Scudder
Managed
Municipal
Bonds
Semiannual Report
June 30, 1997
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.
SCUDDER (logo)
<PAGE>
In Brief
o Scudder Managed Municipal Bonds' 30-day net annualized SEC yield was 4.66% as
of June 30, 1997. For investors in the two highest federal tax brackets of 36%
and 39.6%, the Fund's yield was equivalent to a fully taxable 7.28% and 7.72%,
respectively.
o The Fund received four stars from Morningstar, reflecting an "above-average"
rating for risk-adjusted performance through June 30, 1997.*
o For one-, three-, five-, and ten-year periods, the Fund placed 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 five-year average annual return in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below T-bill returns. 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 five stars for three-year performance and four stars
for five-year performance among 1,315 and 640 municipal funds, respectively.
Past performance is no guarantee of future returns.
Table of Contents
2 In Brief 19 Financial Statements
3 Letter from the Fund's President 22 Financial Highlights
4 Performance Update 23 Notes to Financial Statements
5 Portfolio Summary 28 Officers and Trustees
6 Portfolio Management Discussion 29 Investment Products and Services
9 Investment Portfolio 30 Scudder Solutions
2 - Scudder Managed Municipal Bonds
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Managed Municipal Bonds'
performance over its most recent semiannual period ended June 30, 1997. In
addition to the Fund's four-star Morningstar rating as of June 30 (see "In
Brief" on page 2), the Fund placed in the top quartile of similar tax free funds
tracked by Lipper for total return performance over one-, three-, five-, and
ten-year periods. The Fund posted a 4.66% 30-day net annualized SEC yield as of
June 30, which is equivalent to a taxable yield of 7.72% for investors in the
top federal tax bracket. As outlined in the discussion that follows, during the
first six months of its fiscal year the Fund has continued to focus on
longer-term noncallable bonds and high overall portfolio quality in pursuit of
high after-tax yields and favorable total returns. Please read the discussion
beginning on page 6 for more information.
For those of you who wish to keep abreast of new products and services, we
would like to take this opportunity to tell you about a recent addition to
Scudder's family of funds -- Scudder International Growth and Income Fund. The
Fund employs a yield-oriented approach to international investing and seeks to
provide long-term growth of capital plus current income. Investors who desire
international exposure but who wish to take a relatively conservative approach
to international investing may appreciate the Fund's emphasis on the dividend
paying stocks of well-established companies outside the United States.
For a complete listing of Scudder's mutual fund offerings, see page 29.
If you have any questions regarding Scudder Managed Municipal Bonds or any
other Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470. Or visit Scudder's Website at http://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 June 30, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------------
1 Year $ 10,868 8.68% 8.68%
5 Year $ 14,023 40.23% 7.00%
10 Year $ 22,281 122.81% 8.34%
- --------------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------------
1 Year $ 10,827 8.27% 8.27%
5 Year $ 14,091 40.91% 7.10%
10 Year $ 21,945 119.45% 8.17%
- --------------------------------------------
- -----------------------------------------------------------------
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 June 30
SCUDDER MANAGED MUNICIPAL BONDS
Year Amount
- ----------------------
'87 $10,000
'88 $10,795
'89 $12,296
'90 $12,950
'91 $14,132
'92 $15,889
'93 $17,965
'94 $17,822
'95 $19,263
'96 $20,502
'97 $22,281
LEHMAN BROTHERS MUNICIPAL
BOND INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $10,741
'89 $11,964
'90 $12,780
'91 $13,931
'92 $15,573
'93 $17,436
'94 $17,466
'95 $19,006
'96 $20,268
'97 $21,945
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>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 8.41 $ 8.82 $ 8.36 $ 8.47 $ 8.86 $ 9.17 $ 8.35 $ 8.52 $ 8.61 $ 8.88
INCOME DIVIDENDS.. $ .61 $ .60 $ .57 $ .54 $ .47 $ .50 $ .46 $ .48 $ .45 $ .46
CAPITAL GAINS
& OTHER
DISTRIBUTIONS..... $ .05 $ .12 $ .33 $ .09 $ .12 $ .29 $ .31 $ - $ - $ .01
FUND TOTAL
RETURN (%)........ 7.95 13.90 5.32 9.13 12.43 13.06 -.80 8.09 6.43 8.68
INDEX TOTAL
RETURN (%)........ 7.42 11.39 6.81 9.01 11.77 11.96 .20 8.82 6.64 8.27
</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 June 30, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Electric Utility Revenue 23%
Core Cities/Lease 13%
Hospital/Health 9%
Water/Sewer Revenue 8%
State General Obligation 6%
Higher Education 6%
Toll Revenue/Transportation 6%
Other General Obligation/Lease 5%
Housing Finance Authority 5%
Miscellaneous Municipal 19%
- --------------------------------------------
100%
- --------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund is broadly diversified,
with securities issued in 31 states
plus the District of Columbia.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
Cash Equivalents 2%
AAA 59%
AA 9%
A 19%
BBB 10%
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.
Overall credit quality remains
high, with 70% of Fund assets
rated AAA, AA, or the equivalent.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Less than 1 year 3%
1 - 5 10%
5 - 10 41%
10 - 20 39%
Greater than 20 years 7%
- --------------------------------------------
100%
- --------------------------------------------
Weighted average effective maturity: 10.2 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Throughout the period, we
maintained an average effective
maturity comparable to the
Fund's competitive universe.
