SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND/TAX FREE
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Scudder Managed Municipal Bonds
Fund #066
Semiannual Report
November 30, 1999
The fund seeks income exempt from regular federal income tax.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
13 Glossary of Investment Terms
14 Investment Portfolio
26 Financial Statements
29 Financial Highlights
30 Notes to Financial Statements
34 Officers and Trustees
35 Investment Products and Services
37 Scudder Solutions
2
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Scudder Managed Municipal Bonds
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ticker symbol SCMBX fund number 066
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Date of Inception: o In an environment of rising interest rates, Scudder
10/14/76 Managed Municipal Bonds posted a total return of -1.20%
for its most recent semiannual period ended November
30, 1999. The fund displayed strong competitive
performance, outpacing the -3.59% average performance
of the fund's peers over the same period, according to
Lipper.
Total Net Assets: o For the one-, three-, five-, and ten-year periods, the
$707.2 million fund's total returns placed it in the top 12% of
similar municipal bond funds as tracked by Lipper
Analytical Services. Please see page 9 for additional
Lipper performance information.
o As of November 30, 1999, Scudder Managed Municipal
Bonds' 30-day net annualized SEC yield was 4.83%,
equivalent to a 8.00% taxable yield for investors
subject to the 39.6% maximum federal income tax rate.
o Scudder Managed Municipal Bonds received an overall
Morningstar Rating(TM)of four stars out of 1610 tax
free funds as of November 30, 1999.*
* Morningstar proprietary rankings reflect historical risk-adjusted
performance as of November 30, 1999. Ratings are subject to change monthly,
and past performance does not guarantee future results. Morningstar ratings
are calculated from the fund's three- and five-year average annual returns
in excess of 90-day Treasury bills with appropriate fee adjustments, and a
risk factor that reflects fund performance below 90-day T-bill returns. The
fund received four stars for the three-year period, five stars for the
five-year period, and four stars for the ten-year period. The top 10% of
funds in a broad asset class receive 5 stars and the next 22.5% receive 4
stars. The fund was rated among 1610, 1330, and 383 funds in its broad
asset class for the three-, five-, and ten-year periods, respectively.
3
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Letter from the Fund's President
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Dear Shareholders,
The Federal Reserve, while placing a high priority on maintaining a generous
level of liquidity in the financial system in the face of uncertainty over the
Y2K date change, helped to push up interest rates and keep the bond market in
retreat during Scudder Managed Municipal Bonds' most recent semiannual period
ended November 30, 1999. Over the six-month period, the fund returned -1.20%.
Despite the negative posting, two positive aspects of the fund's performance
should be noted: First, the fund's SEC yield increased from 4.16% on May 31,
1999, to 4.83% as of November 30. Its November 30 yield was equivalent to a
taxable yield of 8.00% for investors in the 39.6% tax bracket. Second, the fund
continues to display strong competitive performance, owing to its longer-term
strategy of buying noncallable bonds and high-coupon, intermediate-maturity
bonds. Over the three-, five-, and ten-year periods ended November 30, the fund
placed in the top 12% of similar high yield municipal bond funds as ranked by
Lipper; for the most recent 12-month period, the fund placed in the top 2% of
similar funds. For more information concerning the fund's investment environment
and portfolio strategy, as well as the outlook for the municipal bond market
over the coming months, please read the Portfolio Management Discussion that
begins on page 9.
It should be noted that Daniel Pierce retired in June 1999 as President of
Scudder Managed Municipal Bonds, at which time I
4
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assumed that role and its responsibilities. We are fortunate that Dan's
longstanding affiliation with Scudder is ongoing, and that we will continue to
benefit from his counsel going forward. I am pleased to join the fund's team in
this capacity, and look forward to serving your interests.
Please call a Scudder Investor Information representative at 1-800-SCUDDER or go
to our Web site at www.scudder.com if you have questions about your fund. Page
37 provides more information on how to contact Scudder. Thank you for choosing
Scudder Managed Municipal Bonds to help meet your investment needs.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder Managed Municipal Bonds
5
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Performance Update
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November 30, 1999
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
LINE CHART DATA:
Scudder Managed Lehman Brothers
Municipal Bonds Municipal Bond Index*
1989 10000 10000
1990 10678 10771
1991 11787 11875
1992 12976 13068
1993 14576 14516
1994 13639 13753
1995 16233 16353
1996 17174 17314
1997 18358 18559
1998 19762 20000
1999 19573 19784
Yearly periods ended November 30
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 11/30/1999 $10,000 Cumulative Annual
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Scudder Managed Municipal Bonds
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1 year $ 9,904 -.96% -.96%
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5 year $ 14,351 43.51% 7.49%
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10 year $ 19,573 95.73% 6.95%
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Lehman Brothers Municipal Bond Index*
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1 year $ 9,892 -1.08% -1.08%
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5 year $ 14,385 43.85% 7.54%
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10 year $ 19,784 97.84% 7.06%
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* The unmanaged Lehman Brothers Municipal Bond Index is a market
value-weighted measure of the long-term, investment grade tax-exempt bond
market consisting of municipal bonds with a maturity of at least two years.
Index returns assume dividends are reinvested and, unlike Fund returns, do
not reflect any fees or expenses.
6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE FUND TOTAL
RETURN (%) AND INDEX TOTAL RETURN (%)
Yearly periods ended November 30
Scudder Managed Lehman Brothers
Municipal Bonds Municipal Bond Index*
1990 6.79 7.71
1991 10.38 10.26
1992 10.08 10.04
1993 12.33 11.08
1994 -6.43 -5.25
1995 19.02 18.91
1996 5.80 5.88
1997 6.90 7.19
1998 7.65 7.77
1999 -0.96 -1.08
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 6.79 10.38 10.08 12.33 -6.43 19.02 5.80 6.90 7.65 -.96
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Index Total
Return (%) 7.71 10.26 10.04 11.08 -5.25 18.91 5.88 7.19 7.77 -1.08
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Net Asset
Value ($) 8.43 8.63 8.64 8.92 7.89 8.88 8.92 9.01 9.18 8.61
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Income
Dividends ($) .55 .53 .51 .48 .46 .48 .45 .46 .45 .45
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Capital Gains
Distributions($ .09 .12 .33 .29 .02 -- -- .05 .05 .04
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</TABLE>
* The unmanaged Lehman Brothers Municipal Bond Index is a market
value-weighted measure of the long-term, investment grade tax-exempt bond
market consisting of municipal bonds with a maturity of at least two years.
Index returns assume dividends are reinvested and, unlike Fund returns, do
not reflect any fees or expenses.
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.
7
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Portfolio Summary
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November 30, 1999
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Diversification
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Electric Utility Revenue 15% Diversification remains
State General Obligation/ an important strategy
Lease 9% for the fund, allowing
Water/Sewer Revenue 9% us to spread risk over a
Core Cities/Lease 9% large number of sectors,
Hospital/Health Revenue 8% maturities, and
Other General Obligation/ geographic areas.
Lease 7%
Resource Recovery/
Project Revenue 6%
Port/Airport Revenue 5%
Housing Finance Authority 5%
Miscellaneous Municipal 27%
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100%
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Quality
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
AAA* 62% Overall portfolio
AA 8% quality remains high,
A 17% with 70% of portfolio
BBB 4% assets rated AAA or AA.
