Scudder International Bond Fund
Semiannual Report
December 31, 1996
Pure No-Load(TM) Funds
For investors seeking an easy and low-cost way to broaden their income-oriented
investments beyond U.S. borders. Invests primarily in high-grade bonds
denominated in foreign currencies.
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
8 Investment Portfolio
11 Financial Statements
14 Financial Highlights
15 Notes to Financial Statements
20 Report of Independent Accountants
21 Officers and Directors
22 Investment Products and Services
23 How to Contact Scudder
In Brief
o Scudder International Bond Fund provided a total return of 4.62% for the
six-month period ended December 31, 1996, reflecting a $0.22 increase in net
asset value per share and a total of $0.29 per share in income distributions.
For the calendar year 1996, the Fund's total return was 3.54%.
o Bolstered by low inflation, moderate economic growth, and progress toward
European Monetary Union, some of Europe's peripheral bond markets recorded
double-digit gains during the period, contributing to the Fund's positive
performance.
o A rising U.S. dollar meant that holdings denominated in foreign
currencies bought fewer and fewer dollars during the six-month period,
ultimately diminishing the Fund's U.S. dollar-based return.
o After months of strong bond market performance in Italy, Spain, and
Sweden, the Fund decreased its holdings in those countries in favor of new
positions in Norway and France.
2 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We are pleased to present the newly redesigned semiannual report for
Scudder International Bond Fund. The new format is designed to enhance the
attractiveness and readability of the reports. Let us know what you think.
As detailed in the following letter from the Fund's portfolio managers,
international bond markets did not rise in tandem over the past six months, but
instead responded to different sets of economic and political stimuli. Some
markets did exceptionally well, while others lagged. In Japan, for example,
bonds in the aggregate declined. The challenge for Scudder International Bond
Fund going forward is to provide a competitive total return while minimizing the
potential risk to shareholders in a sometimes volatile global market. We
believe, however, that ongoing technological advances, worldwide deregulation of
key industries, and the globalization of economic activity are combining to
create a positive long-term outlook for investors.
We wish 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 as manager alongside team
leader Adam Greshin. Chris brings a wealth of expertise and more than nine years
of investment-related experience to the team. We thank Peg, who has been named
director of Scudder's Institutional Group, for her many years of outstanding
service to the Fund.
We'd also like to take this opportunity to introduce a newcomer to
Scudder's mutual fund lineup: Scudder Pathway Series. A "fund of funds," the
Series includes four portfolios that invest in Scudder mutual funds to achieve a
variety of objectives -- from conservative growth to international equity
exposure. Each Pathway portfolio provides diversification and professional asset
management with a single investment. For more information on the Series and
other Scudder products and services, please turn to page 22.
We thank you for your continued investment in Scudder International Bond
Fund. As always, please do not hesitate to call Investor Relations at
1-800-225-2470 with any questions. We also encourage you to visit our Web site
at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Bond Fund
3 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
PERFORMANCE UPDATE as of December 31, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER INTERNATIONAL BOND FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,354 3.54% 3.54%
5 Year $12,798 27.98% 5.06%
Life of
Fund* $21,532 115.32% 9.45%
SALOMON BROTHERS NON-U.S. DOLLAR
WORLD GOVERNMENT BOND INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,408 4.08% 4.08%
5 Year $15,906 59.06% 9.72%
Life of
Fund* $22,524 125.24% 10.13%
*The Fund commenced operations on July 6, 1988.
