Scudder
Managed
Municipal
Bonds
Annual Report
December 31, 1997
Pure No-Load(TM) Funds
A fund that seeks to provide income exempt from regular federal income tax
primarily through investments 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>
Scudder Managed Municipal Bonds
- --------------------------------------------------------------------------------
Date of Inception: 10/14/76 Total Net Assets as of Ticker Symbol: SCMBX
12/31/97: $728 million
- --------------------------------------------------------------------------------
o Scudder Managed Municipal Bonds' 30-day net annualized SEC yield was 4.28% as
of December 31, 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 6.69% and
7.09%, respectively.
o The Fund received four stars from Morningstar, reflecting an "above-average"
rating for risk-adjusted performance through December 31, 1997.*
o For three-, five-, and ten-year periods, the Fund's total returns place it in
the top third of performance among similar municipal bond funds as tracked by
Lipper Analytical Services. Please see page 6 for additional Lipper performance
information.
Table of Contents
3 Letter from the Fund's President 24 Notes to Financial Statements
4 Performance Update 27 Report of Independent Accountants
5 Portfolio Summary 28 Tax Information
6 Portfolio Management Discussion 29 Shareholder Meeting Results
9 Glossary of Investment Terms 32 Officers and Trustees
10 Investment Portfolio 33 Investment Products and Services
20 Financial Statements 34 Scudder Solutions
23 Financial Highlights
* 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. The Fund received four stars
for three- and five-year performance, and three stars for ten-year
performance, and was rated among 1494, 720, and 337 municipal funds for the
respective periods. Of the funds rated, 10% received five stars, and 22.5%
received four stars. Past performance is no guarantee of future returns.
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 12-month reporting period ended December 31,
1997. In addition to the Fund's four-star Morningstar rating as of December 31
(see page 2), the Fund placed in the top third of similar tax-free funds tracked
by Lipper for total return performance over three-, five-, and ten-year periods.
The Fund also posted a 4.28% 30-day net annualized SEC yield as of December 31,
which is equivalent to a taxable yield of 7.09% for investors in the top federal
tax bracket. Though municipal bond yields are currently lower than in recent
years, the difference or "spread" between bond yields and inflation during the
Fund's most recent fiscal year was larger than it has been since December 1994.
Regardless of the overall level of interest rates, this spread represents what
bond investors really earn. Please see the discussion beginning on page 6 for
more information.
For those of you who are interested in new Scudder products, we recently
introduced a new industry sector fund, Scudder Financial Services Fund. One of
Scudder's Choice Series sector funds, the Fund seeks long-term growth by
investing in financial services companies in the U.S. and abroad. In addition,
two other Choice Series funds will be launched on March 2: Scudder Health Care
Fund, seeking long-term growth from health care companies located around the
world, and Scudder Technology Fund, pursuing long-term growth by investing in
companies that develop, produce, or distribute technology.
As you may know, the Fund's investment adviser has changed its name to
Scudder Kemper Investments, Inc. from Scudder, Stevens & Clark, Inc., reflecting
the acquisition of a majority interest in Scudder by Zurich Insurance Company,
and the combining of Scudder's business with that of Zurich Kemper Investments,
Inc. We think these changes are positive and should broaden our resources in
managing the Fund.
If you have any questions regarding Scudder Managed Municipal Bonds or any
other Scudder fund, please call Investor Relations at 1-800-225-2470. Or visit
Scudder's Web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Managed Municipal Bonds
3 - Scudder Managed Municipal Bonds
<PAGE>
PERFORMANCE UPDATE as of December 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER MANAGED MUNICIPAL BONDS
- --------------------------------------------
1 Year $ 10,929 9.29% 9.29%
5 Year $ 14,193 41.93% 7.25%
10 Year $ 23,137 131.37% 8.75%
- --------------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------------
1 Year $ 10,921 9.21% 9.21%
5 Year $ 14,263 42.63% 7.36%
10 Year $ 22,791 127.91% 8.58%
- --------------------------------------------
- -----------------------------------------------------------------
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
- ----------------------
'87 $10,000
'88 $11,227
'89 $12,483
'90 $13,329
'91 $14,958
'92 $16,302
'93 $18,473
'94 $17,357
'95 $20,328
'96 $21,170
'97 $23,137
LEHMAN BROTHERS MUNICIPAL
BOND INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $11,014
'89 $12,203
'90 $13,093
'91 $14,683
'92 $15,979
'93 $17,941
'94 $17,013
'95 $19,984
'96 $20,869
'97 $22,791
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>
<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... $8.60 $8.54 $8.45 $8.80 $8.72 $9.09 $8.07 $8.94 $8.84 $9.13
INCOME DIVIDENDS.. $ .60 $ .59 $ .55 $ .53 $ .51 $ .47 $ .46 $ .48 $ .45 .46
CAPITAL GAINS
DISTRIBUTIONS..... $ .02 $ .39 $ .09 $ .12 $ .33 $ .29 $ .02 $ -- $ -- $ .05
FUND TOTAL
RETURN (%)........ 12.27 11.19 6.77 12.23 8.98 13.32 -6.04 17.12 4.15 9.29
INDEX TOTAL
RETURN (%)........ 10.16 10.79 7.29 12.14 8.82 12.28 -5.17 17.46 4.43 9.21
</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, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Electric Utility Revenue 23%
Core Cities/Lease 13%
Hospital/Health 9%
Water/Sewer Revenue 8%
State General Obligation 6%
Toll Revenue/Transportation 6%
Higher Education 5%
Other General Obligation/Lease 5%
Housing Finance Authority 5%
Miscellaneous Municipal 20%
- --------------------------------------------
100%
- --------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
As of December 31, the Fund
held securities issued in 27
states plus the District of
Columbia.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
AAA 60%
AA 9%
A 12%
BBB 17%
Not Rated 2%
- --------------------------------------------
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 65% of Fund assets
rated AAA, AA.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Less than 1 year 3%
1 - 5 11%
5 - 10 41%
10 - 20 37%
Greater than 20 years 8%
- --------------------------------------------
100%
- --------------------------------------------
Weighted average effective maturity: 9.7 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund maintained an average
effective maturity comparable
to its competitive universe
throughout the year.
For more complete details about the Fund's investment portfolio, see page 10.
5 - Scudder Managed Municipal Bonds
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Reflecting investors' confidence in the bond market and the U.S. economy,
municipal bonds performed well during 1997 and helped Scudder Managed Municipal
Bonds post a solid 9.29% total return during its most recent fiscal year ended
December 31. In addition, the Fund provided a 30-day net annualized SEC yield of
4.28% as of December 31, equivalent to fully taxable yields of 6.69% and 7.09%,
respectively, for investors in the 36% and 39.6% tax brackets.
