Scudder
Global Bond
Fund
Annual Report
October 31, 1997
Pure No-Load(TM) Funds
A fund which seeks total return with an emphasis on current income by investing
primarily in high-grade bonds denominated in foreign currencies and the U.S.
dollar. Capital appreciation is a secondary objective.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o Scudder Global Bond Fund provided a 0.66% total return for the 12-month period
ended October 31, 1997, reflecting a challenging environment for U.S. investors
in foreign fixed-income securities.
o A strongly rising U.S. dollar dominated the global currency markets for most
of the year, diminishing returns for U.S. investors in foreign markets. The Fund
increased its dollar exposure during the period.
o Several countries in Southeast Asia devalued their currencies late in the
period. The effect was generally negative for emerging market bonds as a whole.
Table of Contents
3 Letter from the Fund's Chairman 18 Financial Highlights
4 Performance Update 19 Notes to Financial Statements
5 Portfolio Summary 25 Report of Independent Accountants
6 Portfolio Management Discussion 26 Shareholder Meeting Results
10 Glossary of Investment Terms 28 Officers and Directors
11 Investment Portfolio 29 Investment Products and Services
15 Financial Statements 30 Scudder Solutions
2 - Scudder Global Bond Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for Scudder Global Bond Fund
for the year ended October 31, 1997. The 12-month period presented a number of
hurdles for U.S. investors in overseas fixed-income securities, including
fluctuating U.S. interest rates, a stronger U.S. dollar, and heightened
volatility in the emerging markets.
The world's bond markets have become increasingly challenging for U.S.
investors, with markets now more closely aligned in terms of the yields they
offer, their appreciation potential and risk, and the way in which they respond
to events in other parts of the world. Through rigorous fundamental research,
Scudder Global Bond Fund diversifies portfolio assets among developed and
developing markets, seeking total return with an emphasis on current income
while also actively managing the portfolio's currency and interest-rate
exposure.
We would like to take this opportunity to introduce a newcomer to Scudder's
mutual fund lineup: Scudder International Growth and Income Fund. The Fund
employs a yield-oriented approach to international investing and seeks to
provide long-term growth of capital plus current income. Investors who desire
international equity exposure but who wish to take a more conservative approach
may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States. For a complete listing of
Scudder's mutual fund offerings, see page 29.
Thank you for your continued investment in Scudder Global Bond Fund. We
believe the Fund remains an appropriate vehicle for investors seeking exposure
to the opportunities for income and capital appreciation to be found in the
world's fixed-income markets. If you have questions about your account, please
call our Investor Relations representatives at 1-800-225-2470; they will be
happy to assist you. You can also obtain information by visiting our Internet
web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman
Scudder Global Bond Fund
3 - Scudder Global Bond Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER EMERGING MARKETS GROWTH FUND
TICKER SYMBOL: SSTGX
- --------------------------------------------
1 Year $ 10,066 0.66% 0.66%
5 Year $ 11,792 17.92% 3.35%
Life of Fund* $ 13,560 35.60% 4.67%
- --------------------------------------------
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
- --------------------------------------------
1 Year $ 10,262 2.62% 2.62%
5 Year $ 14,456 44.56% 7.65%
Life of Fund* $ 18,061 80.61% 9.38%
- --------------------------------------------
*The Fund commenced operations on March 1, 1991.
Index comparisons begin March 31, 1991.
- ----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- ----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED OCTOBER 31
SALOMON BROTHERS WORLD
GOVERNMENT BOND INDEX
Year Amount
- ----------------------
3/91* $10,000
'91 $10,970
'92 $12,493
'93 $13,992
'94 $14,498
'95 $16,704
'96 $17,600
'97 $18,061
SCUDDER GLOBAL BOND FUND
Year Amount
- ----------------------
3/91* $10,000
'91 $10,653
'92 $11,487
'93 $12,307
'94 $12,277
'95 $12,944
'96 $13,458
'97 $13,546
SALOMON BROTHERS CURRENCY-
HEDGED WORLD GOVERNMENT
BOND INDEX (1-3 YEARS)**
Year Amount
- ----------------------
3/91* $10,000
'91 $10,075
'92 $10,896
'93 $11,702
'94 $12,058
'95 $12,748
12/95 $13,625
The unmanaged Salomon Brothers World Government Bond Index consists of
worldwide fixed-rate government bonds with remaining maturities greater than
one year. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses.
- ----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- ----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
<TABLE>
<CAPTION>
1991* 1992 1993 1994 1995 || 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE........... $12.01 $11.84 $11.68 $10.78 $10.53 || $10.25 $ 9.71
INCOME DIVIDENDS.......... $ .76 $ 1.08 $ .95 $ .87 $ .80 || $ .67 $ .59
CAPITAL GAINS ||
DISTRIBUTIONS............. $ -- $ -- $ .02 $ -- $ -- || $ -- $ --
FUND TOTAL RETURN (%)**... 6.65 7.83 7.14 -.25 5.43 || 3.97 .66
INDEX TOTAL RETURN (%).... 5.56 7.56 6.08 1.87 9.68 || 5.36 2.62
</TABLE>
On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global Income
Fund and its investment objective was to provide high current income through
short-term instruments. Since adopting its current objectives, the cumulative
return is 3.13.