Index comparisons begin July 31, 1988.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED DECEMBER 31
Scudder International Bond Fund
Year Amount
- ----------------------
7/88* $10,000
'88 $10,598
'89 $11,365
'90 $13,764
'91 $16,824
'92 $18,105
'93 $20,971
'94 $19,167
'95 $20,796
'96 $21,532
S&P 500 Index
Year Amount
- ----------------------
7/88 $10,000
'88 $10,942
'89 $10,569
'90 $12,184
'91 $14,161
'92 $14,835
'93 $17,079
'94 $18,102
'95 $21,642
'96 $22,524
The unmanaged Salomon Brothers Non-U.S. Dollar 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 DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989* 1989 1990 1991 1992 1993 1994 1995 1996
-----------------------------------------------------------------------
NET ASSET VALUE... $12.21 $11 97 $12.90 $13.53 $12.83 $13.50 $11.38 $11.46 $11.20
INCOME DIVIDENDS.. $ .49 $ 1.05 $ 1.16 $ 1.17 $ 1.07 $ .92 $ .99 $ .85 $ .64
CAPITAL GAINS
DISTRIBUTIONS..... $ - $ - $ .29 $ .81 $ .62 $ .39 $ - $ - $ -
FUND TOTAL
RETURN (%)........ 5.98 7.23 21.11 22.23 7.62 15.83 -8.61 8.50 3.54
INDEX TOTAL
RETURN (%)........ 9.42 -3.41 15.29 16.22 4.77 15.12 5.99 19.55 4.08
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased. If
the Adviser had not temporarily capped expenses, the average annual
total return for the Fund for the five year and life of Fund periods would
have been lower.
4 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1996
- ---------------------------------------------------------------------------
MARKET EXPOSURE
- ---------------------------------------------------------------------------
Geographical
Germany 21.2%
Italy 13.6%
Superantional Agencies 13.6%
United Kingdom 8.5%
France 7.2%
Denmark 5.7%
Canada 4.6%
Finland 4.3%
Spain 4.1%
New Zealand 3.7%
Norway 3.6%
Sweden 3.0%
Korea 2.8%
Austria 2.7%
Australia 1.0%
United States 0.3%
Switzerland 0.1%
------
100.0%
======
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Several of Europe's peripheral bond markets recorded
double-digit gains this year.
Interest Rate Exposure
Japan 24.0%
Germany 20.4%
Italy 11.1%
United Kingdom 8.5%
France 7.2%
Denmark 5.7%
Canada 4.6%
Spain 4.1%
New Zealand 3.7%
Norway 3.6%
Sweden 3.0%
Korea 2.8%
Australia 1.0%
United States 0.3%
------
100.0%
======
Exposure to European bond markets - particularly the higher-
yielding markets of Italy and Spain - has been decreased given their
strong performance in 1996
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------
Currency Exposure (a)
Japan 26.1%
Germany 22.7%
Italy 10.4%
United Kingdom 8.5%
United States 7.4%
Denmark 5.7%
Spain 4.1%
Sweden 3.0%
Korea 2.8%
France 2.6%
Canada 2.5%
New Zealand 1.7%
Norway 1.5%
Australia 1.0%
------
100.0%
======
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 8.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder International Bond Fund provided a 4.62% total return during the
six-month period ended December 31, 1996, based on a $0.22 increase in net asset
value per share and a total of $0.29 in income distributions. The unmanaged
Salomon Brothers Non-U.S. Dollar World Government Bond Index, the Fund's
benchmark, gained a slightly stronger 5.45% during the period, principally owing
to its lack of expenses and the effect of Fund currency hedging activity. For
the calendar year 1996, the Fund's total return was 3.54%.
Against a backdrop of benign inflation and moderate to sluggish economic growth,
interest rates generally moved lower throughout the six-month period ended
December 31, 1996, sparking gains in most global bond markets. However, not all
markets rose at the same pace. After several years of slow growth in some
countries -- France and Japan, for example -- rates at the start of the period
were already low and therefore had little room to fall. Investors seeking higher
yields generally took to the smaller and riskier peripheral European and
emerging markets, where yields in some cases topped 10% at the beginning of the
period. In Europe, we believe progress toward monetary union has helped
investors feel more comfortable owning the bonds of smaller countries where
damaging inflation historically has been more the rule than the exception. The
combination of higher yields and an improved political and economic landscape
led to double-digit returns in some markets during the period.
Performance in Review
The Fund's positive performance derived largely from investments in such
high-yielding European markets as Spain, Italy, and the United Kingdom. To make
the most of these rising markets, the Fund invested in longer-term bonds, which
tend to be more sensitive than short-term bonds to changes in interest rates.