For more complete details about the Fund's investment portfolio, see page 9.
5 - Scudder Managed Municipal Bonds
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
During its most recent semiannual period Scudder Managed Municipal Bonds, and
the bond market in general, benefited from an economic environment that seemed
to be the best of both worlds -- a healthy U.S. economy accompanied by low to
declining inflation. Though the wary bond market's response to this good news
was significantly more modest than that of the stock market, most bonds recorded
price increases. The Fund posted a 3.13% total return for the six months ended
June 30, 1997, based on a $0.04 increase in the Fund's net asset value to $8.88,
plus income distributions of $0.23 per share and short-term capital gain
distributions of $0.01 per share over the six-month period. The Fund's return
outpaced the 2.95% average total return of 238 similar funds over the same
period as measured by Lipper Analytical Services, Inc. As shown in the
accompanying chart, 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. 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
4.66% as of June 30, equivalent to fully taxable yields of 7.28% and 7.72%,
respectively, for investors in the 36% and 39.6% tax brackets.
---------------------------------------------------------------
Competitive Total Return
(Total returns for periods ended June 30, 1997)
---------------------------------------------------------------
Scudder
Managed Lipper Number
Municipal average of
Bonds annual Funds Percentile
Period return return Rank tracked Ranking
----------------------------------------------------------------
Six months 3.13% 2.95% 66 of 238 Top 28%
1 year 8.68% 7.81% 40 of 226 Top 18%
3 years* 7.73% 7.10% 38 of 176 Top 22%
5 years* 7.00% 6.51% 21 of 107 Top 20%
10 years* 8.34% 7.76% 11 of 67 Top 16%
* Average Annual Return
Past performance does not guarantee future results.
Quiescent Inflation Bolsters Bonds
The U.S. economy roared out of the gate during the first quarter of 1997 at a
4.9% annualized rate of GDP growth, understandably sparking fears of renewed
inflation among many market participants. It then retreated to a more modest
2.2% rate during the second quarter. All the while inflation not only remained
at a low level, but producer prices -- a leading indicator of inflation --
actually fell for six consecutive months from January through June 1997.
6 - Scudder Managed Municipal Bonds
<PAGE>
Why has inflation been declining recently? We don't believe there is a
single reason for the subduing of U.S. inflation but rather a convergence of
causes. These include trade deregulation and business globalization,
technological advances, declines in defense spending worldwide following the end
of the Cold War, and reductions in government spending, especially in the United
States and in countries attempting to forge the European Monetary Union.
This economic environment benefited municipal bonds. Yields of 10-year Treasury
bonds rose a fraction of a percentage point, and their prices declined -0.50%,
while 10-year municipal yields declined one tenth of a percentage point and
their prices rose 0.80%. The municipal bond market also benefited from light new
issue volume and steady demand from institutional and individual investors.
Noncallable Bonds Still a Mainstay
Our fundamental strategy during the Fund's most recent semiannual period was the
same as it has been in recent years: to purchase bonds with call protection,
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. In addition, we maintained an average effective maturity comparable
to the Fund's competitive universe throughout the period. As of June 30, 1997,
Scudder Managed Municipal Bonds' average effective maturity was 10.2 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 June 30, bonds with
effective maturities between 10 and 20 years represented 39% 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, 1997, the Fund held securities issued in 31 states plus the District
of Columbia. Lastly, the Fund's credit quality remains high, with 70% 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, 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.
Economic and Market
Prospects
Although we are in the seventh consecutive year of economic growth for the
United States, the odds still appear to favor a continuation of that growth,
perhaps even at a slightly higher rate. At the same time, the enormous expansion
of U.S. consumer credit, among other factors, leaves the U.S. economy little
7 - Scudder Managed Municipal Bonds
<PAGE>
margin for error. Whether growth continues unabated or is interrupted, we
believe inflation will remain at relatively low levels, which is always a
positive foundation for the bond market.
Over the remainder of Scudder Managed Municipal Bonds' fiscal year we will
maintain our emphasis on longer-maturity noncallable municipal bonds and look to
add higher-yielding bonds where opportunities and attractive values present
themselves. We expect to continue to maintain a "neutral" average maturity, and
to seek high current tax free income and attractive total return for our
investors.
