Scudder Managed Municipal Bonds posted a 4.15% total
return for the 12 months ended December 31, 1996. A slight decline in the Fund's
net asset value -- from $8.94 on December 31, 1995, to $8.84 as of December
31,1996 -- was offset by income distributions of $0.45 per share over the
12-month period. The Fund's return outpaced the 3.30% average total return of
225 similar funds over the same period as measured by Lipper Analytical
Services, Inc. As shown in the chart below, the Fund's average annual total
returns place it in the top quartile of its peer group for one-, three-, five-
and 10-year periods.
=======================================================
Strong Relative Performance
(Average annual returns for periods ended December
31, 1996)
=========================================================
Scudder
Managed Lipper Number
Municipal average of
Bonds annual Fund Funds Percentile
Period return return Rank tracked Ranking
==========================================================
1 year 4.15% 3.30% 49 of 225 Top 22%
3 years 4.65% 4.14% 38 of 159 Top 24%
5 years 7.19% 6.78% 25 of 103 Top 24%
10 years 7.82% 7.18% 11 of 64 Top 17%
==========================================================
Past performance does not guarantee future results.
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 provided a 30-day net annualized SEC yield of
4.73% as of December 31, 1996, equivalent to a 7.39% taxable yield for investors
in the 36% federal income tax bracket.
An Uncertain Bond Market
During the Fund's most recent fiscal year, bond prices moved alternately higher
and lower as opinions concerning the direction of the economy swung from one
extreme to the other. At the start of 1996, weakening economic indicators led
many market participants to believe that the U.S. economy might be falling into
a recession. But the economy soon gained some strength, and the consensus of
economists' opinions shifted to expectations of a soft economic landing and
moderate inflation. At mid-year, the bond market struggled as the numbers seemed
to forecast very strong economic growth and an outbreak of inflation: Statistics
showed that shoppers were returning to retail stores, and hiring was increasing
significantly. But by late summer, moderating economic indicators had soothed
the market. Bond yields declined and the economy retreated as consumers seemed
to feel the weight of their personal debt -- credit card debt service payments
as a percentage of disposable income rose to an all-time high in 1996.
Following a period of underperformance caused in part by the temporary
refloating of the "flat tax" idea during the presidential primaries, municipal
bond returns exceeded those of Treasuries during 1996. Yields of 10-year
municipal bonds rose one quarter of a percentage point, and their prices
6-Scudder Managed Municipal Bonds
<PAGE>
declined 1.77%, while 10-year Treasury yields rose eight tenths of a percentage
point and their prices declined 5.34%. Changes in supply and demand were not
decisive factors in tax-free bond performance, as a modest increase in the
supply of municipals was met by a corresponding increase in demand, particularly
from retail purchasers and insurance companies.
Noncallable Bonds
Central to Strategy
To strike a balance between benefiting from slightly higher rates and providing
a measure of protection from potential future interest rate increases, we
maintained an average effective maturity comparable to the Fund's competitive
universe during the most recent fiscal year. Scudder Managed Municipal Bonds'
average effective maturity was 10 years as of December 31, 1996. In addition,
purchasing bonds with call protection remains a fundamental part of our
investment strategy, ensuring that a significant portion of the Fund's bonds are
not retired before maturity. (Generally, a bond is called in by its issuer so
that it can be refinanced at a lower prevailing rate.) Our emphasis on call
protection provides a more reliable income stream than would exist if the Fund's
portfolio held a significant proportion of bonds that could be called in before
their stated maturities. While many municipal market participants have recently
increased their focus on this segment of the market, Scudder shareholders have
benefited from our pursuit of attractive noncallable bonds for more than five
years.
Overall, we continue to purchase high-grade, longer-maturity municipal bonds to
pursue our primary investment goal: to maximize the Fund's yield while
maintaining as much price stability as possible. On December 31, bonds with
effective maturities between 10 and 20 years represented 40% 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 December 31,1996, the Fund held securities issued in 30 states plus the
District of Columbia. Lastly, the Fund's credit quality remains high, with 73%
of Fund assets rated AAA or AA, or of equivalent quality. Securities are rated
by Standard & Poor's, Moody's Investor Service, Fitch Investors Service, or, if
unrated, are assigned a rating by Scudder. The Portfolio Summary on page 5
provides more information about the Fund's holdings, including quality,
maturity, and sector representation.
A New Era of Growth?
We expect the latter part of the 1990s to be a time of exciting change and
enormous economic possibilities. We believe that rapid technological advances,
falling trade barriers, and worldwide deregulation are forging a new U.S.
economy characterized by significant growth and declining inflation. Before this
new economy can take root, however, we expect a transitional period of weaker
economic activity -- consumers are currently weighed down by debt, and more
banks are tightening lending to consumers than at any time since the 1989-90
recession. Following this transition, growth accompanied by even lower
7-Scudder Managed Municipal Bonds
<PAGE>
inflation can assert itself. This scenario would be favorable for bonds, which
have been outshone by stocks during 1995 and 1996 but remain an important
ingredient of a balanced investment portfolio: Bonds can provide investors with
diversification, current income, and increased principal stability. For
investors in higher tax brackets, municipal bonds continue to offer significant
after-tax rewards.