** Prior to December 27, 1995, the Salomon Brothers Currency-Hedged World
Government Bond Index (1-3 years) was used as a comparative index.
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
expenses, the total returns for the Fund for the one year, five year, and
life of Fund periods would have been lower.
4 - Scudder Global Bond Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1997
- ---------------------------------------------------------------------------
GEOGRAPHICAL EXPOSURE
- ---------------------------------------------------------------------------
U.S. 22.7%
Italy 11.5%
Germany 6.9%
U.K. 6.6%
Spain 6.3%
Ireland 5.8%
France 5.4%
Australia 4.3%
Norway 4.1%
Supranational 3.9%
Japan 3.6%
Canada 3.2%
Denmark 1.8%
Venezuela 1.8%
Sweden 1.7%
Egypt 1.6%
South Africa 1.3%
New Zealand 1.2%
Panama 1.2%
Morocco 1.2%
Poland 1.1%
Hungary 1.1%
Other 1.7%
- ------------------------------------
100%
- ------------------------------------
The Fund has broad exposure to
more than 20 overseas bond markets
in addition to the U.S.
- --------------------------------------------------------------------------
INTEREST RATE EXPOSURE
- --------------------------------------------------------------------------
U.S. 23.9%
Italy 11.4%
Japan 8.5%
New Zealand 7.0%
Germany 6.9%
Ireland 5.8%
France 5.4%
U.K. 5.4%
Spain 4.2%
Australia 4.2%
Norway 4.1%
Denmark 1.8%
Sweden 1.7%
Canada 1.6%
Egypt 1.6%
South Africa 1.3%
Morocco 1.2%
Hungary 1.1%
Poland 1.1%
Indonesia 1.0%
Other 0.8%
- ------------------------------------
100%
- ------------------------------------
The Fund has taken a cautious
approach to interest rate risk.
- --------------------------------------------------------------------------
CURRENCY EXPOSURE (a)
- --------------------------------------------------------------------------
Australia 0.4%
Canada 1.7%
Denmark 1.9%
Egypt 1.6%
France 5.5%
Germany 5.8%
Hungary 1.3%
Ireland 5.9%
Italy 9.7%
Japan 9.1%
Mexico 0.9%
Morocco 1.2%
New Zealand 3.6%
Norway 4.1%
Poland 1.1%
South Africa 1.3%
Spain 4.2%
Sweden 0.7%
Switzerland -13.7%
U.K. 5.4%
U.S. 48.3%
- ------------------------------------
100%
- ------------------------------------
Exposure to the U.S. Dollar has
continued to increase, given the
strength of the domestic economy.
(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 11.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
5 - Scudder Global Bond Fund
<PAGE>
Portfolio Management Discussion
The following interview with Gary Johnson, Lead Portfolio Manager of Scudder
Global Bond Fund, provides a look at the Fund's fiscal year 1997 performance and
strategy, as well as management's outlook for the coming year.
Q: What was the global investment environment like for bonds during the past
year?
A: In the United States, economic activity was vigorous and widespread. Consumer
spending rose, unemployment fell, sales of new homes set records, and
manufacturing capacity became increasingly strained. Anticipating a potential
spike in inflation, the Federal Reserve Board raised short-term interest rates
by a quarter of a percentage point in late March. The adjustment dampened bond
market returns momentarily; bonds regained lost ground later in the year as
evidence of noninflationary growth bolstered investor confidence.
In Europe, the peripheral markets of Spain, Italy, and Sweden, buoyed by
improving fiscal deficits and a benign inflation outlook, continued to
outperform the core markets of Germany and France. Prospects for a broader
European Monetary Union (EMU) continued to narrow yield spreads among potential
participants. Earlier in the decade, when EMU was more theory than reality, less
fiscally virtuous countries such as Italy and Spain paid a stiff yield premium
to borrow in the markets. After the exchange rate mechanism crumbled in late
1992, Italian 10-year bonds traded as high as seven percentage points above
German bonds. Today, that spread has narrowed to 60 basis points (less than
two-thirds of one percentage point). In part, this reflects Italy's success at
curbing inflation and the growth of government borrowing. But it also reflects
the market's perception that Italy and Germany will one day share the same
currency. Strong performance also came from the U.K. market this year, as talk
of eventual British participation in EMU led to a dramatic rally in long-term
bonds.
Japan's economy seemed to be improving until a tax increase in April hurt that
country's already beleaguered consumers. Part of the Japanese government's plan
to reduce the bulging budget deficit by cutting spending and raising taxes, the
higher consumption tax coincides with the announcement of major deregulation
measures related to land reform and Japan's troubled banking sector. The economy
contracted at more than an 11% annual rate in the second quarter and bonds
rallied. As Japan's economic situation worsened over the summer, we increased
our investment stake. Although the extremely low yields on these securities
effectively capped their return potential, our Japanese position helped soften
the impact of declines in emerging markets.
Q: What about the emerging markets?
A: This year, investors witnessed how many of the emerging markets can respond
to negative economic events in any one emerging market. In the roughly two years
leading up to this summer, Japan and China enjoyed the benefits of declining
currencies relative to the U.S. dollar -- the chief benefit being cheaper
exports relative to other Southeast Asian countries, many of whom had
historically "pegged" their currencies to the U.S. dollar. The pressure for
countries such as Thailand, Indonesia, and Malaysia to become more competitive
through cheaper exports culminated this year in a series of currency
devaluations. Several monetary policy missteps in the aftermath of the
6 - Scudder Global Bond Fund
<PAGE>
devaluations left investors wary of emerging markets in general.