Laggards included Germany -- the Fund's largest geographical weighting -- and
Japan. In Japan, the bond market was decidedly lackluster (-1.26% for the
six-month period). Record-low interest rates at the start of the period held out
little hope of a rally. Anticipating continued poor returns, we eliminated by
the end of the period the Fund's already modest direct investments in Japan,
focusing instead on "supranational" issues (e.g. bonds issued by the
International Bank for Reconstruction and Development) that are denominated in
yen.
Bond Market Returns
(6/30/96 - 12/31/96 in US$)
-----------------------------------------------
United Kingdom 16.68%
Australia 11.61%
Italy 11.58%
Spain 10.36%
Canada 10.00%
Sweden 7.90%
Denmark 6.46%
France 6.25%
Austria 5.21%
Germany 4.71%
Japan -1.26%
Source: Salomon Brothers World Government Bond Index
6 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
On the currency front, the U.S. dollar gained ground against major European
currencies and the yen, eroding returns for the Fund. After prolonged recessions
in Germany and Japan, we had anticipated a rebound in economic growth --
particularly in Japan, where growth is a stated government priority.
Accelerating economic activity would in turn boost the value of these currencies
relative to others around the world, as demand for German and Japanese goods
escalated. To date, this has not happened, and the yen and deutschemark have
lost ground relative to the U.S. dollar. On the positive side of the ledger,
dollar-bloc currencies (those of Australia, Canada, and New Zealand)
representing roughly 16% of the portfolio's currency exposure on June 30th, and
some peripheral European currencies (25% of Fund currency exposure at mid-year),
held their own during the period, rising in tandem with the U.S. dollar and even
outpacing it in some cases.
Looking Ahead
In the months ahead, we expect some of Europe's peripheral markets to come back
to earth, perhaps giving back some of the gains of the past year. Accordingly,
we have reduced the Fund's sensitivity to changing interest rates in those
markets by focusing on shorter-maturity bonds. In addition, we have reduced the
Fund's weighting in such markets as Italy, Spain, and Sweden in favor of new
investments in Norway and France. In other respects, the Fund's bond strategy
remains largely unaltered from our last report six months ago. With regard to
currency, we have begun adding to the Fund's yen exposure, given that currency's
extended decline relative to the U.S. dollar and our belief that Japan's
economic recovery is imminent. The increased exposure to the yen was
accomplished without direct investment in Japan's bond market, where interest
rates have much more room to rise than fall. At the same time, we have reduced
the Fund's exposure to Canadian and other dollar-bloc currencies, which have for
months generally increased in value along with the U.S. dollar and may now be
due for a reversal.
In our view, the outlook for international bond markets is good, characterized
by low inflation, moderate economic growth, and a new era of fiscal and
political stability in many important markets. Going forward, Scudder
International Bond Fund will continue to provide a vehicle for participating in
the opportunities for income and capital appreciation presented by overseas bond
markets.