Sincerely,
Your Portfolio Management Team
/s/Donald C. Carleton /s/Philip G. Condon
Donald C. Carleton Philip G. Condon
8 - Scudder Managed Municipal Bonds
<PAGE>
Investment Portfolio as of June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Municipal Investments 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
District Of Columbia
District of Columbia, General Fund Recovery Series B-3,
Variable Rate Demand Note, 4.1%, 6/1/03* .................................... 400,0000 A1+ 400,000
Mississippi
Perry County, MS, Pollution Control Revenue, Leaf River
Forest Products, Daily Demand Note, 4.05%, 3/1/02* .......................... 1,500,000 P1 1,500,000
North Dakota
Grand Forks, ND, Hospital Facilities Revenue, Daily Demand Note,
4.15%, 12/1/16* ............................................................. 1,400,000 MIG1 1,400,000
Ohio
Cuyahoga County, OH, Health & Education, University Hospital of
Cleveland, Daily Demand Note, 4.2%, 1/1/16* ................................. 2,300,000 MIG1 2,300,000
Texas
Harris County, TX, Health Facilities Development Corporate
Hospital Revenue, 4%, 10/1/17* .............................................. 1,000,000 MIG1 1,000,000
Utah
Intermountain Power Supply Agency, UT, Series 1993, 5.55%, 7/1/11* ............ 3,000,000 A 3,003,810
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $9,569,850) 9,603,810
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 98.6%
- ------------------------------------------------------------------------------------------------------------------------------
Alaska
- ------------------------------------------------------------------------------------------------------------------------------
North Slope Borough, AK, General Obligation:
Series B, Zero Coupon, 1/1/03 (d) ........................................... 8,000,000 AAA 6,125,840
Capital Appreciation:
Series A, Zero Coupon, 6/30/06 (d) ......................................... 7,000,000 AAA 4,425,540
Series B, Zero Coupon, 6/30/04 (d) ......................................... 15,000,000 AAA 10,608,600
Series B, Zero Coupon, 6/30/05 (d) ......................................... 18,200,000 AAA 12,155,235
Arizona
Maricopa County, AZ, School District #28, Kyrene Elementary School,
Series B, Zero Coupon, 1/1/06 (d) ........................................... 4,905,000 AAA 3,209,783
Arkansas
Arkansas Development Finance Authority, Single Family Mortgage Revenue,
Series B, 7.7%, 12/1/14 ..................................................... 1,815,000 A 1,853,616
California
California General Obligation:
6.25%, 10/1/07 (d) .......................................................... 4,000,000 AAA 4,468,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6.25%, 4/1/08 (d) ........................................................... 5,000,000 AAA 5,562,950
6.6%, 2/1/09 (d) ............................................................ 15,600,000 AAA 17,803,656
California Housing Finance Agency, Multi-Unit Rental Housing Revenue,
Series A, 7.7%, 8/1/10 ...................................................... 1,000,000 A 1,086,470
California Statewide Community Development Authority, Certificate of
Participation, Lutheran Homes, 5.5%, 11/15/08 ............................... 2,250,000 A 2,313,113
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 3,346,600
Step-up coupon, 0% to 1/1/05, 7.1% to 1/1/11 ................................ 4,000,000 BBB 2,692,480
Step-up coupon, 0% to 1/1/05, 7.1% to 1/1/12 ................................ 4,000,000 BBB 2,693,200
Step-up coupon, 0% to 1/1/05, 7.1% to 1/1/14 ................................ 6,250,000 BBB 4,165,750
Zero Coupon, 1/1/15 ........................................................ 11,000,000 BBB 3,790,930
Los Angeles County, CA, Certificate of Participation, Disney Parking Project,
Zero Coupon:
9/1/07 ..................................................................... 4,030,000 A 2,257,606
9/1/09 ..................................................................... 5,425,000 A 2,679,896
Roseville, CA, Unified High School District, General Obligation, Series B,
Zero Coupon:
8/1/10 (d) ................................................................. 1,830,000 AAA 911,230
8/1/15 (d) ................................................................. 1,000,000 AAA 365,700
San Joaquin, CA, Certificate of Participation, County Public Facilities
Project, 5.5%, 11/15/13 (d) ................................................ 3,895,000 AAA 3,983,611
Colorado
Castle Rock Ranch Colorado Public Improvements Authority Public Facilities
Revenue, 6.25%, 12/1/17 ..................................................... 4,820,000 AA 5,210,372
Colorado Housing Finance Authority Revenue, Series A:
8.1%, 10/1/05 ............................................................... 2,030,000 AA 2,304,212
8.15%, 10/1/06 .............................................................. 2,145,000 AA 2,434,318
8.25%, 10/1/10 (b) .......................................................... 1,940,000 AA 2,181,976
8.25%, 10/1/11 .............................................................. 1,680,000 AA 1,882,238
8.25%, 10/1/12 .............................................................. 1,945,000 AA 2,169,784
Multi-Family Mortgage:
8.15%, 10/1/07 ............................................................. 2,320,000 AA 2,627,238
8.2%, 10/1/08 .............................................................. 2,510,000 AA 2,841,897
8.2%, 10/1/09 .............................................................. 2,725,000 AA 3,072,029
Denver, CO, Urban Renewal Authority Tax Incremental Revenue, 7.5%, 9/1/04 ..... 1,000,000 SS&C 1,007,040
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Connecticut
Connecticut Resource Recovery Authority, Series 1996 A, 6.25%, 11/15/06 (d) ... 2,000,000 AAA 2,202,460
District Of Columbia
District of Columbia, Certificate of Participation:
7.3%, 1/1/13 ................................................................ 1,000,000 BB 1,079,990
Series 1993, 6.875%, 1/1/03 ................................................. 2,500,000 BB 2,613,125
District of Columbia, General Obligation:
Series A, 5.875%, 6/1/05 (d) ................................................ 3,300,000 AAA 3,486,780
Series B, Zero Coupon, 6/1/03 (d) ........................................... 2,000,000 AAA 1,500,820