Q: How did Scudder Global Bond Fund perform relative to its benchmark, the
Salomon World Government Bond Index, in fiscal 1997?
A: The Fund's 0.66% return compares with a 2.62% total return for the unmanaged
index. The Fund's underperformance can be attributed largely to our relatively
conservative duration stance in the United States, and the fact that we were
underweight U.S. bonds in general. The Federal Reserve has demonstrated a
willingness to raise interest rates should persistent economic growth put
pressure on prices. They have also stated that noninflationary growth is
something on the order of 2.5% per annum, yet the economy has grown at better
than 3% all year. As a result, we were cautious with our U.S. holdings at a time
when that market was rallying.
Q: How did the Fund perform relative to its peers?
A: The average return of the 137 global bond funds tracked by Lipper Analytical
Services was 4.69% for the 12-month period. Many competing funds held
substantial stakes in the higher-yielding emerging markets during the year,
which exposed them to significantly greater volatility in October, when the
emerging markets gave back much of their earlier gains. During that month, the
Fund's return was 0.65%, versus -0.34% on average for the 149 global bond funds
tracked by Lipper.
Q: What were some of the positive factors contributing to fund performance this
year?
A: The chief contributor to positive performance was the Fund's stake in the
United States. With the yield advantage in "peripheral" European markets such as
Spain and Italy disappearing and with heightened volatility in the emerging
markets, investors increasingly have turned to the United States and Japan. Of
the developed countries, the United States now has one of the highest-yielding
bond markets -- along with a shrinking budget deficit, a strong currency, and
negligible inflation. The Fund's U.S. holdings (20% of net assets as of October
31, 1997) aided overall performance during the year, despite the market's
pullback in March related to the Fed rate increase.
Q: What factors detracted from Fund performance?
A: The strength of the U.S. dollar in the first half of the year hurt overall
Fund performance, because at that time the Fund had insufficient dollar
exposure. Changes in currency exchange rates can have a significant impact on
returns to U.S. holders of foreign bonds. When the value of the dollar rises
versus the currency in which your investment is held, the gain you may have
received "on paper" from that investment is reduced and can be turned into a
loss. Since the spring, we have employed a quantitative approach to currency
exposure, designed to keep the short-term impact on the Fund of a fluctuating
dollar within a relatively narrow range, while also seeking to minimize the
expense of managing currency risk.
7 - Scudder Global Bond Fund
<PAGE>
An additional negative came from our emerging-market holdings, which, although
relatively small (less than 10% of net assets at mid-year) and outside of
Southeast Asia, were nevertheless affected by events in that corner of the
world.
Q: How would you summarize Fund strategy going forward?
A: In the coming months, we expect to continue to hold emerging market bonds as
our primary investment in improving country fundamentals. In our view, bonds
from markets such as Argentina, Poland, and Mexico -- where ongoing reforms are
creating more favorable terms for investors -- are the most likely to receive
credit rating upgrades. We also expect to take advantage of opportunities in
select emerging markets that we believe are now oversold as a result of the
trouble in Southeast Asia.
In Europe, we expect to focus more on the peripheral markets, such as Italy,
Spain, and Sweden, than on the larger, principal markets. Although the secondary
markets have been the undisputed leaders in performance for the bulk of this
decade, we believe there is still opportunity for rates to fall and bond prices
to rise, especially in the short-end of the yield curve, as markets position for
European Monetary Union.
In the United States, we expect to maintain a somewhat cautious stance with
respect to interest rate exposure. Unless growth slows from the roughly 3% that
we've seen in the previous four calendar quarters, we believe the Federal
Reserve may see fit to raise rates in the new year. We intend to overweight the
8 - Scudder Global Bond Fund
<PAGE>
dollar, however, given the relative strength of the U.S. economy.
After this summer's rally, the Japanese market is now considered a relatively
safe haven, given that leading economic indicators have sunk to levels not seen
since before the recession of the early 1990s. At the same time, the more
burdensome tax structure in Japan is likely to quell domestic consumption.
Nevertheless, yields of less than 2% on 10-year bonds provide little room for
further gain. In the coming months, we intend to reduce our Japanese position.
With a stake in the world's developed and developing markets and a cautious eye
toward the future direction of interest rates, we believe Scudder Global Bond
Fund is well positioned to make the most of the fixed-income opportunities that
lie ahead.
Scudder Global
Bond Fund:
A Team Approach to Investing
Scudder Global Bond Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Gary P. Johnson assumed responsibility for the Fund's
day-to-day management and investment strategies in 1997. Gary, who has 16
years of investment industry experience, joined Scudder in 1987. Adam M.
Greshin, Portfolio Manager, joined Scudder in 1986 as an international bond
analyst and is Product Leader for Scudder's global and international
fixed-income investing.
9 - Scudder Global Bond Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing or discounted government or
corporate security that typically requires the
issuer to pay a fixed amount of interest for a
specified time, usually a number of years, then
repay the bondholder the face amount (principal)
of the bond. Bondholders have an IOU from an
issuer but no ownership privileges, as with
stockholders.
