Scudder
International
Bond Fund
Annual Report
June 30, 1997
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 (logo)
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
13 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
23 Report of Independent Accountants
24 Officers and Directors
25 Investment Products and Services
26 Scudder Solutions
In Brief
o Reflecting a difficult environment for U.S. investors in foreign fixed-income
securities, Scudder International Bond Fund provided a total return of 0.94% for
the 12-month period ended June 30, 1997.
o For most of the second half of the Fund's fiscal year, global currency
markets witnessed a strongly rising U.S. dollar, which hurt performance.
o The Fund has implemented a quantitative approach to currency management,
designed to limit the short-term impact of such fluctuations.
o As of the end of the period, nearly half of portfolio assets were invested in
the fixed-income markets of the established Western European economies; the Fund
has also built a core position in higher-yielding, short-term emerging market
securities.
o Interest rates in the developed economies are at relatively low levels such
that the Fund's overall duration and exposure to interest rate risk has become
more defensive.
2 - Scudder International Bond Fund
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for Scudder International Bond
Fund for the period ended June 30, 1997. As outlined in the portfolio management
discussion that follows, the 12 months covered by this report were difficult
ones for U.S. investors in overseas fixed-income securities, as bond prices
weakened due to higher interest rates and a rising dollar combined to produce
total returns that were negative in many cases. Despite the recent difficult
past, Scudder International Bond Fund remains an appropriate vehicle for
investors seeking diversification and exposure to the opportunities for income
and capital appreciation to be found in the world's fixed-income markets.
As outlined in a special letter sent in April to all Fund shareholders,
Gary P. Johnson, a Managing Director of Scudder International Bond Fund's
investment adviser, Scudder, Stevens & Clark, Inc., assumed the responsibility
of Lead Portfolio Manager for the Fund during the period. Gary, who joined
Scudder in 1987, has broad experience as Research Director of Scudder's Global
Bond Group. Scudder International Bond Fund's objectives remain the same: to
earn income from high quality bonds around the world, while also seeking to
limit the Fund's exposure to currency risks and volatile interest rates.
To keep you abreast of developments within the Scudder family of funds, we
would like to take this opportunity to tell you about a newcomer to our 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 exposure but who wish to take a 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 25.
Thank you for your continued investment in Scudder International Bond Fund.
If you have questions about your account, please call Scudder Investor Relations
at 1-800-225-2470 or visit our Internet web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Bond Fund
3 - Scudder International Bond Fund
<PAGE>
PERFORMANCE UPDATE as of June 30, 1997
- -----------------------------------------------------------------
FUND INDEX COMPARISONS
- -----------------------------------------------------------------
Total Return
--------------
Period Growth
Ended of Average
6/30/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER INTERNATIONAL BOND FUND
- --------------------------------------------
1 Year $ 10,094 0.94% 0.94%
5 Year $ 11,738 17.38% 3.26%
Life of Fund* $ 20,775 107.75% 8.47%
- --------------------------------------------
SALOMON BROTHERS NON-U.S. DOLLAR WORLD
GOVERNMENT BOND INDEX
- --------------------------------------------
1 Year $ 10,216 2.16% 2.16%
5 Year $ 14,799 47.99% 8.15%
Life of Fund* $ 21,815 118.15% 9.14%
- --------------------------------------------
* The Fund commenced operations on July 6, 1988. Index
comparisons begin on July 31, 1988.