Sincerely,
Your Portfolio Management Team
/s/Adam M. Greshin /s/Christopher B. Steward
Adam M. Greshin Christopher B. Steward
Lead Portfolio Manager Portfolio Manager
7 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO AS OF DECEMBER 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE ($)
- --------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 0.2%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. DOLLARS 0.2%
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/96 at 6.7% to be
repurchased at $630,235 on 1/2/97, collateralized by a $594,000 U.S. Treasury Note, -----------
9.25%, 8/15/98 (Cost $630,000).............................................................. 630,000 630,000
-----------
FOREIGN DENOMINATED DEBT OBLIGATIONS 99.6%
- --------------------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLARS 1.0%
Commonwealth of Australia, 6.75%, 11/15/06..................................................... 4,800,000 3,635,580
-----------
BRITISH POUNDS 8.5%
Abbey National PLC, 7.125%, 3/14/01............................................................ 7,500,000 12,683,194
United Kingdom Treasury Bond, 9%, 10/13/08..................................................... 9,120,000 17,331,088
-----------
30,014,282
-----------
CANADIAN DOLLARS 4.6%
Government of Canada, 7.5%, 3/1/01............................................................. 3,200,000 2,517,909
Government of Canada, 7%, 12/1/06.............................................................. 12,200,000 9,276,717
Rogers Cantel Mobile Communications Inc., 10.5%, 6/1/06........................................ 5,650,000 4,599,139
-----------
16,393,765
-----------
DANISH KRONER 5.7%
Kingdom of Denmark, 9%, 11/15/98............................................................... 30,870,000 5,694,807
Kingdom of Denmark, 8%, 5/15/03................................................................ 76,550,000 14,391,842
-----------
20,086,649
-----------
DEUTSCHEMARKS 20.4%
Bayerische Landesbank, 6%, 2/27/06............................................................. 18,150,000 11,803,554
Federal Republic of Germany, 5.25%, 10/20/98................................................... 64,540,000 43,188,610
Federal Republic of Germany, 6%, 2/16/06....................................................... 4,090,000 2,692,075
Landesbank Rheinland-Pfalz Girozentrale Global, 5.75%, 10/16/03................................ 22,075,000 14,461,202
-----------
72,145,441
-----------
FRENCH FRANCS 7.2%
Government of France OAT STRIP, Principal Only, 10/25/04....................................... 64,430,000 8,079,994
Government of France OAT, 7.25%, 4/25/06....................................................... 81,900,000 17,451,486
-----------
25,531,480
-----------
ITALIAN LIRE 11.1%
Republic of Italy, 9.5%, 12/1/99............................................................... 44,000,000,000 31,194,203
Republic of Italy, 8.5%, 4/1/04................................................................ 11,435,000,000 8,060,244
-----------
39,254,447
-----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
8 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPANESE YEN 24.0%
Asian Development Bank, 5.625%, 2/18/02........................................................ 710,000,000 7,211,678
Deutsche Bank AG, 4.375%, 7/16/98.............................................................. 310,000,000 2,822,797
Republic of Finland, 5.25%, 4/16/98............................................................ 200,000,000 1,826,330
Republic of Finland, 6%, 1/29/02............................................................... 1,300,000,000 13,400,560
Republic of Italy, 2.3%, 9/25/98............................................................... 1,000,000,000 8,833,700
Inter-American Development Bank, 2.25%, 2/5/02................................................. 62,000,000 542,917
International Bank for Reconstruction & Development, 4.5%, 6/20/00............................. 1,840,000,000 17,603,103
International Bank for Reconstruction & Development, 5.25%, 3/20/02............................ 322,000,000 3,240,121
International Bank for Reconstruction & Development, 4.75%, 12/20/04........................... 1,991,000,000 19,965,770
Oesterreichische Kontrollbank AG, 6.5%, 9/19/98................................................ 1,000,000,000 9,448,309
-----------
84,895,285
-----------
KOREAN WON 2.7%
AIG International Inc., Promissory Note, Linked to the Korean Won, 9.71%,
2/28/97..................................................................................... 2,490,159,000 2,924,053