CURRENCY RISK The risk of loss to a portfolio because of changes
in the value of different currencies. For a U.S.
investor in overseas markets, the risk that a
rising dollar relative to foreign currencies will
reduce returns.
DURATION A measure of a portfolio's sensitivity to changes
in interest rates. Generally, the longer the
duration (expressed in years), the greater the
sensitivity to a change in rates.
EMERGING MARKETS The rapidly growing stock and bond markets of
newly industrialized countries, such as Brazil or
Indonesia.
EXCHANGE RATE The price at which the currency of one country can
be converted to the currency of another.
GROSS DOMESTIC PRODUCT The value of a country's annual goods and services
(GDP) produced by the people, businesses, governments,
and property located in that country.
VOLATILITY The tendency of a security, commodity, or market
to rise and fall in price over time. Volatility is
inherent in almost all investments but differs in
degree from investment to investment and from
market to market. For example, in the United
States, money-market mutual funds strive to
maintain a fixed price and thus experience very
little volatility, if any. By comparison, bonds
from the emerging markets can be extremely
volatile.
YIELD The dividends or interest paid on a security,
expressed as a percentage of the security's
current price.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
10 - Scudder Global Bond Fund
<PAGE>
Investment Portfolio as of October 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 2.8%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Dollars
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/97 at 5.7%, to be
repurchased at $3,698,756 on 11/3/97, collateralized by a $3,615,000 U.S. Treasury --------------
Bond, 6.375%, 1/15/00 (Cost $3,697,000) ................................................ 3,697,000 3,697,000
--------------
Foreign Denominated Debt Obligations 76.0%
- ------------------------------------------------------------------------------------------------------------------------------
Australian Dollars 4.2%
Commonwealth of Australia, 10%, 2/15/06 ................................................. 6,320,000 5,600,814
British Pounds 5.4% --------------
United Kingdom Treasury Bond, 8%, 12/7/15 ............................................... 3,700,000 7,181,033
Canadian Dollars 1.6% --------------
Rogers Cantel Mobile Communications Inc., 10.5%, 6/1/06 ................................. 2,600,000 2,196,842
Danish Kroner 1.8% --------------
Kingdom of Denmark, 7%, 11/15/07 ........................................................ 15,200,000 2,457,790
Deutsche Marks 6.9% --------------
Federal Republic of Germany, 8.875%, 12/20/00 ........................................... 5,600,000 3,633,328
Federal Republic of Germany, 6%, 2/16/06 ................................................ 9,270,000 5,553,293
--------------
9,186,621
--------------
Egyptian Pounds 1.6%
Citibank Time Deposit linked to Egyptian Pound, 8.4%, 11/3/97 ........................... 2,307,294 677,916
Citibank Time Deposit linked to Egyptian Pound, 8.4%, 11/6/97 ........................... 1,741,587 511,682
Citibank Time Deposit linked to Egyptian Pound, 8.35%, 11/12/97 ......................... 3,017,056 886,460
--------------
2,076,058
--------------
French Francs 5.4%
Government of France, 8.5%, 10/25/08 .................................................... 34,100,000 7,246,795
Hungarian Forints 1.1% --------------
Government of Hungary, 23.5%, 11/6/97 ................................................... 291,000,000 1,496,756
Indonesian Rupiahs 1.0% --------------
J.P. Morgan & Co. Time Deposit linked to Indonesian Rupiah, 14.16%, 11/12/97 ............ 4,997,621,679 1,360,750
Irish Pounds 5.8% --------------
Republic of Ireland, DIBOR less .04% (6.2%), 4/19/00 .................................... 2,334,000 3,503,794
Republic of Ireland, 6.5%, 10/18/01 ..................................................... 2,750,000 4,276,232
--------------
7,780,026
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Global Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Italian Lire 11.5%
Republic of Italy, 8.5%, 8/1/99 ....................................................... 15,835,000,000 9,736,855
Republic of Italy, 8.5%, 1/1/04 ....................................................... 8,240,000,000 5,476,969
--------------
15,213,824
--------------
Japanese Yen 8.4%
European Investment Bank, 3%, 9/20/06 ................................................. 400,000,000 3,639,385
Japan Development Bank, 2.875%, 12/20/06 .............................................. 530,000,000 4,778,147
Kingdom of Spain, 3.1%, 9/20/06 ....................................................... 307,000,000 2,798,330
--------------
11,215,862
--------------
Mexican Pesos 0.4%
Certificados de la Tesoreria, Zero Coupon, 12/4/97 .................................... 5,064,870 589,012
Moroccan Dirham 1.2% --------------
Citibank Time Deposit linked to Moroccan Dirham, 8%, 12/1/97 .......................... 15,068,800 1,591,840
New Zealand Dollars 7.0% --------------
Federal National Mortgage Association Global Note, 7.25%, 6/20/02 ..................... 6,610,000 4,124,750
Government of Canada, 6.625%, 10/3/07 ................................................. 3,439,000 2,097,853
Government of New Zealand, 8%, 7/15/98 ................................................ 2,570,000 1,603,142
International Bank for Reconstruction & Development, 9%, 7/8/99 ....................... 2,400,000 1,522,277
--------------
9,348,022
--------------
Norwegian Kroner 4.1%
Kingdom of Norway, 6.75%, 1/15/07 ..................................................... 36,000,000 5,473,294