Not Rated 9%
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100%
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Weighted average quality: AA+
* Includes Cash Equivalents
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Effective Maturity
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Less than 1 year 4% The Fund continues its
1 to less than 5 years 19% cautious stance on the
5 to less than 10 years 40% market with respect to
10 to less than 15 years 23% interest rate risk,
Greater than 15 years 14% maintaining an average
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100% imilar to that of its
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Weighted average effective
maturity: 9.34 years
For more complete details about the Fund's investment portfolio, see page 14. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
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Portfolio Management Discussion
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November 30, 1999
Dear Shareholders,
During Scudder Managed Municipal Bonds' most recent semiannual period, municipal
bonds languished along with the rest of the fixed income market as stock indexes
soared and the Federal Reserve maintained upward pressure on interest rates.
Reflecting the fact that 1999 was one of the most difficult years ever for
bonds, the fund posted a -1.20% total return for the six-month period ended
November 30, 1999. On the plus side, the fund's tax-free 4.83% SEC yield as of
November 30 was equivalent to an 8.00% yield for investors in the top (39.6%)
tax bracket.
In addition, Scudder Managed Municipal Bonds received a four-star
(above-average) rating from Morningstar as of November 30 (see page 3 for
additional information), and continues to display top-tier competitive
performance as ranked by Lipper Analytical Services: As shown in the
accompanying table, the fund's average annual total returns placed it in the
highest 12% of similar funds over three-, five-, and ten-year periods; for the
one-year period ended November 30, the fund placed in the top 2% of similar
funds. Please turn to the Performance Update on page 5 for more information on
the fund's long-term progress, including comparisons with the unmanaged Lehman
Brothers Municipal Bond Index.
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Top-Tier Rankings
(Average annual returns for periods ended November 30, 1999)
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Scudder Lipper
Managed Average Number of
Municipal Bonds Annual Funds Percentile
Period Return Return Rank Tracked Ranking
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1 Year -0.96% -3.51% 6 of 264 Top 2%
3 Years 4.46% 3.29% 7 of 218 Top 3%
5 Years 7.49% 6.50% 15 of 171 Top 9%
10 Years 6.95% 6.37% 10 of 78 Top 12%
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Past performance does not guarantee future results.
9
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Slow Retreat for Bonds
During the last half of 1998, bonds were avidly sought as a safe haven following
Asia's economic turmoil and the Russian debt default. As the global economy
began to stabilize and growth gained a foothold in Europe, Asia, and Latin
America, market participants began to worry over possible increases in
inflation. By the second half of 1999, the bond market shifted its focus to the
Y2K issue, concerned about the effect the date changeover might have on
computers and countries around the world. The U.S. Federal Reserve took action
of its own to address market concerns: It raised interest rates three times from
June through November to dampen inflation. The Fed also substantially increased
liquidity to keep the financial markets functioning smoothly beyond 1999's
close. The Fed's rate increases and a burgeoning money supply -- raising
additional inflation fears -- kept bond prices in retreat through the end of the
period.
Though most fixed-income investments posted negative returns, municipals managed
to outperform Treasuries during the six months ended November 30. The price of
an average 10-year AAA-rated municipal bond declined 3.1% over the period, while
the price of an average 10-year Treasury bond declined 4.2%.
Changing Conditions Provided Opportunity
Scudder Managed Municipal Bonds' goal is to provide a high level of tax free
income from an actively managed portfolio consisting primarily of
investment-grade municipal bonds. Over the course of the period, higher interest
rates created challenges, but also provided opportunities to reposition the
fund's portfolio to what we believe is a favorable stance over the near term.
Accordingly, our recent portfolio strategy included:
1) purchasing longer-term bonds. Over the period, the fund sold bonds in the
nine- to 13-year range where the municipal yield curve was historically
flat, and purchased bonds in the 14- to 20-year range.
10
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This portion of the yield curve offers the best relative yield and total
return potential given the steepness of the curve.
2) emphasizing call protection when purchasing bonds for the fund's portfolio.
(Generally a bond is called in by its issuer when it can be refinanced at a
lower prevailing rate.) Our call-protection strategy provides a more
reliable income stream for the fund than would exist if the portfolio held
a significant proportion of bonds that could be called in before their
stated maturities.
3) recognizing losses on certain bonds in order to offset capital gains in the
fund's portfolio and carry losses forward in the future. This strategy
provides us with additional flexibility to restructure the portfolio as
needed, reducing concern about incurring significant capital gains when
bonds are sold for a profit.
4) purchasing premium bonds rather than par bonds (which can more easily
decline to a discount). Buying bonds priced at a premium helped the fund by
minimizing its exposure to "market discount" bonds. When municipal bonds
decline low enough in price to be subject to the market discount tax, they
can lose value relative to higher coupon bonds. That's because future gains
from these bonds are taxable to prospective buyers at potentially higher
ordinary income tax rates rather than at capital gain tax rates. We also
buy bonds after they become market discounts to take advantage of their
cheap levels and the opportunity for strong performance when the market
rallies.
In addition, the fund has maintained its cautious stance on the market with
respect to interest rate risk, increasing its average duration only as much as
its competitive universe. As of November 30, the fund's average duration was
6.88 years. (Duration gives relative weight to both principal and interest
payments through the life of a bond and has replaced average maturity as the
standard measure of interest rate sensitivity among professional investors.
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Generally, the shorter the duration, the less sensitive a portfolio will be to
changes in interest rates.)
Lastly, the fund's overall level of portfolio quality remains high, with 70% of
the fund's portfolio rated AAA or AA, or of equivalent quality. And
diversification remains an important strategy for the fund, allowing us to
spread risk over a large number of sectors, maturities, and geographic areas. As
of November 30, the fund held securities issued in 25 states, the District of
Columbia, Puerto Rico, and the Virgin Islands. The Portfolio Summary on page 7
provides more information about the fund's holdings, including quality,
maturity, and sector representation.
Outlook
Despite the difficult environment for bonds, municipals' high after-tax yields
provide attractive value for investors in the highest tax brackets. And two
scenarios could provide a considerable boost to bonds over the coming months --
first, when investors become convinced that the Fed has completed its latest
round of interest rate increases, they should return to the bond market in
appreciable numbers; second, if the U.S. economy slows during the second half of
2000 as some economists are predicting, inflation concerns may subside.
In terms of fund strategy, we will continue to seek competitive returns by
purchasing longer-maturity noncallable bonds over the coming months. And rather
than attempting to make investment decisions based on short-term market
movements, we will search for the most attractively valued bonds as we seek a
high level of tax-free income for our shareholders.
Sincerely,
Your Portfolio Management Team
/s/Philip G. Condon /s/Ashton P. Goodfield
Philip G. Condon Ashton P. Goodfield
12
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Glossary of Investment Terms
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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 A municipal bond backed by the "full faith and credit" Bond
Obligation (including the taxing and further borrowing power) of the
Bond 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 The price per share of a mutual fund based
Value (Nav) on the sum of the market value of all the securities owned by
the fund, plus other assets less liabilities, divided by the
number of outstanding shares.
Taxable The level of yield a fully taxable instrument would
Equivalent have to provide to equal that of a tax-free municipal
Yield bond on an after-tax basis.