- -----------------------------------------------------------------
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 June 30
SCUDDER INTERNATIONAL BOND FUND
Year Amount
- ---------------------------
7/89 $10,000
'89 $10,216
'90 $12,013
'91 $13,800
'92 $17,699
'93 $19,866
'94 $19,304
'95 $20,062
'96 $20,581
'97 $20,775
SALOMON BROTHERS NON-U.S. DOLLAR WORLD
GOVERNMENT BOND INDEX
Year Amount
- ---------------------------
7/88 $10,000
'89 $ 9,829
'90 $10,544
'91 $11,581
'92 $14,741
'93 $16,175
'94 $17,704
'95 $21,724
'96 $21,354
'97 $21,815
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 June 30
<TABLE>
<CAPTION>
1989* 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
NET ASSET VALUE... $ 11.27 $ 12.08 $ 12.35 $ 13.68 $ 13.57 $ 11.97 $ 11.43 $ 10.98 $ 10.52
INCOME DIVIDENDS.. $ 1.00 $ 1.09 $ 1.21 $ 1.09 $ 1.04 $ .91 $ .98 $ .73 $ .58
CAPITAL GAINS
DIVIDENDS......... $ - $ - $ .29 $ .81 $ .62 $ .39 $ - $ - $ -
FUND TOTAL
RETURN (%)........ 2.16 17.59 14.88 28.25 12.24 -2.83 3.92 2.59 0.94
INDEX TOTAL
RETURN (%)........ -1.69 7.25 9.84 27.29 9.74 9.46 22.71 -1.70 2.16
</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
maintained 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 June 30, 1997
- ---------------------------------------------------------------------------
GEOGRAPHICAL EXPOSURE
- ---------------------------------------------------------------------------
Italy 20%
Germany 12%
Spain 8%
Sweden 8%
Denmark 6%
U.K. 6%
Canada 5%
U.S. 5%
Ireland 4%
Japan 4%
Supranational 4%
Australia 3%
Austria 3%
Norway 2%
Switzerland 2%
Egypt 1%
Greece 1%
Indonesia 1%
South Africa 1%
Other 4%
------
100.0%
======
Approximately half of portfolio
assets are invested in the
fixed-income markets of established
Western European economies
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- ---------------------------------------------------------------------------
INTEREST RATE EXPOSURE
- ---------------------------------------------------------------------------
Italy 20%
Japan 14%
Germany 11%
Sweden 8%
Denmark 6%
U.K. 6%
U.S. 6%
Australia 5%
Canada 5%
Ireland 4%
Spain 4%
Norway 2%
Egypt 1%
Greece 1%
Indonesia 1%
Mexico 1%
New Zealand 1%
Philippines 1%
South Africa 1%
Other 2%
------
100.0%
======
The Fund has taken a
defensive stance with respect
to interest rate risk
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- ---------------------------------------------------------------------------
CURRENCY EXPOSURE (a)
- ---------------------------------------------------------------------------
U.S. 33%
Japan 21%
Italy 19%
Sweden 8%
Denmark 6%
Ireland 4%
Spain 4%
Norway 2%
South Africa 1%
Indonesia 1%
Greece 1%
Egypt 1%
U.K. 1%
Mexico 1%
Philippines 1%
Morocco 1%
Chile 1%
Switzerland -1%
Canada -1%
Germany -4%
------
100.0%
======
The Fund's exposure to the
U.S. dollar has been increased
in view of its strengthening in
early 1997
(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 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5 - Scudder International Bond Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Reflecting a difficult environment for U.S. investors in foreign fixed-income
securities, Scudder International Bond Fund provided a total return of 0.94% for
the 12-month period ended June 30, 1997. The Salomon Brothers Non-U.S. World
Government Bond Index (unhedged) returned 2.16% for the same period.
As of June 30, the Fund's 30-day net yield stood at 4.47%.
A Rising Dollar Reduces
Returns to U.S. Investors
Scudder International Bond Fund seeks attractive income through investments in
high grade bonds denominated in foreign currencies, while also seeking to
protect and enhance principal by actively managing the portfolio's currency,
bond market, and maturity exposure. For most of the second half of the Fund's
fiscal year, global currency markets witnessed a strongly rising U.S. dollar.
Currency exchange rate changes are one of the risks of international investing,
and can in fact have as significant an impact on returns to U.S. holders of
foreign bonds as interest rates and security selection. A rising dollar, such as
we experienced in the early part of 1997, can reduce returns to U.S. investors
in overseas markets, since it makes holdings of securities denominated in
foreign currencies worth fewer dollars. (By the same token, a falling dollar
relative to foreign currencies may enhance returns to U.S. investors.) For much
of the period, the Fund's exposure to foreign currencies reduced returns in view
of the dollar's rise, although the dollar has gained ground against the Japanese
yen more recently.