Polish Zlotys 1.1% --------------
Morgan Guaranty Trust Co. Time Deposit linked to Polish Zloty, 24.68%, 11/21/97 ....... 2,571,000 738,409
Morgan Guaranty Trust Co. Time Deposit linked to Polish Zloty, 24%, 11/21/97 .......... 2,550,750 738,068
--------------
1,476,477
--------------
South African Rands 1.3%
J.P. Morgan Time Deposit linked to South African Rand, 15.25%, 11/10/97 ............... 8,441,541 1,753,722
Spanish Pesetas 4.2% --------------
Kingdom of Spain, 9.4%, 4/30/99 ....................................................... 560,000,000 4,076,739
Kingdom of Spain, 10%, 2/28/05 ........................................................ 180,000,000 1,535,951
--------------
5,612,690
--------------
Swedish Kronor 1.7%
Kingdom of Sweden, 6%, 2/9/05 ......................................................... 16,900,000 2,225,009
Turkish Lire 0.3% --------------
J.P. Morgan & Co. Time Deposit linked to Turkish Lira, 79.5%, 12/30/97 ................ 65,311,200,000 359,958
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $102,243,374) 101,443,195
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Global Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated Debt Obligations 21.0%
- ------------------------------------------------------------------------------------------------------------------------------
Cedulas Hipotecarias, LIBOR plus .29% (8.791%), 9/1/00 ............................. 1,300,000 1,279,664
Imperial Credit Industries, Inc., 9.875%, 1/15/07 .................................. 460,000 453,100
Midland Bank PLC, 7.625%, 6/15/06 .................................................. 1,500,000 1,581,585
Republic of Panama, Past Due Interest Bond, LIBOR plus .8125% (6.688%), 7/17/16 .... 1,027,130 754,941
Republic of Panama, 8.875%, 9/30/27 ................................................ 1,000,000 850,000
Republic of Venezuela, Debt Conversion Bond, Floating Rate Bond, Series DL,
LIBOR plus .875% (6.75%), 12/18/07 ................................................ 2,750,000 2,385,625
Tenet Healthcare Corp., 8%, 1/15/05 ................................................ 550,000 555,500
Time Warner Inc., 9.125%, 1/15/13 .................................................. 4,300,000 5,081,180
U.S. Treasury Note, 6%, 8/15/99 .................................................... 10,500,000 10,560,690
U.S. Treasury Note, 5.875%, 11/15/99 ............................................... 3,850,000 3,866,246
Webster Financial Corp., 9.36%, 1/29/27 ............................................ 500,000 553,526
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Debt Obligations (Cost $27,721,182) 27,922,057
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost $133,661,556) 133,062,252
- ------------------------------------------------------------------------------------------------------------------------------
Purchased Options 0.2%
- ------------------------------------------------------------------------------------------------------------------------------
Call on Japanese Yen, strike price 118.2, expires 12/2/97 ..........................JPY 827,400,000 56,495
Put on Australian Dollars, strike price .7189, expires 12/10/97 ....................AUD 3,500,000 73,500
Put on Deutsche Marks, strike price 1.8057, expires 1/22/98 ........................DEM 14,000,000 42,000
Put on Italian Lire, strike price 1786, expires 1/7/98 .............................ITL 26,400,000,000 52,008
Put on New Zealand Dollars, strike price .614, expires 12/3/97 .....................NZD 3,277,000 13,436
Put on New Zealand Dollars, strike price .6224, expires 11/7/97 ....................NZD 11,500,000 48,162
Number of
Contracts
---------------
Put on Eurolira, strike price 92.75, expires 12/16/97 .............................. 670 9,880
Tokyo Stock Exchange Put on Japanese Yen, strike price 124, expires 12/9/97 ........ 21 3,490
Put on Eurodollars, strike price 93.75, expires 12/16/97 ........................... 80 1,000
Put on Eurodollars, strike price 94, expires 12/15/97 .............................. 540 13,500
- ------------------------------------------------------------------------------------------------------------------------------
Total Purchased Options (Cost $642,505) 313,471
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $134,304,061) (a) 133,375,723
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Global Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $134,304,061. At October 31,
1997, net unrealized depreciation for all securities based on tax cost was
$928,338. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $2,531,971 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$3,460,309.
At October 31, 1997, outstanding written options were as follows:
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value
- ------------ -------------------------------------------------------
AUD ...................... 3,500 12/11/97 AUD .7408 2,100
NZD ...................... 11,500 11/10/97 NZD .64 1,173
NZD ...................... 3,277 12/4/97 NZD .6482 2,130
Number of
Contracts
---------
MATIF Notionnel Futures .. 84 11/28/97 FRF 99 42,089
------
Total outstanding written options (Premiums received $150,986) ......... 47,492
------
Currency Abbreviations
- ------------------------------------------------------------------
AUD Australian Dollar ITL Italian Lira
CHF Swiss Franc JPY Japanese Yen
DEM Deutsche Mark MXP Mexican Peso
FRF French Franc NOK Norwegian Kroner
GBP British Pound NZD New Zealand Dollar
HUF Hungarian Forints SEK Swedish Krona
IND Indonesian Rupiah USD U.S. Dollar
The accompanying notes are an integral part of the financial statements.