Series B3, 5.3%, 6/1/05 (d) ................................................. 1,350,000 AAA 1,376,163
Series B3, 5.5%, 6/1/07 (d) (g) ............................................. 1,000,000 AAA 1,028,440
Series B3, 5.5%, 6/1/08 (d) ................................................. 3,225,000 AAA 3,296,595
District of Columbia, Georgetown University, Series A, 7.25%, 4/1/11 .......... 2,965,000 A 3,076,099
Georgia
Burke County, GA, Development Authority, Pollution Control Revenue, Ogelthorpe
Power Corp., Vogtle Project, 7.7%, 1/1/06 (d) (g) ........................... 11,000,000 AAA 12,933,580
Georgia Municipal Electricity Authority Power Revenue, 6.5%, 1/1/12 (d) ....... 3,500,000 AAA 3,932,705
Monroe County, GA, Development Authority, Pollution Control Revenue,
Ogelthorpe Power Corporation, Scherer Project, 6.7%, 1/1/09 ................. 3,255,000 A 3,665,293
Municipal Electric Authority of Georgia, Power Revenue, Series V,
6.5%, 1/1/12 (d) ............................................................ 5,000,000 AAA 5,618,150
Illinois
Central Lake County, IL, Joint Action Water Agency, Refunding Revenue,
Zero Coupon, 5/1/04 (d) ..................................................... 2,445,000 AAA 1,743,285
Chicago, IL, Motor Fuel Tax Revenue, 5.375%, 1/1/14 (d) ....................... 5,000,000 AAA 4,975,650
Chicago, IL, General Obligation:
Emergency Telephone System, 5.6%, 1/1/09 (d) ................................ 7,200,000 AAA 7,502,688
Series 1996-A-2, 6.25%, 1/1/14 (d) .......................................... 3,750,000 AAA 4,108,238
Chicago, IL, General Obligation Lease, Board of Education, Series A,
6.25%, 1/1/15 (d) ........................................................... 2,725,000 AAA 2,985,129
Chicago, IL, Public Building Commission:
Building Revenue, Series A, 5.25%, 12/1/08 (d) .............................. 2,655,000 AAA 2,693,630
Capital Appreciation, ETM, Series 1990 A, Zero Coupon, 1/1/08 (d)** ......... 4,000,000 AAA 2,332,920
Chicago, IL, Wastewater Transmission Revenue, 5.375%, 1/1/13 (d) .............. 3,100,000 AAA 3,098,388
Cook County, IL, Community High School District #233:
Homewood & Flossmor Series 1993B, Zero Coupon, 12/1/11 (d) .................. 1,690,000 AAA 777,231
Homewood & Flossmor Series 1993B, Zero Coupon, 12/1/12 (d) .................. 1,700,000 AAA 735,284
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Du-Page, IL, Industrial Development Revenue, Weyerhaeuser Company Project,
Series 1983, 8.65%, 11/1/08 ................................................. 3,600,000 NR 3,669,876
Hoffman Estates, IL, Tax Incremental Revenue, Zero Coupon, 5/15/06 ............ 8,500,000 A 5,361,630
Illinois Development Finance Authority Refunding Revenue Commonwealth Edison,
Series 1994, 5.85%, 1/15/14 (d) ............................................. 5,000,000 AAA 5,131,350
Illinois Educational Facilities Authority, Loyola University, Zero Coupon,
7/1/05 (d) .................................................................. 3,100,000 AAA 2,070,087
Illinois Health Facilities Authority:
Delnor Community Hospital, 5.5%, 5/15/13 (d) ................................ 1,500,000 AAA 1,488,930
Memorial Medical Center - Springfield, 5.25%, 10/1/09 (d) ................... 1,725,000 AAA 1,718,687
Illinois State Sales Tax Revenue, Series P, 6.5%, 6/15/13 ..................... 2,100,000 AAA 2,352,126
Northern Illinois University, Board of Regents, Series 1992, Zero Coupon:
4/1/05 (d) .................................................................. 1,865,000 AAA 1,261,206
10/1/05 (d) ................................................................. 1,865,000 AAA 1,229,781
4/1/06 (d) .................................................................. 1,865,000 AAA 1,194,048
10/1/06 (d) ................................................................. 1,865,000 AAA 1,164,021
4/1/07 (d) .................................................................. 1,865,000 AAA 1,123,998
10/1/07 (d) ................................................................. 1,865,000 AAA 1,095,203
Northwest Suburban Municipal Joint Action Water Agency, IL, ETM, 6.5%,
5/1/15** .................................................................... 2,000,000 AAA 2,144,180
Oak Lawn, IL, Water and Sewer Revenue, Series A, Zero Coupon:
10/1/03 (d) ................................................................. 1,295,000 AAA 956,202
10/1/04 (d) ................................................................. 1,295,000 AAA 907,704
10/1/05 (d) ................................................................. 1,295,000 AAA 857,368
10/1/06 (d) ................................................................. 1,295,000 AAA 811,913
Rosemont, IL, Zero Coupon:
Tax Increment, 12/1/04 (d) .................................................. 6,000,000 AAA 4,156,320
Tax Increment-3, Series C, 12/1/05 (d) ...................................... 7,060,000 AAA 4,616,393
State University Retirement System, IL, Special Revenue, Zero Coupon,
10/1/05 (d) ................................................................. 7,000,000 AAA 4,615,800
University of Chicago, IL, Hospital Refunding, 5.5%, 8/15/08 (d) .............. 2,500,000 AAA 2,550,675
Will County, IL, School District #201-U, Crete Monee, Zero Coupon,
12/15/06 (d) ................................................................ 3,725,000 AAA 2,311,325
Winnebago County, IL, School District #122:
6.55%, 6/1/09 (d) ........................................................... 1,675,000 AAA 1,894,660
6.55%, 6/1/10 (d) ........................................................... 1,825,000 AAA 2,060,115
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Indiana
Indiana Health Facilities Finance Authority, Hospital Revenue, Ancilla
Systems Inc., Series A, 6%, 7/1/18 (d) ...................................... 3,965,000 AAA 4,116,027
Indiana Municipal Power Agency, Power Supply System, Series B:
6%, 1/1/12 (d) (g) .......................................................... 1,750,000 AAA 1,878,398
5.5%, 1/1/16 (d) (g) ........................................................ 8,960,000 AAA 9,001,395
Indiana Transportation Finance Authority, Highway Revenue, Series A, 5.75%,
6/1/12 (d) .................................................................. 5,000,000 AAA 5,229,750