The Fund is currently employing a quantitative approach that is designed to keep
the short-term impact of a fluctuating dollar within a relatively narrow range,
while also seeking to minimize the expense of managing currency risk. The
majority of the portfolio's exposure to major foreign markets is being managed
to maintain, in effect, a currency "put option" -- which allows the holder to
lock in the ability to exchange a foreign currency for U.S. dollars at a
predetermined rate. Our goal is to limit significantly the potential negative
impact of a strengthening dollar, while allowing for appreciation potential
should the dollar fall. Rather than making longer-term commitments based on the
fundamental outlook for a given market's currency, the Fund adjusts its
positions on an ongoing basis with movements in U.S. and foreign currencies. In
view of the dollar's strengthening over the early part of 1997, this "dynamic"
approach to managing currency risk has resulted in increasing the percentage of
the portfolio hedged into U.S. dollars.
Seeking Attractive Bond
Markets and Yields
Allocation of portfolio assets among the major world bond markets based on
rigorous fundamental research is central to the Fund's pursuit of high income
and competitive total returns. In addition to the rising dollar, overseas
fixed-income markets -- which are often highly responsive to developments in our
own economy and bond market -- have faced continuing uncertainties regarding the
future direction of U.S. interest rates, including the potential for the Federal
Reserve to implement additional increases in short-term rates. In particular,
6 - Scudder International Bond Fund
<PAGE>
European markets, which had been hurt by weakness in the United States earlier
in 1997, followed the U.S. market up towards the end of the period. Given a
somewhat unsettled backdrop, we have taken steps to broaden diversification
across global bond markets, with a focus on increasing the Fund's yield.
As of the end of the period, nearly half of portfolio assets were invested in
the fixed-income markets of the established Western European economies.
Preparation for European Monetary Union (EMU) has imposed fiscal and monetary
discipline on these countries and has been a dominant factor in the bond
markets. In particular, our holdings in Spain and Italy have benefited from the
increased likelihood that those countries will qualify for participation in the
first round of EMU. The dollar-bloc countries of Australia, New Zealand, and
Canada were overweighted as well, at 10.7% of portfolio assets. Fixed-income
instruments in these countries offer a yield advantage over other major markets.
Exposure to Japan, where yields have been at very low levels, was a modest 14.0%
at the end of June. In view of the uncertainties surrounding possible Fed action
to increase U.S. interest rates, we have chosen not to invest in U.S.
fixed-income securities with the exception of short-term investments, which are
of a defensive nature.
Given the relatively low prevailing yields offered by fixed-income securities in
developed countries, the Fund has built a core position in emerging market money
market securities, which stood at around 6.0% of portfolio assets at the end of
June. Such securities offer a substantial yield advantage versus debt offerings
7 - Scudder International Bond Fund
<PAGE>
in established economies, as well as less interest rate risk due to their short
duration. The Fund's emerging market holdings are spread among Pacific Basin,
Latin American, and African countries, and the highest portfolio concentration
in any one of these markets will generally be in the 1% range. This broad
diversification is designed to help reduce the risks of investing in emerging
market securities.
With interest rates in the developed economies at relatively low levels and
global economic growth increasing, in our view the potential remains for rising
rates and falling bond prices in the major markets. As other central banks begin
tightening monetary policy, this will put pressure on global bond markets.
Accordingly, we have taken a somewhat defensive strategy with respect to
interest rate risk, maintaining an overall portfolio duration below that of the
Fund's benchmark index. In addition, the timing of interest rate increases in
major markets will significantly affect the values of foreign currencies
relative to the dollar.
Scudder International Bond Fund remains an appropriate vehicle for investors
seeking valuable exposure to the potential for solid income and total returns
offered by overseas bond markets, as well as added portfolio diversification. We
thank you for your continued investment, and encourage you to call Scudder
Investor Relations at 1-800-225-2470 with any questions.
Sincerely,
Your Portfolio Management Team
/s/Gary P. Johnson /s/Adam M. Greshin
Gary P. Johnson Adam M. Greshin
Lead Portfolio Manager Portfolio Manager
Scudder International
Bond Fund:
A Team Approach to Investing
Scudder International 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 February 1997. Mr.