Over the coming year, we expect to maintain an average effective maturity that
is in line with our competitive universe. We will seek to add value, as we have
in the past, by emphasizing call protection and security selection rather than
by making significant interest rate forecasts.
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 the
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
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 16 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.
8-Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO as of December 31, 1996
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS 0.9%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOUTH CAROLINA
South Carolina Jobs-Economic Development Authority, Franciscan Sisters of the Poor,
St. Francis Hospital, Variable Rate Daily Demand Note, 4.95%, 7/1/22*.................. 200,000 MIG1 200,000
TENNESSEE
Metropolitan Nashville Airport Authority, TN, Variable Rate Demand Note, 4.95%,
10/1/12*............................................................................... 600,000 A1+ 600,000
UTAH
Intermountain Power Supply Agency, UT, Series 1993, 5.55%, 7/1/11*....................... 3,000,000 AA 2,958,900
WASHINGTON
Washington Healthcare Facilities Authority, Series 1985-E Variable Rate Demand Note,
5%, 10/1/05*........................................................................... 2,500,000 A1+ 2,500,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (Cost $6,269,850) 6,258,900
- -------------------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL INVESTMENTS 99.1%
- -------------------------------------------------------------------------------------------------------------------------------
ALASKA
North Slope Borough, AK, General Obligation:
Series B, Zero Coupon, 1/1/03 (d)...................................................... 8,000,000 AAA 5,941,520
Capital Appreciation:
Series A, Zero Coupon, 6/30/06 (d)................................................... 7,000,000 AAA 4,246,900
Series B, Zero Coupon, 6/30/04 (d)................................................... 15,000,000 AAA 10,266,450
Series B, Zero Coupon, 6/30/05 (d)................................................... 18,200,000 AAA 11,744,824
ARIZONA
Maricopa County, AZ, School District #28, Kyrene Elementary School, Series B,
Zero Coupon, 1/1/06 (d)................................................................ 4,905,000 AAA 3,103,786
ARKANSAS
Arkansas Development Finance Authority, Single Family Mortgage Revenue, Series B,
7.7%, 12/1/14.......................................................................... 1,960,000 A 2,012,332
CALIFORNIA
California General Obligation:
6.4%, 2/1/06 (d)....................................................................... 3,500,000 AAA 3,897,285
6.25%, 10/1/07 (d)..................................................................... 4,000,000 AAA 4,439,680
6.25%, 4/1/08 (d)...................................................................... 5,000,000 AAA 5,541,450
6.6%, 2/1/09 (d)....................................................................... 15,600,000 AAA 17,705,688
California Housing Finance Agency, Multi-Unit Rental Housing Revenue, Series A,
7.7%, 8/1/10........................................................................... 1,000,000 A 1,090,470
The accompanying notes are an integral part of the financial statements.
</TABLE>
9 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Statewide Community Development Authority, Certificate of Participation,
Lutheran Homes, 5.5%, 11/15/08......................................................... 2,250,000 A 2,343,532
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 3,195,650
Step-up coupon, 0% to 1/1/05, 7.1% to 1/1/11......................................... 4,000,000 BBB 2,580,640
Step-up coupon, 0% to 1/1/05, 7.1% to 1/1/12......................................... 4,000,000 BBB 2,579,040
Step-up coupon, 0% to 1/1/05, 7.15% to 1/1/14........................................ 6,250,000 BBB 4,013,875
Zero Coupon, 1/1/15.................................................................. 11,000,000 BBB 3,697,210
Los Angeles County, CA, Certificate of Participation, Disney Parking Project,
Zero Coupon:
9/1/07............................................................................... 4,030,000 A 2,105,473
9/1/09............................................................................... 5,425,000 A 2,478,845
Roseville, CA, Unified High School District, General Obligation, Series B,
Zero Coupon:
8/1/10 (d)........................................................................... 1,830,000 AAA 874,594
8/1/15 (d)........................................................................... 1,000,000 AAA 350,620
San Joaquin, CA, Certificate of Participation, County Public Facilities Project,
5.5%, 11/15/13 (d)..................................................................... 3,895,000 AAA 3,946,141
San Jose, CA, Redevelopment Agency, Merged Area Redevelopment Project, Tax
Allocation Bonds, 6%, 8/1/08 (d)....................................................... 1,500,000 AAA 1,636,125
COLORADO
Castle Rock Ranch, CO, Public Improvements Authority, Public Facilities Revenue,
6.25%, 12/1/17......................................................................... 4,820,000 AA 5,080,569
Colorado Housing Finance Authority Revenue, Series A:
8.1%, 10/1/05.......................................................................... 2,030,000 AA 2,319,864
8.15%, 10/1/06......................................................................... 2,145,000 AA 2,450,813
8.25%, 10/1/10 (b)..................................................................... 1,940,000 AA 2,195,207
8.25%, 10/1/11......................................................................... 1,680,000 AA 1,893,091
8.25%, 10/1/12......................................................................... 1,945,000 AA 2,181,570
Multi-Family Mortgage:
8.15%, 10/1/07....................................................................... 2,320,000 AA 2,644,591
8.2%, 10/1/08........................................................................ 2,510,000 AA 2,860,597
8.2%, 10/1/09........................................................................ 2,725,000 AA 3,091,213
CONNECTICUT
Connecticut Resource Recovery Authority, Series 1996A, 6.25%, 11/15/06 (d)............... 2,000,000 AAA 2,199,340
The accompanying notes are an integral part of the financial statements.
