Scudder
Global Bond
Fund
Annual Report
October 31, 1996
Pure No-Load(TM) Funds
A fund designed to provide total return with an emphasis on current income by
investing primarily in high-grade bonds denominated in foreign currencies and
the U.S. dollar.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
13 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
24 Report of Independent Accountants
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o Scudder Global Bond Fund provided a total return of 3.97% for the fiscal year
ended October 31, 1996, reflecting gains in Europe, flat U.S. and Japanese
performance, and the effects of a stronger U.S. dollar.
o Bolstered by low inflation, moderate economic growth, and progress toward
European monetary union, several of Europe's peripheral bond markets recorded
double-digit gains this year.
o A rising U.S. dollar relative to other key currencies meant that gains in
foreign markets bought fewer and fewer dollars during the 12-month period,
ultimately cutting into the Fund's U.S.-based return.
o After months of negative performance in the U.S. bond market, the Fund's
management team expects a turnaround and has increased its holdings there.
Heading into 1997, the Fund also intends to bolster its exposure to foreign
currencies, which are likely to benefit if the U.S. dollar retreats.
2 - Scudder Global Bond Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We are pleased to present the newly redesigned annual report for Scudder
Global Bond Fund. The new format is designed to enhance the attractiveness and
readability of the reports. Let us know what you think.
In this era of electronic information we have also taken a look at our
abbreviated quarterly reports, which you generally receive during the month
after the end of your fund's first and third fiscal quarters. Going forward,
these printed reports will be discontinued, and portfolio information will be
made available on a more timely basis -- each month, in most cases -- through
Scudder's Web site, Scudder's automated information line (SAIL), and by calling
Investor Relations.
As detailed in the portfolio management discussion that follows, fiscal
year 1996 was somewhat lackluster for U.S. investors in global bond markets -- a
disappointment for those who participated in the rocky markets of 1994 and 1995.
We look forward to the coming year with optimism; however, as low inflation and
moderate economic growth the world over have set the stage for positive bond
market returns. Moreover, we expect that a retreat in the value of the U.S.
dollar will yield Fund returns more in line with those in local bond markets,
which in some cases this year were quite exciting.
We'd like to take this opportunity to announce a change in your fund's
management team. Christopher B. Steward, a Scudder fixed-income analyst since
1992 and a key member of Scudder's Global Bond group, has replaced Margaret
Hadzima on the team headed by Adam Greshin. Chris brings a wealth of experience,
including more than nine years of investment-related experience, to the team.
We thank you for your continued investment in Scudder Global Bond Fund.
Please do not hesitate to call Investor Relations at 1-800-225-2470 with any
questions.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President
Scudder Global Bond Fund
3 - Scudder Global Bond Fund
<PAGE>
PERFORMANCE UPDATE as of October 31 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GLOBAL BOND FUND
- --------------------------------------
1 Year $10,397 3.97% 3.97%
5 Year $12,632 26.32% 4.78%
Life of
Fund* $13,472 34.72% 5.39%
- --------------------------------------
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
- --------------------------------------
1 Year $10,536 5.36% 5.36%
5 Year $16,043 60.43% 9.90%
Life of
Fund* $17,599 75.99% 10.65%
- --------------------------------------
SALOMON BROTHERS CURRENCY-HEDGED WORLD
GOVERNMENT BOND INDEX (1-3 YEARS)
- --------------------------------------
1 Year $10,773 7.73% 7.73%
5 Year $13,668 36.68% 6.44%
Life of
Fund* $14,428 44.28% 6.78%
- --------------------------------------
*The Fund commenced operations on March 1, 1991.
Index comparisons begin March 31, 1991.
- -----------------------------------------------------------------
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 OCTOBER 31
SCUDDER GLOBAL BOND FUND
Year Amount
- ----------------------
3/91* $10,000
'91 $10,653
'92 $11,487
'93 $12,307
'94 $12,277
'95 $12,944
'96 $13,457
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
Year Amount
- ----------------------
3/91* $10,000
'91 $10,970
'92 $12,494
'93 $13,993
'94 $14,499
'95 $16,703
'96 $17,599
SALOMON BROTHERS CURRENCY-HEDGED
WORLD GOVERNMENT BOND INDEX (1-3 YEARS)
Year Amount
- ----------------------
3/91* $10,000
'91 $10,556
'92 $11,354
'93 $12,044
'94 $12,210
'95 $13,392
'96 $14,428
The unmanaged Salomon Brothers World Government Bond Index consists of
worldwide fixed-rate government bonds with remaining maturities greater
than one year. 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 OCTOBER 31
1991* 1992 1993 1994 1995 1996
----------------------------------------------------
NET ASSET VALUE... $12.01 $11.84 $11.68 $10.78 $10.53 $10.25
INCOME DIVIDENDS.. $ .76 $ 1.08 $ .95 $ .87 $ .80 $ .67
CAPITAL GAINS
DIVIDENDS......... $ -- $ -- $ .02 $ -- $ -- $ --
FUND TOTAL
RETURN (%)........ 6.65 7.83 7.14 -.25 5.43 3.97
INDEX TOTAL
RETURN (%)**...... 5.56 7.56 6.08 1.87 9.68 5.36
On December 27, 1995, the Fund adopted its current name and objectives. Prior
to that date, the Fund was known as the Scudder Short Term Global Income Fund
and its investment objective was to provide high current income through
short-term instruments. Since adopting its current objectives, the cumulative
return is 2.46. **The Salomon Brothers Currency-Hedged World Government Bond
Index (1-3 years) was used as a comparative index for yearly periods ended
October 31, 1995.