14 - Scudder Global Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1997
<TABLE>
Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $133,661,556) .................. $ 133,062,252
Purchased options, at market (identified cost $642,505) ................ 313,471
Foreign currency, at market (identified cost $99,631) .................. 100,649
Interest receivable .................................................... 3,297,261
Receivable on investments sold ......................................... 13,890,175
Receivable for when-issued and forward delivery securities sold ........ 1,072,500
Receivable on Fund shares sold ......................................... 7,015
Unrealized appreciation on forward currency exchange contracts ......... 531,344
Other assets ........................................................... 9,314
----------------
Total assets 152,283,981
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 13,925,358
Payable for when-issued and forward delivery securities ................ 1,072,500
Dividends payable ...................................................... 205,787
Payable for Fund shares redeemed ....................................... 742,221
Accrued management fee ................................................. 22,420
Other payables and accrued expenses .................................... 175,508
Written options, at market (premiums received $150,986) ................ 47,492
Unrealized depreciation on forward currency exchange contracts ......... 979,230
----------------
Total liabilities ...................................................... 17,170,516
----------------------------------------------------------------------------------------------
Net assets, at market value $ 135,113,465
----------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments ......................................................... (599,304)
Options ............................................................. (225,540)
Foreign currency related transactions ............................... (446,598)
Accumulated net realized loss .......................................... (8,283,332)
Paid-in capital ........................................................ 144,668,239
----------------------------------------------------------------------------------------------
Net assets, at market value $ 135,113,465
----------------------------------------------------------------------------------------------
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($135,113,465 /
13,913,602 shares of capital stock outstanding, $.01 par value, ----------------
300,000,000 shares authorized) ...................................... $9.71
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Global Bond Fund
<PAGE>
Statement of Operations
year ended October 31, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $59,791) .................... $ 11,836,620
----------------
Expenses:
Management fee ......................................................... 1,269,569
Services to shareholders ............................................... 544,605
Custodian and accounting fees .......................................... 279,487
Directors' fees and expenses ........................................... 50,590
Reports to shareholders ................................................ 54,747
Auditing ............................................................... 91,642
Legal .................................................................. 14,907
Registration fees ...................................................... 20,816
Other .................................................................. 29,195
----------------
Total expenses before reductions ....................................... 2,355,558
Expense reductions ..................................................... (664,865)
----------------
Expenses, net .......................................................... 1,690,693
----------------------------------------------------------------------------------------------
Net investment income 10,145,927
----------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................ (7,830,292)
Options ................................................................ 1,518,785
Futures contracts ...................................................... (951,057)
Foreign currency related transactions .................................. 465,160
----------------
(6,797,404)
Net unrealized appreciation (depreciation) during the period on:
Investments ............................................................ (2,188,455)
Options ................................................................ (1,180,202)
Foreign currency related transactions .................................. (212,546)
----------------
(3,581,203)
----------------------------------------------------------------------------------------------
Net loss on investment transactions (10,378,607)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (232,680)
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Global Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 10,145,927 $ 18,417,604
Net realized loss from investment transactions ............ (6,797,404) (9,160,980)
Net unrealized depreciation on investment transactions
during the period ...................................... (3,581,203) (1,385,338)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ................................................ (232,680) 7,871,286
-------------- --------------
Distributions to shareholders from:
Net investment income ..................................... (2,459,944) (11,459,193)
-------------- --------------
Tax return of capital ..................................... (7,685,983) (6,958,411)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................. 26,565,023 18,750,629
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 7,206,681 14,288,523
Cost of shares redeemed ................................... (105,683,539) (162,428,423)
-------------- --------------
Net decrease in net assets from Fund share transactions ... (71,911,835) (129,389,271)
-------------- --------------
Decrease in net assets .................................... (82,290,442) (139,935,589)
Net assets at beginning of period ......................... 217,403,907 357,339,496
-------------- --------------
Net assets at end of period ............................... $135,113,465 $217,403,907
-------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................. 21,216,085 33,924,422
-------------- --------------
Shares sold ............................................... 2,733,367 1,831,418
Shares issued to shareholders in reinvestment of
distributions ............................................. 736,022 1,396,784
Shares redeemed ........................................... (10,771,872) (15,936,539)
-------------- --------------
Net decrease in Fund shares ............................... (7,302,483) (12,708,337)
-------------- --------------
Shares outstanding at end of period ....................... 13,913,602 21,216,085
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Global Bond Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
March 1, 1991
(commencement of
operations) to
Years Ended October 31, October 31,
1997 1996 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Net asset value, beginning of period ........ $10.25 $10.53 $10.78 $11.68 $11.84 $12.01 $12.00
Income from investment operations: -------------------------------------------------------------------------------------
Net investment income ....................... .59 .67 .80 .87 .95 1.08 .76
Net realized and unrealized gain
(loss) on investment transactions ........ (.54) (.28) (.25) (.90) (.14) (.17) .01
-------------------------------------------------------------------------------------
Total from investment operations ............ .05 .39 .55 (.03) .81 .91 .77
Less distributions from: -------------------------------------------------------------------------------------
Net investment income ....................... (.14) (.42) (.36) (.02) (.95) (1.08) (.76)
Net realized gains on investments ........... -- -- -- -- (.02) -- --
Tax return of capital ....................... (.45) (.25) (.44) (.85) -- -- --
-------------------------------------------------------------------------------------
Total distributions ......................... (.59) (.67) (.80) (.87) (.97) (1.08) (.76)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Net asset value, end of period .............. $9.71 $10.25 $10.53 $10.78 $11.68 $11.84 $12.01
-------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........................ 0.66 3.97 5.43 (.25) 7.14 7.83 6.65**
Ratios and Supplemental Data
Net assets, end of period ($millions) ....... 135 217 357 560 1,041 1,369 205
Ratio of operating expenses, net to
average daily net assets (%) ............ 1.00 1.00 1.00 1.00 1.00 1.00 1.00*
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) ..................... 1.39 1.28 1.20 1.15 1.11 1.23 1.89*
Ratio of net investment income to
average daily net assets (%) ............. 6.00 6.67 7.73 7.76 8.10 8.94 9.97*
Portfolio turnover rate (%) ................. 256.5 335.7 182.8 272.4 259.8 274.2 26.1*
</TABLE>
* Annualized
** Not annualized
(a) Total returns would have been lower had certain expenses not been reduced.