</TABLE>
10 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DISTRICT OF COLUMBIA
District of Columbia, Certificate of Participation:
Series 1993, 6.875%, 1/1/03............................................................ 2,500,000 BB 2,560,900
7.3%, 1/1/13........................................................................... 1,000,000 BB 1,047,390
District of Columbia, General Obligation:
Series A, 5.875%, 6/1/05 (d)........................................................... 3,300,000 AAA 3,473,085
Series B, Zero Coupon, 6/1/03 (d)...................................................... 2,000,000 AAA 1,450,460
Series B3, 5.3%, 6/1/05 (d)............................................................ 1,350,000 AAA 1,368,225
Series B3,5.5%, 6/1/07 (d)............................................................. 1,000,000 AAA 1,015,000
Series B3, 5.5%, 6/1/08 (d)............................................................ 3,225,000 AAA 3,249,316
District of Columbia, Georgetown University, Series A, 7.25%, 4/1/11..................... 2,965,000 A 3,113,250
GEORGIA
Burke County, GA, Development Authority, Pollution Control Revenue, Ogelthorpe
Power Corp., Vogtle Project, 7.7%, 1/1/06 (d).......................................... 11,000,000 AAA 12,850,200
Monroe County, GA, Development Authority, Pollution Control Revenue, Ogelthorpe
Power Corporation, Scherer Project, 6.7%, 1/1/09....................................... 3,255,000 A 3,640,457
Municipal Electric Authority of Georgia, Power Revenue, Series V, 6.5%, 1/1/12 (d)....... 5,000,000 AAA 5,566,000
Municipal Electric Authority of Georgia, Special Obligation, 4th Crossover, Series X,
Project #1, 6.5%, 1/1/12 (d)........................................................... 3,500,000 AAA 3,896,200
ILLINOIS
Central Lake County, IL, Joint Action Water Agency, Refunding Revenue,
Zero Coupon, 5/1/04 (d)................................................................ 2,445,000 AAA 1,697,270
Chicago, IL, Motor Fuel Tax Revenue, 5.375%, 1/1/14 (d).................................. 5,000,000 AAA 4,926,100
Chicago, IL, General Obligation, Emergency Telephone System, 5.6%, 1/1/09 (d)............ 7,200,000 AAA 7,441,704
Chicago, IL, General Obligation, Series 1996-A-2, 6.25%, 1/1/14 (d)...................... 2,000,000 AAA 2,178,220
Chicago, IL, General Obligation Lease, Board of Education, Series A, 6.25%,
1/1/15 (d)............................................................................. 2,725,000 AAA 2,963,192
Chicago, IL, Public Building Commission:
Building Revenue, Series A, 5.25%, 12/1/07 (d)......................................... 5,000,000 AAA 5,070,350
Building Revenue, Series A, 5.25%, 12/1/08 (d)......................................... 2,655,000 AAA 2,666,549
Zero Coupon, ETM, Series 1990A, 1/1/08 (d)**........................................... 4,000,000 AAA 2,214,040
Chicago, IL, Wastewater Transmission Revenue, 5.375%, 1/1/13 (d)......................... 3,100,000 AAA 3,052,632
Cook County, IL, Community High School District #233:
Homewood & Flossmor Series 1993B, Zero Coupon, 12/1/11 (d)............................. 1,690,000 AAA 736,113
Homewood & Flossmor Series 1993B, Zero Coupon, 12/1/12 (d)............................. 1,700,000 AAA 694,943
Du-Page, IL, Industrial Development Revenue, Weyerhaeuser Company Project,
Series 1983, 8.65%, 11/1/08............................................................ 3,600,000 NR 3,685,644
The accompanying notes are an integral part of the financial statements.