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. If the Adviser had not temporarily
capped expenses, the total returns for the Fund for the one year, five year,
and life of Fund periods would have been lower.
4 - Scudder Global Bond Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL EXPOSURE INTEREST RATE EXPOSURE
- ---------------------------------------------------------------------------
U.S. 23.2% U.S. 23.2%
Germany 14.9% Japan 17.1%
Italy 9.6% Germany 14.9%
U.K. 8.6% Italy 9.6%
Supranational 5.7% U.K. 8.6%
Canada 5.6% Canada 5.6%
New Zealand 5.5% New Zealand 5.5%
France 5.2% France 5.2%
Japan 5.0% Denmark 4.2%
Denmark 4.2% Spain 3.0%
Belgium 3.3% Australia 2.0%
Austria 3.1% Sweden 1.1%
Spain 3.0% ----
Australia 2.0% 100%
Sweden 1.1% ====
----
100%
====
Several of Europe's peripheral Exposure to the U.S. has been
bond markets recorded increased in anticipation of a
double-digit gains this year. turnaround after months of negative
performance.
Graphs in the form of pie charts appears here,
illustrating the exact data points in the above tables.
- -------------------------------------------------------------
Currency Exposure (a)
- -------------------------------------------------------------
Australia 2.0%
Canada 5.6%
Denmark 4.2%
France 2.5%
Germany 18.7%
Italy 5.4%
Japan 11.3%
New Zealand 4.6%
Spain 3.0%
U.K. 5.0%
U.S. 37.7%
-----
100%
=====
A rising U.S. dollar relative to other
currencies limited Fund returns during
the period.
- -----------------------------------------------------------------------------
(a) Currency exposure after taking into account the effects of foreign
currency options, futures, and forward contracts.
For more complete details about the Fund's investment portfolio,
see page 10. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - Scudder Global Bond Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Global Bond Fund has been managed by Adam M. Greshin since early 1995.
Christopher B. Steward joined the management team in May of this year. The
Fund's fiscal year 1996 performance and strategy, as well as management's
outlook going into 1997, are presented here in an interview with Adam Greshin,
Lead Portfolio Manager of Scudder Global Bond Fund.
Q: What was the global investment environment like for bonds during the
past year?
A: It is difficult to characterize this year's global bond markets with a single
statement. Each market appeared to respond to its own fundamentals, resulting in
varying performance from region to region. In the United States, the bond market
started the year out very strong, with projections for economic growth and
inflation revised downward. In early 1996, the market gave back much of its
gains when it was feared that economic growth and inflation would accelerate.
Several economic indicators -- new housing starts and retail sales among them --
surged in the first two months of the calendar year. Ultimately, these fears
proved premature. Evidence again pointed to slower economic growth, and bonds
rallied as a result, ending up almost exactly where they started a year earlier.
In all, the U.S. market saw much interim volatility but very little gain.
In Europe, the situation was different. Markets such as Germany and France
responded to slow economic growth and low inflation, and were only narrowly
affected by the growth scare in the United States. Europe's recession of the
early 1990s was far deeper than America's momentary lapse in economic growth in
1990. High unemployment and excess manufacturing capacity in Europe should take
much longer to unwind before inflation becomes a serious threat. The smaller,
so-called "peripheral" European markets -- Italy, Spain, and Sweden, for example
- -- performed even better than their larger counterparts as investors sought to
take advantage of their relatively higher yields. We believe that progress
towards European Monetary Union has helped investors feel more comfortable
owning the bonds of these countries, where political instability and damaging
inflation historically have been more the rule than the exception.
In Japan, the bond market was decidedly lackluster. Very low interest rates and
a massive monetary stimulation program by the Bank of Japan held out little hope
of a rally in the near future. The market's spirits were further dampened by a
growth scare early in 1996 -- a reaction to months of monetary stimulation. In
the end, growth failed to materialize.
Q: In 1994 and 1995, widely fluctuating currencies caused much turmoil in the
bond markets. How would you characterize the currency market in 1996?
A: Global currency markets were significantly more stable this year than last
but no more rewarding for U.S. investors overseas. The dollar gained ground
against major European currencies and the Japanese yen, eroding returns for U.S.
investors. (To illustrate, if you had bought a German bond last year and sold it
this year for a profit, the return on your investment would be reduced when you
converted those deutschemarks into U.S. dollars.) As the year progressed,
foreign currencies bought fewer and fewer dollars. But not all overseas
6 - Scudder Global Bond Fund
<PAGE>
currencies declined relative to the dollar. Dollar-bloc currencies -- those of
Australia, Canada, and New Zealand -- and some peripheral European currencies
held their own during the year, rising in tandem with the dollar and even
outpacing it in some cases.