The Fund's 9.29% total return was based on a $0.29 increase in net asset value
per share to $9.13, plus income distributions of $0.46, short-term gains of
$0.005, and long-term gains of $0.045. The Fund's return outpaced the 9.11%
average of 235 similar funds as tracked by Lipper Analytical Services, Inc. As
shown in the accompanying chart, the Fund's average annual total returns also
place it in the top third of its peer group for three-, five-, and ten-year
periods. Please turn to the Performance Update on page for more information on
the Fund's long-term progress, including comparisons with the unmanaged Lehman
Brothers Municipal Bond Index.
Bonds Benefit as Inflation Fades
The year 1997 was rewarding for most bond investors as the market's focus
gradually shifted from the possibility of an overheating U.S. economy and
increases in inflation to the Asian currency crisis and speculation about
deflation. As Asian currencies such as the Korean won and the Thai baht
surrendered approximately half of their value versus the U.S. dollar from July
to December, expectations grew that lower-cost Asian imports and reduced profit
expectations for global U.S.-based companies would keep the domestic economy and
inflation under control for some time to come, despite nearly full employment.
Competitive Total Return
(Average annual total returns for periods ended
December 31, 1997)
-------------------------------------------------------------
Scudder
Managed Number
Municipal of
Bonds Lipper Funds Percentile
Period return return Rank tracked Ranking
-------------------------------------------------------------
1 year 9.29% 9.11% 93 of 235 Top 40%
3 years 10.06% 9.65% 61 of 190 Top 32%
5 years 7.25% 6.84% 27 of 111 Top 24%
10 years 8.75% 8.24% 14 of 72 Top 19%
Past performance does not guarantee future results.
Yield declines and price gains in the municipal bond sector reflected this
favorable environment. Despite an increase in new issue volume compared with
1996, municipal bonds posted price gains across the maturity spectrum. For
example, yields of 10-year municipal bonds declined approximately one half of a
percentage point, and their prices rose 4% during the period.
It's important to note that in the current environment of lower municipal yields
and much lower inflation, "real" interest rates -- interest rates minus
6 - Scudder Managed Muncipal Bonds
<PAGE>
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Municipal Yields Compared with Inflation
December 31, 1994 - December 31, 1997
LINE CHART DATA:
- ---------------------------------------------------------------------------
CPI 10-year municipal bonds
- ---------------------------------------------------------------------------
12/94 2.80% 5.80%
3.05 5.30
2.76 5.05
2.81 4.90
1/96 2.73 4.65
2.90 5.00
2.95 5.15
2.99 5.00
1/97 3.04 4.85
2.50 5.10
2.23 4.75
2.08 4.50
12/97 1.84 4.60
Chart indicates a 2.76% Spread between the 10-year municipal bonds at 4.60%
12/97) and the CPI at 1.84% (12/97)
Municipal yields represented by 10-year, AAA-rated municipal bonds.
Inflation represented by CPI (Consumer Price Index).
Sources: Salomon Brothers; Datastream
increases in the CPI, a recognized barometer of inflation -- have rarely been
higher. Real interest rates depict the level of income bondholders actually
earn, taking into account the erosion in value of their principal from
inflation. The above chart illustrates the gap between municipal bond yield
levels and inflation since December 1994.
High Grade,
Longer-Maturity Bonds
Our fundamental focus during the Fund's most recent fiscal year remained the
same: to purchase bonds with call protection, ensuring that a significant
portion of the Fund's bonds are not retired before maturity. (Generally, as
rates fall, 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, the Fund maintained an average effective maturity comparable to its
competitive universe throughout the year: As of December 31, 1997, Scudder
Managed Municipal Bonds' average effective maturity was 9.7 years.
Overall, we continue to purchase high-grade, longer-maturity municipal bonds to
pursue our primary investment goal: to achieve investment results superior to an
unmanaged portfolio of municipal bonds. On December 31, bonds with effective
maturities between 10 and 20 years represented 37% 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 the spread
of risk over a large number of sectors, maturities, and geographic areas. As of
December 31, 1997, the Fund held securities issued in 27 states plus the
District of Columbia. Lastly, the Fund's overall credit quality remains high,
with over 65% 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 diversification.
7 - Scudder Managed Muncipal Bonds
<PAGE>
Inflation Expectation is Low
Amid the gloom (and economic pain for the people of Asia) of the Asian currency
crisis is a ray of sunshine -- the relaxing of inflation worries in the U.S.
bond market. Though no one can predict exactly how long it will last, we expect
this slow-growth, low-inflation environment to continue and to benefit municipal
bonds over the coming months. With this in mind, we will continue to purchase
longer-maturity noncallable municipal bonds and look to add higher-yielding
bonds when opportunities and attractive values present themselves. At the same
time, we will attempt to limit the amount of taxable capital gains generated
through turnover in the Fund's portfolio, carefully weighing each trade. As
always, rather than attempting to predict short-term market movements, we will
search for value as we seek high tax-free income and attractive total returns
for our investors.
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 Kemper
Investments, Inc. (SKI) 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 a 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 SKI'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
SKI 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 SKI funds. Philip G. Condon, Portfolio Manager, became a member
of the team in 1988 and has worked at SKI 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 SKI tax free funds.
8 - Scudder Managed Muncipal Bonds
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the
federal, state, or local government or a
corporation that obligates the issuer to pay
the bondholder a specified amount of interest
for a stated period -- usually a number of
years -- and to repay the face amount of the
bond at its maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith
and credit" (including the taxing and further
borrowing power) of the city, state, or
agency that issues the bond. A general
obligation bond is repaid with the issuer's
general revenue and borrowings.
INFLATION An overall increase in the prices of goods
and services, as happens when business and
consumer spending increases relative to the
supply of goods available in the marketplace
-- in other words, when too much money is
chasing too few goods. High inflation has a
negative impact on the prices of fixed-income
securities.
MUNICIPAL BOND An interest-bearing debt security issued by a
state or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund based on
the sum of the market value of all the
securities owned by the fund divided by the
number of outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument
would have to provide to equal that of a
tax-free municipal bond on an after-tax
basis.
30-DAY SEC YIELD The standard yield reference for bond funds,
based on a formula prescribed by the SEC.
This annualized yield calculation reflects
the 30-day average of the income earnings of
every holding in a given fund's portfolio,
net of expenses, assuming each is held to
maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return --
annualized or compound -- is based on a
combination of share price changes plus
income and capital gain distributions, if
any, expressed as a percentage gain or loss
in value.
