Scudder
Global
Discovery Fund
Annual Report
October 31, 1996
Pure No-Load(TM) Funds
For investors seeking above-average capital
appreciation over the long term by investing
primarily in the equity securities of small
companies located throughout the world.
A pure no-load(TM) fund with no
commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
24 Report of Independent Accountants
25 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o For its fiscal year ended October 31, 1996, Scudder Global Discovery Fund
provided a total return of 20.97%, significantly outperforming the average
global small company fund tracked by Lipper Analytical Services and the
unmanaged MSCI World Index.
o The Fund continued to focus on individual companies rather than country
selection. Replacing SAP and Atmel as the largest portfolio holdings are
IHC/Caland NV and HBO & Co.
o Aggregate holdings in Japan have been reduced and a restructuring of the
remaining holdings to focus more on consumer stocks has been undertaken. In the
United States, we have increased holdings in the healthcare service sector while
cutting back on technology stocks.
2 - Scudder Global Discovery Fund
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We hope you enjoy your newly redesigned shareholder report. The new format
is designed to enhance the attractiveness and readability of the annual and
semiannual reports. Let us know what you think.
In this age of electronic information we have also taken a look at our
short-form quarterly reports, sent after the end of your fund's first and third
fiscal quarters. Many shareholders have told us that these reports are no longer
as useful as they once were, and so they have been discontinued. Going forward,
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 a Scudder Investor Relations
representative.
As outlined in the management discussion that follows, Scudder Global
Discovery Fund's performance for the fiscal year ended October 31, 1996, was
most gratifying. The Fund's total return of 20.97% exceeded by a comfortable
margin returns for both the average global small company fund tracked by Lipper
Analytical Services and for stocks globally. We believe Scudder Global Discovery
Fund remains an excellent choice for investors seeking long-term capital
appreciation from smaller companies anywhere in the world poised to benefit from
expanding markets.
Finally, we'd like to take this opportunity to highlight some additions
made this fall to the Scudder Family of Funds. Scudder Classic Growth Fund seeks
long-term capital appreciation with a higher degree of principal stability than
the average growth fund. Scudder 21st Century Growth Fund takes a more
aggressive approach, focusing primarily on emerging companies with the potential
to benefit from the rapidly changing industrial and economic landscape. Most
recently, we introduced the Scudder Pathway Series, four portfolios --
Conservative, Balanced, Growth, and International -- each of which include five
or more Scudder Funds and which together are designed to meet a range of
investor needs. For more information on these and other Scudder Fund products
and services, please turn to page 26.
Thank you for your continued investment in Scudder Global Discovery Fund.
Please do not hesitate to call Investor Relations at 1-800-225-2470 with any
questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Global Discovery Fund
3 - Scudder Global Discovery 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 DISCOVERY FUND
- ---------------------------------------
1 Year $12,097 20.97% 20.97%
5 Year $18,557 85.57% 13.16%
Life of Fund* $18,433 84.33% 12.62%
- ---------------------------------------
MSCI WORLD INDEX
- ---------------------------------------
1 Year $11,630 16.30% 16.30%
5 Year $16,498 64.98% 10.52%
Life of Fund* $16,760 67.60% 10.69%
- ---------------------------------------
*The Fund commenced operations on September 10, 1991.
Index comparisons begin September 30, 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 DISCOVERY FUND
Year Amount
- ----------------------
9/91* $10000
10/91 $ 9770
'92 $ 9894
'93 $13459
'94 $13837
'95 $14988
'96 $18140
INDEX
Year Amount
- ----------------------
9/91* $10000
10/91 $10159
'92 $ 9628
'93 $12228
'94 $13163
'95 $14412
'96 $16760
The Morgan Stanley Capital International (MSCI) World Index is an unmanaged
capitalization-weighted measure of global stock markets including the U.S.,
Canada, Europe, Australia, and the Far East. Index returns assume dividends
reinvested net of withholding tax 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... $11.92 $12.05 $16.14 $16.27 $17.54 $20.45
INCOME DIVIDENDS.. $ -- $ .02 $ .07 $ .18 $ -- $ .20
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ .12 $ .15 $ .08 $ .44
FUND TOTAL
RETURN (%)........ -.67 1.26 36.04 2.80 8.32 20.97
INDEX TOTAL
RETURN (%)........ 1.59 -5.23 27.01 7.65 9.48 16.30
On March 6, 1996, The Fund adopted its current name. Prior to that date, the
Fund was known as the Scudder Global Small Company Fund. 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 maintained the Fund's expenses,
the total returns for the five year and life of Fund periods would have been
lower.
4 - Scudder Global Discovery Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 13% Cash Equivalents)
- ---------------------------------------------------------------------------
Europe 44%
U.S. & Canada 37%
Japan 11%
Pacific Basin 4%
Latin America 3%
Other 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Portfolio weightings favor European
equities at the expense of Japan.