On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current
income through short-term instruments. Financial information prior to
December 27, 1995 should not be considered representative of the present
Fund.
18 - Scudder Global Bond Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Global Bond Fund (the "Fund") is a non-diversified series of Scudder
Global Fund, Inc., a Maryland corporation registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The objective of the Fund is to provide total return with an emphasis on current
income by investing primarily in high-grade bonds denominated in foreign
currencies and the U.S.
dollar.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities other than money market securities
are valued by pricing agents approved by the Officers of the Fund, which
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Money market instruments purchased with an original 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 repurchase price.
When-issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on currencies as a
hedge against potential adverse price movements in the value of portfolio
assets. In addition, during the period, the Fund purchased call options and
wrote put options on currencies to lock in the purchase price of a security or
currency which it expects to purchase in the near future and to enhance
potential gain. If the Fund writes an option and the option expires unexercised,
the Fund will realize income, in the form of a capital gain, to the extent of
the amount received for the option (the "premium"). If the Fund elects to close
out the option it would recognize a gain or loss based on the difference between
the cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium
19 - Scudder Global Bond Fund
<PAGE>
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 prices are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased interest rate futures to manage the duration of the portfolio,
and as a temporary substitute for purchasing selected investments. Also, during
the period, the Fund sold interest rate futures to hedge against declines in the
value of portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge, the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
20 - Scudder Global Bond Fund
<PAGE>
(ii) purchases and sales of investment securities, interest income and
certain expenses at the daily rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes, and no federal
income tax provision was required. At October 31, 1997, the Fund had a net tax
basis capital loss carryforward of approximately $8,121,000 which may be applied
against any realized net taxable capital gains of each succeeding year until
fully utilized or until October 31, 2002 ($2,376,000), October 31, 2003
($5,009,000) and October 31, 2004 ($736,000), the respective expiration dates,
whichever occurs first.
Distribution of Income and Gains. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is distributed to shareholders monthly. During any particular year
net realized gains and certain unrealized gains (which for federal income tax
reporting purposes may be considered realized) from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed and, therefore, will be distributed to shareholders. An
additional distribution may be made to the extent necessary to avoid the payment
of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in options, futures, forward
currency contracts and foreign currency denominated investments. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly
21 - Scudder Global Bond Fund
<PAGE>
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.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the year ended October 31, 1997, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $336,296,349 and $403,958,774, respectively. Purchases and sales of
U.S. Government obligations aggregated $54,486,111 and $66,907,919,
respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1997 was $680,689,677.
Transactions in written options for the year ended October 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Exchange Traded Options Over-the-Counter Options on Currencies (000 omitted)
---------------------------- ------------------------------------------ ---------------
Number of
Contracts Premiums AUD DEM FRF Premiums
---------------------------- ------------------------------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Beginning -- $ -- -- 6,611 -- $ 69,390
of Period ..
Written ...... 591 730,361 62,096 52,231 28,027 1,058,251
Closed ....... (423) (542,670) (46,700) (39,335) -- (615,748)
Exercised .... (84) (149,231) (4,696) (6,615) (28,027) (408,997)
Expired ...... -- -- (7,200) (12,892) -- (76,471)
----------- ----------- ----------- ----------- ----------- ----------
End of
Period ..... 84 $ 38,460 3,500 -- -- $ 26,425
----------- ----------- ----------- ----------- ----------- ----------
-----------------------------------------------------------------------------------------
</TABLE>
22 - Scudder Global Bond Fund
<PAGE>
Transactions in written options for the year ended October 31, 1997 are
summarized as follows (continued):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Over-the-Counter Options on Currencies (000 omitted)
--------------------------------------------------------------------------------------------
GBP ITL JPY NZD SEK GBP/DEM NOK/DEM Premiums
-------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning -- -- 3,084,706 5,660 -- -- -- $ 455,387
of Period ..
