Scudder
International
Bond Fund
Semiannual Report
December 31, 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>
Scudder International Bond Fund
- --------------------------------------------------------------------------------
Date of Inception: 7/6/88 Total Net Assets as of Ticker Symbol: SCIBX
12/31/97: $177.3 million
- --------------------------------------------------------------------------------
o Scudder International Bond Fund provided a 5.05% 30-day SEC yield as of
December 31, 1997, against a backdrop of declining yields worldwide.
o The Fund's -0.60% total return for the six-month period ended December 31
reflects a challenging environment for U.S. investors in foreign fixed-income
securities, in which the U.S. dollar rose sharply against other currencies. A
partial currency hedge enabled the Fund to outperform its benchmark index for
the period.
o Several countries in Southeast Asia devalued their currencies in the summer
and fall under competitive pressure from Japan and China, and the effects were
felt throughout the emerging markets.
Table of Contents
3 Letter from the Fund's Chairman 17 Financial Highlights
4 Performance Update 18 Notes to Financial Statements
5 Portfolio Summary 24 Report of Independent Accountants
6 Portfolio Management Discussion 25 Stockholder Meeting Results
9 Glossary of Investment Terms 28 Officers and Directors
10 Investment Portfolio 29 Investment Products and Services
14 Financial Statements 30 Scudder Solutions
2-Scudder International Bond Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the mid-year report for Scudder International
Bond Fund for the six months ended December 31, 1997. The period presented a
number of hurdles for U.S. investors in overseas fixed-income securities,
including 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 the way in which they respond to events
in other parts of the world. Through rigorous fundamental research, Scudder
International Bond Fund seeks to diversify portfolio assets across developed and
developing markets, seeking a high level of income with an emphasis on capital
preservation while also actively managing the portfolio's currency and
interest-rate exposure.
As you may know, we have been conducting extensive research to find out
your needs and preferences regarding materials we send to you. Recently, a
survey was sent to a sampling of shareholders to gauge satisfaction with the
funds' annual and semiannual reports. An impressive majority of respondents --
88% -- were satisfied or very satisfied with the reports. Respondents clearly
liked the question and answer format and the idea of including a glossary of
investment terms. We have already begun to implement these changes to the
reports, and you can expect that we will continue to make improvements based on
your feedback going forward.
Thank you for your continued investment in Scudder International Bond Fund.
We believe the Fund remains an appropriate vehicle for investors seeking
exposure to the income opportunities found in non-U.S. fixed-income markets. If
you have questions about your account or any Scudder Fund, 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 International Bond Fund
3-Scudder International Bond Fund
<PAGE>
PERFORMANCE UPDATE as of December 31, 1997
- -----------------------------------------------------------------
FUND INDEX COMPARISONS
- -----------------------------------------------------------------
Total Return
--------------
Period Growth
Ended of Average
12/31/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER INTERNATIONAL BOND FUND
- --------------------------------------------
1 Year $ 9,590 -4.10% -4.10%
5 Year $ 11,405 14.05% 2.67%
Life of Fund* $ 20,650 106.50% 7.94%
- --------------------------------------------
SALOMON BROTHERS NON-U.S. DOLLAR WORLD
GOVERNMENT BOND INDEX
- --------------------------------------------
1 Year $ 9,574 -4.26% -4.26%
5 Year $ 14,533 45.33% 7.76%
Life of Fund* $ 21,558 115.58% 8.49%
- --------------------------------------------
* 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 December 31
SCUDDER INTERNATIONAL BOND FUND
Year Amount
- ---------------------------
7/88 $10,000
'88 $10,598
'89 $11,365
'90 $13,764
'91 $16,824
'92 $18,105
'93 $20,971
'94 $19,167
'95 $20,796
'96 $21,532
'97 $20,650
SALOMON BROTHERS NON-U.S. DOLLAR WORLD
GOVERNMENT BOND INDEX
Year Amount
- ---------------------------
7/88 $10,000
'88 $10,941
'89 $10,568
'90 $12,185
'91 $14,160
'92 $14,834
'93 $17,077
'94 $18,099
'95 $21,635
'96 $22,518
'97 $21,558
The unmanaged Salomon Brothers Non-U.S. Dollar World Government Bond Index
consists of worldwide fixed-rate government bonds with remaining maturities
greater than one year. Index returns assume reinvestment of dividends, and
unlike Fund returns, do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods Ended December 31
<TABLE>
<CAPTION>
1988* 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
NET ASSET VALUE... $12.21 $11 97 $12.90 $13.53 $12.83 $13.50 $11.38 $11.46 $11.20 $10.16
INCOME DIVIDENDS.. $ .49 $ 1.05 $ 1.16 $ 1.17 $ 1.07 $ .92 $ .99 $ .85 $ .64 $ .58
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ .29 $ .81 $ .62 $ .39 $ -- $ -- $ -- $ --
FUND TOTAL
RETURN (%)........ 5.98 7.23 21.11 22.23 7.62 15.83 -8.61 8.50 3.54 -4.10
INDEX TOTAL
RETURN (%)........ 9.42 -3.41 15.29 16.22 4.77 15.12 5.99 19.55 4.08 -4.26
</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 maintained the
Fund's expenses, the total return for the five year and life of Fund periods
would have been lower.