30-Day SEC The standard yield reference for bond funds, based on a
Yield 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.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
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Investment Portfolio as of November 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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Short-Term Municipal Investments 0.8%
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<S> <C> <C>
District of Columbia
District of Columbia, General Obligation, General Fund
Recovery, Series 1991 B, Daily Demand Note, 4.0%,
6/1/2003* .............................................. 1,450,000 1,450,000
Texas
Harris County, TX, Health Facilities Saint Lukes Episcopal
Hospital, Series 1997 A, Daily Demand Note, 3.7%,
2/15/2027* ............................................. 4,500,000 4,500,000
Total Short-Term Municipal Investments (Cost $5,950,000) 5,950,000
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Long-Term Municipal Investments 99.2%
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Alaska
North Slope Borough, AK, General Obligation:
Series 1993 B, Zero Coupon, 1/1/2003 (b) .............. 8,000,000 6,904,400
Series 1994 B, Zero Coupon, 6/30/2004 (b) ............. 15,000,000 11,988,300
Series 1994 B, Zero Coupon, 6/30/2005 (b) ............. 18,200,000 13,776,490
Series 1995 A, Zero Coupon, 6/30/2006 (b) ............. 7,000,000 5,008,640
Arizona
Maricopa County, AZ, School District No. 28, Kyrene
Elementary School, Series 1993 B, Zero Coupon,
1/1/2006 (b) .......................................... 4,905,000 3,614,445
California
California General Obligation:
Series 1989, 6.25%, 10/1/2007 (b) (d) ................. 4,000,000 4,404,960
Series 1990, 6.25%, 4/1/2008 (b) ...................... 5,000,000 5,500,100
Series 1991, 6.6%, 2/1/2009 (b) ....................... 15,600,000 17,558,268
California Housing Finance Agency, Multi-Unit Rental
Housing Revenue, Series 1992 A, 7.7%, 8/1/2010 ........ 1,000,000 1,076,580
California Pollution Control Financing Authority, Solid
Waste Disposal Revenue, Canadian Fibre of Riverside PJ,
Series 1997 A, AMT, 9%, 7/1/2019 ...................... 12,000,000 12,913,680
California Statewide Community Development Authority,
Certificate of Participation, Lutheran Homes, 5.5%,
11/15/2008 ............................................ 2,250,000 2,320,538
Foothill Eastern Transportation Corridor Agency, CA, Toll
Road Revenue:
Series 1995 A, Step-up Coupon, ETM, 0% to
1/1/2005, 7.05% to 1/1/2009** ......................... 5,000,000 4,155,300
Series 1995 A, Step-up Coupon, Prerefunded 1/1/2010
at 102, 0% to 1/1/2005, 7.1% to 1/1/2012 (c) .......... 4,000,000 3,406,120
The accompanying notes are an integral part of the financial statements.
14
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Principal
Amount ($) Value ($)
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Series 1995 A, Step-up Coupon, Prerefunded 1/1/2010
at 102, 0% to 1/1/2005, 7.15% to 1/1/2014 (c) ...... 6,250,000 5,332,563
Series 1995 A, Step-up Coupon, Prerefunded 1/1/2010
at 102, 0% to 1/1/2005, 7.1% to 1/1/2011 (c) ....... 4,000,000 3,403,640
Series 1995 A, Zero Coupon, 1/1/2015 ................. 11,000,000 4,732,310
Los Angeles County, CA, Certificate of Participation,
Disney Parking Project:
Series 1993, Zero Coupon, 9/1/2007 ................... 4,030,000 2,682,408
Series 1993, Zero Coupon, 9/1/2009 ................... 5,425,000 3,192,830
Roseville, CA, Unified High School District, General
Obligation:
Series 1995 B, Zero Coupon, 8/1/2010 (b) ............. 1,830,000 1,053,842
Series 1995 B, Zero Coupon, 8/1/2015 (b) ............. 1,000,000 411,360
San Joaquin, CA:
Certificate of Participation, County Public
Facilities Project, Series 1993, 5.5%, 11/15/2013 (b) 3,895,000 3,974,925
Transportation Corridor Agency, Toll Road
Revenue, Series 1997 A, Zero Coupon, 1/15/2012 (b) ... 2,000,000 1,040,800
Colorado
Colorado Housing Finance Authority Revenue, Multi-Family
Mortgage:
Series 1992 A, 8.1%, 10/1/2005 ....................... 2,030,000 2,199,201
Series 1992 A, 8.15%, 10/1/2006 ...................... 2,145,000 2,326,574
Series 1992 A, 8.15%, 10/1/2007 ...................... 2,320,000 2,516,388
Series 1992 A, 8.2%, 10/1/2008 ....................... 2,510,000 2,725,709
Series 1992 A, 8.2%, 10/1/2009 ....................... 2,725,000 2,959,187
Series 1992 A, 8.25%, 10/1/2010 ...................... 1,940,000 2,109,246
Series 1992 A, 8.25%, 10/1/2011 ...................... 1,680,000 1,826,563
Series 1992 A, 8.25%, 10/1/2012 ...................... 1,945,000 2,114,682
Denver, CO, Urban Renewal Authority, Tax Increment
Revenue, Pavilions-Convention, AMT, Series 1989, 7.5%,
9/1/2004 ............................................. 945,000 992,798
District of Columbia
District of Columbia, Certificate of Participation:
Series 1993, 6.875%, 1/1/2003 ........................ 1,780,000 1,815,849
Series 1993, 7.3%, 1/1/2013 .......................... 1,000,000 1,051,510
District of Columbia, General Obligation:
Inverse Floating Rate Note, Series 1999 B, 6.818%,
6/1/2010*** .......................................... 12,500,000 12,858,250
Series 1989 B, Zero Coupon, 6/1/2003 (b) ............. 2,000,000 1,693,840
Series 1993 A, 5.875%, 6/1/2005 (b) .................. 3,300,000 3,455,166
Series 1993 B, 5.3%, 6/1/2005 (b) .................... 1,350,000 1,376,420
The accompanying notes are an integral part of the financial statements.
15
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Principal
Amount ($) Value ($)
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Series 1993 B, 5.5%, 6/1/2007 (b) .......................... 1,000,000 1,025,300
Series 1993 B, 5.5%, 6/1/2008 (b) .......................... 3,225,000 3,299,691
District of Columbia, Water and Sewer Authority, Public
Utility Revenue, Series 1998, 5.5%, 10/1/2023 (b) .......... 5,000,000 4,757,600
Georgia
Burke County, GA, Development Authority, Pollution
Control Revenue, Votgle Project, Series 1992, 7.7%,
Prerefunded 1/1/2003 at 103, 1/1/2006 (b)(c) ............... 5,000,000 5,582,050
Georgia Municipal Electric Authority, Power Revenue:
Series 1991 V, 6.5%, 1/1/2012 (b) .......................... 5,000,000 5,516,050
Series 1997 X, 6.5%, 1/1/2012 (b) .......................... 3,500,000 3,861,235
Illinois
Central Lake County, IL, Joint Action Water Agency,
Series 1991, Zero Coupon, 5/1/2004 (b) ..................... 2,445,000 1,967,271
Chicago, IL, General Obligation, Certificate of Participation:
Board of Education, Series 1992 A, 6.25%, 1/1/2015 (b) ..... 2,725,000 2,903,651
Emergency Telephone Systems, Series 1993, 5.6%,
1/1/2009 (b) ............................................. 7,200,000 7,512,048
Series 1996 A2, 6.25%, 1/1/2014 (b) ........................ 3,750,000 4,015,388
Chicago, IL, Motor Fuel Tax Revenue, Series 1993,
5.375%, 1/1/2014 (b) ....................................... 5,000,000 4,905,450
Chicago, IL, O'Hare International Airport, Special Facilities
Revenue, United Airlines Project, Series 1999 A, 5.35%,
9/1/2016 ................................................... 2,250,000 1,959,998
Chicago, IL, Public Building Commission:
Series 1990 A, ETM, Zero Coupon, 1/1/2008 (b)** ............ 4,000,000 2,622,440
Series 1993 A, 5.25%, 12/1/2008 (b) ........................ 2,655,000 2,685,373
Chicago, IL, Wastewater Transmission Revenue, Series
1993, 5.375%, 1/1/2013 (b) ................................. 3,215,000 3,188,026
Du-Page, IL, Industrial Development Revenue,
Weyerhaeuser Company Project, Series 1983, 8.65%,
11/1/2008 .................................................. 3,600,000 3,650,544
Hoffman Estates, IL, Tax Increment Revenue, Series 1991,
Zero Coupon, 5/15/2006 ..................................... 8,500,000 6,047,920
Illinois Development Finance Authority, Pollution Control
Revenue, Commonwealth Edison, Series 1994, 5.85%,
1/15/2014 (b) .............................................. 5,000,000 5,140,200
Illinois Educational Facilities Authority, Loyola University,
Series 1991 A, ETM, Zero Coupon, 7/1/2005** ................ 3,100,000 2,352,621
Illinois Health Facilities Authority:
Centegra Health System, Series 1998, 5.2%, 9/1/2012 ........ 1,000,000 925,940
Memorial Medical Center-Springfield, Series 1993,
5.25%, 10/1/2009 (b) ..................................... 1,725,000 1,726,190
University of Chicago Hospital, Series 1993 A, 5.5%,
8/15/2008 (b) ............................................ 2,500,000 2,537,650
The accompanying notes are an integral part of the financial statements.