Q: How did Scudder Global Bond Fund perform in such an environment?
A: Scudder Global Bond Fund provided a 3.97% total return for the year,
reflecting flat U.S. performance (at 22% of portfolio holdings on June 30, 1996,
the U.S. market represented the Fund's largest geographic weighting) and the
effect of a stronger U.S. dollar.
Q: How did the Fund perform relative to its benchmark index, the unmanaged
Salomon Brothers World Government Bond Index?
A: The Index returned a slightly higher 5.36%, primarily due to its lower
weighting in the United States. The difference in performance also can be
attributed to the fact that in late 1995, the Fund was still operating under its
former objective, seeking high current income from a portfolio of short-term
securities.
Q: What investments contributed most to the Fund's positive performance?
A: By far the most positive contribution came from the smaller peripheral
European markets and the United Kingdom. Italy, Spain, Sweden, and the UK
returned 29%, 17%, 19%, and 13%, respectively, in U.S. dollar terms during the
year. In these markets, the Fund held bonds of relatively long duration, with
most bonds having more than 10 years remaining before maturity.
Q: What were some of the disappointments?
A: The biggest disappointment of the past year was the performance of yen and
mark-based holdings, which lost their value as the U.S. dollar appreciated. (At
mid-year, 15% of Fund holdings were yen-denominated in anticipation of Japanese
economic strength, which would likely boost the country's currency.) Also,
exposure to longer-maturity U.S. bonds hurt performance in early 1996, when
inflation was judged by many pundits to be just around the corner.
Q: It's been almost a year since the Fund altered its investment objective and
approach, from seeking short-term income to more of an emphasis on total return.
What effect has this change had on Fund performance over the past year?
A: In general, the Fund's newfound flexibility to hold medium and long-maturity
bonds has resulted in stronger total returns, with price appreciation coming
from several European markets this year, for example. On the other hand, the
Fund's increased exposure to foreign currencies (under its previous objective,
the Fund generally held little foreign currency) has restrained those returns in
a year when the U.S. dollar has appreciated. We expect that at some point the
dollar will retreat and that the Fund's performance will more closely reflect
local market returns.
Q: Many emerging-market bonds provided double-digit returns this year. Why
doesn't the Fund invest more heavily in these markets?
A: The emerging-debt markets -- including the bonds of Latin American, Eastern
European, and Asian governments -- carry considerable investment risk and as
7 - Scudder Global Bond Fund
<PAGE>
such are not deemed appropriate long-term holdings for Scudder Global Bond Fund.
When investment returns in these markets are high, as they have been for the
past year, it is easy to forget the political instability, rampant inflation,
and wildly fluctuating currencies that produced double-digit losses in several
markets in 1994 and 1995. That said, the Fund does invest in these markets from
time to time. However, our commitment to emerging-debt markets is not permanent,
and our approach to investing in such places is relatively conservative.
Q: What type of investor might benefit from owning Scudder Global Bond Fund?
A: Scudder Global Bond Fund is perhaps best suited for an investor who wishes to
complement a well-diversified portfolio of stocks with a conservative exposure
to the world's fixed-income markets. The Fund is not intended to be the
cornerstone of an investment portfolio but can provide important diversification
to a portfolio of stocks, since historically stocks and bonds have not always
moved in tandem. As previously mentioned, the Fund is relatively conservative in
its approach to the world's riskier bond markets and thus is designed to deliver
a more consistent return from year to year than funds that limit their
investment scope to a particular region or class of bonds.
Q: What markets do you find particularly attractive now?
A: We think the U.S. bond market offers significant upside potential in the
coming months, if not for the next few years. We believe that economic growth in
the United States is moderating, inflation has failed to materialize despite
8 - Scudder Global Bond Fund
<PAGE>
spurts of stronger growth, and long-term interest rates have room to fall. To
take advantage of these developments, the Fund now has roughly 25% of its assets
invested in the United States.
From a currency standpoint, the reverse is true. After a year of steady gains,
we expect the dollar to decline in value somewhat relative to other currencies.
In anticipation, we are increasing the Fund's exposure to select European
currencies and the yen.
Sincerely,
Your Portfolio Management Team
/s/Adam M. Greshin /s/Christopher B. Steward
Adam M. Greshin Christopher B. Steward
Scudder Global
Bond Fund:
A Team Approach to Investing
Scudder Global Bond Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Adam M. Greshin assumed responsibility for the Fund's
day-to-day management and investment strategies in 1995. Adam joined Scudder
in 1986 as an international bond analyst and is Product Leader for Scudder's
global and international fixed-income investing. Christopher B. Steward,
Portfolio Manager, joined the Fund's team in 1996 and contributes to the
Fund's research and security selection. Prior to joining Scudder in 1992,
Chris spent five years as an investment analyst.