4-Scudder International Bond Fund
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1997
- ---------------------------------------------------------------------------
GEOGRAPHICAL EXPOSURE
- ---------------------------------------------------------------------------
Italy 18.3%
United Kingdom 17.3%
France 10.6%
Spain 8.2%
Denmark 5.8%
Ireland 5.6%
Germany 5.4%
Sweden 5.0%
Norway 4.5%
Canada 2.6%
Finland 2.6%
Peru 2.2%
Australia 2.1%
Argentina 1.8%
Panama 1.6%
Hungary 1.4%
Mexico 1.2%
Poland 1.2%
Other 2.6%
------
100.0%
======
The Fund has substantial exposure
to smaller European bond markets
such as Italy and Spain.
- ---------------------------------------------------------------------------
INTEREST RATE EXPOSURE
- ---------------------------------------------------------------------------
Italy 18.3%
United Kingdom 17.3%
France 6.0%
Japan 5.8%
Denmark 5.8%
United States 5.8%
Ireland 5.6%
Germany 5.4%
Sweden 5.0%
European Currency 4.6%
Norway 4.5%
Finland 2.6%
Canada 2.6%
Spain 2.4%
Australia 2.1%
Hungary 1.4%
Poland 1.2%
Mexico 1.2%
Other 2.4%
------
100.0%
======
The Fund is cautiously
positioned with respect to
interest rate risk.
- ---------------------------------------------------------------------------
CURRENCY EXPOSURE (a)
- ---------------------------------------------------------------------------
United States 40.0%
Italy 13.2%
United Kingdom 8.4%
France 6.0%
Japan 5.8%
Denmark 5.8%
Ireland 5.6%
Sweden 5.0%
European Currency 4.6%
Norway 4.5%
Canada 2.6%
Spain 2.4%
Hungary 1.4%
Poland 1.2%
Mexico 1.2%
South Africa 0.8%
Turkey 0.8%
Thailand 0.8%
Australia -0.1%
Germany -10.0%
------
100.0%
======
Exposure to foreign currency
fluctuation is reduced through
hedging a portion of the
portfolio back into U.S. dollars.
(a) Currency exposure after taking into account the effects of foreign
currency options, futures, and forward contracts.
- -----------------------------------------------------------------------
For more complete details about the Fund's investment portfolio, see page 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5-Scudder International Bond Fund
<PAGE>
Portfolio Management Discussion
We asked Gary P. Johnson, lead portfolio manager of Scudder International Bond
Fund, to discuss the market environment and the Fund's current investment
strategy.
Q: How did the Fund perform in the six-month period ended December 31, 1997?
A: Despite a period of generally declining interest rates globally, Scudder
International Bond Fund provided a competitive 30-day SEC yield of 5.05% on
December 31, 1997. The Fund's yield benefited both from an emphasis on Europe's
peripheral markets and careful investment in some of the world's rapidly
developing markets. The Fund's -0.6% total return masks modest gains in its
European holdings. Throughout the period, a rising U.S. dollar diminished those
gains, and in some cases produced negative results. The Fund's return compares
with a -1.18% total return for the unmanaged and unhedged Salomon Brothers
Non-U.S. World Government Bond Index. The Fund's outperformance can be
attributed largely to our strategy for managing currency risk, in which a
portion of the Fund's foreign-currency exposure was hedged back to the U.S.
dollar.