(Sources: SKI; Barron's Dictionary of Finance and Investment Terms)
9 - Scudder Managed Muncipal Bonds
<PAGE>
Investment Portfolio as of December 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 0.8%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona
Arizona Educational Loan Marketing Corporation, Educational Loan Revenue
35 Day Auction Series 1997A, 4.15%, 12/1/02 .................................. 2,000,000 AA 2,000,000
Kansas
Burlington, KS, Environmental Improvement Revenue, Kansas City Power & Light,
Periodic Auction Reset, 4.15%, 12/1/23* ...................................... 1,000,000 A 1,000,000
Massachusetts
Massachusetts Industrial Finance Agency, Merritt Care, Daily Demand Note, 5%,
4/1/09* ...................................................................... 200,000 MIG1 200,000
Ohio
Cuyahoga County, OH, Health & Education, University Hospital of Cleveland,
Daily Demand Note, 5.2%, 1/1/16* ............................................. 1,000,000 MIG1 1,000,000
Texas
Harris County, TX, Health Facilities Authority, Saint Lukes, Daily Demand Note,
5%, 2/15/27* ................................................................. 900,000 A1+ 900,000
North Central, TX, Health Facilities Development Corp., Methodist Hospital of
Dallas, Daily Demand Note, Series C, 5%, 12/1/15* ............................ 700,000 MIG1 700,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $5,800,000) 5,800,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 99.2%
- ------------------------------------------------------------------------------------------------------------------------------
Alaska
North Slope Borough, AK, General Obligation:
Series B, Zero Coupon, 1/1/03 (d) (g) ........................................ 8,000,000 AAA 6,394,720
Capital Appreciation:
Series A, Zero Coupon, 6/30/06 (d) .......................................... 7,000,000 AAA 4,732,000
Series B, Zero Coupon, 6/30/04 (d) .......................................... 15,000,000 AAA 11,175,300
Series B, Zero Coupon, 6/30/05 (d) .......................................... 18,200,000 AAA 12,883,234
Arizona
Maricopa County, AZ, School District #28, Kyrene Elementary School,
Series B, Zero Coupon, 1/1/06 ................................................ 4,905,000 AAA 3,419,717
California
California General Obligation:
6.25%, 10/1/07 (d) ........................................................... 4,000,000 AAA 4,605,240
6.25%, 4/1/08 (d) ............................................................ 5,000,000 AAA 5,771,800
6.6%, 2/1/09 (d) ............................................................. 15,600,000 AAA 18,478,668
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Housing Finance Agency, Multi-Unit Rental Housing Revenue, Series A,
7.7%, 8/1/10 ................................................................. 1,000,000 A 1,106,170
California Pollution Control Financing Authority, Solid Waste Disposal Revenue,
Canadian Fibre of Riverside PJ, Series 1997A, 9%, 7/1/19 ..................... 12,000,000 NR 12,669,480
California Statewide Community Development Authority, Certificate of
Participation, Lutheran Homes, 5.5%, 11/15/08 ................................ 2,250,000 A 2,403,720
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 3,704,200
Step-up Coupon, 0% to 1/1/05, 7.1% to 1/1/11 ................................ 4,000,000 BBB 3,011,360
Step-up Coupon, 0% to 1/1/05, 7.1% to 1/1/12 ................................ 4,000,000 BBB 3,018,120
Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/14 ............................... 6,250,000 BBB 4,725,125
Zero Coupon, 0% to 1/1/15 ................................................... 11,000,000 BBB 4,395,050
Los Angeles County, CA, Certificate of Participation, Disney Parking Project,
Zero Coupon:
9/1/07 ...................................................................... 4,030,000 A 2,432,790
9/1/09 ...................................................................... 5,425,000 A 2,916,860
Roseville, CA, Unified High School District, General Obligation:
Series B, Zero Coupon, 8/1/10 (d) ........................................... 1,830,000 AAA 995,172
Series B, Zero Coupon, 8/1/15 (d) ........................................... 1,000,000 AAA 406,890
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue,
Capital Appreciation, Refunding, Series 1997A, Zero Coupon, 1/15/12 .......... 2,000,000 AAA 993,020
San Joaquin, CA, Certificate of Participation, County Public Facilities
Project, 5.5%, 11/15/13 (d) .................................................. 3,895,000 AAA 4,190,747
Colorado
Castle Rock Ranch Colorado Public Improvements Authority Public Facilities
Revenue, 6.25%, 12/1/17 ...................................................... 4,820,000 AA 5,514,514
Colorado Housing Finance Authority Revenue:
Series A, 8.25%, 10/1/10 (b) ................................................. 1,940,000 AA 2,184,886
Series A, 8.25%, 10/1/11 ..................................................... 1,680,000 AA 1,885,313
Series A, 8.25%, 10/1/12 ..................................................... 1,945,000 AA 2,174,063
Series A, Multi-Family Mortgage:
8.1%, 10/1/05 ............................................................... 2,030,000 AA 2,306,527
8.15%, 10/1/06 .............................................................. 2,145,000 AA 2,436,784
8.15%, 10/1/07 .............................................................. 2,320,000 AA 2,630,346
8.2%, 10/1/08 ............................................................... 2,510,000 AA 2,845,311
8.2%, 10/1/09 ............................................................... 2,725,000 AA 3,076,770
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Denver, CO, Urban Renewal Authority Tax Incremental Revenue, 7.5%, 9/1/04 ...... 1,000,000 SS&C 1,069,090
District Of Columbia
District of Columbia, Certificate of Participation:
7.3%, 1/1/13 ................................................................. 1,000,000 BB 1,096,690
Series 1993, 6.875%, 1/1/03 .................................................. 2,155,000 BB 2,259,065
District of Columbia, General Obligation:
Series A, 5.875%, 6/1/05 (d) ................................................. 3,300,000 AAA 3,590,235
Series B, Zero Coupon, 6/1/03 (d) ............................................ 2,000,000 AAA 1,573,280
Series B3, 5.3%, 6/1/05 (d) .................................................. 1,350,000 AAA 1,420,200
Series B3, 5.5%, 6/1/07 (d) .................................................. 1,000,000 AAA 1,070,170
Series B3, 5.5%, 6/1/08 (d) .................................................. 3,225,000 AAA 3,460,748
District of Columbia, Georgetown University, Series A, 7.25%, 4/1/11 ........... 2,965,000 A 3,045,263
Georgia
Burke County, GA, Development Authority, Pollution Control Revenue, Ogelthorpe