- --------------------------------------------------------------------------
SECTORS
(Excludes 13% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 17%
Health 16%
Service Industries 13%
Consumer Staples 10%
Energy 10%
Consumer Discretionary 7%
Technology 7%
Durables 6%
Manufacturing 5%
Other 9%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Portfolio assets are broadly
diversified across a range of sectors.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(22% of Portfolio)
- --------------------------------------------------------------------------
1. IHC CALAND N.V.
Dredging and offshore services in the Netherlands
2. HBO & COMPANY
U.S. designer of computerized information systems to the healthcare industry
3. AUTOLIV AB
Manufacturer of automobile safety bags in Sweden
4. BANK OF IRELAND PLC
Bank
5. SERCO GROUP PLC
Facilities management company in the United Kingdom
6. BILLING INFORMATION CONCEPTS
Billing and information management services in the United States
7. FRESENIUS AG
Manufacturer and distributor of pharmaceutical and medical systems products
in Germany
8. CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Owner and operator of national and regional private commercial television
stations in Central Europe and Germany
9. BOSKALIS WESTMINISTER NV
Netherlands international contractor specializing in dredging activities
10.JERONIMO MARTINS
Food producer and retailer in Portugal
There were a number of changes in the top ten portfolio holdings
over the past year.
- -----------------------------------------------------------------------------
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 Discovery Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For its fiscal year ended October 31, 1996, Scudder Global Discovery Fund
provided a total return of 20.97%, significantly outperforming the average
global small company fund tracked by Lipper Analytical Services, which returned
14.54%. This performance also compared favorably to that of the unmanaged MSCI
World Index, which returned 16.30%. The unmanaged Salomon Brothers Extended
Market Index, which reflects the performance of small stocks globally, returned
14.89% for the period.
Positive Market Environment
With the exception of Japan, performance of the major equity markets was
generally robust over the 12 months covered by this report. The prolonged
expansion of the U.S. economy continued through the end of the Fund's fiscal
period, as did the domestic stock market's upward swing, despite periods of
volatility brought on by investor fears of inflation. In Europe, growth is
moderate, inflation is benign, and monetary conditions are easy. Against a
backdrop of relatively high unemployment, the prospects of a more flexible
interpretation of the convergence criteria for joining European Monetary Union
(EMU) have emerged, and the markets have responded positively.
The Japanese economic recovery has not been as strong as initially anticipated.
However, low interest rates and a weaker yen should over time help to reflate
the economy. Consumer prices are stable after three years of inflation and the
fundamentals of the real estate market appear to be improving. Outside of Japan,
growth expectations in Asia have slowed from the torrid pace of recent years.
The global environment for smaller stock investing during the fiscal year was
divided into a strong first half of the year and a weak second half. The
accompanying chart depicts the performance differential each month of large cap
versus small cap stocks world wide.
BAR CHART TITLE: Large Cap vs. Small Cap Stock Performance
Salomon Brothers: Primary Market Index vs.
Extended Market Index
11/95 - 10/96
CHART DATA:
% Small Cap Outperforms
Monthly Differential 11/95 -1.28
-0.10
-0.51
2/96 1.53
0.22
4/96 2.63
0.05
6/96 -1.78
-1.85
8/96 1.36
-1.97
10/96 -1.62
Large Cap Outperforms
Small stock performance softened over the latter part of the period.
Top Holdings Drive
Performance
We continued to manage your portfolio actively throughout the year, and many of
the changes had a positive impact on performance for the period. The biggest
gains for the portfolio, however, resulted from a handful of stocks owned at the
beginning of the year. Of particular note was Fresenius AG, the German
manufacturer of dialysis equipment, and its partially owned subsidiary,
6 - Scudder Global Discovery Fund
<PAGE>
Fresenius USA. The former doubled in price in the period and the latter was
merged with the National Medical Division of W.R. Grace to form a new German
company called Fresenius Medical Care, of which Fresenius owns slightly more
than half. Combined, these companies would constitute the Fund's second largest
holding, or 3.8% of the equities in the portfolio. The attraction of the kidney
dialysis business is simple. Because of the aging population in the developed
nations of the world, the number of candidates for this procedure is growing
three to four times faster than the population at large, and we see that
industry consolidating around the biggest and the best providers of that
service. Vivra and Total Renal Care are two other participants in this business
held by the portfolio.
Another corporate restructuring also resulted in a large portfolio gain.
Sterling Software's spinoff of its electronic commerce division provided a
straightforward benefit to shareholders in that the new company was capitalized
by the market at an amount greater than the value of the parent company at the
beginning of the year. Together, Sterling Software and the new Sterling Commerce
now constitute 3.1% of the portfolio's equity assets and, combined, would make
up its third largest holding.
There were a number of changes in the largest ten portfolio holdings over the
past year. Notable in their departure were the top two holdings at the end of
fiscal '95 -- German-based software company SAP and U.S.-based semiconductor
producer Atmel. Both had reached "oversized" status after contributing
significantly to the Fund's performance. SAP, for example, had increased in
price by 919% in U.S. dollars from the time of the first purchase by the Fund in
April of 1993 to the last sale. Replacing SAP and Atmel as the largest portfolio
holdings are IHC/Caland NV, the Netherlands-based manufacturer of dredgers and
offshore production platforms for the oil industry, and the U.S.-based HBO &
Co., the leading consolidator in the booming hospital information systems
industry.