Q: How would you describe the Fund's strategy during this period?
A: Our strategy during the first half of the fiscal year was three-fold. First,
we sought to own bonds in markets that were rallying. Second, we attempted to
limit the Fund's overall currency risk. Third, we invested in certain emerging
market bonds to enhance the Fund's overall yield.
The Fund's emphasis on Europe's smaller markets helped boost its total return.
The peripheral markets of Spain, Italy, and Sweden, buoyed by improving fiscal
deficits and a benign inflation outlook, outperformed 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 29 basis points (less than one-third of one percentage point).
In part, this reflects Italy's success at curbing both 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.
Japanese bonds rallied during the period, as prospects for economic revival went
from bad to worse. Already reeling from the announcement of a new consumption
tax and plans to rein in fiscal spending, Japan is expected to suffer as a
result of the Southeast Asian crisis. The region's malaise affects Japan because
nearly 20% of Japan's exports flow to these countries, and because its weak
domestic economy raises its reliance on export-led growth. We reduced the Fund's
Japanese exposure during the period. Although these bonds are now
6-Scudder International Bond Fund
<PAGE>
------------------------------------------------------
Yields Fall Around The World
------------------------------------------------------
12/31/96 6/30/97 12/31/97
Canada 6.38% 6.23% 5.68%
Japan 2.71 2.60 1.84
Germany 5.78 5.69 5.35
France 5.73 5.56 5.34
United Kingdom 7.50 7.07 6.29
Italy 7.44 6.83 5.64
Spain 6.73 6.34 5.63
Sweden 6.70 6.59 5.96
Denmark 6.53 6.31 5.65
Mexico 9.58 9.00 9.05
------------------------------------------------------
Source: Salomon Brothers. Figures represent yields
on 10-year government securities.
considered to be a relatively safe haven, their yields are just too low -- less
than 2% for a 10-year bond -- to warrant a sizable investment stake, in our
view.
Throughout the period, we sought to limit the short-term impact of fluctuating
foreign currencies. Changes in currency exchange rates can have a significant
impact on returns to U.S. holders of foreign bonds. When the value of the U.S.
dollar rises versus the currency in which the Fund's 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 impact of fluctuating currencies
within a relatively narrow range, while also seeking to minimize the expense of
managing currency risk. Nevertheless, the strength of the U.S. dollar hurt
overall Fund performance during the period. While we may seek to limit currency
risk, we do not intend to eliminate it. When the dollar finally begins to
weaken, the Fund's exposure to foreign currencies should benefit performance.
Q: And the emerging markets?
A: With European yields in free fall, we sought to take advantage of
opportunities in the emerging markets. Although relatively small (less than 10%
of net assets), the Fund's allocation to these high-yielding markets provided an
important boost to its overall yield. The Fund's net asset value suffered,
however, as the pressure for certain Asian countries 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
devaluations left investors wary of emerging markets in general.
Q: What's the Fund's strategy going forward?
A: In the coming months, we expect to continue to hold emerging market bonds as
our primary call on 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
7-Scudder International Bond Fund
<PAGE>
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 continue to emphasize the peripheral markets, such as
Italy, Spain, and Sweden, at the expense of 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 EMU.
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 International
Bond Fund is well-positioned to make the most of the fixed-income opportunities
that lie ahead.
8-Scudder International 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.
HEDGING The attempt to minimize a risk by taking steps to offset
that risk. With currencies, hedges can be established (for a
cost) in the form of options or forward contracts that
ensure that a security transaction will take place at a
specified exchange rate.
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
highly volatile.
YIELD The dividends or interest paid on a security, expressed as a
percentage of the security's current price.