</TABLE>
11 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois Development Finance Authority, Refunding Revenue, Commonwealth Edison,
Series 1994, 5.85%, 1/15/14 (d)........................................................ 5,000,000 AAA 5,117,150
Illinois Educational Facilities Authority, Loyola University, Zero Coupon, 7/1/05 (d).... 3,100,000 AAA 2,013,791
Illinois Health Facilities Authority:
Delnor Community Hospital, 5.5%, 5/15/13 (d)........................................... 1,500,000 AAA 1,479,210
Memorial Medical Center - Springfield, 5.25%, 10/1/09 (d).............................. 1,725,000 AAA 1,705,921
Illinois State Sales Tax Revenue, Series P, 6.5%, 6/15/13................................ 2,100,000 AAA 2,339,946
Northern Illinois University, Board of Regents, Series 1992, Zero Coupon:
4/1/05 (d)............................................................................. 1,865,000 AAA 1,227,002
10/1/05 (d)............................................................................ 1,865,000 AAA 1,196,248
4/1/06 (d)............................................................................. 1,865,000 AAA 1,154,771
10/1/06 (d)............................................................................ 1,865,000 AAA 1,125,229
4/1/07 (d)............................................................................. 1,865,000 AAA 1,085,561
10/1/07 (d)............................................................................ 1,865,000 AAA 1,057,269
Northwest Suburban Municipal Joint Action Water Agency, IL, ETM, 6.5%, 5/1/15**.......... 2,000,000 AAA 2,122,940
Oak Lawn, IL, Water and Sewer Revenue Series A, Zero Coupon:
10/1/03 (d)............................................................................ 1,295,000 AAA 931,571
10/1/04 (d)............................................................................ 1,295,000 AAA 880,509
10/1/05 (d)............................................................................ 1,295,000 AAA 830,639
10/1/06 (d)............................................................................ 1,295,000 AAA 781,325
Rosemont, IL, Zero Coupon:
Tax Increment, 12/1/04 (d)............................................................. 6,000,000 AAA 4,045,920
Tax Increment-3, Series C, 12/1/05 (d)................................................. 7,060,000 AAA 4,490,301
State University Retirement System, IL, Special Revenue, Zero Coupon, 10/1/05 (d)........ 7,000,000 AAA 4,489,940
University of Chicago, IL, Hospital Refunding, 5.5%, 8/15/08 (d)......................... 2,500,000 AAA 2,537,550
Will County, IL, School District #201-U, Crete Monee, Zero Coupon, 12/15/06 (d).......... 3,725,000 AAA 2,271,617
Winnebago County, IL, School District #122:
6.55%, 6/1/09 (d)...................................................................... 1,675,000 AAA 1,886,419
6.55%, 6/1/10 (d)...................................................................... 1,825,000 AAA 2,049,457
INDIANA
Indiana Health Facilities Finance Authority, Hospital Revenue, Ancilla Systems Inc.,
Series A, 6%, 7/1/18 (d)............................................................... 3,965,000 AAA 4,178,674
Indiana Municipal Power Agency, Power Supply System, Series B:
6%, 1/1/12 (d)......................................................................... 1,750,000 AAA 1,862,577
5.5%, 1/1/16 (d)....................................................................... 10,860,000 AAA 10,872,706
The accompanying notes are an integral part of the financial statements.
</TABLE>
12 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Indiana Transportation Finance Authority, Highway Revenue, Series A, 5.75%,
6/1/12 (d)............................................................................. 5,000,000 AAA 5,191,900
Rockport, IN, Pollution Control Revenue, Series B, Refunding Bonds, 7.6%, 3/1/16......... 4,500,000 BBB 4,856,355
LOUISIANA
Bastrop, LA, Industrial Development Board Pollution Control Revenue, International
Paper Co. Project, 6.9%, 3/1/07........................................................ 10,250,000 A 11,133,345
Louisiana State General Obligation, Series 1996A, 6%, 8/1/02 (d)......................... 5,000,000 AAA 5,337,950
New Orleans, LA, General Obligation, Zero Coupon, 9/1/05 (d)............................. 2,500,000 AAA 1,624,025
MAINE
Maine Housing Authority, Mortgage Purchase Revenue, 1987 Series A2, 7.65%,
11/15/15............................................................................... 1,195,000 AA 1,233,395
MARYLAND
Northeast Maryland Waste Disposal Authority, Southwest Resource Recovery
System Revenue:
6.9%, 1/1/00 (d)..................................................................... 1,595,000 AAA 1,704,640
7.2%, 1/1/06 (d)..................................................................... 3,440,000 AAA 3,944,270
7.2%, 1/1/07 (d)..................................................................... 3,390,000 AAA 3,886,940
MASSACHUSETTS
Massachusetts Bay Transportation Authority, General Transportation System,
Series B, 6.2%, 3/1/16................................................................. 2,500,000 A 2,711,700
Massachusetts College Building Authority Project, Series A:
7.5%, 5/1/10........................................................................... 4,110,000 A 4,898,545
7.5%, 5/1/14........................................................................... 3,750,000 A 4,609,538
Massachusetts Health & Educational Facilities Authority, Massachusetts General
Hospital, Series F, 6.25%, 7/1/12 (d).................................................. 3,000,000 AAA 3,272,070
Massachusetts Water Resource Authority:
Series A, 6.5%, 7/15/09................................................................ 2,625,000 A 2,926,140
Series A, 6.5%, 7/15/19................................................................ 13,445,000 A 15,020,082
Series C, 6%, 12/1/11.................................................................. 10,000,000 A 10,672,300
MICHIGAN
Michigan State Hospital Finance Authority, Hospital Revenue, Sinai Hospital,
Series 1995, 6%, 1/1/08................................................................ 3,000,000 BBB 2,963,700
MONTANA
Montana Board Housing Revenue, Capital Appreciation, Single-Family Revenue,
Series A, Zero Coupon, 6/1/10.......................................................... 12,300,000 AA 2,796,774
The accompanying notes are an integral part of the financial statements.