Rockport, IN, Pollution Control Revenue, Series B, Refunding Bonds,
7.6%, 3/1/16 ................................................................ 4,500,000 BBB 4,881,060
Louisiana
Bastrop, LA, Industrial Development Board Pollution Control Revenue,
International Paper Co. Project, 6.9%, 3/1/07 ............................... 10,250,000 A 11,166,863
New Orleans, LA, General Obligation, Zero Coupon, 9/1/05 (d) .................. 2,500,000 AAA 1,662,075
Maine
Maine Housing Authority, Mortgage Purchase Revenue, 1987 Series A2,
7.65%, 11/15/15 ............................................................. 1,015,000 AA 1,040,680
Maryland
Northeast Maryland Waste Disposal Authority, Southwest Resource Recovery
System Revenue:
6.9%, 1/1/00 (d) ........................................................... 1,595,000 AAA 1,688,914
7.2%, 1/1/06 (d) ........................................................... 3,440,000 AAA 3,955,381
7.2%, 1/1/07 (d) ........................................................... 3,390,000 AAA 3,887,618
Massachusetts
Massachusetts Bay Transportation Authority, General Transportation System,
Series B, 6.2%, 3/1/16 ...................................................... 2,500,000 A 2,717,725
Massachusetts College Building Authority Project, Series A:
7.5%, 5/1/10 ................................................................ 4,110,000 A 4,956,742
7.5%, 5/1/14 ................................................................ 3,750,000 A 4,575,600
Massachusetts Health & Educational Facilities Authority, Massachusetts General
Hospital Series F, 6.25%, 7/1/12 (d) ........................................ 3,000,000 AAA 3,292,410
Massachusetts Water Resource Authority:
Series A, 6.5%, 7/15/09 ..................................................... 2,625,000 A 2,932,493
Series A, 6.5%, 7/15/19 ..................................................... 13,445,000 A 15,112,718
Series C, 6%, 12/1/11 ....................................................... 10,000,000 A 10,730,400
Michigan
Michigan State Hospital Finance Authority, Hospital Revenue, Sinai Hospital,
Series 1995, 6%, 1/1/08 ..................................................... 3,000,000 BBB 3,036,810
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Montana
Montana Board Housing Revenue, Capital Appreciation, Single-Family Revenue,
Series A, Zero Coupon, 6/1/10 ............................................... 9,990,000 AA 2,417,280
Nevada
Nevada State Housing Division, Single Family Mortgage Revenue, Series R,
5.95%, 10/1/11 .............................................................. 6,835,000 AA 7,017,631
New Hampshire
New Hampshire Health Facilities Revenue, 6.2%, 1/1/12 ......................... 1,085,000 BBB 1,075,799
New Hampshire State Housing Authority, Single Family Revenue, 5.9%, 7/1/19 (f) 2,000,000 AA 2,042,940
New York
Metropolitan Transportation Authority of New York, Transit Facilities Revenue:
Services Contract, 5.75%, 7/1/13 (d) ........................................ 6,775,000 AAA 7,071,339
Transit Facilities Revenue, 7%, 7/1/02 ...................................... 1,595,000 BBB 1,741,086
New York City, General Obligation:
Series 1995E, 6.6%, 8/1/04 .................................................. 7,500,000 A 8,147,700
Series 1995E, 6.5%, 2/15/05 ................................................. 7,000,000 BBB 7,552,580
Series 1996G, 6.75%, 2/1/09 ................................................. 8,000,000 A 8,848,000
Series A, 6.375%, 8/1/04 .................................................... 5,000,000 AAA 5,333,250
Series B, 6.75%, 8/15/03 .................................................... 3,000,000 A 3,268,890
Series B, 6%, 8/15/04 ....................................................... 3,425,000 A 3,600,737
Series B, 6.1%, 8/15/05 ..................................................... 3,510,000 A 3,709,789
Series H, 7.2%, 8/1/01 (d) .................................................. 2,260,000 AAA 2,469,592
Series H, 7%, 2/1/05 ........................................................ 3,895,000 A 4,198,927
Prerefunded, 8/1/99, Series 1989D, 7%, 8/1/02 (d) (e) ....................... 515,000 AAA 551,611
Prerefunded, 8/1/99, Series 1989D, 7%, 8/1/02 (d) (e) ....................... 125,000 AAA 133,886
Prerefunded, 8/1/99, Series 1989D, 7%, 8/1/02 (e) ........................... 430,000 AAA 460,569
Unrefunded Balance, Series 1989D, 7%, 8/1/02 ................................ 2,055,000 A 2,174,909
Unrefunded Balance, Series 1989D, 7%, 8/1/02 (d) ............................ 1,705,000 AAA 1,818,178
Unrefunded Balance, Series 1989D, 7%, 8/1/02 (d) ............................ 515,000 AAA 549,186
New York State Dormitory Authority:
City University System, Consolidated Revenue:
Series A, 5.75%, 7/1/06 .................................................... 4,000,000 BBB 4,159,480
Series A, 5.75%, 7/1/06 (d) ................................................ 5,000,000 AAA 5,332,650
Series E, 5.75%, 7/1/06 .................................................... 5,255,000 BBB 5,464,517
Series F, 5.375%, 7/1/07 ................................................... 2,000,000 BBB 1,993,120
College and University Pooled Capital Program, 7.8%, 12/1/05 (d) ............ 3,710,000 AAA 3,970,479
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Montefiore Medical Center, 5.75%, 8/1/07 (d) ................................ 5,015,000 AAA 5,313,944
New York State Medical Care Facilities, Finance Agency Revenue, Mount Sinai
Hospital, Series 1983, 5.95%, 8/15/09 ....................................... 3,950,000 AAA 4,096,150
Port Authority of New York & New Jersey Split Amount NC Series 1996, 7%,
10/1/07 ..................................................................... 2,000,000 NR 2,201,180
North Carolina
North Carolina Eastern Municipal Power Agency Series C, 7%, 1/1/07 ............ 7,965,000 A 8,833,902
North Carolina Municipal Power Agency, 5.25%, 1/1/09 (d) ...................... 8,500,000 AAA 8,609,905
North Carolina Municipal Power Agency #1, Catawba Electric Refunding Revenue:
7.25%, 1/1/07 ............................................................... 6,500,000 A 7,443,020
Series 1990, 5.5%, 1/1/13 (d) ............................................... 2,600,000 AAA 2,640,456
Ohio
Ohio Water Development Authority, Pollution Control Revenue, Ohio Edison