- -------------------------------------------------------
Scudder Global Discovery Fund
Ten Largest Percentage Gainers
(in order of U.S. dollar returns)
One Year Ending 10/31/96
=======================================================
Company USD
% Equities % Gain
- -------------------------------------------------------
BE Aerospace 1.44 176.19
Fresenius Non Vtg Pfd 2.31 170.92
Lojas Renner 0.37 134.04
Saipem 1.24 131.17
Gucci Group 1.72 130.00
Dalmine Siderca 0.40 112.00
MLP Pfd 1.71 109.25
Benton Oil & Gas 1.59 102.06
IHC Caland 4.09 96.52
Wandel & Goltermann 0.75 95.00
- -------------------------------------------------------
7 - Scudder Global Discovery Fund
<PAGE>
Other new arrivals to the top ten were Fresenius, BosKalis, Billing Information
Concepts, Central European Media (CETV), and Jeronimo Martins.
Focus on Individual
Companies in Global
Business Environment
The role of emerging countries in the performance of the portfolio is
understated by the conventional statistical breakdown shown in this report. The
domicile of the headquarters of a company is becoming less and less relevant in
an increasingly global business environment. Thus, our investment focus on
companies rather than countries is working to our advantage because it prevents
our analysis from getting bogged down in fine and increasingly murky
distinctions.
CETV and Jeronimo Martins illustrate the impact of globalization and emerging
markets. The former is a holding company with executive offices in Bermuda and
London, whose main asset is its dominant television station in Prague. Since the
Fund's first purchase the company has expanded into the broadcasting market in
six more Central European countries. Jeronimo Martins has recorded an excellent
record of growth in the food business in its home country of Portugal, and is
now looking to grow its earnings through the development of a similar business
in Poland. There are many other examples of this phenomenon in your portfolio.
For example, Benton Oil (1.6% of equities) derives all of its earnings from
Venezuela, and future earnings will come from Russia and the China Sea. Millicom
(1.5%), based in Luxembourg, focuses on providing cellular telephone services in
those areas where basic telephone service does not meet demand. Over 40% of its
revenues are attributable to Latin America and Africa.
As we noted above, the country weightings are becoming residual in nature as we
focus more on companies. However, the aggregate performance of regional holdings
can still be assessed. Within this context, your portfolio has fared quite well
in Europe over the last 12 months both in absolute terms and relative to
European stocks in the aggregate. We enter fiscal '97 as we did the previous
year -- overweighted in this market. Our Japanese holdings represent the mirror
image -- underweighted and underperforming that large-cap dominated market. We
have reduced aggregate holdings in Japan and have undertaken a restructuring of
the remaining holdings to focus more on consumer stocks with defined niches and
strong growth prospects, such as Matsumotokiyoshi (drug stores). In the U.S., we
think that wrenching changes in the financing of healthcare service will provide
both risk and opportunity in the years to come. We have increased holdings in
this sector, while cutting back rather dramatically on technology stocks.
Finally, our experience -- especially in the Far East -- has led us to be
increasingly selective when investing in emerging markets, focusing only on
those companies in which management and shareholder stakes are clearly in close
alliance. Growth at the GNP level is definitely not enough -- our focus on
company selection is heightened when investing in these markets.
8 - Scudder Global Discovery Fund
<PAGE>
Looking forward, we remain cautious regarding the level of markets especially in
the United States and Europe. Nonetheless, we believe that there are many
companies already in the portfolio that are built to weather whatever storms
arise, and we intend to add to these positions if presented with favorable
prices. As we enter a new fiscal year, the Fund will continue to seek out
individual small companies we believe are positioned to benefit from expanding
markets anywhere in the world. Scudder Global Discovery Fund remains an
appropriate vehicle for long-term investors seeking capital appreciation. We
thank you for your continued investment.
Sincerely,
Your Portfolio Management Team
/s/Gerald J. Moran /s/Sewall P. Hodges
Gerald J. Moran Sewall P. Hodges
/s/Elizabeth J. Allan /s/Joan R. Gregory
Elizabeth J. Allan Joan R. Gregory
Scudder Global Discovery Fund: A Team Approach to Investing
Scudder Global Discovery Fund is run 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. They are supported by Scudder's large staff of
economists, research analysts, traders, and other investment specialists who
work in Scudder 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 Gerald J. Moran has set Scudder Global Discovery Fund's
investment strategy and overseen its daily operation since the Fund was
introduced in 1991. Gerry joined Scudder's equity research and management area
in 1968 and has been a portfolio manager since 1985. Sewall Hodges, Portfolio
Manager, joined Scudder in 1995 and the team in 1996. Sewall, who has ten years
in global analysis and portfolio management, focuses on stock selection and
research. Portfolio Manager Elizabeth Allan, who joined the team in 1994,
concentrates on the Fund's Pacific Basin investments. Elizabeth has been a
portfolio manager at Scudder since 1991 and joined the firm in 1987. Joan
Gregory, Portfolio Manager, joined the team in 1994 and focuses on stock
selection, a role she has played since she joined Scudder in 1992. Joan has been
involved with investment in global and international stocks as an assistant
portfolio manager since 1989.
Your Portfolio Management Team: Gerald J. Moran, Sewall P. Hodges, Elizabeth J.