Johnson, who has 16 years of investment industry experience, joined Scudder in
1987. Portfolio Manager Adam M. Greshin specializes in global and international
bond investments. Mr. Greshin was involved in the original design of Scudder
International Bond Fund and has been a portfolio manager of the Fund since its
inception in 1988.
8 - Scudder International Bond Fund
<PAGE>
Investment Portfolio as of June 30, 1997
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 0.9%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/97 at 5.9% to
be repurchased at $2,135,350 on 7/1/97, collateralized by a $2,060,000 U.S. ------------
Treasury Note, 7.125%, 2/29/00 (Cost $2,135,000) ................................ 2,135,000 2,135,000
------------
U.S. Treasury Obligations 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 10/23/97 (Cost $ 1,215,370) ................................... 1,235,000 1,215,252
------------
Foreign Denominated Debt Obligations 93.7%
- ------------------------------------------------------------------------------------------------------------------------------
Australian Dollars 4.6%
Commonwealth of Australia, 9.5%, 8/15/03 .......................................... 3,400,000 2,916,158
Commonwealth of Australia, 10%, 2/15/06 ........................................... 3,540,000 3,175,823
International Finance Corp., 7.75%, 6/24/99 ....................................... 5,670,000 4,414,478
-----------
10,506,459
-----------
British Pounds 5.6%
United Kingdom Treasury Bond, 8%, 12/7/15 ......................................... 7,200,000 13,037,952
-----------
Canadian Dollars 5.1%
Government of Canada, 7.5%, 3/1/01 ................................................ 1,060,000 817,714
Government of Canada, 7%, 12/1/06 ................................................. 8,120,000 6,169,024
Rogers Cantel Mobile Communications Inc., 10.5%, 6/1/06 ........................... 5,650,000 4,727,873
-----------
11,714,611
-----------
Chilean Pesos 0.8%
Citibank Time Deposit, 10%, 8/11/97 ............................................... 792,300,000 1,902,280
-----------
Danish Kroner 6.0%
Kingdom of Denmark, 8%, 5/15/03 ................................................... 26,950,000 4,588,158
Kingdom of Denmark, 7%, 11/10/24 .................................................. 61,800,000 9,190,865
-----------
13,779,023
-----------
Deutschemarks 11.3%
Bayerische Landesbank, 6%, 2/27/06 ................................................ 13,585,000 7,936,764
Federal Republic of Germany, 8.875%, 12/20/00 ..................................... 2,000,000 1,316,473
Federal Republic of Germany, 8.375%, 5/21/01 ...................................... 11,540,000 7,555,019
Landesbank Rheinland-Pfalz Girozentrale Mainz, 5.75%, 10/16/03 .................... 15,600,000 9,201,204
-----------
26,009,460
-----------
Egyptian Pound 1.1%
Citibank Time Deposit, 9.25%, 8/4/97 .............................................. 3,818,250 1,123,650
Citibank Time Deposit, 9.3%, 8/12/97 .............................................. 4,665,375 1,373,075
-----------
2,496,725
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Greek Drachmas 1.2%
Bankers Trust Company Time Deposit, 9.02%, 8/14/97 ................................ 759,839,599 2,767,078
-----------
Indonesian Rupiah 1.2%
J.P. Morgan & Co. Time Deposit, 11.2%, 8/11/97 .................................... 6,743,748,174 2,770,260
-----------
Irish Pounds 4.5%
Republic of Ireland, 6.5%, 10/18/01 ............................................... 6,680,000 10,325,191
-----------
Italian Lira 19.4%
Republic of Italy, 9.5%, 4/15/99 .................................................. 21,800,000,000 13,530,636
Republic of Italy, 8.5%, 8/1/99 ................................................... 35,000,000,000 21,426,678
Republic of Italy, 8.5%, 1/1/04 ................................................... 15,480,000,000 9,976,304
-----------
44,933,618
-----------
Japanese Yen 14.0%
European Investment Bank, 3%, 9/20/06 ............................................. 880,000,000 8,000,070
Japan Development Bank, 2.875%, 12/20/06 .......................................... 900,000,000 8,078,988
Kingdom of Spain, 3.1%, 9/20/06 ................................................... 900,000,000 8,163,037
Republic of Austria 3.75%, 2/3/09 ................................................. 850,000,000 8,060,441