9 - Scudder Global Bond Fund
<PAGE>
Investment Portfolio as of October 31, 1996
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 1.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollars 1.0%
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/96 at 5.52%, to be
repurchased at $2,175,334 on 11/1/96, collateralized by a $1,388,000 U.S. Treasury ----------
Bond, 13.875%, 5/15/11 (Cost $2,175,000) ....................................................... 2,175,000 2,175,000
----------
Foreign Denominated Debt Obligations 76.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Australian Dollars 2.0%
Commonwealth of Australia, 10%, 10/15/02 ......................................................... 4,800,000 4,315,191
British Pounds 8.5%
Abbey National Treasury, 6%, 8/10/99 ............................................................. 1,580,000 2,499,736
SmithKline Beecham PLC, 8.375%, 12/29/00 ......................................................... 4,000,000 6,686,351
United Kingdom Treasury Bond, 7.5%, 12/7/06 ...................................................... 3,610,000 5,822,456
United Kingdom Treasury Bond, 8%, 12/7/15 ........................................................ 1,915,000 3,150,952
----------
18,159,495
----------
Canadian Dollars 5.5%
Government of Canada, 7.5%, 3/1/01 ............................................................... 625,000 503,225
Government of Canada, 6.5%, 6/1/04 ............................................................... 10,350,000 7,873,328
Government of Canada, 8.75%, 12/1/05 ............................................................. 1,500,000 1,301,890
Rogers Cantel Ltd., 10.5%, 6/1/06 ................................................................ 2,600,000 2,128,138
----------
11,806,581
----------
Danish Kroner 4.2%
Kingdom of Denmark, 9%, 11/15/00 ................................................................. 19,915,000 3,851,719
Kingdom of Denmark, 8%, 3/15/06 .................................................................. 16,200,000 2,987,949
Nykredit A/S, 6%, 10/1/26 ........................................................................ 14,630,000 2,128,752
----------
8,968,420
----------
Deutsche Marks 14.7%
Federal Republic of Germany, 5.25%, 10/20/98 ..................................................... 6,145,000 4,164,263
Federal Republic of Germany, 8.25%, 9/20/01 ...................................................... 8,605,000 6,437,242
Federal Republic of Germany, 6%, 9/15/03 ......................................................... 9,535,000 6,435,175
Federal Republic of Germany, 6%, 2/16/06 ......................................................... 22,045,000 14,500,634
----------
31,537,314
----------
French Francs 5.2%
Government of France OAT, 7.25%, 4/25/06 ......................................................... 51,800,000 11,063,293
----------
Italian Lire 9.5%
Republic of Italy, 8.5%, 1/1/97 .................................................................. 11,300,000,000 7,441,119
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - SCUDDER GLOBAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Republic of Italy, 9.5%, 12/1/99 ............................................................... 18,455,000,000 12,875,384
----------
20,316,503
----------
Japanese Yen 16.9%
Export-Import Bank of Japan, 4.375%, 10/1/03 ................................................... 790,000,000 7,692,105
International Bank for Reconstruction & Development, 5.25%, 3/20/02 ............................ 790,000,000 8,021,272
International Bank for Reconstruction & Development, 4.75%, 12/20/04 ........................... 403,200,000 4,058,526
Japan Development Bank, 6.5%, 9/20/01 .......................................................... 268,000,000 2,844,561
Kingdom of Belgium, 6.875%, 7/9/01 ............................................................. 650,000,000 7,024,561
Republic of Austria, 4.5%, 9/28/05 ............................................................. 430,000,000 4,330,175
Republic of Austria, 3.75%, 2/3/09 ............................................................. 241,000,000 2,286,329
----------
36,257,529
----------
New Zealand Dollars 5.4%
Government of New Zealand, 10%, 7/15/97 ........................................................ 3,330,000 2,382,285
Government of New Zealand, 8%, 11/15/06 ........................................................ 12,485,000 9,256,369
----------
11,638,654
----------
Spanish Pesetas 3.0%
Kingdom of Spain, 11.45%, 8/30/98 .............................................................. 254,600,000 2,151,884
Kingdom of Spain, 10.3%, 6/15/02 ............................................................... 190,000,000 1,690,129
Kingdom of Spain, 8%, 5/30/04 .................................................................. 312,000,000 2,500,400
----------
6,342,413
----------
Swedish Krona 1.1%
Kingdom of Sweden, 6%, 2/9/05 .................................................................. 16,900,000 2,361,479
- ------------------------------------------------------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $161,884,042) ................................. 162,766,872
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated Debt Obligations 21.9%
- ------------------------------------------------------------------------------------------------------------------------------------
U. S. Dollars 21.9%
360Communications Co., 7.125%, 3/1/03 .......................................................... 5,200,000 5,153,564
ITT Corp., 6.75%, 11/15/05 ..................................................................... 2,100,000 2,037,105
Lockheed Martin Corp., 7.25%, 5/15/06 .......................................................... 5,200,000 5,323,812
Meditrust SBI, 7.82%, 9/10/26 .................................................................. 2,750,000 2,848,285
Time Warner Inc., 9.125%, 1/15/13 .............................................................. 4,300,000 4,685,065
U.S. Treasury Bond, 7.25%, 8/15/22 ............................................................. 6,900,000 7,314,000
U.S. Treasury Bond, 6.25%, 8/15/23 ............................................................. 6,300,000 5,918,031
U.S. Treasury Note, 6.625%, 6/30/01 ............................................................ 2,265,000 2,312,769