AIG International Inc., Promissory Note, Linked to the Korean Won, 9.6%,
5/30/97..................................................................................... 2,490,159,000 2,913,900
J.P. Morgan & Co. Promissory Note, Linked to the Korean Won, 9.825%, 2/5/97.................... 3,305,390,000 3,906,585
-----------
9,744,538
-----------
NEW ZEALAND DOLLARS 3.7%
Government of New Zealand, 8%, 11/15/06........................................................ 17,650,000 13,124,545
-----------
NORWEGIAN KRONER 3.6%
Kingdom of Norway, 9.5%, 10/31/02.............................................................. 16,580,000 3,106,376
Kingdom of Norway, 5.75%, 11/30/04............................................................. 38,205,000 5,909,010
Kingdom of Norway, 6.75%, 1/15/07.............................................................. 22,600,000 3,676,339
-----------
12,691,725
-----------
SPANISH PESETAS 4.1%
Kingdom of Spain, 11.45%, 8/30/98.............................................................. 490,000,000 4,097,606
Kingdom of Spain, 10.3%, 6/15/02............................................................... 570,000,000 5,207,629
Kingdom of Spain, 8%, 5/30/04.................................................................. 633,000,000 5,288,077
-----------
14,593,312
-----------
SWEDISH KRONER 3.0%
Kingdom of Sweden, 6%, 2/9/05.................................................................. 76,000,000 10,753,703
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN DENOMINATED DEBT OBLIGATIONS (COST $351,684,808) 352,864,752
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
9 - SCUDDER INTERNATIONAL BOND FUND
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. DOLLAR DENOMINATED DEBT OBLIGATIONS 0.1%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. DOLLARS 0.1%
U.S. Treasury Bill, 1/23/97.................................................................... 100,000 99,715
U.S. Treasury Bill, 4/24/97.................................................................... 350,000 344,491
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. DOLLAR DENOMINATED DEBT OBLIGATIONS (COST $444,153) 444,206
- --------------------------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS 0.1%
- --------------------------------------------------------------------------------------------------------------------------------
Call on Japanese Yen, strike price JPY 103.92, expire 1/17/97.................................. 2,765,800,000 --
Call on Japanese Yen, strike price JPY 109.91, expire 1/22/97.................................. 938,545,000 1,688
Put on French Francs, strike price FRF 5.1815, expire 3/11/97.................................. 52,120,709 131,344
Put on Deutsche Marks, strike price DEM 1.565,expire 2/6/97.................................... 5,203,800 13,530
Put on Deutsche Marks, strike price DEM 1.57, expire 2/3/97.................................... 5,360,400 12,329
CONTRACTS
-----------
Call on U.S. Treasury Bond Futures, strike price 118, expire 2/22/97........................... 480 97,500
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS (COST $939,373) 256,391
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (COST $353,698,334) (a) 354,195,349
- --------------------------------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $353,886,388. At December 31, 1996, net unrealized
appreciation for all securities based on tax cost was $308,961. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of market value over tax cost
of $5,623,214 and aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $5,314,253.
<CAPTION>
At December 31, 1996 outstanding written options were as follows (Note A):
PRINCIPAL
AMOUNT EXPIRATION STRIKE MARKET
CALL OPTIONS (000'S) DATE PRICE VALUE($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEM........................... 5,531 2/3/97 DEM 1.5319 34,846
DEM........................... 5,406 2/6/97 DEM 1.5199 24,326
NZD........................... 18,465 1/16/97 NZD .7047 80,323
JPY........................... 2,765,800 1/17/97 JPY 103.92 --
JPY........................... 938,545 1/22/97 JPY 109.91 563
-------
Total outstanding written options (Premiums received $644,837)................................. 140,058
=======
<CAPTION>
CURRENCY ABBREVIATIONS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AUD Australian Dollar FRF French Franc JPY Japanese Yen SEK Swedish Kroner
CAD Canadian Dollar GBP British Pound NLG Dutch Guilder USD U.S. Dollar
DEM Deutschemark ITL Italian Lire NZD New Zealand Dollar
The accompanying notes are an integral part of the financial statements.