</TABLE>
13 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEVADA
Nevada State Housing Division, Single Family Mortgage Revenue, Series R, 5.95%,
10/1/11................................................................................ 7,300,000 AA 7,485,639
NEW YORK
Metropolitan Transportation Authority of New York, Transit Facilities Revenue:
7%, 7/1/02............................................................................. 1,595,000 BBB 1,731,612
Service Contract, Series O, 5.75%, 7/1/13.............................................. 6,775,000 BBB 6,796,544
New York City, General Obligation:
Series 1995E, 6.5%, 2/15/05............................................................ 7,000,000 BBB 7,476,630
Series 1995E, 6.6%, 8/1/04............................................................. 7,500,000 A 8,062,200
Series 1996G, 6.75%, 2/1/09............................................................ 5,000,000 A 5,417,250
Series A, 6.375%, 8/1/04............................................................... 5,000,000 A 5,295,150
Series B, 6%, 8/15/04.................................................................. 3,425,000 A 3,562,616
Series B, 6.1%, 8/15/05................................................................ 3,510,000 A 3,665,037
Series B, 6.75%, 8/15/03............................................................... 3,000,000 A 3,239,520
Series H, 7%, 2/1/05................................................................... 4,000,000 A 4,336,000
Series H, 7.2%, 8/1/01 (d)............................................................. 2,260,000 AAA 2,476,847
Prerefunded 8/1/99, Series 1989D, 7%, 8/1/02 (e)....................................... 430,000 AAA 465,101
Prerefunded 8/1/99, Series 1989D, 7%, 8/1/02 (d) (e)................................... 110,000 AAA 119,176
Prerefunded 8/1/99, Series 1989D, 7%, 8/1/02 (d) (e)................................... 365,000 AAA 394,795
Unrefunded Balance, Series 1989D, 7%, 8/1/02........................................... 2,570,000 A 2,737,204
Unrefunded Balance, Series 1989D, 7%, 8/1/02 (d)....................................... 2,135,000 AAA 2,295,488
Unrefunded Balance, Series 1989D, 7%, 8/1/02 (d)....................................... 640,000 AAA 688,109
New York State Dormitory Authority:
College and University Pooled Capital Program, 7.8%, 12/1/05 (d)....................... 4,155,000 AAA 4,477,013
City University System, Consolidated Revenue:
Series A, 5.75%, 7/1/06.............................................................. 4,000,000 BBB 4,103,000
Series A, 5.75%, 7/1/06 (d).......................................................... 5,000,000 AAA 5,339,300
Series E, 5.75%, 7/1/06.............................................................. 5,255,000 BBB 5,390,316
Series F, 5.375%, 7/1/07............................................................. 5,000,000 BBB 4,927,150
New York State Medical Care Facilities, Finance Agency Revenue, Mount Sinai
Hospital, Series 1983, 5.95%, 8/15/09.................................................. 4,360,000 AAA 4,498,299
New York State Urban Development Corporation:
5.5%, 1/1/08........................................................................... 1,600,000 BBB 1,581,824
Correctional Facilities, Series A, 5.1%, 1/1/08 (d)...................................... 3,735,000 AAA 3,764,096
The accompanying notes are an integral part of the financial statements.
</TABLE>
14 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State Urban Development Corporation Revenue:
Correctional Capital Facilities, Series A, 5.45%, 1/1/07............................... 6,475,000 BBB 6,514,692
Correctional Facilities, Series A, 5.4%, 1/1/06 (d).................................... 2,500,000 AAA 2,591,950
NORTH CAROLINA
North Carolina Eastern Municipal Power Agency Series C, 7%, 1/1/07....................... 7,965,000 A 8,733,304
North Carolina Municipal Power Agency, 5.25%, 1/1/09..................................... 8,500,000 AAA 8,582,960
North Carolina Municipal Power Agency #1, Catawba Electric Refunding Revenue:
7.25%, 1/1/07.......................................................................... 6,500,000 A 7,441,460
Series 1990, 5.5%, 1/1/13 (d).......................................................... 2,600,000 AAA 2,667,236
OHIO
Ohio Water Development Authority, Pollution Control Revenue, Ohio Edison
Company Project, Series 1989A, 7.625%, 7/1/23.......................................... 4,890,000 BBB 5,142,569
PENNSYLVANIA
Philadelphia, PA, Hospital and Higher Education Facilities Authority, Temple
University Hospital, Series A, 6.5%, 11/15/08.......................................... 2,800,000 A 2,946,608
RHODE ISLAND
Convention Center Authority, Rhode Island Revenue, 5%, 5/15/20 (d)....................... 19,685,000 AAA 17,635,791
Rhode Island Housing and Mortgage Finance Corp., Home Ownership Opportunity
Bond, Series 2, 7.5%, 10/1/21.......................................................... 1,025,000 AA 1,068,440
TENNESSEE
Knox County, TN, Health Education and Housing Facilities Board, Fort Sanders
Alliance, 7.25%, 1/1/09 (d)............................................................ 3,250,000 AAA 3,819,498
TEXAS
Austin, TX, Combined Utility Systems Revenue Refunding, Series 1993A,
Zero Coupon, 5/15/03 (d)............................................................... 2,890,000 AAA 2,124,208
Dallas-Fort Worth, TX, International Airport Revenue, Series A:
7.8%, 11/1/07 (d)...................................................................... 2,390,000 AAA 2,839,416
7.375%, 11/1/09 (d).................................................................... 4,500,000 AAA 5,229,765
Harris County, TX, Health Facilities Texas Medical Center Project, Series 1996,
6.25%, 5/15/10 (d)..................................................................... 3,000,000 AAA 3,240,420
Harris County, TX, Toll and Sub Lien, Series A, Zero Coupon, 8/15/04 (d)................. 4,050,000 AAA 2,781,621
Houston, TX, Water Conveyance System Contract, Certificate of Participation, Series J,
6.125%, 12/15/05 (d)................................................................... 2,500,000 AAA 2,727,350
Houston, TX, Water and Sewer System Authority, Series C, Zero Coupon:
12/1/05 (d)............................................................................ 15,000,000 AAA 9,581,850
12/1/07 (d)............................................................................ 3,400,000 AAA 1,920,762
Lower Colorado River Authority, TX, Revenue Refunding, Zero Coupon, 1/1/03 (d)........... 8,900,000 AAA 6,660,404
The accompanying notes are an integral part of the financial statements.