Allan and Joan R. Gregory
9 - Scudder Global Discovery Fund
<PAGE>
Investment Portfolio as of October 31, 1996
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 1.0%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/96 at 5.52%, to be
repurchased at $3,689,566 on 11/1/96, collateralized by a $3,754,000 U.S. Treasury -----------
Note, 5.125%, 4/30/98 (Cost $3,689,000) ............................................. 3,689,000 3,689,000
-----------
Commercial Paper 2.8%
- ------------------------------------------------------------------------------------------------------------------------------
American Express Credit Corp. Discount Note, 11/19/96 (Cost $ 9,973,750) .............. 10,000,000 9,973,750
-----------
Short Term Notes 9.0%
- ------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.5%, 11/1/96 (Cost $32,000,000) .............................. 32,000,000 32,000,000
-----------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 87.2%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 0.9%
Dalmine Siderca (Steel producer) ...................................................... 776,200 1,234,343
Quilmes Industrial S.A. (Leading beer distributor) .................................... 51,800 527,713
Quilmes Industrial S.A. (ADR) ......................................................... 125,900 1,321,950
----------
3,084,006
----------
Australia 0.9%
Coca Cola Amatil Ltd. (Soft drink bottler and distributor) ............................ 241,882 3,325,638
----------
Bermuda 0.6%
Terra Nova (Bermuda) Holdings Ltd. "A" (Property, casualty and marine insurance and
reinsurance company) ................................................................ 94,500 2,008,125
----------
Brazil 1.1%
Banco Bradesco S.A.* (pfd.) (Commercial bank) ......................................... 333,000,000 2,839,284
Lojas Renner S.A. (pfd.) (Specialty retailer of apparel, cosmetics, electronics,
household appliances and furniture) ................................................. 21,400,000 1,145,610
----------
3,984,894
----------
Canada 0.3%
Renaissance Energy Ltd.* (Exploration, production and marketing of crude oil and natural
gas, operating in Alberta) ........................................................... 30,000 950,818
Stressgen Biotechnologies Corp. "A"* (Developer of products for treatment of cancer and
certain infectious diseases) ......................................................... 105,000 274,059
----------
1,224,877
----------
Czech Republic 1.9%
Central European Media Enterprises Ltd. "A"* (Owner and operator of national and regional
private commercial television stations in central Europe and Germany) ................ 237,700 6,655,600
----------
France 2.0%
Dassault Systemes SA* (Computer aided design, manufacturing and engineering software
products) ............................................................................ 75,000 3,228,078
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Essilor International (Manufacturer of various types of lenses, eyeglasses, contact lenses and
optical measuring instruments) ......................................................... 14,100 3,710,236
----------
6,938,314
----------
Germany 5.7%
Fresenius Medical Care AG* (ADR) (Manufacturer of products and systems for treatment of kidney
failure) ................................................................................ 153,460 4,565,448
Fresenius AG (pfd.) (Manufacturer and distributor of pharmaceutical and medical systems
products) ............................................................................... 32,900 7,117,449
Leica Camera AG* (Leading manufacturer of cameras and optical equipment) .................. 5,900 199,544
Marschollek Lautenschlaeger und Partner AG (pfd.) (Leading independent life insurance
company) ................................................................................ 38,000 5,271,328
Marschollek Lautenschlaeger und Partner AG Rights ......................................... 38,000 47,693
Moebel Walther AG (pfd.) (Furniture retailer) ............................................. 45,500 2,813,225
Pfeifer Vacuum Technology AG* (Manufacturer of various pumps and vacuum systems) .......... 20,000 320,000
----------
20,334,687
----------
Hong Kong 0.3%
Jinhui Shipping and Transportation Ltd. (Operator of cargo fleet of ships transporting steel,
iron ore, non-ferrous metals and agricultural products) ................................. 1,068,600 1,068,600
----------
Indonesia 1.2%
Kalbe Farma (Ordinary) (Pharmaceutical producer and distributor) .......................... 280 331
Merck-Indonesia (Foreign registered) (Pharmaceutical company) (b) ......................... 100,000 485,239
Modern Photo Film Co.(Foreign registered) (Photographic film distributor) ................. 238,000 656,640
Mustika Ratu (Foreign registered) (Consumer cosmetics producer) (b) ....................... 677,500 1,047,343
Panin Bank (Foreign registered) (Bank) .................................................... 373,000 372,399
Sekar Bumi (Foreign registered) (Producer of frozen raw shrimp, prawns and fish) .......... 382,000 213,247
Steady Safe Transportation Service (Operator of taxis and buses in Jakarta) ............... 551,933 533,269
Unilever-Indonesia (Foreign registered) (Consumer products manufacturer) .................. 51,743 777,673
----------
4,086,141
----------
Ireland 3.2%
Bank of Ireland PLC (Bank) ................................................................ 915,068 7,571,547
Irish Continental Group PLC (Transport of passengers, freight and containers between
Ireland, the U.K. and the continent) .................................................... 133,305 944,503
Irish Life PLC (Provider of life and disability insurance and pensions) ................... 640,750 2,776,118
----------
11,292,168
----------
Italy 4.8%
Bulgari SpA (Manufacturer and retailer of fine jewelry, luxury watches and perfumes ....... 111,200 1,928,907
De Rigo SpA (ADR)* (Manufacturer and distributor of sunglasses and prescription
eyeglass frames) ........................................................................ 47,000 511,125
Esaote Biomedica SpA* (Manufacturer of biomedical diagnostic equipment) ................... 143,000 477,712