16
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Principal
Amount ($) Value ($)
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Illinois State Sales Tax Revenue, Series 1992 P, 6.5%,
6/15/2013 ....................................................... 2,100,000 2,296,035
Illinois University Retirement System, Series 1990, Zero
Coupon, 10/1/2005 (b) ........................................... 7,000,000 5,223,330
Northern Illinois University, Board of Regents:
Series 1992, Zero Coupon, 4/1/2005 (b) .......................... 1,865,000 1,427,005
Series 1992, Zero Coupon, 10/1/2005 (b) ......................... 1,865,000 1,391,644
Series 1992, Zero Coupon, 4/1/2006 (b) .......................... 1,865,000 1,348,824
Series 1992, Zero Coupon, 10/1/2006 (b) ......................... 1,865,000 1,314,769
Series 1992, Zero Coupon, 4/1/2007 (b) .......................... 1,865,000 1,272,452
Series 1992, Zero Coupon, 10/1/2007 (b) ......................... 1,865,000 1,239,721
Oak Lawn, IL, Water and Sewer Revenue:
Series 1992 A, Zero Coupon, 10/1/2003 (b) ....................... 1,295,000 1,074,319
Series 1992 A, Zero Coupon, 10/1/2004 (b) ....................... 1,295,000 1,018,427
Series 1992 A, Zero Coupon, 10/1/2005 (b) ....................... 1,295,000 963,571
Series 1992 A, Zero Coupon, 10/1/2006 (b) ....................... 1,295,000 909,297
Rosemont, IL, Tax Increment Revenue:
Series 1990, Zero Coupon, 12/1/2004 (b) ......................... 6,000,000 4,691,100
Series 1990, Zero Coupon, 12/1/2005 (b) ......................... 7,060,000 5,224,259
Will County, IL, School District No. 201, General
Obligation, Series 1991, ETM, Zero Coupon,
12/15/2006 (b)** ................................................ 3,725,000 2,612,864
Winnebago County, IL, School District No. 122, General
Obligation:
Series 1992, 6.55%, 6/1/2009 (b) ................................ 1,675,000 1,857,458
Series 1992, 6.55%, 6/1/2010 (b) ................................ 1,825,000 2,015,913
Indiana
Indiana Health Facilities Finance Authority, Hospital
Revenue:
Series 1990 A, 6%, 7/1/2002 (b) ................................. 215,000 222,560
Series 1990 A, 6%, 7/1/2003 (b) ................................. 230,000 239,982
Series 1990 A, 6%, 7/1/2004 (b) ................................. 240,000 251,717
Series 1990 A, 6%, 7/1/2005 (b) ................................. 255,000 268,296
Series 1990 A, 6%, 7/1/2006 (b) ................................. 270,000 284,669
Series 1990 A, 6%, 7/1/2007 (b) ................................. 285,000 300,590
Series 1990 A, 6%, 7/1/2008 (b) ................................. 160,000 168,539
Series 1990 A, 6%, 7/1/2009 (b) ................................. 165,000 173,964
Series 1990 A, 6%, 7/1/2010 (b) ................................. 175,000 184,672
Series 1990 A, 6%, 7/1/2011 (b) ................................. 185,000 194,947
Series 1990 A, 6%, 7/1/2012 (b) ................................. 190,000 199,242
Series 1990 A, 6%, 7/1/2013 (b) ................................. 200,000 208,690
Series 1990 A, 6%, 7/1/2014 (b) ................................. 215,000 223,047
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
- ---------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------
Series 1990 A, 6%, 7/1/2015 (b) ................................. 225,000 231,662
Series 1990 A, 6%, 7/1/2016 (b) ................................. 235,000 240,960
Series 1990 A, 6%, 7/1/2017 (b) ................................. 250,000 255,175
Series 1990 A, 6%, 7/1/2018 (b) ................................. 265,000 269,452
Indiana Municipal Power Agency, Power Supply System:
Series 1993 B, 6%, 1/1/2012 (b) ................................. 1,750,000 1,850,188
Series 1993 B, 5.5%, 1/1/2016 (b) ............................... 8,960,000 8,809,382
Indiana Transportation Finance Authority, Highway
Revenue, Series 1993 A, 5.75%, 6/1/2012 (b) ..................... 5,000,000 5,180,650
Rockport, IN, Pollution Control Revenue, Series 1991 B,
7.6%, 3/1/2016 .................................................. 4,500,000 4,684,995
Louisiana
Bastrop, LA, Pollution Control Revenue, International
Paper Co. Project, Series 1992, 6.9%, 3/1/2007 .................. 10,250,000 10,758,298
New Orleans, LA, General Obligation, Series 1991, Zero
Coupon, 9/1/2005 (b) ............................................ 2,500,000 1,880,675
Maryland
Maryland Economic Development Corporation Revenue,
Chesapeake Bay Conference, Series 1999 B, 7.75%,
12/1/2031 ....................................................... 7,000,000 6,975,360
Northeast Maryland Waste Disposal Authority, Southwest
Resource Recovery System:
Series 1993, 7.2%, 1/1/2006 (b) ................................. 3,440,000 3,795,455
Series 1993, 7.2%, 1/1/2007 (b) ................................. 3,390,000 3,740,289
Massachusetts
Massachusetts Bay Transportation Authority, Series 1997 C,
6.2%, 3/1/2016 .................................................. 2,500,000 2,641,950
Massachusetts College Building Authority Project:
Series 1994 A, 7.5%, 5/1/2010 ................................... 4,110,000 4,862,829
Series 1994 A, 7.5%, 5/1/2014 ................................... 3,750,000 4,468,688
Massachusetts Health & Educational Facilities Authority,
Massachusetts General Hospital, Series 1992 F, 6.25%,
7/1/2012 (b) .................................................... 3,000,000 3,259,170
Massachusetts Port Authority Revenue, Series 1999 B, AMT,
5.5%, 7/1/2012 (b) .............................................. 2,000,000 2,001,480
Massachusetts State Development Financial Agency,
Revenue, Health Care Facilities, Series 1999 A, 7.1%,
7/1/2032 ........................................................ 2,000,000 1,922,780
Massachusetts Water Resource Authority:
Series 1992 A, 6.5%, 7/15/2009 .................................. 2,625,000 2,872,328
Series 1992 A, 6.5%, 7/15/2019 .................................. 13,445,000 14,484,299
Series 1993 C, 6%, 12/1/2011 .................................... 10,000,000 10,624,900
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
- -------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
Michigan
Michigan State Hospital Finance Authority, Series 1999 A,
6%,11/15/2019 ................................................... 3,000,000 2,898,450
Montana
Montana Board Housing Revenue, Family Housing Authority,
Series 1984 A, Zero Coupon, 6/1/2010 ............................ 150,000 46,722
Nevada
Nevada State Housing Division, Single Family Mortgage
Revenue, Series 1993 R, 5.95%, 10/1/2011 ........................ 3,050,000 3,081,598
New Hampshire
New Hampshire State Housing Finance Authority, Single
Family Revenue, AMT, Series 1997 C, 5.9%, 7/1/2019 .............. 1,370,000 1,473,476
New York
Metropolitan Transportation Authority of New York, Transit
Facilities Revenue:
Series 1991, 7%, 7/1/2002 ....................................... 1,595,000 1,679,742
Series 1993 O, 5.75%, 7/1/2013 (b) .............................. 6,775,000 6,981,096
Monroe County, NY, Airport Authority, Series 1999, AMT,
5.75%, 1/1/2013 (b) ............................................. 4,515,000 4,648,825
New York City, NY, General Obligation:
Series 1989 D, 7%, 8/1/2002 (b) ................................. 165,000 168,236
Series 1989 D, 7%, 8/1/2002 ..................................... 655,000 667,727
Series 1989 H, 7.2%, 8/1/2001 (b) ............................... 2,005,000 2,073,772
Series 1992 A, 6.375%, 8/1/2004 ................................. 5,000,000 5,256,900
Series 1992 H, 7%, 2/1/2005 ..................................... 480,000 508,507
Series 1992 H, 7%, Prerefunded 1/1/2002 at 101.50,
2/1/2005 (c) .................................................. 5,000 5,335