</TABLE>
15 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Antonio, TX, Airport Systems Revenue Refunding, 7%, 7/1/02 (d)....................... 1,695,000 AAA 1,891,501
San Antonio, TX, Electric and Gas, Revenue Refunding, Series A, Zero Coupon:
2/1/05 (d)............................................................................. 7,000,000 AAA 4,662,770
2/1/05 (d)............................................................................. 5,000,000 AAA 3,330,550
UTAH
Intermountain Power Agency, UT, Power Supply Revenue, Series C, 5.25%, 7/1/14............ 4,000,000 AA 3,866,720
Salt Lake City, UT, Hospital Revenue, Intermountain Health Care, Series 1992,
Inversed Inflow, 6.65%, 2/15/12***..................................................... 1,500,000 AA 1,596,300
Utah Associated Municipal Power System, Hunter Project, Refunding Revenue, Zero
Coupon, 7/1/03 (d)..................................................................... 5,700,000 AAA 4,150,683
VIRGINIA
Chesapeake, VA, Water and Sewer, Series 1995A, 5%, 12/1/25............................... 5,000,000 AA 4,585,900
Virginia Beach, VA, Development Authority, Virginia Beach General Hospital Project,
5.125%, 2/15/18 (d).................................................................... 3,000,000 AAA 2,845,920
WASHINGTON
Washington Health Care Facilities Authority:
Empire Health Services-Spokane, 5.8%, 11/1/08 (d)...................................... 4,865,000 AAA 5,175,095
Sisters of St. Joseph of Peace, 5.3%, 3/1/09 (d)....................................... 4,315,000 AAA 4,353,231
Franciscan Health System - St. Joseph's/Tacoma, 5.4%, 1/1/07 (d)....................... 2,000,000 AAA 2,049,700
Franciscan Health System - St. Joseph's/Tacoma, 5.4%, 1/1/08 (d)....................... 2,645,000 AAA 2,712,077
Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue:
6.875%, 7/1/17....................................................................... 6,000,000 AAA 6,662,520
Series 1990B, 7.25%, 7/1/09 (d)...................................................... 12,350,000 AAA 14,403,682
Series 1993B, 5.5%, 7/1/06 (d)....................................................... 4,915,000 AAA 5,039,251
Series A, 7.15%, 7/1/02 (d).......................................................... 2,550,000 AAA 2,733,014
Series A, 7%, 7/1/11................................................................. 4,725,000 AAA 5,199,012
Series A, Zero Coupon, 7/1/07 (d).................................................... 8,570,000 AAA 4,877,787
Nuclear Project #2, Refunding Revenue:
Series 1993B, 5.5%, 7/1/06 (d)....................................................... 4,000,000 AAA 4,101,120
Series A, 6%, 7/1/07 (d)............................................................. 7,000,000 AAA 7,495,530
Series A, 7.25%, 7/1/06.............................................................. 7,000,000 AA 8,017,030
Series B, 7%, 7/1/12................................................................. 14,385,000 AAA 15,828,103
Nuclear Project #3, Refunding Revenue
5.65%, 7/1/08 (d).................................................................... 3,000,000 AAA 3,163,620
Series A, Zero Coupon, 7/1/06 (d).................................................... 1,380,000 AAA 836,473
The accompanying notes are an integral part of the financial statements.
</TABLE>
16 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (c) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series B, 7.375%, 7/1/04 .............................................................. 750,000 AA 823,995
Series B, Prerefunded 1/1/00, 7.25%, 7/1/15 (e)........................................ 5,000,000 AAA 5,503,500
Series B, Zero Coupon, 7/1/02 (d)...................................................... 11,925,000 AAA 9,122,744
Series B, Zero Coupon, 7/1/06 (d)...................................................... 5,555,000 AAA 3,367,108
Series C, 5%, 7/1/06 (d)............................................................... 10,000,000 AAA 9,881,000
WEST VIRGINIA
West Virginia, School Building Authority Revenue, Series B, 6.75%, 7/1/10 (d)............ 1,600,000 AAA 1,734,080
WISCONSIN
Green Bay, WI, Industrial Development Revenue, Weyerhaeuser Company Project,
Series A, 9%, 9/1/06................................................................... 1,700,000 NR 1,718,972
Wisconsin Health and Educational Facilities Authority, Hospital Sisters Services Inc.,
Obligated Group, 5.375%, 6/1/13 (d).................................................... 1,500,000 AAA 1,454,610
WYOMING
Wyoming Community Development Authority, Single Family Mortgage, Series A,
5.85%, 6/1/13.......................................................................... 3,000,000 AA 3,023,610
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (Cost $668,909,326) 720,567,565
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0% (Cost $675,179,176) (a) 726,826,465
- -------------------------------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $675,179,176. At December 31, 1996, net
unrealized appreciation for all securities based on tax cost was $51,647,289. This
consisted of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $52,095,124 and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax cost
over market value of $447,835.