-----------
32,302,536
-----------
Mexican Pesos 1.0%
Certificados de la Tesoreria, Zero Coupon, 12/4/97 ................................ 8,364,700 965,111
Certificados de la Tesoreria, Zero Coupon, 6/4/98 ................................. 12,580,140 1,317,931
-----------
2,283,042
-----------
Moroccan Dirham 0.9%
Citibank Time Deposit, 8%, 12/1/97 ................................................ 20,719,600 2,171,840
-----------
New Zealand Dollars 1.0%
International Bank for Reconstruction & Development, 9%, 7/8/99 ................... 3,400,000 2,392,541
-----------
Norwegian Kroner 2.1%
Kingdom of Norway, 5.75%, 11/30/04 ................................................ 11,100,000 1,524,650
Kingdom of Norway, 6.75%, 1/15/07 ................................................. 22,600,000 3,259,224
-----------
4,783,874
-----------
Philippine Pesos 1.0%
J.P. Morgan & Co. Time Deposit, 10.45%, 7/29/97 ................................... 59,068,800 2,237,164
-----------
South African Rand 1.2%
J.P. Morgan & Co. Time Deposit, 15.75%, 9/11/97 ................................... 12,758,773 2,819,845
-----------
Spanish Pesetas 4.1%
Kingdom of Spain, 9.4%, 4/30/99 ................................................... 1,000,000,000 7,281,181
Kingdom of Spain, 10%, 2/28/05 .................................................... 270,000,000 2,258,415
-----------
9,539,596
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Swedish Kronor 7.6%
Kingdom of Sweden, 13%, 6/15/01 ................................................... 21,700,000 3,543,208
Kingdom of Sweden, 10.25%, 5/5/03 ................................................. 35,000,000 5,462,014
Kingdom of Sweden, 6%, 2/9/05 ..................................................... 68,000,000 8,601,700
-----------
17,606,922
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $218,195,151) 216,380,017
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated Debt Obligations 3.8%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Dollars
------------
Federal National Mortgage Association 7.25%, 6/20/02 (Cost $8,856,102) ............ 12,880,000 8,861,903
------------
Purchased Options 1.1%
- ------------------------------------------------------------------------------------------------------------------------------
Put on Australian Dollars, strike price .7725, expire 8/1/97 ...................... AUD 12,000,000 224,400
Put on Canadian Dollars, strike price 88.43, expire 7/3/97 ........................ CAD 16,400,000 777,347
Put on Canadian Dollars, strike price 80.25, expire 9/30/97 ....................... CAD 16,300,000 158,825
Put on Deutsche Marks, strike price 1.746, expire 9/30/97 ......................... DEM 41,892,000 333,041
Put on Deutsche Marks, strike price 1.72, expire 7/14/97 .......................... DEM 38,242,800 325,064
Put on Deutsche Marks, strike price 1.72, expire 8/8/97 ........................... DEM 6,000,000 46,568
Put on Deutsche Marks, strike price 1.728, expire 7/15/97 ......................... DEM 8,625,000 61,057
Put on Deutsche Marks, strike price 1.73, expire 8/12/97 .......................... DEM 41,087,500 336,918
Put on Japanese Yen, strike price 125.55, expire 7/24/97 .......................... JPY 781,000,000 128
Put on New Zealand Dollars, strike price .675, expire 8/8/97 ...................... NZD 6,398,730 25,659
Number of
Contracts
-------------
Put on TSE 10 year Japan Bond Index, strike price 121, expire 8/29/97 ............. 28 51,320
Put on Eurodollars, strike price 93.75, expire 12/15/97 ........................... 40 9,500
Put on Euromarks, strike price 96.75, expire 9/16/97 .............................. 2,013 57,720
Put on Eurolira, strike price 92.75, expire 12/16/97 .............................. 1,040 30,624
- ------------------------------------------------------------------------------------------------------------------------------
Total Purchased Options (Cost $2,040,948) 2,438,171
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $232,442,571) (a) 231,030,343
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $232,442,571. At June 30,
1997, net unrealized depreciation for all securities based on tax cost was
$1,412,228. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $4,090,231 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$5,502,459.