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gucci Group (New York Shares) (Designer and producer of personal luxury accessories and
apparel) ................................................................................. 77,000 5,313,000
Luxottica Group SpA (ADR) (Manufacturer and marketer of eyeglasses) ........................ 32,300 2,051,050
Mediolanum SpA* (Life insurance company) ................................................... 145,300 1,440,853
Saes Getters SpA di Risparmio (Manufacturer of getters, refined chemicals used in cathode ray
tubes and other monitors) ................................................................ 112,000 1,381,371
Saipem SpA (International contractor in oil and gas exploration and drilling, construction of
refineries and pipelines) ................................................................ 748,000 3,818,504
----------
16,922,522
----------
Japan 9.9%
Albis Co Limited (Food wholesaler) ......................................................... 71,000 886,096
FCC Co., Ltd. (Manufacturer of motorcycle and automobile clutches) ......................... 38,000 1,118,826
Fast Retailing Co., Ltd. (Operator of casual clothes retail chain) ......................... 27,500 729,917
Genki Sushi Co., Ltd. (North Kanto-based fast-food sushi chain) ............................ 57,000 1,102,127
Japan Associated Finance Co. (Venture capital company) ..................................... 51,000 4,199,947
Matsumotokiyoshi (Operator of supermarket chain) ........................................... 92,000 2,773,422
Nichiei Co., Ltd. (Finance company for small- and medium-sized firms) ...................... 63,000 4,197,047
Nippon Electric Glass Co., Ltd. (Leading producer of cathode-ray tube glass) ............... 129,000 1,972,754
Riso Kagaku Corp. (Manufacturer of copying machines) ....................................... 30,500 2,173,976
Rock Field Co., Ltd. (Major delicatessen food processor) ................................... 14,000 178,414
Royal Ltd. (Wholesaler and retailer of automobile equipment and parts) ..................... 103,400 2,335,542
Sagami Chain Co., Ltd. (Operator of noodle restaurant chain) ............................... 79,000 1,478,907
ShinMaywa Industries, Ltd. (Leading maker of dump trucks and other specialty vehicles) ..... 114,000 986,905
Shohkoh Fund & Co., Ltd. (Finance company for small and medium-sized firms) ................ 28,000 5,881,526
Square Co., Ltd. (Producer of software for video games) .................................... 78,000 4,044,648
Sundrug Co., Ltd. (Operator of outlet drug store chain) .................................... 30,000 1,120,584
-----------
35,180,638
-----------
Korea 0.2%
Korea 1990 Trust IDR* (Investment company) (c) .............................................. 180 units 765,000
-----------
Luxembourg 1.3%
Millicom International Cellular SA* (Developer and operator of cellular telephone
networks) ................................................................................. 116,500 4,630,875
-----------
Mexico 0.9%
Grupo Casa Autrey SA (ADR) (Consumer specialty manufacturer) ................................ 166,600 3,144,575
-----------
Netherlands 5.9%
Boskalis Westminster NV (International contractor specializing in dredging activities) ...... 310,000 6,301,741
De Telegraaf Holding NV (Leading publisher of newspapers, magazines and books) .............. 69,600 1,496,862
IHC Caland N.V. (Dredging and offshore services) ............................................ 225,800 12,599,511
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Qiagen N.V.* (Biopharmaceutical company) ............................................... 22,800 624,146
-----------
21,022,260
-----------
Philippines 0.1%
Republic Glass Holdings Corp. (Maker of glass products for passenger cars and light
commercial vehicles) ................................................................. 1,000,000 194,064
-----------
Poland 0.7%
Gorazdze Cement SA (Cement producer) ................................................... 33,800 877,703
Pioneer Poland Fund (Closed-end investment company) (b) (d) ............................ 3 1,433,547
-----------
2,311,250
-----------
Portugal 1.8%
Jeronimo Martins (Food producer and retailer) .......................................... 68,760 6,271,739
-----------
Singapore 0.3%
GP Batteries International, Ltd. (Developer, manufacturer and distributor of batteries
and battery-related products) ........................................................ 400,000 1,160,000
-----------
Sweden 2.2%
Autoliv AB (Manufacturer of automobile safety bags) .................................... 180,400 7,658,316
-----------
Switzerland 1.2%
Phoenix Mecano AG (Bearer) (Manufacturer of housings and components for computers) ..... 3,000 1,473,734
Schindler Holdings AG (PC) (Leading elevator and escalator manufacturer) ............... 2,650 2,704,382
-----------
4,178,116
-----------
Thailand 0.1%
American Standard Sanitaryware (Foreign registered) (Manufacturer of bathroom
fixtures) (b) ........................................................................ 28,200 375,926
Bangkok Dusit Medical Services Co., Ltd. (Health services) ............................. 99 131
-----------
376,057
-----------
United Kingdom 7.5%
Brake Brothers PLC (Specialist supplier of frozen foods to the catering industry) ...... 180,300 2,221,600
Expro International Group PLC (Provider of oilfield services) .......................... 325,700 2,274,308
Hambros Insurance Services Group PLC (Insurance company) ............................... 903,300 1,345,325
Hardy Oil & Gas PLC (Oil and gas exploration and development) .......................... 886,000 3,828,886
Provident Financial PLC (Personal finance group) ....................................... 496,300 3,720,045
Serco Group PLC (Facilities management company) ........................................ 703,700 7,227,551
Tibbett and Britten Group PLC (Transportation services for manufacturing and retail
industries) .......................................................................... 574,100 6,003,920
-----------
26,621,635
-----------
United States 32.2%