(b) At December 31, 1996 this security, in part, has been pledged to cover initial margin
requirements for open futures contracts.
At December 31, 1996, open futures contracts sold short were as follows (Note A):
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
- --------------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
20 Year U.S.
Treasury Bonds Mar. 1997 100 11,399,000 11,262,500
-------------- ---------------
Total net unrealized appreciation on
open futures contracts sold short......................................... 136,500
===============
(c) All of the securities held have been determined by the Adviser 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 by the Adviser
to be of comparable quality to rated eligible securities.
(d) Bond is insured by one of these companies: AMBAC, BIG, 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.
The accompanying notes are an integral part of the financial statements.
17 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
* Floating rate and monthly, weekly, or daily demand notes are securities whose yields vary
with a designated market index or market rate, such as the coupon-equivalent of the Treasury
bill rate. Variable rate demand notes are securities whose yields are periodically reset at
levels that are generally comparable to tax-exempt commercial paper. These securities are
payable on demand within seven calendar days and normally incorporate an irrevocable letter
of credit or line of credit from a major bank. These notes are carried, for purposes of
calculating average weighted maturity, at the longer of the period remaining until the next
rate change or to the extent of the demand period.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are collateralized by U.S.
Treasury securities which are held in escrow by a trustee and used to pay principal and
interest on bonds so designated.
*** Inverse floating rate notes are instruments whose yields have an inverse relationship to
benchmark interest rates. These securities are shown at their rates as of December 31, 1996.
The accompanying notes are an integral part of the financial statements.
</TABLE>
18 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of December 31, 1996
<S> <C>
Assets
- -------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $675,179,176) (Note A)............ $ 726,826,465
Cash...................................................................... 64,988
Interest receivable....................................................... 12,755,698
Receivable for Fund shares sold........................................... 85,649
Daily variation margin on open futures contracts (Note A)................. 125,000
Other assets.............................................................. 10,130
--------------
Total assets.............................................................. 739,867,930
Liabilities
- -------------------------------------------------------------------------------------------------------------
Dividends payable......................................................... 1,576,841
Payable for Fund shares redeemed.......................................... 418,104
Accrued management fee (Note C)........................................... 315,137
Other accrued expenses (Note C)........................................... 134,987
--------------
Total liabilities......................................................... 2,445,069
- -------------------------------------------------------------------------------------------------------------
Net assets, at market value............................................... 737,422,861
- -------------------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on:
Investments............................................................. 51,647,289
Futures................................................................. 136,500
Accumulated net realized loss............................................. (6,029,325)
Paid-in capital........................................................... 691,668,397
- -------------------------------------------------------------------------------------------------------------
Net assets, at market value............................................... $ 737,422,861
- -------------------------------------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($737,422,861 /
83,437,562 outstanding shares of beneficial interest, $.01 par value, --------------
unlimited number of shares authorized).................................. $ 8.84
--------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
19 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
year ended December 31, 1996
<S> <C>
Investment Income
- -------------------------------------------------------------------------------------------------------------
Income:
Interest.................................................................. $ 43,610,656
--------------
Expenses:
Management fee (Note C)................................................... 3,826,131
Services to shareholders (Note C)......................................... 453,323
Custodian and accounting fees (Note C).................................... 217,255
Trustees' fees and expenses (Note C)...................................... 47,420
Reports to shareholders................................................... 70,119
Auditing.................................................................. 49,158
Registration fees......................................................... 31,331
Legal..................................................................... 12,151
Other..................................................................... 24,803
--------------
4,731,691
- -------------------------------------------------------------------------------------------------------------
Net investment income..................................................... 38,878,965
- -------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------------------------------------
Net realized gain from:
Investments............................................................... 2,573,778
Futures................................................................... 410,307
--------------
2,984,085
--------------
Net unrealized appreciation (depreciation) during the period on:
Investments................................................................ (12,727,687)
Futures.................................................................... 279,687
--------------
(12,448,000)
- -------------------------------------------------------------------------------------------------------------
Net loss on investment transactions....................................... (9,463,915)
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations...................... $ 29,415,050
- -------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
20 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income..................................................... $ 38,878,965 $ 41,903,981
Net realized gain (loss) from investment transactions..................... 2,984,085 (2,152,376)
Net unrealized appreciation (depreciation) on investment transactions
during the period....................................................... (12,448,000) 78,966,934
-------------- --------------
Net increase in net assets resulting from operations...................... 29,415,050 118,718,539
-------------- --------------
Distributions to shareholders from net investment income.................. (38,878,965) (41,903,981)
Fund share transactions: -------------- --------------
Proceeds from shares sold................................................. 59,805,253 66,806,552
Net asset value of shares issued to shareholders in reinvestment of
distributions........................................................... 19,595,317 21,004,076
Cost of shares redeemed................................................... (107,450,318) (98,237,351)
-------------- --------------
Net decrease in net assets from Fund share transactions................... (28,049,748) (10,426,723)
-------------- --------------
Increase (decrease) in net assets......................................... (37,513,663) 66,387,835
Net assets at beginning of period......................................... 774,936,524 708,548,689
-------------- --------------
Net assets at end of period............................................... $ 737,422,861 $ 774,936,524
-------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period................................. 86,659,129 87,839,034
-------------- --------------
Shares sold............................................................... 6,821,954 7,853,077
Shares issued to shareholders in reinvestment of distributions............ 2,240,147 2,444,465
Shares redeemed........................................................... (12,283,668) (11,477,447)
-------------- --------------
Net decrease in Fund shares............................................... (3,221,567) (1,179,905)
-------------- --------------
Shares outstanding at end of period....................................... 83,437,562 86,659,129
-------------- --------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
21 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each period
and other performance information derived from the financial statements.