U.S. Treasury Note, 5.75%, 8/15/03 ............................................................. 8,000,000 7,791,280
U.S. Treasury Note, 6.5%, 8/15/05 .............................................................. 3,500,000 3,536,645
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Debt Obligations (Cost $46,214,235) .............................. 46,920,556
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost $210,273,277) .......................................................... 211,862,428
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - SCUDDER GLOBAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Options 1.1%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Call on Japanese Yen, strike price 103.92, expire 1/17/97 ................................ JPY 1,173,800,000 5,869
Put on Deutsche Marks, strike price 1.4865, expire 2/27/97 ................................ DEM 6,876,549 114,151
Put on Japanese Yen, strike price 108.29, expire 1/21/97 ................................ JPY 1,293,684,000 501,949
Put on Japanese Yen, strike price 109.25, expire 1/17/97 ................................ JPY 1,173,800,000 377,964
Put on Japanese Yen, strike price 112.88, expire 1/22/97 ................................ JPY 737,106,000 99,141
Put on Japanese Yen, strike price 113.25, expire 12/5/96 ................................ JPY 1,173,800,000 116,793
Contracts
---------
Call on Italian Lira 10 year Bond, strike price 124, expire 2/21/97 ............................ 54 105,903
U.S. Treasury Bond Future, strike price 112, expire 11/16/96 ................................... 667 1,094,297
- ------------------------------------------------------------------------------------------------------------------------------------
Total Purchased Options (Cost $1,525,683) ...................................................... 2,416,067
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $211,798,960)(a) ..................................... 214,278,495
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $211,820,963. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$2,457,532. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $6,226,242 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$3,768,710.
At October 31, 1996, outstanding written options were as follows (Notes A
and B):
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value($)
- ------------ ------- ---- ----- --------
DEM ......... 6,611 2/27/97 DEM 1.429 12,692
JPY ......... 1,173,800 1/17/97 JPY 103.92 2,582
JPY ......... 737,106 1/22/97 JPY 109.91 43,489
NZD ......... 5,660 11/27/96 NZD .7071 23,772
Put Options
- -----------
JPY ......... 1,173,800 1/17/97 JPY 109.25 377,964
---------
Total outstanding written options (Premiums received $524,777) .. 460,499
=========
Currency Abbreviations
- ----------------------------------------------------------------------
DEM Deutsche Mark JPY Japanese Yen
NZD New Zealand Dollar AUD Australian Dollar
CAD Canadian Dollar ECU European Currency Unit
FRF French Franc GBP British Pound
ITL Italian Lira SEK Swedish Krona
DKK Danish Kroner
The accompanying notes are an integral part of the financial statements.
12 - SCUDDER GLOBAL BOND FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1996
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $210,273,277) (Note A) ..... $211,862,428
Purchased options, at market (identified cost $1,525,683) (Note A) . 2,416,067
Cash ............................................................... 923
Foreign currency, at market (identified cost $140,139) (Note A) .... 139,975
Interest receivable ................................................ 5,157,843
Receivable on investments sold ..................................... 34,118,840
Receivable on Fund shares sold ..................................... 41,522
Unrealized appreciation forward currency exchange contracts
(Notes A % D) ................................................... 247,497
Daily variation margin on futures contracts (Note A) ............... 36,130
Other assets ....................................................... 6,114
------------
Total assets ....................................................... 254,027,339
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................. $ 34,407,084
Dividends payable .................................................. 303,402
Payable for Fund shares redeemed ................................... 580,842
Accrued management fee (Note C) .................................... 114,427
Other accrued expenses (Note C) .................................... 285,418
Written options, at market (premiums received $524,777) (Note A) ... 460,499
Unrealized depreciation on forward currency exchange contracts
(Note A & D} .................................................... 471,760
------------
Total liabilities .................................................. 36,623,432
-----------------------------------------------------------------------------------
Net assets, at market value ........................................ $217,403,907
-----------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments ..................................................... 1,589,151
Options ......................................................... 954,662
Foreign currency related transactions ........................... (234,052)
Accumulated net realized loss ...................................... (10,456,910)
Paid-in capital .................................................... 225,551,056
-----------------------------------------------------------------------------------
Net assets, at market value ........................................ $217,403,907
-----------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($217,403,907 / 21,216,085 shares of capital stock outstanding, ------------
$.01 par value, 300,000,000 shares authorized) ................... $ 10.25
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - SCUDDER GLOBAL BOND FUND
<PAGE>
Statement of Operations
year ended October 31, 1996
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest (net of foreign taxes withheld of $327,883) .............. $ 21,178,465
Expenses:
Management fee (Note C) ........................................... $ 2,067,598
Services to shareholders (Note C) ................................. 705,553