(Sources: SKI; Barron's Dictionary of Finance and Investment Terms)
9-Scudder International Bond Fund
<PAGE>
Investment Portfolio as of December 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations 0.2%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Dollars
U.S. Treasury Bill, 3/12/98 ...................................................... 115,000 113,863
U.S. Treasury Bill, 4/30/98 ...................................................... 150,000 147,444
U.S. Treasury Bill, 5/28/98 (b) .................................................. 35,000 34,256
- ------------------------------------------------------------------------------------------------------------------------------
Total U. S. Treasury Obligations (Cost $295,558) 295,563
- ------------------------------------------------------------------------------------------------------------------------------
Foreign Denominated Debt Obligations 94.0%
- ------------------------------------------------------------------------------------------------------------------------------
Australian Dollars 2.1%
Commonwealth of Australia, 10%, 2/15/06 .......................................... 4,470,000 3,643,461
------------
British Pounds 17.3%
United Kingdom Treasury Bond, 8%, 12/7/00 ........................................ 7,605,000 12,971,750
United Kingdom Treasury Bond, 8%, 12/7/15 ........................................ 7,200,000 14,073,541
United Kingdom Treasury Bond, 8%, 6/7/21 ......................................... 1,490,000 2,987,710
------------
30,033,001
------------
Canadian Dollars 2.6%
Rogers Cantel Mobile Communications Inc., 10.5%, 6/1/06 .......................... 5,650,000 4,482,213
------------
Danish Kroner 5.8%
Kingdom of Denmark, 7%, 11/15/07 ................................................. 27,000,000 4,333,465
Nykredit A/S, 7%, 10/1/29 ........................................................ 39,770,000 5,744,962
------------
10,078,427
------------
Deutsche Marks 5.2%
Landesbank Rheinland-Pfalz Girozentrale Global, 5.75%, 10/16/03 .................. 15,600,000 8,921,101
------------
European Currency Units 4.6%
Government of France, 5%, 3/16/99 ................................................ 3,000,000 3,313,788
Government of France, 5.5%, 4/25/07 .............................................. 4,200,000 4,627,762
------------
7,941,550
------------
Finnish Markka 2.6%
Republic of Finland, 6%, 4/25/08 ................................................. 24,000,000 4,560,075
------------
French Francs 6.0%
Government of France, 8.5%, 10/25/08 ............................................. 50,000,000 10,384,328
------------
Hungarian Forints 1.4%
Chase Manhattan Bank Currency Linked Note, 19.19%, 2/6/98 ........................ 483,538,040 2,437,870
------------
</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>
Irish Pounds 5.6%
Republic of Ireland, 6.5%, 4/19/00 ............................................... 3,985,000 5,680,167
Republic of Ireland, 6.5%, 10/18/01 .............................................. 2,680,000 4,015,093
------------
9,695,260
------------
Italian Lire 18.3%
Republic of Italy, 8.25%, 7/1/99 ................................................. 6,680,000,000 3,948,603
Republic of Italy, 8.5%, 8/1/99 .................................................. 30,000,000,000 17,760,380
Republic of Italy, 5.5%, 9/15/00 ................................................. 3,395,000,000 1,952,885
Republic of Italy, 8.5%, 1/1/04 .................................................. 12,380,000,000 8,096,809
------------
31,758,677
------------
Japanese Yen 5.8%
Kingdom of Spain, 3.1%, 9/20/06 .................................................. 1,200,000,000 10,099,789
------------
Mexican Pesos 1.2%
Certificados de la Tesoreria, Zero Coupon, 6/4/98 ................................ 17,569,140 2,007,617
------------
Norwegian Kroner 4.5%
Kingdom of Norway, 6.75%, 1/15/07 ................................................ 53,000,000 7,818,093
------------
Polish Zlotys 1.2%
Morgan Guaranty Trust Co. Currency Linked Note, 24.25%, 1/22/98 .................. 7,106,628 2,024,497
------------
South African Rands 0.8%
Bankers Trust Co. Time Deposit linked to South African Rand, 15.66%, 1/12/98 ..... 6,888,132 1,415,418
------------
Spanish Pesetas 2.4%
Kingdom of Spain, 9.4%, 4/30/99 .................................................. 270,000,000 1,879,394
Kingdom of Spain, 10%, 2/28/05 ................................................... 270,000,000 2,243,753
------------
4,123,147
------------
Swedish Kronor 5.0%
Kingdom of Sweden, 6%, 2/9/05 .................................................... 68,000,000 8,617,824
------------
Thai Bahts 0.8%
Chase Manhattan Bank Currency Linked Note, 14.47%, 1/30/98 ....................... 60,643,900 1,327,000
------------
Turkish Lira 0.8%
J.P. Morgan & Co. Time Deposit linked to Turkish Lira, 81%, 1/12/98 .............. 184,850,000,000 886,808
J.P. Morgan & Co. Time Deposit linked to Turkish Lira, 84%, 2/6/98 ............... 91,925,000,000 443,965
------------
1,330,773
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $166,853,431) 162,700,121
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11-Scudder International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated Debt Obligations 5.5%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cedulas Hipotecarias, 8.79%, 9/1/00 .............................................. 1,976,000 1,877,649
Letras del Tesoro, Zero Coupon, 3/20/98 .......................................... 1,250,000 1,225,625