Series 1995 B, 6.75%, 8/15/2003 ................................. 3,000,000 3,203,430
Series 1995 B, 6%, 8/15/2004 .................................... 3,425,000 3,594,606
Series 1995 B, 6.1%, 8/15/2005 .................................. 3,510,000 3,706,876
Series 1995 E, 6.6%, 8/1/2004 ................................... 6,500,000 6,975,280
Series 1995 E, 6.5%, 2/15/2005 .................................. 7,000,000 7,485,520
Series 1996 G, 6.75%, 2/1/2009 .................................. 2,000,000 2,206,740
New York State Dormitory Authority, City University System,
Consolidated Revenue Lease:
Series 1993 A, 5.75%, 7/1/2006 .................................. 4,000,000 4,118,920
Series 1993 A, 5.75%, 7/1/2006 (b) .............................. 3,000,000 3,147,090
Series 1993 E, 5.75%, 7/1/2006 .................................. 3,085,000 3,176,717
Series 1993 F, 5.375%, 7/1/2007 ................................. 2,000,000 2,009,160
New York State Dormitory Authority Revenue:
Series 1993 A, 5.5%, 5/15/2019 .................................. 1,500,000 1,431,060
Series 1993 C, 5.25%, 5/15/2021 ................................. 2,000,000 1,820,240
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
- -------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
Onondaga County, NY, Industrial Development Agency,
Solid Waste Disposal Facility, Solvay Paperboard LLC,
Series 1998, AMT, 7%, 11/1/2030 ................................. 3,500,000 3,508,995
Port Authority of New York & New Jersey, Special
Obligation Revenue, Series 1996, AMT, 7%, 10/1/2007 ............. 2,000,000 2,107,020
North Carolina
North Carolina Municipal Power Agency No. 1, Catawba
Electric Revenue, Series 1993, 5.25%, 1/1/2009 (b) .............. 8,500,000 8,548,365
Oklahoma
Oklahoma Development Finance Authority, Hillcrest Health
Center Inc., Series 1999 A, 5.625%, 8/15/2019 ................... 2,500,000 2,130,450
Oregon
Chemeketa, OR, Community College District, Series 1998,
5.5%, 6/1/2014 (b) .............................................. 2,385,000 2,396,853
Pennsylvania
Allegheny County, PA, Airport Revenue, Pittsburgh
International Airport, Series 1997 A, AMT, 5.75%,
1/1/2013 (b) .................................................... 1,500,000 1,523,370
Armstrong County, PA, St Francis Medical Center Project,
Series 1992 A, 6.25%, 6/1/2013 (b) .............................. 1,000,000 1,046,980
Berks County, PA, Municipal Authority Hospital Revenue,
Reading Hospital and Medical Center Project:
Series 1993, 5.5%, 10/1/2008 (b) ................................ 1,000,000 1,023,110
Series 1993, 5.7%, 10/1/2014 (b) ................................ 1,000,000 1,021,530
Bethlehem, PA, Water Revenue, Series 1992,
Prerefunded 11/15/2001 at 100, 11/15/2001, 6.25%,
11/15/2001 (b) (c) .............................................. 1,000,000 1,037,180
Bucks County, PA, Water and Sewer Authority Revenue,
Series 1977, ETM, 6.375%, 12/1/2008** ........................... 425,000 451,490
Delaware County, PA, White Horse Village, Series 1996 A,
6.6%, 7/1/2006 .................................................. 1,000,000 1,007,770
Delaware County, PA, Health Facilities Revenue, Mercy
Health Corp. of Southeastern Pennsylvania, Series
1993 B, 6%, Prerefunded 11/15/2005 at 100,
11/15/2007 (c) .................................................. 1,500,000 1,594,605
Delaware County, PA, Hospital Authority Revenue,
Delaware County Memorial Hospital, Series 1995, 5.5%,
8/15/2013 (b) ................................................... 1,750,000 1,729,945
Erie County, PA, Industrial Devlopment Authority, Pollution
Control Revenue, Series 1997 A, 5.3%, 4/1/2012 .................. 1,000,000 961,400
Erie County, PA, Prison Authority, Commonwealth Lease
Revenue, Series 1991, Prerefunded 11/1/2001 at 100,
6.25%, 11/1/2001 (b) (c) ........................................ 1,000,000 1,036,450
Gettysburgh, PA, Gettysburgh College, Series 1998,
5.375%, 8/15/2013 (b) ........................................... 1,020,000 1,019,908
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- -------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
Harrisburg, PA, General Obligation, Series
1997 D, Zero Coupon, 9/15/2011 (b) .............................. 1,000,000 524,390
Indiana County, PA, Industrial Development Authority,
Pollution Control Revenue, Pennsylvania Electric
Company, Series 1995, 5.35%, 11/1/2010 (b) ...................... 1,000,000 1,018,170
Latrobe, PA, Industrial Development Authority, St. Vincent
College Project, Series 1998, 5.375%, 5/1/2013 .................. 1,000,000 949,970
Luzerne County, PA, Flood Protection Authority, Series
1998 A, 5.25%, 1/15/2013 (b) .................................... 1,400,000 1,361,122
Montgomery County, PA, Multi-Family Housing Revenue,
KBF Associates L.P. Project, Series 1993 A, 6.375%,
7/1/2012 ........................................................ 1,500,000 1,495,410
Pennsylvania Convention Center Authority, Series 1989 A,
ETM, 6%, 9/1/2019 (b)** ......................................... 2,200,000 2,253,724
Pennsylvania General Obligation:
Series 1992, 10%, 4/15/2002 (b) ................................. 2,500,000 2,805,600
Series 1992, 6.25%, 7/1/2010 .................................... 1,000,000 1,090,560
Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue:
Series 1991, 7.15%, 4/1/2015 .................................... 865,000 891,383
Series 1992, 6.85%, 10/1/2009 ................................... 840,000 871,996
Pennsylvania Intergovernmental Cooperation Authority,
Special Tax Revenue, City of Philadelphia, Series 1992,
6.8%, Prerefunded 6/15/2002 at 100, 6/15/2012 (c) ............... 1,000,000 1,056,990
Philadelphia, PA, General Obligation, School District, Series
1995 A, 6.25%, 9/1/2009 ......................................... 1,000,000 1,083,410
Philadelphia, PA, Hospital and Higher Education Facilities
Authority, Children's Seashore House, Series 1992 A,
7%, 8/15/2012 ................................................... 1,000,000 1,054,680
Philadelphia, PA, Industrial Development Authority:
Baptist Home of Philadelphia, Series 1998 A, 5.5%,
11/15/2018 ...................................................... 1,000,000 841,060
Commercial Development Revenues, Series 1997, 6.5%,
10/1/2027 ....................................................... 1,000,000 993,590
Philadelphia, PA, Port Authority Lease Revenue, Series
1993, 6.2%, 9/1/2013 (b) ........................................ 2,000,000 2,073,300
Philadelphia, PA, Water & Wastewater Revenue,
Series 1993, 5.625%, 6/15/2009 (b) .............................. 2,000,000 2,070,860
Philadelphia, PA, Water and Wastewater Revenue, Series
1995, 6.25%, 8/1/2010 (b) ....................................... 1,000,000 1,087,630
Pittsburgh, PA, General Obligation, Series 1993 A, 5.5%,
9/1/2014 ........................................................ 1,500,000 1,493,865
Pittsburgh, PA, Water and Sewer System Revenue, Series
1986, ETM, 7.25%, 9/1/2014 (b)** ................................ 150,000 172,242
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
- ---------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------
Somerset County, PA, General Authority, Commonwealth
Lease Revenue, Series 1991, Prerefunded 10/15/2001 at
100, 6.25%, 10/15/2011 (b) (c) .................................. 1,000,000 1,035,620
Union County, PA, Higher Education Facilities Authority,
Bucknell University, Series 1992, 6.2%, 4/1/2007 (b) ............ 1,000,000 1,043,210
University Area, PA, Sewer Revenue, Series 1993, 5.25%,
11/1/2014 (b) ................................................... 1,750,000 1,710,993
Puerto Rico
Puerto Rico Public Building Authority, Government
Facilities Revenue, Series 1995 A, 6.25%, 7/1/2013 (b) .......... 1,000,000 1,092,140