Abercrombie & Fitch Co. "A"* (Retails casual apparel for men and women) ................ 21,700 477,400
Alaska Air Group Inc.* (Scheduled and charter airline services) ........................ 66,000 1,452,000
Aptargroup, Inc. (Manufacturer of packaging equipment components) ...................... 97,100 3,131,475
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BE Aerospace* (Airline audio/video control systems) .................................... 203,200 4,419,600
Barrett Resources Corp.* (Oil and gas exploration and production) ...................... 74,000 2,839,750
Bell & Howell Holdings Co.* (Information access and dissemination services) ............ 90,600 2,423,550
Benton Oil & Gas Co.* (Oil and gas exploration, development and production) ............ 200,000 4,900,000
Billing Information Concepts* (Billing and information management services) ............ 275,500 7,197,438
CapMAC Holdings Inc. (Provider of financial guaranty insurance) ........................ 133,300 4,448,888
Cintas Corp. (Uniform rentals) ......................................................... 45,000 2,621,250
ContiFinancial Corp.* (Provider of financing for a broad range of loans) ............... 90,900 2,954,250
CytoTherapeutics, Inc.* (Developer of therapeutic products for treatment of certain chronic and
disabling diseases) .................................................................. 80,000 710,000
Enron Global Power & Pipelines L.L.C. (Owner and manager of power plants and a natural gas
pipeline system) ..................................................................... 120,800 3,397,500
Factset Research Systems Inc.* (Provides on-line integrated financial database services) 14,300 343,200
Fiserv Inc.* (Data processing services) ................................................ 120,775 4,634,741
HBO & Company (Designer of computerized information systems to the healthcare industry) 129,200 7,768,150
IGEN Inc.* (Producer of medical supplies) .............................................. 313,300 1,879,800
Karrington Health, Inc.* (Owner and operator of private pay assisted living residences) 98,700 1,554,525
M.S. Carriers Inc.* (Truckload carrier of general freight) ............................. 96,300 1,805,625
Matrix Pharmaceutical, Inc.* (Developer of site-specific treatments for cancer and serious
skin diseases) ....................................................................... 81,100 613,319
Midwest Express Holding, Inc.* (Operator of passenger airline catering to business travelers) 60,000 2,040,000
National Processing, Inc.* (Low-cost, high-volume card and check transaction processing) 85,700 1,628,300
Neurogen Corp.* (Developer of biopharmaceuticals for treatment of psychiatric and neurological
disorders) ........................................................................... 100,000 2,175,000
Nordson Corp. (Industrial application equipment) ....................................... 17,900 984,500
OccuSystems Inc.* (Provider of primary care physician and case management services) .... 117,300 3,211,088
PHAMIS, Inc.* (Developer and installer of patient-centered healthcare information systems) 100,000 1,500,000
R.P. Scherer Corp.* (Manufacturer of drug delivery system) ............................. 72,300 3,352,913
Raytel Medical Corp.* (Provider of healthcare services) ................................ 188,000 2,068,000
Ribozyme Pharmaceuticals, Inc.* (Developer of human therapeutics) ...................... 100,000 975,000
Rofin-Sinar Technologies Inc.* (Manufacturer of laser products use for cutting and welding) 214,200 2,623,950
Rohr Industries Inc.* (Manufacturer of jet engine assemblies) .......................... 167,000 3,089,500
Silicon Valley Group Inc.* (Manufacturer of equipment for semiconductor industry) ...... 120,400 2,001,650
Somatogen Inc.* (Developer of human blood substitute) .................................. 100,000 1,062,500
Sterling Commerce, Inc.* (Producer of electronic data interchange products and services) 198,134 5,572,519
Sterling Software Inc. (Computer software products) .................................... 119,700 3,890,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stillwater Mining Co.* (Exploration and development of mines in Montana producing platinum,
palladium and associated metals) ..................................................... 80,800 1,393,800
Thomas Nelson, Inc. (Publisher) ........................................................ 120,962 1,481,785
Tiffany & Co. (Retailer of jewelry and gift items) ..................................... 100,000 3,700,000
Total Renal Care Holdings* (Provides dialysis services for sufferers of chronic kidney
failure) ............................................................................. 50,600 1,973,400
Trimedyne Inc. Warrants (expire 2/11/97) (b) ........................................... 8,500 468
Triton Energy Ltd.* (Independent oil and gas exploration and production company) ....... 34,200 1,526,175
U.S. Long Distance Corp. (Long distance telecommunication and information services) .... 58,500 489,938
Vincam Group Inc.* (Provider of solutions to complexities and costs of employment and personnel) 20,000 635,000
Vivra, Inc.* (Provider of dialysis services) .......................................... 101,850 3,246,469
Wandel & Goltermann Technologies, Inc.* (Manufacturer of test, measurement, diagnostic and
monitoring products for local and wide area networks) ............................... 118,200 2,304,900
Watson Pharmaceuticals, Inc.* (Producer of medications and drug delivery systems) ..... 40,700 1,358,363
-----------
113,857,929
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $233,474,430) 308,298,026
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $279,137,180) (a) 353,960,776
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $281,532,448. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$72,428,328. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $89,362,733 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$16,934,405.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at October 31, 1996, aggregated
$3,601,521. See Note A of the Notes to Financial Statements.