At June 30, 1997 outstanding written options were as follows (Note A):
<TABLE>
<CAPTION>
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value($)
------------ -------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD .......................... 12,000 8/1/97 AUD .76 51,600
NZD .......................... 6,399 8/8/97 NZD .6907 10,750
NZD .......................... 9,700 7/22/97 NZD .6945 4,365
GBP .......................... 5,475 8/25/97 GBP 2.7548 426,999
GBP .......................... 1,800 7/17/97 GBP 2.8295 70,390
<CAPTION>
Number of
Call Options on Financial Futures Contracts
--------------------------------- ---------
<S> <C> <C> <C> <C>
TSE 10 year Japan Bond Index ..... 7 8/29/97 JPY 123.0 97,753
LIFFE Gilt Futures ............... 154 8/22/97 GBP 113.0 220,305
---------
Total outstanding written options (Premiums received $492,094) ......................... 882,162
=========
</TABLE>
Currency Abbreviations
AUD Australian Dollar
GBP British Pound
CAD Canadian Dollar
DEM Deutschemark
NOK Norwegian Krone
ITL Italian Lire
JPY Japanese Yen
USD U.S. Dollar
NZD New Zealand Dollar
SEK Swedish Krona
CHF Swiss Franc
FRF French Franc
The accompanying notes are an integral part of the financial statements.
12 - Scudder International Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $230,401,623) ................ $ 228,592,172
Purchased options, at value (identified cost $2,040,948) ............. 2,438,171
Foreign currency at market (identified cost $58,636) ................. 58,446
Cash ................................................................. 979
Receivable for investments sold ...................................... 2,581,942
Interest receivable .................................................. 4,985,114
Receivable for Fund shares sold ...................................... 126,109
Unrealized appreciation on forward currency exchange contracts ....... 68,253
Other assets ......................................................... 4,791
----------------
Total assets ......................................................... 238,855,977
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ..................................... 719,078
Payable for investments purchased .................................... 600,518
Dividends payable .................................................... 194,355
Accrued management fee ............................................... 177,928
Other payables and accrued expenses .................................. 167,117
Written options at market (premiums received $492,094) ............... 882,162
Unrealized depreciation on forward currency exchange contracts ....... 121,634
----------------
Total liabilities .................................................... 2,862,792
--------------------------------------------------------------------------------------------
Net assets, at market value $ 235,993,185
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ......... (23,214,640)
Net unrealized appreciation (depreciation) on:
Investments .......................................................... (1,809,451)
Options .............................................................. 7,155
Foreign currency related transactions ................................ (94,641)
Accumulated net realized loss ........................................ (72,335,053)
Paid-in capital ...................................................... 333,439,815
--------------------------------------------------------------------------------------------
Net assets, at market value $ 235,993,185
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($235,993,185 / 22,435,381 shares of capital stock
outstanding, $.01 par value, 200,000,000 shares ----------------
of capital stock authorized) ...................................... $10.52
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder International Bond Fund
<PAGE>
Statement of Operations
year ended June 30, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Interest (net of withholding taxes of $322,977) ...................... $ 24,028,118
-----------------
Expenses:
Management fee ....................................................... 3,077,316
Services to shareholders ............................................. 998,250
Custodian and accounting fees ........................................ 510,916
Directors' fees and expenses ......................................... 47,002
Reports to shareholders .............................................. 75,646
Auditing ............................................................. 98,198
Legal ................................................................ 36,525
Registration fees .................................................... 18,036
Other ................................................................ 57,031
-----------------
4,918,920
---------------------------------------------------------------------------------------------
Net investment income 19,109,198
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... (8,441,976)
Options .............................................................. (249,807)
Futures contracts .................................................... (4,842,520)
Foreign currency related transactions ................................ (3,122,216)
-----------------
(16,656,519)
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments .......................................................... 2,040,962
Options .............................................................. 1,757,450
Foreign currency related transactions ................................ 1,034,647
-----------------
4,833,059