Rhode Island
Rhode Island Convention Center Authority, Series 1993 B,
5%, 5/15/2020 (b) ............................................... 2,750,000 2,413,648
Texas
Austin, TX, Independant School District, General
Obligation, Series 1998, 5%, 8/1/2015 ........................... 2,000,000 1,875,740
Austin, TX, Bergstrom Landhost Enterprises Inc., Airport
Hotel, Series 1999 A, 6.75%, 4/1/2027 ........................... 4,000,000 3,732,080
Conroe TX, Independant School District, General Obligation,
Series 1999, 5.5%, 2/15/2013 .................................... 1,250,000 1,254,550
Dallas-Fort Worth, TX, Airport Revenue:
Series 1990, AMT, 7.5%, 11/1/2025 (b) ........................... 14,250,000 14,774,258
Series 1992 A, 7.8%, 11/1/2007 (b) .............................. 2,390,000 2,716,235
Series 1992 A, 7.375%, 11/1/2009 ................................ 4,500,000 5,029,245
Harris County, TX, Health Facilities, Texas Medical Center
Project, Series 1996, 6.25%, 5/15/2010 (b) ...................... 3,000,000 3,216,510
Harris County, TX, Toll Road Authority, Series 1992 A, Zero
Coupon, 8/15/2004 (b) ........................................... 4,050,000 3,217,118
Harris County, TX, Series 1998, AMT, 5.5%, 8/15/2006 (b) .......... 3,070,000 3,145,768
Houston, TX, Water and Sewer System Authority:
Series 1991 C, Zero Coupon, 12/1/2005 (b) ....................... 15,000,000 11,119,200
Series 1991 C, Zero Coupon, 12/1/2007 (b) ....................... 3,400,000 2,245,768
Houston, TX, Water Conveyance System Contract,
Certificate of Participation, Series 1993 J, 6.125%,
12/15/2005 (b) .................................................. 2,500,000 2,659,100
Lower Colorado River Authority, TX, Series 1999 B, 6%,
5/15/2010 ....................................................... 5,000,000 5,307,000
North Texas, Highway Revenue Tolls, Dallas Tollway, Series
1997 A, 5%, 1/1/2020 (b) ........................................ 2,165,000 1,923,364
San Antonio, TX, Airport Systems Revenue, Series 1991,
ETM, 7%, 7/1/2002 (b)** ......................................... 1,695,000 1,799,395
San Antonio, TX, Electric and Gas Revenue:
Series 1989 A, Zero Coupon, 2/1/2005 (b) ........................ 7,000,000 5,409,180
Series 1991 A, Zero Coupon, 2/1/2005 (b) ........................ 5,000,000 3,863,700
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- ---------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------
Texas Municipal Power Agency, Series 1989, Zero Coupon,
9/1/2012 (b) .................................................... 5,150,000 2,530,607
Texas Water Development Board Revenue, Series 1999 B,
5.25%, 7/15/2017 ................................................ 5,000,000 4,714,400
Travis County, TX, Health Facilities Development Corp.,
Ascension Health, Inverse Floating Rate Note:
Series 1999 A, 7.32%, 11/15/2011 (b)*** ......................... 1,720,000 1,818,436
Series 1999 A, 8.29%, 11/15/2015 (b)*** ......................... 1,390,000 1,485,688
Series 1999 A, 8.32%, 11/15/2016 (b)*** ......................... 6,885,000 7,291,559
Utah
Intermountain Power Agency, UT, Power Supply Revenue:
Series 1993, 5.55%, 7/1/2011 .................................... 3,000,000 3,004,110
Series 1993 C, 5.25%, 7/1/2014 .................................. 4,000,000 3,853,800
Salt Lake City, UT, Hospital Revenue, Intermountain Health
Care, Inversed Inflow, Series 1992, 5.55%, 2/15/2012*** ......... 1,500,000 1,586,280
Virgin Islands
Virgin Islands, Public Finance Authority Revenue:
Series 1992 A, 7.25%, Prerefunded 10/1/2002 at 102,
10/1/2018 (c) ................................................. 1,500,000 1,648,515
Series 1998 C, 5.5%, 10/1/2008 .................................. 1,500,000 1,501,950
Virginia
Fairfax County, VA, Economic Development Authority
Revenue, Series 1999 A, 7.25%, 10/1/2019 ........................ 2,000,000 1,926,600
Virginia Beach, VA, Development Authority, VA Beach
General Hospital Project, Series 1993, 5.125%,
2/15/2018 (b) ................................................... 3,000,000 2,764,350
Washington
Cowlitz County, WA, General Obligation, Series 1999,
5.5%, 11/1/2016 (b) ............................................. 1,560,000 1,516,445
Seattle, WA, General Obligation, Library Facilities, Series
1999 A, 5.375%, 12/1/2013 ....................................... 6,200,000 6,142,898
Washington State Health Care Facilities Authority, Empire
Health Services -- Spokane, Series 1993, 5.8%,
11/1/2008 (b) ................................................... 4,865,000 5,070,984
Washington State Public Power Supply System:
Nuclear Project No. 1:
Series 1990 B, 7.25%, 7/1/2009 (b) ............................ 12,350,000 14,236,463
Series 1991 A, Zero Coupon, 7/1/2007 (b) ...................... 8,570,000 5,771,381
Nuclear Project No. 2:
Series 1990 A, 7.25%, 7/1/2006 ................................ 7,000,000 7,845,040
Series 1994, 6.0%, 7/1/2007 (b) ............................... 7,000,000 7,423,500
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
- ------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------
Nuclear Project No. 3:
Series 1989 A, Zero Coupon, 7/1/2006 (b) ................... 1,380,000 985,375
Series 1989 B, Zero Coupon, 7/1/2006 (b) ................... 5,555,000 3,966,492
Series 1990 B, Zero Coupon, 7/1/2002 (b) ................... 11,925,000 10,566,981
Series 1990 B, 7.375%, 7/1/2004 ............................ 750,000 776,903
Series 1993 B, 5.65%, 7/1/2008 (b) ......................... 3,000,000 3,113,430
Wisconsin
Green Bay, WI, Industrial Development Revenue,
Weyerhaeuser Company Project, Series 1981, 9%,
9/1/2006 ..................................................... 1,700,000 1,715,725
Wisconsin Health and Educational Facilities Authority:
Aurora Health Care Inc.:
Series 1999 A, 5.6%, 2/15/2029 ............................. 4,000,000 3,384,920
Series 1999 B, 5.625%, 2/15/2029 ........................... 2,500,000 2,123,450
Hospital Sisters Services Inc., Series 1993, 5.375%,
6/1/2013 (b) ............................................... 1,500,000 1,460,010
Wyoming
Wyoming Community Development Authority, Single Family
Mortgage Revenue, Series 1993 A, 5.85%, 6/1/2013 ............. 3,000,000 3,019,170
Total Long-Term Municipal Investments (Cost $660,961,903) 696,800,068
- ------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $666,911,903) 702,750,068
- ------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $666,911,903. At November 30,
1999, net unrealized appreciation for all securities based on tax cost was
$35,838,165. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $40,049,413 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$4,211,248.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC,
FSA or MBIA/BIG.
(c) 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 issues and to retire the bonds in full at the
earliest refunding date.
(d) At November 30, 1999, these securities, in part or in whole, have been
segregated to cover when-issued securities and initial margin requirements
for open futures contracts.
* 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 exempt commercial paper. These securities are
payable on demand within seven calendar days and normally incorporate an
irrevocable letter 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.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
*** Inverse floating rate notes are instruments whose yields may change based
on the change in the relationship between long-term and short-term interest
rates and which exhibit added interest rate sensitivity compared to other
bonds with a similar maturity. These securities are shown at their rates as
of November 30, 1999.
AMT: Alternative minimum tax
<TABLE>
<CAPTION>