Power Corp., Vogtle Project, 7.7%, 1/1/06 (d) ................................ 5,000,000 AAA 5,898,738
Georgia Municipal Electricity Authority Power Revenue, 6.5%, 1/1/12 (d) ........ 3,500,000 AAA 4,093,670
Monroe County, GA, Development Authority, Pollution Control Revenue, Ogelthorpe
Power Corporation, Scherer Project, 6.7%, 1/1/09 ............................. 3,255,000 A 3,787,876
Municipal Electric Authority of Georgia, Power Revenue,
Series V, 6.5%, 1/1/12 (d) ................................................... 5,000,000 AAA 5,848,100
Illinois
Central Lake County, IL, Joint Action Water Agency, Refunding Revenue, Zero
Coupon, 5/1/04 (d) ........................................................... 2,445,000 AAA 1,841,061
Chicago, IL, Motor Fuel Tax Revenue, 5.375%, 1/1/14 (d) ........................ 5,000,000 AAA 5,267,000
Chicago, IL, General Obligation:
Emergency Telephone System, 5.6%, 1/1/09 (d) ................................. 7,200,000 AAA 7,796,736
Series 1996-A-2, 6.25%, 1/1/14 (d) ........................................... 3,750,000 AAA 4,288,950
Chicago, IL, General Obligation Lease, Board of Education, Series A, 6.25%,
1/1/15 (d) ................................................................... 2,725,000 AAA 3,118,790
Chicago, IL, Public Building Commission:
Building Revenue, Series A, 5.25%, 12/1/08 (d) ............................... 2,655,000 AAA 2,828,000
Capital Appreciation, ETM, Series 1990A, Zero Coupon, 1/1/08 (d)** ........... 4,000,000 AAA 2,508,720
Chicago, IL, Wastewater Transmission Revenue, 5.375%, 1/1/13 (d) ............... 3,100,000 AAA 3,285,628
Cook County, IL, Community High School District #233, Homewood & Flossmor,
Series 1993B, Zero Coupon, 12/1/11 (d) ....................................... 1,690,000 AAA 847,670
Du-Page, IL, Industrial Development Revenue, Weyerhaeuser Company Project,
Series 1983, 8.65%, 11/1/08 .................................................. 3,600,000 NR 3,675,492
Hoffman Estates, IL, Tax Incremental Revenue, Zero Coupon, 5/15/06 ............. 8,500,000 A 5,732,910
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Managed Muncipal 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 5,524,500
Illinois Educational Facilities Authority, Loyola University,
Zero Coupon, 7/1/05 (d) ...................................................... 3,100,000 AAA 2,202,457
Illinois Health Facilities Authority:
Delnor Community Hospital, 5.5%, 5/15/13 (d) ................................. 1,500,000 AAA 1,544,745
Memorial Medical Center-- Springfield, 5.25%, 10/1/09 (d) .................... 1,725,000 AAA 1,803,902
Illinois Health Facilities Authority Revenue, University of
Chicago Hospital, Series A, 5.5%, 8/15/08 (d) ................................ 2,500,000 AAA 2,637,225
Illinois State Sales Tax Revenue, Series P, 6.5%, 6/15/13 ...................... 2,100,000 AAA 2,468,676
Northern Illinois University, Board of Regents:
Series 1992, Zero Coupon, 4/1/05 (d) ......................................... 1,865,000 AAA 1,340,208
Series 1992, Zero Coupon, 10/1/05 (d) ........................................ 1,865,000 AAA 1,310,013
Series 1992, Zero Coupon, 4/1/06 (d) ......................................... 1,865,000 AAA 1,275,343
Series 1992, Zero Coupon, 10/1/06 (d) ........................................ 1,865,000 AAA 1,246,305
Series 1992, Zero Coupon, 4/1/07 (d) ......................................... 1,865,000 AAA 1,212,437
Series 1992, Zero Coupon, 10/1/07 (d) ........................................ 1,865,000 AAA 1,184,555
Oak Lawn, IL, Water and Sewer Revenue:
Series A, Zero Coupon, 10/1/03 (d) ........................................... 1,295,000 AAA 1,003,755
Series A, Zero Coupon, 10/1/04 (d) ........................................... 1,295,000 AAA 957,096
Series A, Zero Coupon, 10/1/05 (d) ........................................... 1,295,000 AAA 909,634
Series A, Zero Coupon, 10/1/06 (d) ........................................... 1,295,000 AAA 865,397
Rosemont, IL:
Tax Increment, Zero Coupon, 12/1/04 (d) ...................................... 6,000,000 AAA 4,401,420
Tax Increment-3, Zero Coupon, Series C, 12/1/05 (d) .......................... 7,060,000 AAA 4,921,597
State University Retirement System, IL, Special Revenue, Zero Coupon,
10/1/05 (d) .................................................................. 7,000,000 AAA 4,916,940
Will County, IL, School District #201-U, Crete Monee, Zero Coupon,
12/15/06 (d) ................................................................. 3,725,000 AAA 2,465,838
Winnebago County, IL, School District #122:
6.55%, 6/1/09 (d) ............................................................ 1,675,000 AAA 1,975,579
6.55%, 6/1/10 (d) ............................................................ 1,825,000 AAA 2,158,701
Indiana
Indiana Health Facilities Financing Authority, Hospital Revenue Community
Hospitals Project, Tax Exempt Custodian Receipts Refund:
Series 1990A:
6%, 7/1/01 .................................................................. 205,000 AAA 217,236
6%, 7/1/03 .................................................................. 230,000 AAA 248,853
6%, 7/1/04 .................................................................. 240,000 AAA 261,576
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6%, 7/1/05 .................................................................. 255,000 AAA 279,972
6%, 7/1/06 .................................................................. 270,000 AAA 298,345
6%, 7/1/07 .................................................................. 285,000 AAA 316,473
6%, 7/1/09 .................................................................. 165,000 AAA 183,889
6%, 7/1/10 .................................................................. 175,000 AAA 194,919
6%, 7/1/11 .................................................................. 185,000 AAA 205,507
6%, 7/1/12 .................................................................. 190,000 AAA 210,885
6%, 7/1/13 .................................................................. 200,000 AAA 222,082
6%, 7/1/14 .................................................................. 215,000 AAA 238,450
6%, 7/1/15 .................................................................. 225,000 AAA 249,365
6%, 7/1/16 .................................................................. 235,000 AAA 260,434
6%, 7/1/17 .................................................................. 250,000 AAA 277,593
6%, 7/1/18 .................................................................. 265,000 AAA 294,391
Series 1997A:
6%, 7/1/02 .................................................................. 215,000 AAA 230,265
6%, 7/1/08 .................................................................. 160,000 AAA 178,347
Indiana Municipal Power Agency, Power Supply System:
Series B, 6%, 1/1/12 (d) ..................................................... 1,750,000 AAA 1,964,200
Series B, 5.5%, 1/1/16 (d) ................................................... 8,960,000 AAA 9,476,723
Indiana Transportation Finance Authority, Highway Revenue, Series A, 5.75%,
6/1/12 (d) ................................................................... 5,000,000 AAA 5,495,400
Rockport, IN, Pollution Control Revenue, Series B, Refunding Bonds,
7.6%, 3/1/16 ................................................................. 4,500,000 BBB 4,919,445
Louisiana
Bastrop, LA, Industrial Development Board Pollution Control Revenue,
International Paper Co. Project, 6.9%, 3/1/07 ................................ 10,250,000 A 11,319,895
New Orleans, LA, General Obligation, Zero Coupon, 9/1/05 (d) ................... 2,500,000 AAA 1,782,675
Maryland
Northeast Maryland Waste Disposal Authority, Southwest Resource Recovery System
Revenue:
6.9%, 1/1/00 ................................................................ 1,595,000 AAA 1,683,698
7.2%, 1/1/06 ................................................................ 3,440,000 AAA 3,982,247
7.2%, 1/1/07 ................................................................ 3,390,000 AAA 3,924,366
Massachusetts
Massachusetts Bay Transportation Authority, General Transportation
System, Series B, 6.2%, 3/1/16 ............................................... 2,500,000 A 2,861,650
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts College Building Authority Project:
Series A, 7.5%, 5/1/10 ....................................................... 4,110,000 A 5,195,246
Series A, 7.5%, 5/1/14 ....................................................... 3,750,000 A 4,802,400
Massachusetts Health & Educational Facilities Authority, Massachusetts General
Hospital Series F, 6.25%, 7/1/12 (d) ......................................... 3,000,000 AAA 3,377,220
Massachusetts Water Resource Authority:
General Revenue, Series C, 6%, 12/1/11 ....................................... 10,000,000 A 11,196,700
Series A, 6.5%, 7/15/09 ...................................................... 2,625,000 A 3,054,818
Series A, 6.5%, 7/15/19 ...................................................... 13,445,000 A 16,006,273
Michigan
Michigan State Hospital Finance Authority, Hospital Revenue, Sinai Hospital,
Series 1995, 6%, 1/1/08 ...................................................... 3,000,000 A 3,214,320
Montana
Montana Board Housing Revenue, Capital Appreciation, Single-Family Revenue,
Series A, Zero Coupon, 6/1/10 ................................................ 6,150,000 AA 1,589,345
Nevada
Nevada State Housing Division, Single Family Mortgage Revenue, Series R, 5.95%,
10/1/11 ...................................................................... 6,325,000 AA 6,615,697
New Hampshire
New Hampshire Higher Educational & Health Facilities Authority Revenue, 6.2%,
1/1/12 ....................................................................... 1,085,000 BBB 1,152,585
New Hampshire State Housing Authority, Single Family Revenue, 5.9%,
7/1/19 (f) ................................................................... 2,000,000 AA 2,112,020
New York
Metropolitan Transportation Authority of New York:
Services Contract, 5.75%, 7/1/13 (d) ......................................... 6,775,000 AAA 7,473,028
Transit Facilities Revenue, 7%, 7/1/02 ....................................... 1,595,000 BBB 1,756,653
New York, NY, 7%, 2/1/05 ....................................................... 2,700,000 AAA 3,024,000
New York City, NY, General Obligation:
Series 1995 B, 6.75%, 8/15/03 ................................................ 3,000,000 A 3,325,530
Series 1995 E, 6.6%, 8/1/04 .................................................. 7,500,000 A 8,325,375
Series 1995 E, 6.5%, 2/15/05 ................................................. 7,000,000 A 7,750,260
Series 1996 G, 6.75%, 2/1/09 ................................................. 8,000,000 A 9,201,920
Series A, 6.375%, 8/1/04 ..................................................... 5,000,000 A 5,415,000
Series B, 6%, 8/15/04 ........................................................ 3,425,000 A 3,687,766
Series B, 6.1%, 8/15/05 ...................................................... 3,510,000 A 3,819,196
Series H, 7.2%, 8/1/01 ....................................................... 255,000 A 278,078
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series H, 7.2%, 8/1/01 (d) ................................................... 2,005,000 AAA 2,180,297
Prerefunded, Series 1989D, 7%, 8/1/02 (d) (e) ................................ 1,445,000 AAA 1,534,157
Prerefunded, Series 1989D, 7%, 8/1/02 (d) (e) ................................ 125,000 AAA 132,713
Prerefunded Balance, Series 1989D, 7%, 8/1/02 (d) (e) ........................ 430,000 AAA 456,531
Unrefunded Balance, Series 1989D, 7%, 8/1/02 ................................. 1,125,000 A 1,186,560
Unrefunded Balance, Series 1989D, 7%, 8/1/02 (d) ............................. 1,705,000 AAA 1,807,198
Unrefunded Balance, Series 1989D, 7%, 8/1/02 (d) ............................. 515,000 AAA 545,869
Unrefunded Balance, Series 1992-H, 7%, 2/1/05 ................................ 1,195,000 A 1,311,740
New York State Dormitory Authority:
College and University Pooled Capital Program, 7.8%,12/1/05 (d) .............. 3,710,000 AAA 3,891,679
City University System, Consolidated Revenue:
Series A, 5.75%, 7/1/06 ..................................................... 4,000,000 BBB 4,279,960
Series A, 5.75%, 7/1/06 (d) ................................................. 3,000,000 AAA 3,295,800
Series E, 5.75%, 7/1/06 ..................................................... 5,255,000 BBB 5,622,797
Series F, 5.375%, 7/1/07 .................................................... 2,000,000 BBB 2,088,460
Montefiore Medical Center, 5.75%, 8/1/07 (d) ................................. 5,015,000 AAA 5,487,814
New York State Medical Care Facilities, Finance Agency, Mount Sinai Hospital,
Series 1983, 5.95%, 8/15/09 .................................................. 3,530,000 AAA 3,696,793
Port Authority of New York & New Jersey, Series 1996, 7%, 10/1/07 .............. 2,000,000 BBB 2,269,440
North Carolina
North Carolina Eastern Municipal Power Agency Series C, 7%, 1/1/07 ............. 7,965,000 AA 9,133,147
North Carolina Municipal Power Agency, 5.25%, 1/1/09 ........................... 8,500,000 AAA 8,995,380
North Carolina Municipal Power Agency #1, Catawba Electric Refunding Revenue,
7.25%, 1/1/07 ................................................................ 6,500,000 A 7,637,240
Ohio
Ohio Water Development Authority, Pollution Control Revenue, Ohio Edison
Company Project, Series 1989 A, 7.625%, 7/1/23 ............................... 4,890,000 BB 5,147,361
Pennsylvania