</TABLE>
10 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1996
ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $353,698,334) (Note A)....................... $354,195,349
Foreign currency at market (identified cost $389,189) (Note A)....................... 394,033
Cash................................................................................. 909
Interest receivable.................................................................. 7,512,485
Receivable for Fund shares sold...................................................... 4,359,857
Unrealized appreciation on forward currency exchange contracts (Notes A & D)......... 328,985
------------
Total assets......................................................................... 366,791,618
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed..................................................... $ 2,141,258
Dividends payable.................................................................... 480,079
Accrued management fee (Note C)...................................................... 283,868
Other accrued expenses (Note C)...................................................... 390,215
Written options at market (premiums received $644,837) (Note A)...................... 140,058
Unrealized depreciation on forward currency exchange contracts (Notes A & D)......... 569,369
------------
Total liabilities.................................................................... 4,004,847
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $362,786,771
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments.......................................................................... 497,015
Written options...................................................................... 504,779
Foreign currency related transactions................................................ (306,491)
Accumulated net realized loss........................................................ (84,163,955)
Paid-in capital...................................................................... 446,255,423
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $362,786,771
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ($362,786,771 / 32,391,260
shares of capital stock outstanding, $.01 par value, 200,000,000 shares ------------
of capital stock authorized)...................................................... $11.20
------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
11 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest (net of withholding taxes of $274,333)...................................... $ 14,699,912
------------
Expenses:
Management fee (Note C).............................................................. 1,903,592
Services to shareholders (Note C).................................................... 550,027
Custodian and accounting fees (Note C)............................................... 309,380
Directors' fees (Note C)............................................................. 18,490
Reports to shareholders.............................................................. 61,726
Auditing............................................................................. 54,181
Legal................................................................................ 15,151
Registration fees.................................................................... 12,238
Interest............................................................................. 7,339
Other................................................................................ 38,130
------------
2,970,254
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,729,658
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments.......................................................................... 9,853,632
Options.............................................................................. 42,470
Futures contracts.................................................................... (4,705,802)
Foreign currency related transactions................................................ (3,106,483)
------------
2,083,817
------------
Net unrealized appreciation during the period on:
Investments.......................................................................... 6,582,696
Written options...................................................................... 19,806
Foreign currency related transactions................................................ 822,797
------------
7,425,299
- -----------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 9,509,116
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,238,774
- -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
12 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
INCREASE (DECREASE) IN NET ASSETS 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income............................................................. $ 11,729,658 $ 47,003,438
Net realized gain (loss) from investment transactions............................. 2,083,817 (12,222,094)
Net unrealized appreciation (depreciation) on investment transactions
during the period.............................................................. 7,425,299 (14,680,712)
------------ ------------
Net increase in net assets resulting from operations.............................. 21,238,774 20,100,632
------------ ------------
Distributions to shareholders:
From net investment income........................................................ (11,729,658) (7,878,363)
------------ ------------
Tax return of capital............................................................. -- (39,125,075)
------------ ------------
Fund share transactions:
Proceeds from shares sold......................................................... 26,461,776 81,445,370
Net asset value of shares issued to shareholders in reinvestment of
distributions.................................................................. 7,445,706 39,214,810
Cost of shares redeemed........................................................... (196,072,165) (487,822,648)
------------ ------------
Net decrease in net assets from Fund share transactions........................... (162,164,683) (367,162,468)
------------ ------------
Decrease in net assets............................................................ (152,655,567) (394,065,274)
------------ ------------
Net assets at beginning of period................................................. 515,442,338 909,507,612
------------------------------
NET ASSETS AT END OF PERIOD....................................................... $362,786,771 $515,442,338
------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period......................................... 46,922,766 79,574,801
------------ ------------
Shares sold....................................................................... 2,364,982 7,198,026
Shares issued to shareholders in reinvestment of distributions.................... 665,053 3,472,904
Shares redeemed................................................................... (17,561,541) (43,322,965)
------------ ------------
Net decrease in Fund shares....................................................... (14,531,506) (32,652,035)
------------------------------
SHARES OUTSTANDING AT END OF PERIOD............................................... 32,391,260 46,922,766
------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
13 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each period and other performance information
derived from the financial statements.