At November 30, 1999, open futures contracts were as follows:
Expiration Aggregate Face Market
Futures Date Contracts Value($) Value ($)
------------------------- ------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Municipal Bond Index 12/21/1999 50 5,522,175 5,500,000
Total unrealized depreciation on open futures contracts............ (22,175)
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments in securities, at value (cost $666,911,903) ....... $ 702,750,068
Cash .......................................................... 685,451
Receivable for investments sold ............................... 444,758
Interest receivable ........................................... 9,435,080
Receivable for Fund shares sold ............................... 2,626,311
Receivable for daily variation margin on open futures contracts 18,750
Other assets .................................................. 10,229
-------------
Total assets .................................................. 715,970,647
Liabilities
- --------------------------------------------------------------------------------
Dividends payable ............................................. 1,320,770
Payable for investments purchased ............................. 6,708,808
Payable for Fund shares redeemed .............................. 227,806
Accrued management fee ........................................ 343,016
Other accrued expenses ........................................ 184,137
-------------
Total liabilities ............................................. 8,784,537
Net assets, at value .......................................... $ 707,186,110
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investment securities ....................................... 35,838,165
Futures ..................................................... (22,175)
Accumulated net realized gain (loss) .......................... (8,475,898)
Paid-in capital ............................................... 679,846,018
Net assets, at value $ 707,186,110
Net Asset Value
- --------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($707,186,110 /
82,137,272 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized).................... $ 8.61
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations for the six months ended November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
Interest ....................................................... $ 20,296,010
------------
Expenses:
Management fee ................................................. 1,806,001
Services to shareholders ....................................... 254,651
Custodian and accounting fees .................................. 81,378
Trustees' fees and expenses .................................... 20,725
Reports to shareholders ........................................ 17,830
Auditing ....................................................... 17,003
Registration fees .............................................. 7,365
Legal .......................................................... 10,833
Other .......................................................... 8,887
------------
Total expenses, before expense reductions ...................... 2,224,673
Expense reductions ............................................. (12,267)
------------
Total expenses, after expense reductions ....................... 2,212,406
Net investment income 18,083,604
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... (2,300,989)
Futures ........................................................ 357,170
------------
(1,943,819)
------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (24,730,979)
Futures ........................................................ (12,500)
------------
(24,743,479)
Net gain (loss) on investment transactions (26,687,298)
Net increase (decrease) in net assets resulting from operations $ (8,603,694)
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------
Six Months
Ended November Five Months Year Ended
Increase (Decrease) in 30, 1999 Ended May 31, December 31,
Net Assets (Unaudited) 1999 1998
- ------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C>
Net investment income ........... $ 18,083,604 $ 14,842,386 $ 36,413,691
Net realized gain (loss) ........ (1,943,819) 3,094,358 4,072,633
Net unrealized appreciation
(depreciation) on investment
transactions during the period (24,743,479) (19,073,544) 4,067,938
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from operations (8,603,694) (1,136,800) 44,554,262
------------- ------------- -------------
Distributions to shareholders:
From net investment income ...... (18,083,604) (14,842,386) (36,413,691)
------------- ------------- -------------
From net realized gains ......... (2,933,309) -- (3,996,751)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ....... 31,992,936 37,202,992 83,789,509
Proceeds from shares issued in
the acquisition of Scudder
Pennsylvania Tax Free Fund..... 71,551,046 -- --
Reinvestment of distributions ... 12,284,296 7,966,563 21,988,411
Cost of shares redeemed ......... (92,422,730) (52,816,744) (101,202,201)
------------- ------------- -------------
Net increase (decrease) in net
assets from Fund share
transactions .................. 23,405,548 (7,647,189) 4,575,719
------------- ------------- -------------
Increase (decrease) in net assets (6,215,059) (23,626,375) 8,719,539
Net assets at beginning of period 713,401,169 737,027,544 728,308,005
Net assets at end of period ..... $ 707,186,110 $ 713,401,169 $ 737,027,544
Other Information
- -----------------------------------------------------------------------------------
Shares outstanding at beginning
of period ..................... 79,451,883 80,293,360 79,790,697
------------- ------------- -------------
Shares sold ..................... 3,680,431 4,073,627 9,148,915
Shares issued in the acquisition
of Scudder Pennsylvania Tax
Free Fund ..................... 8,189,666 -- --
Shares issued to shareholders in
reinvestment of distributions . 1,413,571 874,504 2,402,379
Shares redeemed ................. (10,598,279) (5,789,608) (11,048,631)
------------- ------------- -------------
Net increase (decrease) in Fund
shares ........................ 2,685,389 (841,477) 502,663
Shares outstanding at end of
period ........................ 82,137,272 79,451,883 80,293,360
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<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>
- -----------------------------------------------------------------------------------
1999(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c) 1994(c)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $ 8.98 $ 9.18 $ 9.13 $ 8.84 $ 8.94 $ 8.07 $ 9.09
beginning of period
--------------------------------------------------------
- -----------------------------------------------------------------------------------
Income from investment
operations:
- -----------------------------------------------------------------------------------
Net investment income .23 .19 .45 .46 .45 .48 .46
- -----------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investment transactions (.33) (.20) .10 .34 (.10) .87 (1.00)
--------------------------------------------------------
- -----------------------------------------------------------------------------------
Total from investment
operations (.10) (.01) .55 .80 .35 1.35 (.54)
- -----------------------------------------------------------------------------------
Less distributions from:
- -----------------------------------------------------------------------------------
Net investment income (.23) (.19) (.45) (.46) (.45) (.48) (.46)
- -----------------------------------------------------------------------------------
Net realized gains on
investment transactions (.04) -- (.05) (.05) -- -- (.02)
--------------------------------------------------------