Philadelphia, PA, Hospital and Higher Education Facilities Authority, Temple
University Hospital, Series A, 6.5%, 11/15/08 ................................ 2,800,000 A 3,151,288
Rhode Island
Convention Center Authority Rhode Island Revenue, 5%, 5/15/20 (d) .............. 14,685,000 AAA 14,241,807
Rhode Island Housing and Mortgage Finance Corp., Home Ownership Opportunity
Bond, Series 2, 7.5%, 10/1/21 ................................................ 630,000 AA 643,854
Tennessee
Knox County, TN, Health, Education and Housing Facilities Board, Fort Sanders
Alliance, 7.25%, 1/1/09 (d) .................................................. 3,250,000 AAA 4,009,200
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Texas
Austin, TX, Combined Utility Systems Revenue Refunding, Zero Coupon, Series
1993A, 5/15/03 (d) ........................................................... 2,890,000 AAA 2,283,851
Dallas-Fort Worth, TX, International Airport, American Airlines Inc.,
7.5%, 11/1/25 ................................................................ 14,250,000 BBB 15,551,453
Dallas-Fort Worth, TX, International Airport Revenue:
Series A, 7.375%, 11/1/09 (d) ................................................ 4,500,000 AAA 5,262,705
Series A, 7.8%, 11/1/07 (d) .................................................. 2,390,000 AAA 2,873,497
Harris County, TX, 5.5%, 8/15/06 (d) (f) ....................................... 3,070,000 AAA 3,254,047
Harris County, TX, Health Facilities Texas Medical Center Project, Series 1996,
6.25%, 5/15/10 (d) ........................................................... 3,000,000 AAA 3,455,490
Harris County, TX, Toll and Sub Lien, Series A, Zero Coupon, 8/15/04 (d) ....... 4,050,000 AAA 3,020,166
Houston, TX, Water Conveyance System Contract, Certificate of Participation,
Series J, 6.125%, 12/15/05 (d) ............................................... 2,500,000 AAA 2,791,400
Houston, TX, Water and Sewer System Authority:
Series C, Zero Coupon, 12/1/05 (d) ........................................... 15,000,000 AAA 10,497,150
Series C, Zero Coupon, 12/1/07 (d) ........................................... 3,400,000 AAA 2,153,220
Lower Colorado River Authority, TX, Revenue Refunding, Zero Coupon, 1/1/03 (d) . 8,900,000 AAA 7,149,014
San Antonio, TX, Airport Systems Revenue Refunding, 7%, 7/1/02 (d) ............. 1,695,000 AAA 1,892,179
San Antonio, TX, Electric and Gas, Revenue Refunding:
Series A, Zero Coupon, 2/1/05 (d) ............................................ 7,000,000 AAA 5,086,200
Series B, Zero Coupon, 2/1/05 (d) ............................................ 5,000,000 AAA 3,633,000
Texas Municipal Power Agency Revenue, Zero Coupon, 9/1/12 ...................... 5,150,000 AAA 2,471,125
Utah
Intermountain Power Agency, UT, Power Supply Revenue, Series C, 5.25%, 7/1/14 .. 4,000,000 AA 4,102,400
Intermountain Power Supply Agency, UT, Series 1993, 5.55%, 7/1/11 .............. 3,000,000 A 3,120,990
Salt Lake City, UT, Hospital Revenue, Intermountain Health Care, Series 1992,
Inversed Inflow, 7.1%, 2/15/12*** ............................................ 1,500,000 AA 1,681,935
Utah Associated Municipal Power System, Hunter Project, Refunding Revenue, Zero
Coupon, 7/1/03 (d) ........................................................... 5,700,000 AAA 4,479,345
Virginia
Chesapeake, VA Water and Sewer, Series 1995A, 5%, 12/1/25 ...................... 5,000,000 AA 4,867,700
Virginia Beach, VA, Development Authority, Virginia Beach General Hospital
Project, 5.125%, 2/15/18 (d) ................................................. 3,000,000 AAA 3,023,880
Washington
Washington Health Care Facilities Authority:
Empire Health Services-Spokane, 5.8%, 11/1/08 (d) ............................ 4,865,000 AAA 5,372,809
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Managed Muncipal Bonds
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating(c) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Franciscan Health System -- St. Joseph's Hospital:
5.4%, 1/1/07 (d) ............................................................ 2,000,000 AAA 2,125,920
5.4%, 1/1/08 (d) ............................................................ 2,645,000 AAA 2,824,014
Sisters of St. Joseph of Peace, 5.3%, 3/1/09 (d) ............................. 4,315,000 AAA 4,556,856
Washington Public Power Supply System:
Nuclear Project #1, Refunding Revenue:
Series 1990B, 7.25%, 7/1/09 (d) ............................................. 12,350,000 AAA 15,018,712
Series 1993B, 5.5%, 7/1/06 (d) .............................................. 4,915,000 AAA 5,255,413
Series A, 7.15%, 7/1/02 (d) ................................................. 2,550,000 AAA 2,716,209
Series A, Zero Coupon, 7/1/07 (d) ........................................... 8,570,000 AAA 5,481,458
Nuclear Project #2, Refunding Revenue:
Series 1993B, 5.5%, 7/1/06 (d) .............................................. 4,000,000 AAA 4,277,040
Series A, 6%, 7/1/07 (d) .................................................... 7,000,000 AA 7,767,340
Series A, 7.25%, 7/1/06 ..................................................... 7,000,000 AAA 8,270,220
Nuclear Project #3, Refunding Revenue:
5.65%, 7/1/08 (d) ........................................................... 3,000,000 AAA 3,257,400
Series A, Zero Coupon, 7/1/06 (d) ........................................... 1,380,000 AAA 929,016
Series B, Zero Coupon, 7/1/02 (d) ........................................... 11,925,000 AAA 9,791,021
Series B, 7.375%, 7/1/04 .................................................... 750,000 AA 817,418
Series B, Zero Coupon, 7/1/06 ............................................... 5,555,000 AAA 3,739,626
Series B, Prerefunded, 7.25%, 7/1/15 (e) .................................... 5,000,000 AAA 5,400,750
Series C, 5%, 7/1/06 (d) .................................................... 7,000,000 AAA 7,239,960
Wisconsin
Green Bay, WI, Industrial Development Revenue, Weyerhaeuser Company Project,
Series A, 9%, 9/1/06 ......................................................... 1,700,000 NR 1,712,325
Wisconsin Health and Educational Facilities Authority, Hospital Sisters
Services Inc., Obligated Group, 5.375%, 6/1/13 (d) ........................... 1,500,000 AAA 1,527,000
Wyoming
Wyoming Community Development Authority, Single Family Mortgage, Series A,
5.85%, 6/1/13 ................................................................ 3,000,000 AA 3,096,240
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $643,469,514) 717,941,192
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $649,269,514) (a) 723,741,192
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Managed Muncipal Bonds
<PAGE>
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $649,269,514. At December 31,
1997, gross and net unrealized appreciation for all securities based on
tax cost was $74,471,678.