Custodian and accounting fees (Note C) ............................ 418,177
Directors' fees and expenses (Note C) ............................. 47,953
Reports to shareholders ........................................... 106,173
Auditing .......................................................... 96,563
Legal ............................................................. 15,724
Registration fees ................................................. 17,127
Amortization of organization expenses ............................. 3,819
Other ............................................................. 57,484
------------
Total expenses before reductions .................................. 3,536,171
Expense reductions (Note C) ....................................... (775,310)
------------
Expenses, net ..................................................... 2,760,861
----------------------------------------------------------------------------------
Net investment income ............................................. 18,417,604
----------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ....................................................... 2,665,146
Options ........................................................... (2,154,497)
Futures contracts ................................................. (4,520,374)
Foreign currency related transactions ............................. (5,151,255)
------------
(9,160,980)
Net unrealized appreciation (depreciation) during the period on:
Investments ....................................................... (6,757,787)
Options ........................................................... 3,437,142
Foreign currency related transactions ............................. 1,935,307
------------
(1,385,338)
------------
Net loss on investment transactions ............................... (10,546,318)
----------------------------------------------------------------------------------
Net increase in net assets resulting from operations .............. $ 7,871,286
----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - SCUDDER GLOBAL BOND FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1996 1995
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 18,417,604 $ 33,340,295
Net realized loss from investment transactions ......... (9,160,980) (28,162,456)
Net unrealized appreciation (depreciation) on investment
transactions during the period.......................... (1,385,338) 14,695,835
------------- -------------
Net increase in net assets resulting from operations ... 7,871,286 19,873,674
------------- -------------
Distributions to shareholders from:
Net investment income .................................. (11,459,193) (14,850,406)
------------- -------------
Tax return of capital .................................. (6,958,411) (18,185,444)
------------- -------------
Fund share transactions:
Proceeds from shares sold .............................. 18,750,629 51,277,133
Net asset value of shares issued to shareholders in
reinvestment of ........................................ 14,288,523 23,158,972
distributions
Cost of shares redeemed ................................ (162,428,423) (263,863,651)
------------- -------------
Net decrease in net assets from Fund share transactions (129,389,271) (189,427,546)
------------- -------------
Decrease in net assets ................................. (139,935,589) (202,589,722)
Net assets at beginning of period ...................... 357,339,496 559,929,218)
------------- -------------
Net assets at end of period ............................ $ 217,403,907 $ 357,339,496
------------- -------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............. 33,924,422 51,959,978
------------- -------------
Shares sold ........................................... 1,831,418 4,874,517
Shares issued to shareholders in reinvestment of
distributions ..................................... 1,396,784 2,204,979
Shares redeemed ....................................... (15,936,539) (25,115,052)
------------- -------------
Net decrease in Fund shares ........................... (12,708,337) (18,035,556)
------------- -------------
Shares outstanding at end of period ................... 21,216,085 33,924,422
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - SCUDDER GLOBAL BOND FUND
<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>
For the Period
March 1, 1991
(commencement of
operations) to
Years Ended October 31, October 31,
1996 1995 1994 1993 1992 1991
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $10.53 $10.78 $11.68 $11.84 $12.01 $12.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income ....................... .67 .80 .87 .95 1.08 .76
Net realized and unrealized gain (loss) on
investment transactions .................. (.28) (.25) (.90) (.14) (.17) .01
--------------------------------------------------------------------------------
Total from investment operations ............ .39 .55 (.03) .81 .91 .77
--------------------------------------------------------------------------------
Less distributions from:
Net investment income ....................... (.42) (.36) (.02) (.95) (1.08) (.76)
Net realized gains on investments ........... -- -- -- (.02) -- --
Tax return of capital ....................... (.25) (.44) (.85) -- -- --
--------------------------------------------------------------------------------
Total distributions ......................... (.67) (.80) (.87) (.97) (1.08) (.76)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net asset value, end of period .............. $10.25 $10.53 $10.78 $11.68 $11.84 $12.01
-------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........................ 3.97 5.43 (.25) 7.14 7.83 6.65**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ...... 217 357 560 1,041 1,369 205
Ratio of operating expenses, net to average
daily net assets (%) ..................... 1.00 1.00 1.00 1.00 1.00 1.00*
Ratio of operating expenses before expense
reductions, to average daily net assets (%) 1.28 1.20 1.15 1.11 1.23 1.89*
Ratio of net investment income to average ... 6.67 7.73 7.76 8.10 8.94 9.97*
daily net assets (%)
Portfolio turnover rate (%) ................. 335.7 182.8 272.4 259.8 274.2 26.1*
* Annualized
** Not annualized
</TABLE>
(a) Total returns would had been lower had certain expenses not been reduced.