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (11,823,460)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 7,285,738
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder International Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended June 30,
Increase (Decrease) in Net Assets 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .......................................... $ 19,109,198 $ 47,003,438
Net realized gain (loss) from investment transactions .......... (16,656,519) (12,222,094)
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. 4,833,059 (14,680,712)
---------------- ---------------
Net increase in net assets resulting from operations ........... 7,285,738 20,100,632
---------------- ---------------
Distributions to shareholders:
From net investment income ..................................... (19,109,198) (7,878,363)
---------------- ---------------
Tax return of capital .......................................... -- (39,125,075)
---------------- ---------------
Fund share transactions:
Proceeds from shares sold ...................................... 53,550,698 81,445,370
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 13,116,739 39,214,810
Cost of shares redeemed ........................................ (334,293,130) (487,822,648)
---------------- ---------------
Net decrease in net assets from Fund share transactions ........ (267,625,693) (367,162,468)
---------------- ---------------
Decrease in net assets ......................................... (279,449,153) (394,065,274)
Net assets at beginning of period .............................. 515,442,338 909,507,612
Net assets at end of period (Including accumulated
distribution in excess of net investment income of ----------------- ----------------
$23,214,640 at June 30, 1997) ............................... $ 235,993,185 $ 515,442,338
----------------- ----------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ...................... 46,922,766 79,574,801
---------------- ---------------
Shares sold .................................................... 4,932,206 7,198,026
Shares issued to shareholders in reinvestment of
distributions ............................................... 1,206,004 3,472,904
Shares redeemed ................................................ (30,625,595) (43,322,965)
---------------- ---------------
Net decrease in Fund shares .................................... (24,487,385) (32,652,035)
----------------- ----------------
Shares outstanding at end of period ............................ 22,435,381 46,922,766
----------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder International 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
July 6, 1988
(commencement
Years Ended June 30, of operations)
to June 30,
1997 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 ......... .58 .73 .98 .92 1.03 1.08 1.21 1.10 1.00
Net realized and unrealized
gain (loss) on investment
transactions (b) ........... (.46) (.45) (.54) (1.22) .52 2.15 .56 .80 (.73)
Total from investment ------------------------------------------------------------------------------------------------
operations ................. .12 .28 .44 (.30) 1.55 3.23 1.77 1.90 .27
------------------------------------------------------------------------------------------------
Less distributions:
From net investment income .... (.58) (.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 ........... (.58) (.73) (.98) (1.30) (1.66) (1.90) (1.50) (1.09) (1.00)
------------------------------------------------------------------------------------------------
Net asset value, end of ------------------------------------------------------------------------------------------------
period ..................... $10.52 $10.98 $11.43 $11.97 $13.57 $13.68 $12.35 $12.08 $11.27
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (c) .......... 0.94 2.59 3.92 (2.83) 12.24 28.25 14.88 17.59 2.16**
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............... 236 515 910 1,231 1,017 542 144 73 13
Ratio of operating expenses,
net to average daily net
assets (%) ................. 1.36 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 (%) ................. 1.36 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 (%) .. 5.28 6.50 8.52 6.86 7.69 8.31 9.48 9.57 8.58*
Portfolio turnover rate (%) ... 298.2 275.7 318.5 232.9 249.7 147.9 260.1 215.6 103.8*
</TABLE>
(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
16 - 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 repurchase 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.
17 - 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
18 - 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, 1997, the Fund had a net tax basis capital
loss carryforward of approximately $73,927,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until June 30, 2003 ($67,834,000), and June 30, 2004 ($6,093,000), the
respective expiration dates, whichever occurs first. In addition, from November
1, 1996 through June 30, 1997, the Fund incurred approximately $22,853,000 of
realized currency losses and $528,000 of realized long-term capital losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the year ending June 30, 1998.
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.
19 - Scudder International Bond Fund
<PAGE>
B. Purchases and Sales of Securities
For the year ended June 30, 1997, purchases and sales of investment securities
(excluding short-term investments) aggregated $1,031,365,065, and
$1,308,691,398, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended June 30, 1997 was $2,663,986,446.