(b) At December 31, 1997 this security, in part, has been pledged to cover
initial margin requirements for open futures contracts.
At December 31, 1997, open futures contracts sold short were as follows
(Note A):
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
20 Year U.S.
Treasury Bonds March, 1998 100 11,918,050 12,046,875
---------- ----------
Total net unrealized depreciation on open futures contracts
sold short ............................................... (128,825)
========
(c) All of the securities held have been determined by the Adviser to be of
the appropriate credit quality as required by the Fund's investment
objectives. Credit ratings shown are assigned by either Standard & Poor's
Ratings Group, Moody's Investors Service, Inc. or Fitch Investors Service,
Inc. Securities rated by Scudder (SS&C) and unrated securities (NR) have
been determined to be of comparable quality to rated 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 December 31, 1997, these securities, in part or in whole, have been
segregated to cover when-issued or forward delivery securities.
* 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, 1997.
The accompanying notes are an integral part of the financial statements.
19 - Scudder Managed Muncipal Bonds
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $649,269,514) ................ $ 723,741,192
Cash ................................................................. 39,334
Receivable for investments sold ...................................... 345,000
Interest receivable .................................................. 11,464,788
Receivable for Fund shares sold ...................................... 108,411
Other assets ......................................................... 20,952
----------------
Total assets ......................................................... 735,719,677
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Dividends payable .................................................... 1,502,761
Payable for when-issued or forward delivery securities ............... 5,070,000
Payable for Fund shares redeemed ..................................... 244,187
Payable for daily variation margin on open futures contracts ......... 59,375
Accrued management fee ............................................... 309,982
Other payables and accrued expenses .................................. 225,367
----------------
Total liabilities .................................................... 7,411,672
-----------------------------------------------------------------------------------------------
Net assets, at market value .......................................... $ 728,308,005
-----------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments ....................................................... 74,471,678
Futures ........................................................... (128,825)
Accumulated net realized loss ........................................ (5,542,536)
Paid-in capital ...................................................... 659,507,688
-----------------------------------------------------------------------------------------------
Net assets, at market value .......................................... $ 728,308,005
-----------------------------------------------------------------------------------------------
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($728,308,005 / 79,790,697 outstanding shares of
beneficial interest, $.01 par value, unlimited number of ----------------
shares authorized) ............................................... $9.13
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Managed Muncipal Bonds
<PAGE>
Statement of Operations
year ended December 31, 1997
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ............................................................ $ 41,611,211
-----------------
Expenses:
Management fee ...................................................... 3,705,253
Services to shareholders ............................................ 501,949
Custodian and accounting fees ....................................... 217,024
Trustees' fees and expenses ......................................... 44,067
Reports to shareholders ............................................. 62,142
Auditing ............................................................ 49,693
Registration fees ................................................... 32,094
Legal ............................................................... 13,374
Other ............................................................... 23,041
-----------------
4,648,637
--------------------------------------------------------------------------------------------
Net investment income 36,962,574
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... 5,118,456
Futures ............................................................. (671,525)
-----------------
4,446,931
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ......................................................... 22,824,389
Futures ............................................................. (265,325)
-----------------
22,559,064
--------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 27,005,995
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 63,968,569
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder Managed Muncipal Bonds
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ....................................... $ 36,962,574 $ 38,878,965
Net realized gain from investment transactions .............. 4,446,931 2,984,085
Net unrealized appreciation (depreciation) on investment
transactions during the period ........................... 22,559,064 (12,448,000)
--------------- ----------------
Net increase in net assets resulting from operations ........ 63,968,569 29,415,050
--------------- ----------------
Distributions to shareholders from:
Net investment income ....................................... (36,962,574) (38,878,965)
--------------- ----------------
Net realized gains .......................................... (3,989,109) --
--------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................... 65,569,325 59,805,253
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ 21,815,625 19,595,317
Cost of shares redeemed ..................................... (119,516,692) (107,450,318)
--------------- ----------------
Net decrease in net assets from Fund share transactions ..... (32,131,742) (28,049,748)
--------------- ----------------
Increase (decrease) in net assets ........................... (9,114,856) (37,513,663)
Net assets at beginning of period ........................... 737,422,861 774,936,524
--------------- ----------------
Net assets at end of period ................................. $ 728,308,005 $ 737,422,861
--------------- ----------------
Other Information
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 83,437,562 86,659,129
--------------- ----------------
Shares sold ................................................. 7,354,111 6,821,954
Shares issued to shareholders in reinvestment of
distributions ............................................ 2,441,767 2,240,147
Shares redeemed ............................................. (13,442,743) (12,283,668)
--------------- ----------------
Net decrease in Fund shares ................................. (3,646,865) (3,221,567)
--------------- ----------------
Shares outstanding at end of period ......................... 79,790,697 83,437,562
--------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 - Scudder Managed Muncipal 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>
Years Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------
<S> <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
Income from investment ---------------------------------------------------------------------------------------
operations:
Net investment income.. .46 .45 .48 .46 .47 .51 .53 .55 .59 .60
Net realized and
unrealized gain
(loss) on investment
transactions ....... .34 (.10) .87 (1.00) .66 .25 .47 -- .33 .38
Total from investment ---------------------------------------------------------------------------------------
operations ......... .80 .35 1.35 (.54) 1.13 .76 1.00 .55 .92 .98
---------------------------------------------------------------------------------------
Less distributions:
From net investment
income ............. (.46) (.45) (.48) (.46) (.47) (.51) (.53) (.55) (.59) (.60)
From net realized gains
on investment
transactions ....... (.05) -- -- -- (.29) (.33) (.12) (.09) (.39) (.02)
In excess of net
realized gains ..... -- -- -- (.02) -- -- -- -- -- --
---------------------------------------------------------------------------------------
Total distributions ... (.51) (.45) (.48) (.48) (.76) (.84) (.65) (.64) (.98) (.62)
---------------------------------------------------------------------------------------
Net asset value, end of ---------------------------------------------------------------------------------------
period ............. $9.13 $8.84 $8.94 $8.07 $9.09 $8.72 $8.80 $8.45 $8.54 $8.60
- ----------------------------------------------------------------------------------------------------------------
Total Return (%) ...... 9.29 4.15 17.12 (6.04) 13.32 8.98 12.23 6.77 11.19 12.27
Ratios and Supplemental
Data
Net assets, end of
period
($ millions) ....... 728 737 775 709 910 830 796 719 691 635
Ratio of operating
expenses to average
net assets (%) ..... .64 .63 .63 .63 .63 .63 .64 .61 .62 .61
Ratio of net investment
income to average
net assets (%) ..... 5.12 5.20 5.59 5.41 5.21 5.76 6.16 6.61 6.78 7.13
Portfolio turnover
rate (%) ........... 9.8 12.2 17.8 33.7 52.8 59.6 32.4 72.1 89.8 75.5
</TABLE>
23 - Scudder Managed Muncipal 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 other than money market securities
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. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
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 year ended
December 31, 1997, the Fund purchased interest rate futures to manage 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.