FOR THE PERIOD
JULY 6, 1988
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS)
DECEMBER 31, YEARS ENDED JUNE 30, TO JUNE 30,
1996 1996 1995 1994(A) 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, --------------------------------------------------------------------------------------------
beginning of period.................. $10.98 $11.43 $11.97 $13.57 $13.68 $12.35 $12.08 $11.27 $12.00
--------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income................... .29 .73 .98 .92 1.03 1.08 1.21 1.10 1.00
Net realized and unrealized
gain (loss) on investment
transactions (b)..................... .22 (.45) (.54) (1.22) .52 2.15 .56 .80 (.73)
--------------------------------------------------------------------------------------------
Total from investment operations........ .51 .28 .44 (.30) 1.55 3.23 1.77 1.90 .27
--------------------------------------------------------------------------------------------
Less distributions:
From net investment income.............. (.29) (.12) -- (.91) (1.04) (1.09) (1.21) (1.09) (1.00)
From net realized gains on
investment transactions.............. -- -- -- -- (.62) (.81) (.29) -- --
In excess of net realized gains on
investment transactions.............. -- -- -- (.39) -- -- -- -- --
Tax return of capital................... -- (.61) (.98) -- -- -- -- -- --
--------------------------------------------------------------------------------------------
Total distributions..................... (.29) (.73) (.98) (1.30) (1.66) (1.90) (1.50) (1.09) (1.00)
--------------------------------------------------------------------------------------------
Net asset value, end of --------------------------------------------------------------------------------------------
period............................... $11.20 $10.98 $11.43 $11.97 $13.57 $13.68 $12.35 $12.08 $11.27
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (c).................... 4.62** 2.59 3.92 (2.83) 12.24 28.25 14.88 17.59 2.16**
Ratios and Supplemental Data
Net assets, end of period ($ millions).. 363 515 910 1,231 1,017 542 144 73 13
Ratio of operating expenses, net to
average daily net assets (%)......... 1.33* 1.26 1.30 1.27 1.25 1.25 1.25 1.25 1.00*
Ratio of operating expenses before
expense reductions,
to average daily
net assets (%)....................... 1.33* 1.26 1.30 1.29 1.37 1.57 1.75 2.51 5.59*
Ratio of net investment income to
average net assets (%)............... 5.24* 6.50 8.52 6.86 7.69 8.31 9.48 9.57 8.58*
Portfolio turnover rate (%)............. 336.4* 275.7 318.5 232.9 249.7 147.9 260.1 215.6 103.8*
(a) Based on monthly average of shares outstanding during the period.
(b) Includes exchange gain (loss) of $.01, $.01 and ($.02) for the periods ended June 30, 1991, 1990 and 1989,
previously included in net investment income.
(c) Total returns for certain periods would have been lower had certain expenses not been reduced.
* Annualized ** Not annualized
</TABLE>
14 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder International 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 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, 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 securities and currencies primarily 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 securities and currencies to lock
in the exchange rate component of the purchase price of securities
expected to be purchased 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 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.
15 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
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
manage the duration of the portfolio. In addition, 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 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.
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
16 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
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 June 30,
1996, the Fund had a net tax basis capital loss carryforward of
approximately $83,774,000, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or
until June 30, 2003, ($77,681,000) and June 30, 2004 ($6,093,000), 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. Distributions of net realized gains
to shareholders are recorded on the ex-dividend date.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting
principles. These differences relate primarily to investments in
options, futures, forward contracts, foreign denominated investments 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.
OTHER. Investment security transactions are accounted for on a trade
date basis. 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 six months ended December 31, 1996, purchases and sales of
investment securities (excluding short-term investments) aggregated
$711,088,938, and $873,122,096, respectively.
17 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
The aggregate face value of futures contracts opened and closed during
the six months ended December 31, 1996 was $2,474,521,553.