Company Project, Series 1989A, 7.625%, 7/1/23 ............................... 4,890,000 BBB 5,146,040
Pennsylvania
Philadelphia, PA, Hospital and Higher Education Facilities Authority, Temple
University Hospital, Series A, 6.5%, 11/15/08 ............................... 2,800,000 A 3,004,792
Rhode Island
Convention Center Authority Rhode Island Revenue, 5%, 5/15/20 (d) ............. 19,685,000 AAA 17,864,531
Rhode Island Housing and Mortgage Finance Corp., Home Ownership Opportunity
Bond, Series 2, 7.5%, 10/1/21 ............................................... 895,000 AA 931,328
Tennessee
Knox County, TN, Health, Education and Housing Facilities Board, Fort Sanders
Alliance, 7.25%, 1/1/09 (d) ................................................. 3,250,000 AAA 3,836,853
Texas
Austin, TX, Combined Utility Systems Revenue Refunding, Series 1993A,
Zero Coupon, 5/15/03 (d) .................................................... 2,890,000 AAA 2,179,609
Dallas-Fort Worth, TX, International Airport Revenue:
American Airlines Inc., 7.5%, 11/1/25 ....................................... 14,250,000 BBB 15,352,380
Series A, 7.8%, 11/1/07 (d) ................................................. 2,390,000 AAA 2,836,452
Series A, 7.375%, 11/1/09 (d) ............................................... 4,500,000 AAA 5,190,390
Harris County, TX:
5.5%, 8/15/06 (d) (f) ....................................................... 3,070,000 AAA 3,109,879
Health Facilities Texas Medical Center Project, Series 1996, 6.25%,
5/15/10 (d) ................................................................. 3,000,000 AAA 3,257,460
Toll and Sub Lien, Series A, Zero Coupon, 8/15/04 (d) ....................... 4,050,000 AAA 2,856,587
Houston, TX, Water Conveyance System Contract, Certificate of Participation,
Series J, 6.125%, 12/15/05 (d) .............................................. 2,500,000 AAA 2,718,950
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Houston, TX, Water and Sewer System Authority, Series C, Zero Coupon:
12/1/05 (d) ................................................................. 15,000,000 AAA 9,848,550
12/1/07 (d) ................................................................. 3,400,000 AAA 1,999,608
Lower Colorado River Authority, TX, Revenue Refunding, Zero Coupon, 1/1/03 (d) 8,900,000 AAA 6,833,331
San Antonio, TX, Airport Systems Revenue Refunding, 7%, 7/1/02 (d) ............ 1,695,000 AAA 1,880,535
San Antonio, TX, Electric and Gas, Revenue Refunding, Series A, Zero Coupon:
2/1/05 (d) .................................................................. 7,000,000 AAA 4,791,430
2/1/05 (d) .................................................................. 5,000,000 AAA 3,422,450
Utah
Intermountain Power Agency, UT, Power Supply Revenue, Series C, 5.25%, 7/1/14 . 4,000,000 AA 3,916,360
Salt Lake City, UT, Hospital Revenue, Intermountain Health Care, Series 1992,
Inversed Inflow, 6.02%, 2/15/12*** .......................................... 1,500,000 AA 1,618,215
Utah Associated Municipal Power System, Hunter Project, Refunding Revenue,
Zero Coupon, 7/1/03 (d) ..................................................... 5,700,000 AAA 4,272,606
Virginia
Chesapeake, VA, Water and Sewer, Series 1995A, 5%, 12/1/25 .................... 5,000,000 AA 4,662,850
Virginia Beach, VA, Development Authority, Virginia Beach General
Hospital Project, 5.125%, 2/15/18 (d) ....................................... 3,000,000 AAA 2,826,780
Washington
Washington Health Care Facilities Authority:
Empire Health Services-Spokane, 5.8%, 11/1/08 (d) ........................... 4,865,000 AAA 5,200,053
Franciscan Health System - St. Joseph's/Tacoma, 5.4%, 1/1/07 (d) ............ 2,000,000 AAA 2,067,560
Franciscan Health System - St. Joseph's/Tacoma, 5.4%, 1/1/08 (d) ............ 2,645,000 AAA 2,730,619
Sisters of St. Joseph of Peace, 5.3%, 3/1/09 (d) ............................ 4,315,000 AAA 4,378,474
Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue:
Series 1990B, 7.25%, 7/1/09 (d) ............................................ 12,350,000 AAA 14,465,061
Series 1993B, 5.5%, 7/1/06 (d) ............................................. 4,915,000 AAA 5,098,624
Series A, 7.15%, 7/1/02 (d) ................................................ 2,550,000 AAA 2,712,588
Series A, Zero Coupon, 7/1/07 (d) .......................................... 8,570,000 AAA 5,098,379
Nuclear Project #2, Refunding Revenue:
Series 1993B, 5.5%, 7/1/06 (d) ............................................. 4,000,000 AAA 4,149,440
Series A, 6%, 7/1/07 (d) ................................................... 7,000,000 AAA 7,522,900
Series A, 7.25%, 7/1/06 .................................................... 7,000,000 AA 8,016,890
Nuclear Project #3, Refunding Revenue:
5.65%, 7/1/08 (d) .......................................................... 3,000,000 AAA 3,125,820
Series A, Zero Coupon, 7/1/06 (d) .......................................... 1,380,000 AAA 872,353
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Managed Municipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series B, 7.375%, 7/1/04 ................................................... 750,000 AA 816,638
Series B, Prerefunded, 1/1/00, 7.25%, 7/1/15 (e) ........................... 5,000,000 AAA 5,440,100
Series B, Zero Coupon, 7/1/02 (d) .......................................... 11,925,000 AAA 9,378,416
Series B, Zero Coupon, 7/1/06 (d) .......................................... 5,555,000 AAA 3,511,538
Series C, 5%, 7/1/06 (d) ................................................... 10,000,000 AAA 10,014,400
Wisconsin
Green Bay, WI, Industrial Development Revenue, Weyerhaeuser Company Project,
Series A, 9%, 9/1/06 ........................................................ 1,700,000 NR 1,711,101
Wisconsin Health and Educational Facilities Authority, Hospital Sisters
Services Inc., Obligated Group, 5.375%, 6/1/13 (d) .......................... 1,500,000 AAA 1,473,975
Wyoming
Wyoming Community Development Authority, Single Family Mortgage, Series A,
5.85%, 6/1/13 ............................................................... 3,000,000 AA 3,030,090
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $648,748,883) 701,016,277
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $658,318,733) (a) 710,620,087