Written ...... 3,568 54,400,000 4,696,145 118,080 104,500 47,194 37,000 2,775,080
Closed ....... (3,568) (54,400,000) (3,522,345) (38,894) (77,000) (17,572) (37,000) (1,843,404)
Exercised .... -- -- (1,173,800) (35,558) -- (17,014) -- (578,874)
Expired ...... -- -- (3,084,706) (34,511) (27,500) (12,608) -- (722,088)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
End of
Period ..... -- -- -- 14,777 -- -- -- $ 86,101
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
-----------------------------------------------------------------------------------------------------------
</TABLE>
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annual rate of 0.75% of the first $1,000,000,000 of average
daily net assets and 0.70% of such assets in excess of $1,000,000,000, computed
and accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Adviser has agreed not to impose all or a portion of its
management fee until February 28, 1998, and during such period to maintain the
annualized expenses of the Fund at not more than 1.00% of average daily net
assets. For the year ended October 31, 1997, the Adviser did not impose a
portion of its management fee aggregating $664,865 and the amount imposed
aggregated $604,704 which was equivalent to an annual effective rate of 0.36% of
the Fund's average daily net assets.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close by the end of the fourth quarter of 1997.
23 - Scudder Global Bond Fund
<PAGE>
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1997, the amount charged to the Fund by SSC aggregated
$375,659, of which $25,549 is unpaid at October 31, 1997.
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,
1997, the amount charged to the Fund by STC aggregated $16,092, of which $1,295
is unpaid at October 31, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1997, the amount charged to the Fund by SFAC aggregated $156,250, of
which $21,641 is unpaid at October 31, 1997.
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, 1997, Directors' fees and expenses aggregated $50,590.
D. Commitments
As of October 31, 1997, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$447,886.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
----------------------- ----------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
IND 2,450,261,679 MXP 5,520,826 11/12/97 (23,449)
IND 2,547,360,000 USD 928,000 11/12/97 221,958
AUD 4,387,680 USD 3,232,843 11/13/97 154,326
DEM 3,089,222 USD 1,684,142 11/13/97 (107,962)
DEM 2,738,385 USD 1,500,000 11/13/97 (88,578)
USD 3,250,000 DEM 5,827,608 11/13/97 130,683
USD 175,000 HUF 34,794,375 11/14/97 3,037
JPY 184,600,459 USD 1,530,785 11/21/97 (6,817)
JPY 410,937,800 SEK 26,000,000 1/14/98 21,340
SEK 26,000,000 JPY 408,540,600 1/14/98 (41,471)
CHF 25,506,973 USD 17,751,390 3/24/98 (691,300)
SEK 10,209,208 USD 1,346,429 4/14/98 (19,653)
-------------
(447,886)
-------------
</TABLE>
E. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
24 - Scudder Global Bond Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder Global Fund, Inc. and to the Shareholders
of Scudder Global Bond Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Global Bond Fund including the investment portfolio, as of October 31, 1997, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the six years in the period then ended and
for the period March 1, 1991 (commencement of operations) to October 31, 1991.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Global Bond Fund as of October 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the six years
in the period then ended and for the period March 1, 1991 (commencement of
operations) to October 31, 1991 in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 18, 1997
25 - Scudder Global Bond Fund
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder Global Bond Fund
(the "Fund") was held on October 27, 1997, at the offices of Scudder, Stevens &
Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York, New York
10154. At the Meeting, as adjourned and reconvened, the following matters were
voted upon by the stockholders (the resulting votes for each matter are
presented below.) With regard to certain proposals, it was recommended that the
Meeting be reconvened in order to provide stockholders with an additional
opportunity to return their proxies. The date of the reconvened meeting at which
the matters were decided is noted after the proposed matter.
1. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Paul Bancroft III 7,945,997 438,416
Sheryle J. Bolton 7,944,548 439,865
William T. Burgin 7,917,691 466,722
Thomas J. Devine 7,939,994 444,419
Keith R. Fox 7,946,227 438,186
William H. Gleysteen, Jr. 7,940,389 444,024
William H. Luers 7,943,735 440,678
Daniel Pierce 7,948,124 436,289
Kathryn L. Quirk 7,943,420 440,993
2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
7,724,932 331,932 327,549 215,665
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
7,911,799 655,649 559,020 157,070
26 - Scudder Global Bond Fund
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 7,114,105 532,250 522,393 215,665
4.2 Borrowing 7,050,009 589,246 529,493 215,665
4.3 Senior securities 7,094,309 551,730 522,709 215,665
4.4 Purchase of physical 7,091,093 548,686 528,969 215,665
commodities
4.5 Concentration 7,107,488 538,500 522,760 215,665
4.6 Underwriting of securities 7,101,699 546,573 520,476 215,665
4.7 Investment in real estate 7,102,995 417,021 648,732 215,665
4.8 Lending 7,090,742 426,293 651,713 215,665
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
7,905,163 126,862 352,388
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
27 - Scudder Global Bond Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board, Director
and Vice President
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter
Capital Management
Corporation
William H. Gleysteen, Jr.
Director; Consultant
William H. Luers
Director; President, The
Metropolitan Museum of Art
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Director;
Executive-in-Residence,
Columbia University Graduate
School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Susan E. Gray*
Vice President
Jerard K. Hartman*
Vice President
Gary P. Johnson*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant
Treasurer
Edward J. O'Connell*
Vice President and Assistant
Treasurer
*Scudder, Stevens & Clark, Inc.
28 - Scudder Global Bond Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
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 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 Spain and Portugal 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. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
29 - Scudder Global Bond Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder Global Bond Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
31 - Scudder Global Bond Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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