Transactions in written options for the six months ended December 31,
1996 are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS OPTIONS ON CURRENCIES (000 OMITTED)
- --------------------------------------------------------------------------------------------------------------
NUMBER OF PREMIUMS PREMIUMS
CONTRACTS RECEIVED ($) DEM NZD AUD RECEIVED ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period....... 220 $170,365 122,833 -- 20,794 $890,379
Written................... 125 575,838 135,909 83,165 -- 1,345,956
Closed.................... (345) (746,203) (86,979) (6,377) -- (784,609)
Exercised................. -- -- -- (46,723) (20,794) (275,780)
Expired................... -- -- (160,826) (11,600) -- (1,021,457)
End of ----------- ----------- ----------- ----------- ----------- -----------
Period.................... -- $ -- 10,937 18,465 -- $154,489
=========== =========== =========== =========== =========== ===========
OPTIONS ON CURRENCIES (000 OMITTED) (CONTINUED)
- ----------------------------------------------------------------------------------
PREMIUMS
GBP JPY SEK RECEIVED ($)
--------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning of Period....... 12,950 -- 131,462 $ 248,045
Written................... -- 9,235,945 -- 1,201,664
Closed.................... -- (2,765,800) (51,597) (537,200)
Exercised................. (12,950) -- -- (63,208)
Expired................... -- (2,765,800) (79,865) (358,953)
----------- ---------- ------------ -----------
End of
Period.................... -- 3,704,345 -- $ 490,348
=========== =========== =========== ===========
</TABLE>
C. RELATED PARTIES
Under the Investment Management Agreement (the "Management Agreement")
with Scudder, Stevens & Clark, Inc. (the "Adviser") the Adviser directs
the investments of the Fund in accordance with its investment objective,
policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio
management services, the Adviser provides certain administrative
services in accordance with the Management Agreement. The Management
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
18 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
be paid by the Adviser. The management fee payable under the Management
Agreement is equal to an annual rate of 0.85% on the first
$1,000,000,000 of average daily net assets and 0.80% of such net assets
in excess of $1,000,000,000, computed and accrued daily and payable
monthly. For the six months ended December 31, 1996, the fee pursuant to
the Management Agreement amounted to $1,903,592, which is equivalent to
an annual effective rate of .85% 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 six months ended December 31, 1996, the amount charged by SSC
aggregated $365,465, of which $61,580 is unpaid at December 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 six months
ended December 31, 1996, the amount charged to the Fund by STC
aggregated $41,058, of which $7,743 is unpaid at December 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 six months ended December 31, 1996, the amount charged
to the Fund by SFAC aggregated $177,783, of which $28,795 is unpaid at
December 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 six months ended December 31, 1996, Directors' fees
and expenses aggregated $18,490.
D. COMMITMENTS
As of December 31, 1996 the Fund had entered into the following forward
currency exchange contracts resulting in net unrealized depreciation of
($240,384).
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (U.S.$)
- --------------------------------- ------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
CAD 10,642,000 USD 7,872,464 2/18/97 85,714
DEM 16,839,000 USD 11,245,117 2/25/97 (280,023)
DEM 3,606,656 USD 2,326,456 1/21/97 16,853
FRF 57,011,802 USD 11,245,117 2/25/97 226,418
ITL 3,567,162,693 USD 2,326,456 1/21/97 (21,087)
JPY 883,945,804 USD 7,872,464 2/18/97 (204,141)
NLG 12,746,300 USD 7,336,000 2/24/97 (64,118)
-------
(240,384)
=======
</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.
19 - SCUDDER INTERNATIONAL BOND FUND
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS OF
SCUDDER INTERNATIONAL BOND FUND:
We have audited the accompanying statement of assets and liabilities of
Scudder International Bond Fund including the investment portfolio, as
of December 31, 1996, and the related statement of operations for the
six-month period then ended, the statements of changes in net assets for
the six-month period then ended and for the year ended June 30, 1996,
and the financial highlights for the six months ended December 31, 1996,
for each of the seven years in the period ended June 30, 1996 and for
the period July 6, 1988 (commencement of operations) to June 30, 1989.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by
correspondence with the custodian. 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 International Bond Fund as of December 31,
1996, the results of its operations for the six-month period then ended,
the changes in its net assets for the six-month period then ended and
for the year ended June 30, 1996, and the financial highlights for the
six months ended December 31, 1996, for each of the seven years in the
period ended June 30, 1996 and for the period July 6, 1988 (commencement
of operations) to June 30, 1989, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 14, 1997
20 - SCUDDER INTERNATIONAL 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, Visiting Professor,
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
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Gerald J. Moran*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Isabel Saltzman*
Vice President
*Scudder, Stevens & Clark, Inc.
21 - SCUDDER INTERNATIONAL 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 Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- -----------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The 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 in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *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.
22 - SCUDDER INTERNATIONAL BOND 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.
23 -SCUDDER INTERNATIONAL 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