Transactions in written options for the year ended June 30, 1997 are summarized
as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Option Contracts Options on Currencies (000 omitted)
----------------------------- ------------------------------------------ ----------------
Number of Premiums Premiums
Contracts Received ($) DEM NZD AUD Received ($)
----------------------------- ------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of
Period ...... 220 $ 170,365 122,833 -- 20,794 $ 890,379
Written ..... 775 1,433,471 207,466 193,519 64,078 2,625,030
Closed ...... (834) (1,343,117) (92,510) (56,553) (43,800) (1,320,864)
Exercised ... -- -- (50,204) (93,353) (29,072) (826,320)
Expired ..... -- -- (187,585) (27,514) -- (1,208,833)
------------ ------------ ----------- ----------- ----------- ------------
End of
Period ...... 161 $ 260,719 -- 16,099 12,000 $ 159,392
============ ============ =========== =========== =========== ============
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Options on Currencies (000 omitted) (continued)
------------------------------------------------------------------------------------------------ ----------------
Premiums
GBP JPY SEK ITL NOK FRF Received ($)
------------------------------------------------------------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of
Period ...... 12,950 -- 131,462 -- -- -- $ 248,045
Written ..... 88,582 14,923,363 238,500 40,000,000 78,000 52,121 5,521,397
Closed ...... (47,734) (3,678,218) (290,097) (40,000,000) (78,000) -- (2,240,406)
Exercised ... (36,970) (4,775,000) -- -- -- (52,121) (2,468,565)
Expired ..... (9,553) (6,470,145) (79,865) -- -- -- (988,488)
------------ ------------ ------------ ------------ ------------ ------------ ------------
End of
Period ...... 7,275 -- -- -- -- -- $ 71,983
============ ============ ============ ============ ============ ============ ============
-----------------------------------------------------------------------------------------------------------------
</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
20 - Scudder International Bond Fund
<PAGE>
into by the Fund. In addition to portfolio management services, the Adviser
provides certain administrative services in accordance with the Management
Agreement. 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 year ended June 30, 1997, the fee pursuant to
the Management Agreement amounted to $3,077,316, which is equivalent to an
annual effective rate of .85% 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 in the fourth quarter of 1997.
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 June 30, 1997, the amount charged by SSC aggregated $681,253, of
which $49,068 is unpaid at June 30, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At June 30, 1997, the Special
Servicing Agreement expense charged to the Fund amounted to $1,925.
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 June 30, 1997,
the amount charged to the Fund by STC aggregated $85,079, of which $7,396 is
unpaid at June 30, 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
June 30, 1997, the amount charged to the Fund by SFAC aggregated $285,933, of
which $16,026 is unpaid at June 30, 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 June 30, 1997, Directors' fees and expenses aggregated $47,002.
21 - Scudder International Bond Fund
<PAGE>
D. Commitments
As of June 30, 1997 the Fund had entered into the following forward currency
exchange contracts resulting in net unrealized depreciation of ($53,381).
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
------------------------- ------------------------- -------------------- ----------------
<S> <C> <C> <C>
JPY 1,359,379,600 CAD 16,400,000 7/7/97 7,973
JPY 170,755,429 USD 1,371,530 7/14/97 (121,634)
USD 1,485,937 JPY 171,194,792 7/14/97 11,068
CHF 4,612,720 USD 3,238,587 9/24/97 49,212
---------
(53,381)
=========
</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.
22 - 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 June 30, 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 then ended, and the financial
highlights for each of the eight years in the period then ended 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 June
30, 1997, 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 June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years then ended, and the financial highlights for each of the eight
years in the period then ended 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.
August 15, 1997
23 - 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
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
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, 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
Jerard K. Hartman*
Vice President
Gary P. Johnson*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
Isabel Saltzman*
Vice President
David S. Lee*
Vice President and Assistant
Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant
Treasurer
*Scudder, Stevens & Clark, Inc.
24 - 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
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
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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 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#
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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. +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.
25 - Scudder International 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:
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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
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder International 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
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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.
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27 - 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
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