(c) 1,000 shares = 1 IDR unit for Korea 1990 Trust.
(d) Market value and cost reflect full payment. The remaining installments
which total $1,108,125 will be payable upon thirty days prior notice from
Pioneering Management Limited.
* Non-income producing security.
Sector breakdown of the Fund's equity securities is noted on page 5.
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1996
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $279,137,180) (Note A) $ 353,960,776
Cash ........................................................ 10,982
Unrealized appreciation on forward currency exchange contracts (Notes
A and D) ................................................. 458,135
Receivable for investments sold ............................. 1,557,361
Receivable for Fund shares sold ............................. 394,326
Dividends and interest receivable ........................... 218,609
Foreign taxes recoverable ................................... 66,332
----------------
Total assets ................................................ 356,666,521
----------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ........................... $ 4,813,021
Payable for Fund shares redeemed ............................ 385,358
Accrued management fee (Note C) ............................. 320,586
Other accrued expenses (Note C) ............................. 271,400
Unrealized depreciation on forward currency exchange contracts (Notes
A and D) ................................................. 45,317
Other payables .............................................. 859
----------------
Total liabilities ........................................... 5,836,541
-------------------------------------------------------------------------------------------
Net assets, at market value ................................. $ 350,829,980
-------------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income (747,671)
Unrealized appreciation on:
Investments .............................................. 74,823,596
Foreign currency related transactions .................... 417,093
Accumulated net realized gain ............................... 14,752,222
Paid-in capital ............................................. 261,584,740
-------------------------------------------------------------------------------------------
Net assets, at market value ................................. $ 350,829,980
-------------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($350,829,980 / 17,152,364 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) ........... $20.45
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Statement of Operations
year ended October 31, 1996
<TABLE>
<S> <C> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $278,065) .............. $ 2,551,488
Interest ........................................................... 1,570,549
-----------------
4,122,037
-----------------
Expenses:
Management fee (Note C) ............................................ 3,201,957
Services to shareholders (Note C) .................................. 728,216
Custodian and accounting fees (Note C) ............................. 403,890
Directors' fees and expenses (Note C) .............................. 48,589
Reports to shareholders ............................................ 134,828
Auditing ........................................................... 72,410
Legal .............................................................. 21,885
Registration fees .................................................. 40,605
Amortization of organization expense (Note A) ...................... 8,849
Other .............................................................. 34,173
-----------------
4,695,402
-------------------------------------------------------------------------------------------
Net investment loss ................................................ (573,365)
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain from:
Investments ........................................................ 14,927,055
Foreign currency related transactions .............................. 2,009,871
-----------------
16,936,926
Net unrealized appreciation during the period on:
Investments ........................................................ 36,860,474
Foreign currency related transactions .............................. 204,652
-----------------
37,065,126
-----------------
Net gain on investment transactions ................................ 54,002,052
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ............... $ 53,428,687
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment loss ....................................... $ (573,365) $ (292,576)
Net realized gain from investment transactions ............ 16,936,926 8,877,150
Net unrealized appreciation on investment transactions
during the period ...................................... 37,065,126 8,320,983
-------------- --------------
Net increase in net assets resulting from operations ...... 53,428,687 16,905,557
-------------- --------------
Distributions to shareholders from:
Net investment income .................................. (2,817,790) --
-------------- --------------
Net realized gains ..................................... (6,128,748) (1,236,433)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................. 140,375,546 77,102,527
Net asset value of shares issued to shareholders in
reinvestment of distributions .......................... 8,373,037 1,187,647
Cost of shares redeemed ................................... (97,489,394) (94,864,766)
-------------- -------------
Net increase (decrease) in net assets from Fund share
transactions ........................................... 51,259,189 (16,574,592)
-------------- --------------
Increase (decrease) in net assets ......................... 95,741,338 (905,468)
Net assets at beginning of period ......................... 255,088,642 255,994,110
-------------- --------------
Net assets at end of period (including accumulated
distributions in excess of net investment income of
$747,671 and undistributed net investment -------------- --------------
income of $2,587,566, respectively) .................... $350,829,980 $255,088,642
-------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................. 14,547,124 15,734,564
-------------- --------------
Shares sold ............................................... 7,361,025 4,678,309
Shares issued to shareholders in reinvestment of
distributions .......................................... 487,939 79,071
Shares redeemed ........................................... (5,243,724) (5,944,820)
-------------- --------------
Net increase (decrease) in Fund shares .................... 2,605,240 (1,187,440)
-------------- --------------
Shares outstanding at end of period ....................... 17,152,364 14,547,124
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 -- SCUDDER GLOBAL DISCOVERY 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
September 10,
1991
(commencement of
operations) to
Years Ended October 31, October 31,
1996 (a) 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $17.54 $16.27 $16.14 $12.05 $11.92 $12.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .............. (.04) (.03) (.02) .04 .07 .01
Net realized and unrealized gain (loss) on
investment transactions ................ 3.59 1.38 .48 4.24 .08 (.09)
------------------------------------------------------------------------------
Total from investment operations .......... 3.55 1.35 .46 4.28 .15 (.08)
------------------------------------------------------------------------------
Less distributions:
From net investment income ................ (.20) -- -- (.07) (.02) --
In excess of net investment income ........ -- -- (.18) -- -- --
From net realized gains on investment
transactions ........................... (.44) (.08) (.15) (.12) -- --
------------------------------------------------------------------------------
Total distributions ....................... (.64) (.08) (.33) (.19) (.02) --
------------------------------------------------------------------------------
Net asset value, end of period $20.45 $17.54 $16.27 $16.14 $12.05 $11.92
----------------------------------------------------------------------------------------------------------------------------
Total Return (%) .......................... 20.97 8.32 2.80 36.04 1.26 (.67)*
Ratios and Supplemental Data
Net assets, end of period ($ millions) 351 255 256 198 55 9
Ratio of operating expenses, net to
average daily net assets (%) ........... 1.60 1.69 1.70 1.50 1.50 1.50**
Ratio of operating expenses before expense
reductions, to average daily net assets
(%) .................................... 1.60 1.69 1.76 2.01 2.53 15.34**
Ratio of net investment income (loss) to
average daily net assets (%) ........... (.20) (.12) (.28) .53 .78 2.47**
Portfolio turnover rate (%) ............... 63.0 43.7 45.8 54.6 23.4 --
Average commission rate paid (b) .......... $.0026 $ -- $ -- $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
* Not annualized
** Annualized
The accompanying notes are an integral part of the financial statements.