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $658,318,733. At June 30,
1997, net unrealized appreciation for all securities based on tax cost was
$52,301,354. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $52,499,523 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$198,169.
(b) At June 30, 1997 this security, in part, has been pledged to cover initial
margin requirements for open futures contracts.
At June 30, 1997, open futures contracts sold short were as follows
(Note A):
Aggregate
Futures Expiration Contracts Face Value($) Market Value($)
------- ---------- --------- ------------- ---------------
20 Year U.S.
Treasury Bonds September 1997 100 11,099,300 11,106,250
---------- ----------
Treasury Bonds
Total net unrealized depreciation on open futures
contracts sold short .................................. (6,950)
==========
(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.
(f) When-issued or forward delivery securities (See Note A in Notes to
Financial Statements).
(g) At June 30, 1997, these securities, in part or in whole, have been
segregated to cover when-issued or forward delivery securities.
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 June 30, 1997.
The accompanying notes are an integral part of the financial statements.
18 - Scudder Managed Municipal Bonds
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $658,318,733) .................. $ 710,620,087
Interest receivable .................................................... 11,434,934
Receivable for Fund shares sold ........................................ 272,888
Daily variation margin on open futures contracts ....................... 56,250
Other assets ........................................................... 23,679
----------------
Total assets ........................................................... 722,407,838
Liabilities
- --------------------------------------------------------------------------------------------------------------------------------
Dividends payable ...................................................... 1,483,535
Due to custodian bank .................................................. 11,585
Payable for when-issued and forward delivery securities ................ 5,070,000
Payable for investments purchased ...................................... 1,085,000
Payable for Fund shares redeemed ....................................... 616,576
Accrued management fee ................................................. 306,436
Other payables and accrued expenses .................................... 127,205
----------------
Total liabilities ...................................................... 8,700,337
------------------------------------------------------------------------------------------------
Net assets, at market value $ 713,707,501
------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments .......................................................... 52,301,354
Futures .............................................................. (6,950)
Accumulated net realized loss ........................................... (3,025,213)
Paid-in capital ......................................................... 664,438,310
------------------------------------------------------------------------------------------------
Net assets, at market value $ 713,707,501
------------------------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($713,707,501 / 80,332,110 outstanding shares of beneficial
interest, $.01 par value, unlimited number of ----------------
shares authorized) ................................................... $8.88
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Managed Municipal Bonds
<PAGE>
Statement of Operations
six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................... $ 21,016,780
-----------------
Expenses:
Management fee ......................................................... 1,854,116
Services to shareholders ............................................... 238,254
Custodian and accounting fees .......................................... 101,265
Trustees' fees and expenses ............................................ 26,519
Reports to shareholders ................................................ 35,598
Auditing ............................................................... 24,945
Registration fees ...................................................... 20,999
Legal .................................................................. 8,131
Other .................................................................. 11,879
-----------------
2,321,706
---------------------------------------------------------------------------------------------
Net investment income 18,695,074
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain from:
Investments ............................................................ 3,209,489
Futures ................................................................ 206,275
-----------------
3,415,764
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ............................................................ 654,065
Futures ................................................................ (143,450)
-----------------
510,615
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 3,926,379
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 22,621,453
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Managed Municipal Bonds
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended
1997 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 18,695,074 $ 38,878,965
Net realized gain from investment transactions ............... 3,415,764 2,984,085
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................ 510,615 (12,448,000)
---------------- ----------------
Net increase in net assets resulting from operations ......... 22,621,453 29,415,050
---------------- ----------------
Distributions to shareholders from:
Net investment income ........................................ (18,695,074) (38,878,965)
---------------- ----------------
Net realized gains ........................................... (411,652) --
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .................................... 32,034,230 59,805,253
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 9,713,331 19,595,317
Cost of shares redeemed ...................................... (68,977,648) (107,450,318)