On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current income
through short-term instruments. Financial information prior to December 27,
1995 should not be considered representative of the present Fund.
16 - SCUDDER GLOBAL BOND FUND
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Global Bond Fund (the "Fund") is a non-diversified series of Scudder
Global Fund, Inc., a Maryland corporation registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Board of Directors and the shareholders of the Fund approved, effective
December 27, 1995, a change to the Fund's name and investment objective, as well
as certain investment policies. The new objective of the Fund is to provide
total return with an emphasis on current income by investing primarily in
high-grade bonds denominated in foreign currencies and the U.S. dollar. Prior to
December 27, 1995, the name of the Fund was Scudder Short Term Global Income
Fund. The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which prices 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 Directors.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on currencies as a
hedge against potential adverse price movements in the value of portfolio
assets. In addition, during the period, the Fund purchased call options and
wrote put options on currencies to lock in the purchase price of a security or
currency which it expects to purchase in the near future and to enhance
potential gain. If the Fund writes an option and the option expires unexercised,
the Fund will realize income, in the form of a capital gain, to the extent of
the amount received for the option (the "premium"). If the Fund elects to close
out the option it would recognize a gain or loss based on the difference between
the cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised, the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent
17 - SCUDDER GLOBAL BOND FUND
<PAGE>
asked price (bid for purchased options) if no bid and asked price are available.
Over-the-counter written or purchased options are valued using dealer supplied
quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
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 period, the
Fund purchased interest rate futures to increase the duration of the portfolio,
as a temporary substitute for purchasing selected investments, and to lock in
the purchase price of a security which it expects to purchase in the near
future. Also, during the period, the Fund 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 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.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and certain
expenses at the daily rates of exchange prevailing on the respective dates
of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
18 - SCUDDER GLOBAL BOND FUND
<PAGE>
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes, and no federal income tax
provision was required. At October 31, 1996, the Fund had a net tax basis
capital loss carryforward of approximately $10,171,000 which may be applied
against any realized net taxable capital gains of each succeeding year until
fully utilized or until October 31, 2002 ($4,463,000), October 31, 2003
($5,009,000) and October 31, 2004 ($699,000), the respective expiration dates,
whichever occurs first.
Distribution of Income and Gains. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is distributed to shareholders monthly. During any particular year
net realized gains and certain unrealized gains (which for federal income tax
reporting purposes may be considered realized) 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.
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 options, futures, forward
currency contracts and foreign currency denominated investments. 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.
For the fiscal year ending October 31, 1996, a portion of the Fund's income
dividends will be treated as nontaxable return of capital distributions under
U.S. tax rules. The final tax status of 1996 distributions will be provided to
shareholders in January 1997 on Form 1099-DIV.
19 - SCUDDER GLOBAL BOND FUND
<PAGE>
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares were deferred and amortized on a
straight-line basis over a five-year period.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the year ended October 31, 1996, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $802,183,339 and $948,089,057, respectively. Purchases and sales of
U.S. Government obligations aggregated $66,306,405 and $39,163,788,
respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1996 was $3,175,006,362, respectively.
Transactions in written options for the year ended October 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Exchange Traded Options Over-the-Counter (000 omitted}
--------------------------- -------------------------------------
Number of Premiums AUD CAD DEM Premiums
Contracts
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning
of Period 297 $ 407,879 8,158 29,201 33,750 $ 886,688
Written ... 400 929,996 35,470 10,500 161,841 2,062,624
Closed .... (697) (1,337,875) -- (29,201) (80,434) (1,086,716)
Exercised . -- -- (27,628) (10,500) (54,670) (1,318,133)
Expired ... -- -- (16,000) -- (53,876) (475,073)
----------- ----------- ----------- --------- ----------- -----------
End of
Period .... -- $ -- -- -- 6,611 $ 69,390
=========== =========== ============ ========= =========== ===========
-----------------------------------------------------------------------------------------
</TABLE>
20 - SCUDDER GLOBAL BOND FUND
<PAGE>
Transactions in written options for the year ended October 31, 1996 are
summarized as follows (continued):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Over-the Counter Options on Currencies (000 omitted)
-------------------------------------------------------------------------------------
ECU FRF GBP ITL JPY SEK Premiums
------------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Beginning
of Period 16,500 -- 17,400 50,300,000 -- 101,000 $ 1,904,190
Written ... 16,500 100,000 17,400 53,128,354 9,758,180 318,829 2,782,996
Closed .... -- (100,000) (17,400) -- (3,095,684) (217,236) (1,380,147)
Exercised . (16,500) -- (8,400) (78,428,354) (3,577,790) (202,593) (2,166,210)
Expired ... (16,500) -- (9,000) (25,000,000) -- -- (709,780)
----------- ------------ ----------- ------------ --------- ------------ -----------
End of
Period .... -- -- -- -- 3,084,706 -- $ 431,049
=========== ============ =========== ============ ========= ============ ===========
------------------------------------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------
Over-the-Counter Options on Currencies (000 omitted)
NZD SEK/DEM GBP/DEM Premiums