Years Ended December 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------
<S> <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
Income from investment --------------------------------------------------------------------------------
operations:
Net investment income............ .45 .48 .46 .47 .51 .53 .55 .59 .60 .61
Net realized and unrealized gain
(loss) on investment
transactions..................... (.10) .87 (1.00) .66 .25 .47 -- .33 .38 (.58)
Total from investment --------------------------------------------------------------------------------
operations..................... .35 1.35 (.54) 1.13 .76 1.00 .55 .92 .98 .03
Less distributions: --------------------------------------------------------------------------------
From net investment income....... (.45) (.48) (.46) (.47) (.51) (.53) (.55) (.59) (.60) (.61)
From net realized gains on
investment transactions........ -- -- -- (.29) (.33) (.12) (.09) (.39) (.02) (.11)
In excess of net realized gains.. -- -- (.02) -- -- -- -- -- -- --
--------------------------------------------------------------------------------
Total distributions.............. (.45) (.48) (.48) (.76) (.84) (.65) (.64) (.98) (.62) (.72)
Net asset value, end of --------------------------------------------------------------------------------
period......................... $8.84 $8.94 $8.07 $9.09 $8.72 $8.80 $8.45 $8.54 $8.60 $8.24
- -----------------------------------------------------------------------------------------------------------------
Total Return (%)................. 4.15 17.12 (6.04) 13.32 8.98 12.23 6.77 11.19 12.27 .34
Ratios and Supplemental Data
Net assets, end of period
($ millions)..................... 737 775 709 910 830 796 719 691 635 592
Ratio of operating expenses to
average net assets (%)......... .63 .63 .63 .63 .63 .64 .61 .62 .61 .63
Ratio of net investment income
to average net assets (%)...... 5.20 5.59 5.41 5.21 5.76 6.16 6.61 6.78 7.13 7.20
Portfolio turnover rate (%)...... 12.2 17.8 33.7 52.8 59.6 32.4 72.1 89.8 75.5 73.5
</TABLE>
22 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
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 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 year ended December 31, 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.
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, 1996, the Fund had a net tax basis capital loss
carryforward of approximately $985,000 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, whichever
occurs first.
23 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
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 annually 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, 1996, purchases and sales of
municipal securities (excluding short-term investments) aggregated
$89,196,868 and $126,057,437, respectively.
The aggregate face value of futures contracts opened and closed during
the year ended December 31, 1996 was $40,419,762 and $41,024,450,
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, 1996, the fee pursuant to the
Agreement amounted to $3,826,131, which was equivalent to an annual
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, 1996, the amount charged to the Fund
by SSC aggregated $329,743, of which $28,897 is unpaid at December 31,
1996.
24 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
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 year ended December 31, 1996, the amount charged to
the Fund by SFAC aggregated $99,729, of which $8,285 is unpaid at
December 31, 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 year ended December 31, 1996, Trustees' fees and
expenses aggregated $47,420.
25 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder Municipal Trust and 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, 1996, 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, 1996 by
correspondence with the custodian. 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,
1996, 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 3, 1997
26 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
TAX INFORMATION
Of the dividends paid from net investment income for the year ended
December 31, 1996, 100% are tax exempt for regular federal income tax
purposes, and are not an item of preference for purposes of the federal
alternative minimum tax, if applicable.
27 - SCUDDER MANAGED MUNICIPAL BONDS
<PAGE>
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28-Scudder Managed Municipal Bonds
<PAGE>
Officers and Trustees
David S. Lee*
President and Trustee
Daniel Pierce*
Vice President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; 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
Kathryn L. Quirk*
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
29-Scudder Managed Municipal Bonds
<PAGE>
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U. S. Income
- ------------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
Retirement Programs
- -------------------
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- -----------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed from expected
least to most risk. +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.
30-Scudder Managed Municipal Bonds
<PAGE>
Account Service and Information
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges,
and an overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment
questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
To receive information about this discount brokerage service and
to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
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 Chicago San Francisco
Boston New York
For information on Scudder Treasurers Trust(TM), an
institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain
portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds**, funds designed
to meet the broad investment management and service needs of
banks and other institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.
** 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.
31-Scudder Managed Municipal Bonds
<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 over 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