---------------- ----------------
Net decrease in net assets from Fund share transactions ...... (27,230,087) (28,049,748)
---------------- ----------------
Increase (decrease) in net assets ............................ (23,715,360) (37,513,663)
Net assets at beginning of period ............................ 737,422,861 774,936,524
---------------- ----------------
Net assets at end of period .................................. $ 713,707,501 $ 737,422,861
---------------- ----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................... 83,437,562 86,659,129
---------------- ----------------
Shares sold .................................................. 3,636,544 6,821,954
Shares issued to shareholders in reinvestment of
distributions ............................................. 1,104,054 2,240,147
Shares redeemed .............................................. (7,846,050) (12,283,668)
---------------- ----------------
Net decrease in Fund shares .................................. (3,105,452) (3,221,567)
---------------- ----------------
Shares outstanding at end of period .......................... 80,332,110 83,437,562
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder Managed Municipal Bonds
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Years Ended December 31,
1997
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ------------------------------------------------------------------------------------------------------
of period ............... $8.84 $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 ...... .23 .45 .48 .46 .47 .51 .53 .55 .59 .60 .61
Net realized and unrealized
gain (loss) on investment
transactions ............ .05 (.10) .87 (1.00) .66 .25 .47 -- .33 .38 (.58)
Total from investment ------------------------------------------------------------------------------------------------------
operations .............. .28 .35 1.35 (.54) 1.13 .76 1.00 .55 .92 .98 .03
------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income . (.23) (.45) (.48) (.46) (.47) (.51) (.53) (.55) (.59) (.60) (.61)
From net realized gains on
investment transactions . (.01) -- -- -- (.29) (.33) (.12) (.09) (.39) (.02) (.11)
In excess of net realized
gains ................... -- -- -- (.02) -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------
Total distributions ........ (.24) (.45) (.48) (.48) (.76) (.84) (.65) (.64) (.98) (.62) (.72)
------------------------------------------------------------------------------------------------------
Net asset value, end of ------------------------------------------------------------------------------------------------------
period .................. $8.88 $8.84 $8.94 $8.07 $9.09 $8.72 $8.80 $8.45 $8.54 $8.60 $8.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ........... 3.13** 4.15 17.12 (6.04) 13.32 8.98 12.23 6.77 11.19 12.27 .34
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............ 714 737 775 709 910 830 796 719 691 635 592
Ratio of operating expenses .65* .63 .63 .63 .63 .63 .64 .61 .62 .61 .63
to average net assets (%)
Ratio of net investment
income to average net
assets (%) .............. 5.22* 5.20 5.59 5.41 5.21 5.76 6.16 6.61 6.78 7.13 7.20
Portfolio turnover rate (%) 30.2* 12.2 17.8 33.7 52.8 59.6 32.4 72.1 89.8 75.5 73.5
</TABLE>
* Annualized
** Not annualized
22 - Scudder Managed Municipal Bonds
<PAGE>
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.
When-issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price. The Fund will establish a segregated account in which it will
maintain cash and liquid debt securities equal in value to commitments for
when-issued or forward delivery securities.
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, 1997, 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.
23 - Scudder Managed Municipal Bonds
<PAGE>
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.
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 six months ended June 30, 1997, purchases and sales of municipal
securities (excluding short-term investments) aggregated $105,888,857 and
$130,171,269, respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1997 was $22,129,850 and $22,429,550, 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,
24 - Scudder Managed Municipal Bonds
<PAGE>
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, 1997, the fee pursuant to the
Agreement amounted to $1,854,116, which was equivalent to an annual effective
rate of .52% of the Fund's average daily net assets.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
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, 1997, the amount charged to the Fund by SSC aggregated
$165,939, of which $27,385 is unpaid at June 30, 1997.
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, 1997, the amount charged to the Fund by SFAC aggregated $48,315,
of which $8,029 is unpaid at June 30, 1997.
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, 1997, Trustees' fees and expenses aggregated $26,519.
25 - Scudder Managed Municipal Bonds
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27 - Scudder Managed Municipal Bonds
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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
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
*Scudder, Stevens & Clark, Inc.
28 - Scudder Managed Municipal Bonds
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
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
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
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 Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income 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, Inc.
Retirement Programs
- -------------------
IRA
SEP 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 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 Spain and Portugal 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 in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++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.
29 - Scudder Managed Municipal Bonds
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder Managed Municipal Bonds
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
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.
SCUDDER
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