- -----------------------------------------------------------------------------------
Total distributions (.27) (.19) (.50) (.51) (.45) (.48) (.48)
- -----------------------------------------------------------------------------------
Net asset value, end
of period $ 8.61 $ 8.98 $ 9.18 $ 9.13 $ 8.84 $ 8.94 $ 8.07
--------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Return (%) (1.20)**(.17)** 6.23 9.29 4.15 17.12 (6.04)
Ratios to Average Net Assets and Supplemental Data
- -----------------------------------------------------------------------------------
Net assets, end of period
($ millions) 707 713 737 728 737 775 709
- -----------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) .63* .64* .62 .64 .63 .63 .63
- -----------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .63* .64* 62 .64 .63 .63 .63
- -----------------------------------------------------------------------------------
Ratio of net investment
income (%) 5.15* 4.92* 4.96 5.12 5.20 5.59 5.41
- -----------------------------------------------------------------------------------
Portfolio turnover rate (%) 55.2* 13.8* 8.6 9.8 12.2 17.8 33.7
- -----------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended November 30, 1999 (Unaudited).
(b) For the five months ended May 31, 1999. On August 10, 1998 the Board of
Trustees of the Trust changed the fiscal year end from December 31 to May
31.
(c) Years ended December 31.
* Annualized
** Not annualized
29
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
A. Significant Accounting Policies
Scudder Managed Municipal Bonds (the "Fund") is a diversified series of Scudder
Municipal Trust (the "Trust") which is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusetts business trust. On August 10, 1998, the
Fund changed its fiscal year end for financial reporting and federal income tax
purposes to May 31 from December 31.
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 purchased with an original
maturity greater than sixty days are valued by pricing agents approved by the
officers of the Trust, whose 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. Money market instruments purchased with an
original maturity of sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of a financial
instrument at a specified price on a specific date (settlement date). During the
period, the Fund purchased interest rate futures as a temporary substitute for
purchasing selected investments. In addition, the Fund also sold interest rate
futures as a temporary substitute for selling selected investments.
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 dependent upon
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
30
<PAGE>
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 the changes in the value of
the securities or currencies 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.
When Issued/Delayed Delivery Securities. The Fund may purchase securities with
delivery or payment to occur at a later date beyond the normal settlement
period. At the time the Fund enters into a commitment to purchase a security,
the transaction is recorded and the value of the security is reflected in the
net asset value. The value of the security may vary with market fluctuations. No
interest accrues to the Fund until payment takes place. At the time the Fund
enters into this type of transaction it is required to segregate cash or other
liquid assets at least equal to the amount of the commitment.
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. Accordingly, the Fund paid no federal income taxes and no
federal income tax provision was required.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. 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 at least annually.
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 primarily relate to investments in future 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.
31
<PAGE>
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
During the six months ended November 30, 1999, purchases and sales of municipal
securities (excluding short-term investments) aggregated $215,370,159 and
$193,478,565, respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended November 30, 1999 was $25,824,714 and $26,400,977, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.55% on the first
$200,000,000 of average daily net assets, 0.50% on the next $500,000,000 of such
net assets and 0.475% on such net assets in excess of $700,000,000, computed and
accrued daily and payable monthly. For the six months ended November 30, 1999,
the fee pursuant to this Agreement amounted to $1,806,001, which was equivalent
to an annualized 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
six months ended November 30, 1999, the amount charged to the Fund by SSC
aggregated $171,647, of which $58,363 is unpaid at November 30, 1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended November 30, 1999, the amount charged to the Fund by
32
<PAGE>
SFAC aggregated $50,635, of which $17,084 is unpaid at November 30, 1999.
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 six months ended November 30,
1999, Trustees' fees and expenses aggregated $20,725.
D. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the six months ended November
30, 1999, the Fund's custodian and transfer agent fees were reduced by $10,324
and $1,943, respectively, under these arrangements.
E. Acquisition of Assets
On September 17, 1999, the Fund acquired all the net assets of Scudder
Pennsylvania Tax Free Fund pursuant to a plan of reorganization approved by
shareholders on Septermber 2, 1999. The acquisition was accomplished by a
tax-free exchange of 8,189,666 shares of the Fund (valued at $71,551,046) for
5,507,746 shares of Scudder Pennsylvania Tax Free Fund outstanding on September
17, 1999. Scudder Pennsylvania Tax Free Fund's net assets at that date
($71,551,046), including $1,222,223 of unrealized appreciation were combined
with those of the Fund. The aggregate nets assets of the Fund immediately before
the acquisition were $670,341,144. The combined net assets of the Fund
immediately following the acquisition were $741,892,190.
F. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
33
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Philip G. Condon*
o President and Trustee o Vice President
Henry P. Becton, Jr. Ashton P. Goodfield*
o Trustee; President and General o Vice President
Manager, WGBH Educational
Foundation Ann M. McCreary*
o Vice President
Dawn-Marie Driscoll
o Trustee; Executive Fellow, Center John Millette*
for Business Ethics, Bentley o Vice President and Secretary
College; President, Driscoll
Associates John R. Hebble*
o Treasurer
Peter B. Freeman
o Trustee; Corporate Director Caroline Pearson*
and Trustee o Assistant Secretary
George M. Lovejoy, Jr. *Scudder Kemper Investments, Inc.
o Trustee; President and Director,
Fifty Associates; Chairman
Emeritus, Meredith and Grew, Inc.
Wesley W. Marple, Jr.
o Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
o Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
o Trustee; Venture Partner,
Internet Capital Group
34
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof 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.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ 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.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold 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.
36
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
37
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
38
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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 INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial
Service Group