19 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Global Discovery Fund (the "Fund"), formerly Scudder Global Small
Company Fund, is a 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 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 securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $3,342,523 (0.95% of net assets) and have been noted in the
investment portfolio as of October 31, 1996.
Their values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the securities
existed, and the difference could be material.
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, is equal to at least 100.5% of the resale price.
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, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
20 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
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.
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 ex and payment dates on dividends,
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.
Distribution of Income and Gains. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. 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 primarily relate to investments in forward contracts, passive
foreign investment companies, and certain securities sold at a loss. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
The Fund uses the 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 have been deferred and are being
amortized on a straight-line basis over a five-year period.
21 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Other. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Purchases and Sales of Securities
During the year ended October 31, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $202,015,627 and
$168,485,247, respectively.
C. Related Parties
Under the Fund's 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 1.10% of the Fund's average daily net assets,
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 provides that if the Fund's expenses,
exclusive of taxes, interest, and extraordinary expenses, exceed specified
limits, such excess, up to the amount of the management fee, will be paid by the
Adviser. For the year ended October 31, 1996, the fee pursuant to the Agreement
amounted to $3,201,957.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. Included
in services to shareholders is $514,910 charged to the Fund by SSC during the
year ended October 31, 1996, of which $45,204 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 $92,508, of which $16,738
is unpaid at October 31, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1996, the amount charged to the Fund by SFAC aggregated $189,560, of
which $17,695 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 $48,589.
22 -- SCUDDER GLOBAL DISCOVERY 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 appreciation of
$412,818.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
--------------------------------- --------------------------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 193,000,000 U.S. Dollars 1,790,353 1/8/97 78,197
Japanese Yen 1,638,300,000 U.S. Dollars 15,112,813 4/16/97 379,938
U.S. Dollars 1,780,478 Japanese Yen 192,950,417 4/16/97 (45,317)
-------
412,818
=======
</TABLE>
E. Lines 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 DISCOVERY FUND
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder Global Fund, Inc. and to the Shareholders
of Scudder Global Discovery Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Global Discovery Fund (formerly Scudder Global Small Company 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 ended October 31, 1996, and for the period
September 10, 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 Discovery Fund as of October 31, 1996, the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period the year then ended, and the financial highlights for
each of the five years in the period ended October 31, 1996, and for the period
September 10, 1991 (commencement of operations) to October 31, 1991 in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 16, 1996
24 -- SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Tax Information
The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1996.
The Fund paid distributions of $.435 per share from net long-term capital gains
during its year ended October 31, 1996. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $12,865,256 as capital gain dividends for its
taxable year ended October 31, 1996.
The Fund paid foreign taxes of $278,065 and the Fund recognized $809,194 of
foreign source income during the taxable year ended October 31, 1996. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.02 per share
of foreign taxes and $.05 of income from foreign sources as having been paid in
the taxable year ended October 31, 1996.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
Officers and Trustees
Daniel Pierce*
Chairman of the Board, Director, and Vice President
William E. Holzer
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; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business
Adam Greshin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25 - Scudder Global Discovery 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 Discovery Fund
<PAGE>
How to Contact Scudder
Account Service and Information
- --------------------------------------------------------------------------------
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an overview
of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment
questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- --------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain an
application
Scudder Brokerage Services* -- 1-800-700-0820
Please address all correspondence to
- --------------------------------------------------------------------------------
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center
- --------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the Scudder Funds
Centers. Check for a Funds Center near you--they can be found in the following
cities:
Boca Raton Chicago San Francisco
Boston New York
For information on Scudder Treasurers Trust(TM), an institutional cash
management service for corporations, non-profit organizations and trusts which
utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds**, funds designed to meet the
broad investment management and service needs of banks and other institutions,
call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC
** Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus
with more complete information, including management fees and expenses.
Please read it carefully before you invest or send money.
27 - Scudder Global Discovery 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