24 - Scudder Managed Muncipal Bonds
<PAGE>
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, as amended, 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.
In addition, from November 1, 1997 through December 31, 1997, the Fund incurred
approximately $151,000 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ending December 31, 1998.
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, 1997, purchases and sales of municipal
securities (excluding short-term investments) aggregated $69,286,017 and
$111,461,080, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended December 31, 1997 was $45,409,700 and $44,890,650, respectively.
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new
25 - Scudder Managed Muncipal Bonds
<PAGE>
Investment Management Agreement (the "Management Agreement") between the Fund
and Scudder Kemper was approved by the Fund's Board of Trustees and by the
Fund's Shareholders. The Management Agreement, which is effective December 31,
1997, is the same in all material respects as the corresponding previous
Investment Management Agreement, except that Scudder Kemper is the new
investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, 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 Management Agreement. The
management fee payable under the Management 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. For the year ended
December 31, 1997, the fee pursuant to these agreements amounted to $3,705,253,
which was equivalent to an annual effective rate of 0.51% 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, 1997, the amount charged to the Fund by SSC aggregated
$329,430, of which $26,971 is unpaid at December 31, 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 year ended
December 31, 1997, the amount charged to the Fund by SFAC aggregated $96,839, of
which $8,012 is unpaid at December 31, 1997.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the year ended December 31, 1997,
Trustees' fees and expenses aggregated $44,067.
26 - Scudder Managed Muncipal 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,
1997, 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, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Managed Municipal Bonds as of December 31, 1997, 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 19, 1998
27 - Scudder Managed Muncipal Bonds
<PAGE>
Tax Information
The Fund paid distributions of $0.045 per share from long-term capital gains
during its year ended December 31, 1997, of which 40.40% represents 20% rate
gains. Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$3,882,533 as a long-term capital gain dividend for the fiscal year ended
December 31, 1997, of which 50.71% represents 20% rate gains.
Of the dividends paid from net investment income for the year ended December 31,
1997, 100% are tax exempt for regular federal income tax purposes, and 2.95%
should be treated as an item of preference for purposes of the federal
alternative minimum tax, if applicable.
28 - Scudder Managed Muncipal Bonds
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Managed Municipal
Bonds (the "Fund") was held on October 24, 1997, at the offices of Scudder
Kemper Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), Two
International Place, Boston, Massachusetts 02110. At the Meeting, as adjourned
and reconvened, the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below). With regard to certain
proposals, it was recommended that the Meeting be reconvened in order to provide
shareholders with an additional opportunity to return their proxies. The date of
the reconvened meeting at which the matters were decided is noted after the
proposed matter.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
54,730,640 1,695,132 1,640,822 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 56,421,157 1,645,438
Dawn-Marie Driscoll 56,383,088 1,683,507
Peter B. Freeman 56,409,396 1,657,199
George M. Lovejoy, Jr. 56,333,986 1,732,609
Dr. Wesley W. Marple, Jr. 56,379,949 1,686,646
Daniel Pierce 56,428,849 1,637,746
Kathryn L. Quirk 56,413,021 1,653,574
Jean C. Tempel 56,377,041 1,689,554
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
50,498,522 3,817,299 2,522,412 1,228,362
29 - Scudder Managed Municipal Bonds
<PAGE>
4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
51,804,282 3,452,462 2,438,307 941,232
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
<S> <C> <C> <C> <C>
5.1 Diversification 50,444,914 3,352,347 3,040,971 1,228,362
5.2 Borrowing 50,080,079 3,717,183 3,040,971 1,228,362
5.3 Senior securities 50,407,684 3,389,578 3,040,971 1,228,362
5.4 Concentration 50,395,513 3,400,433 3,042,287 1,228,362
5.5 Loans 50,438,453 3,359,314 3,040,465 1,228,362
5.6 Underwriting of securities 50,465,960 3,331,301 3,040,971 1,228,362
5.7 Investment in real estate 50,343,894 3,454,371 3,039,967 1,228,362
5.8 Purchases of physical commodities 50,334,347 3,463,329 3,040,558 1,228,362
5.9 Investment in California municipal N/A N/A N/A N/A
securities
5.10 Investment in municipal securities 50,475,025 3,324,160 3,039,048 1,228,362
5.11 Investment in Massachusetts N/A N/A N/A N/A
municipal securities
5.12 Investment in New York municipal N/A N/A N/A N/A
securities
5.13 Investment in Ohio municipal N/A N/A N/A N/A
securities
5.14 Investment in Pennsylvania N/A N/A N/A N/A
municipal securities
30 - Scudder Managed Municipal Bonds
<PAGE>
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
5.15 Investment in short-term municipal N/A N/A N/A N/A
securities
5.16 Elimination of tax diversification N/A N/A N/A N/A
5.17 Purchases of voting securities N/A N/A N/A N/A
5.18 Affiliated transactions N/A N/A N/A N/A
5.19 Disclosed practices 50,431,460 3,364,446 3,042,327 1,228,362
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
56,123,317 575,869 1,367,409
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
31 - Scudder Managed Municipal Bonds
<PAGE>
Officers and Trustees
Daniel Pierce*
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, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
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, Secretary and
Treasurer
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
32 - Scudder Managed Muncipal 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
Scudder S&P 500 Index 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
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. Certain Scudder funds may not be available for
purchase or exchange. +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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
33 - Scudder Managed Muncipal 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 previously designated.
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
- ------------------------------------------------------------------------------------------------------------------------------
34 - Scudder Managed Muncipal 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
</TABLE>
35 - Scudder Managed Muncipal Bonds
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
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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