-----------------------------------------------------------
Beginning
of Period -- -- -- $ --
Written ... 23,360 103,208 5,102 227,516
Closed .... -- (80,603) -- (88,083)
Exercised . (17,700) -- (5,102) (83,312)
Expired ... -- (22,605) -- (31,783)
----------- ------------ ----------- ------------
End of
Period .... 5,660 -- -- $ 24,338
=========== ============ =========== ===========
-----------------------------------------------------------
21 - SCUDDER GLOBAL BOND FUND
<PAGE>
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annual rate of 0.75% of the first $1,000,000,000 of average
daily net assets and 0.70% of such assets in excess of $1,000,000,000 computed
and accrued daily and payable monthly. As manager of the assets of the Fund, 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 Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. The
Adviser has agreed not to impose all or a portion of its management fee until
February 28, 1997, and during such period to maintain the annualized expenses of
the Fund at not more than 1.00% of average daily net assets. For the year ended
October 31, 1996, the Adviser did not impose a portion of its management fee
aggregating $775,310 and the amount imposed aggregated $1,292,288 which was
equivalent to an annual effective rate of 0.47% 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. For the
year ended October 31, 1996, the amount charged to the Fund by SSC aggregated
$478,160, of which $34,371 is unpaid at October 31, 1996
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1996, the amount charged to the Fund by STC aggregated $14,129, of which $2,398
is unpaid at October 31, 1996
Effective November 29, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, assumed responsibility for determining the daily net
asset value per share and maintaining the portfolio and general accounting
records of the Fund. For the year ended October 31, 1996, the amount charged to
the Fund by SFAC aggregated $233,988, of which $19,368 is unpaid at October 31,
1996.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1996, Directors' fees and expenses aggregated $47,953.
22 - SCUDDER GLOBAL BOND FUND
<PAGE>
D. Commitments
As of October 31, 1996, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$224,263.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
----------------------- ----------------------- ------------------- -----------------
<C> <C> <C> <C>
SEK 15,341,595 USD 2,317,461 11/12/96 (12,179)
ITL 2,274,823,569 DEM 2,269,762 11/18/96 709
FFR 29,350,803 DEM 8,682,000 11/25/96 (6,600)
GBP 687,174 DEM 1,666,549 11/25/96 (18,229)
GBP 4,065,000 DEM 9,954,047 11/25/96 (44,828)
FFR 26,946,000 JPY 578,541,398 11/27/96 (173,049)
JPY 583,394,373 FFR 26,946,000 11/27/96 130,346
DEM 18,157,000 USD 11,907,010 12/09/96 (79,529)
USD 4,447,000 DEM 6,777,762 12/09/96 27,413
USD 7,423,098 DEM 11,379,238 12/09/96 89,029
ITL 11,352,496,791 USD 7,367,418 12/09/96 (86,540)
DKK 26,451,769 USD 4,521,670 12/10/96 (21,413)
USD 4,572,475 DKK 26,451,769 12/10/96 (29,393)
------------
(224,263)
============
</TABLE>
E. Line of Credit
The Fund and several affiliated Funds ("The Participants") share in a $500
million 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 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. In addition, the
Fund also maintains an uncommitted line of credit.
23 - SCUDDER GLOBAL BOND FUND
<PAGE>
Report of Independent Accountants
Tax Information
To the Board of Directors of Scudder Global Fund, Inc. and to the Shareholders
of Scudder Global Bond Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Global Bond Fund including the investment portfolio, as of October 31, 1996, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended and
for the period March 1, 1991 (commencement of operations) to October 31, 1991.
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
October 31, 1996, 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 Global Bond Fund as of October 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended and for the period March 1, 1991 (commencement of
operations) to October 31, 1991 in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 20, 1996
24 - SCUDDER GLOBAL BOND FUND
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board, Director and Vice President
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Sheryle J. Bolton
Director; Consultant
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; Consultant
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Susan E. Gray*
Vice President
Adam M. Greshin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
Cornelia M. Small*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25 - Scudder Global Bond Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Capital Growth Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Emerging Markets Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed from expected
least to most risk. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *Not available in all states.
+++ +++A no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are
traded on various stock exchanges.
26 - Scudder Global Bond Fund
<PAGE>
How to Contact Scudder
<TABLE>
<CAPTION>
Account Service and Information
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- -----------------------------------------------------------------------------------------------------------------------------------
For information about the Scudder funds, including additional applications and prospectuses, or for answers to
investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- -----------------------------------------------------------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Please address all correspondence to
- -----------------------------------------------------------------------------------------------------------------------------------
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center
- -----------------------------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they
can be found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
For information on Scudder Treasurers Trust(TM), an institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum),
call: 1-800-541-7703.
For information on Scudder Institutional Funds**, funds designed to meet the broad investment management and
service needs of banks and other institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061-- Member NASD/SIPC
** Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus with more complete information, including
management fees and expenses. Please read it carefully before you invest or send money.
</TABLE>
27 - Scudder Global Bond Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER (logo)