Republic of Panama, Past Due Interest Bond, 6.69%, 7/17/16 ....................... 1,300,111 1,059,590
Republic of Panama, 8.88%, 9/30/27 ............................................... 1,750,000 1,636,250
Republic of Peru, Past Due Interest Bond, 4%, 3/7/17 ............................. 5,750,000 3,766,250
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Debt Obligations (Cost $9,530,859) 9,565,364
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost $176,679,848) 172,561,048
- ------------------------------------------------------------------------------------------------------------------------------
Purchased Options 0.3%
- ------------------------------------------------------------------------------------------------------------------------------
Put on British Pounds, strike price 1.63, expires 1/8/98 ......................... GBP 16,750,000 34,170
Put on Deutsche Marks, strike price 1.7575, expires 2/17/98 ...................... DEM 27,680,625 415,209
Put on Italian Lire, strike price 1786, expires 1/7/98 ........................... ITL 47,300,000,000 27,907
Number of
Contracts
---------------
Call on U.S. Treasury Note Future, strike price 108, expires 2/23/98 ............. 125 121,094
- ------------------------------------------------------------------------------------------------------------------------------
Total Purchased Options (Cost $688,756) 598,380
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $177,368,604) (a) 173,159,428
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $177,368,604. At December 31,
1997, net unrealized depreciation for all securities based on tax cost was
$4,209,176. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $2,480,900 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$6,690,076.
(b) At December 31, 1997, these securities, in whole or in part, were pledged
to cover initial margin requirements on open future contracts.
At December 31, 1997, open future contracts sold short were as follows:
<TABLE>
<CAPTION>
Expiration Aggregate Market
Futures Date Contracts Face Value ($) Value ($)
-------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
French 10 year Bond 3/16/98 123 10,298,535 10,399,478
-----------
Total net unrealized depreciation on open futures contracts sold short .................... 100,943
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12-Scudder International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
At December 31, 1997 outstanding written options were as follows:
<TABLE>
<CAPTION>
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value($)
- ------------ ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
GBP ............................. 16,750 1/8/98 GPB 1.6604 89,110
ITL ............................. 26,294,625 2/17/98 ITL 1669.5 15,251
---------
Total outstanding written options (Premiums received $362,513) ............................ 104,361
=========
</TABLE>
Currency Abbreviations
AUD Australian Dollar GBP British Pound NZD New Zealand Dollar
DEM Deutsche Mark ITL Italian Lire SEK Swedish Krona
FIM Finnish Markka JPY Japanese Yen USD U.S. Dollar
The accompanying notes are an integral part of the financial statements.
13-Scudder International Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $176,679,848) ................ $ 172,561,048
Purchased options, at value (identified cost $688,756) ............... 598,380
Cash ................................................................. 53,284
Receivable for investments sold ...................................... 2,184,685
Interest receivable .................................................. 4,222,660
Receivable for Fund shares sold ...................................... 288,021
Daily variation margin receivable on open futures contracts .......... 76,545
Unrealized appreciation on forward currency exchange contracts ....... 452,017
Other assets ......................................................... 6,619
----------------
Total assets ......................................................... 180,443,259
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ..................................... 492,534
Payable for investments purchased .................................... 387,791
Notes payable ........................................................ 1,600,000
Dividends payable .................................................... 178,262
Written options at market (premiums received $362,513) ............... 104,361
Unrealized depreciation on forward currency exchange contracts ....... 9,869
Accrued management fee ............................................... 129,789
Other payables and accrued expenses .................................. 281,053
----------------
Total liabilities .................................................... 3,183,659
-------------------------------------------------------------------------------------------
Net assets, at market value $ 177,259,600
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ......... (23,214,640)
Net unrealized appreciation (depreciation) on:
Investments .......................................................... (4,118,800)
Futures contracts .................................................... (100,943)
Options .............................................................. 167,776
Foreign currency related transactions ................................ 341,788
Accumulated net realized loss ........................................ (77,813,404)
Paid-in capital ...................................................... 281,997,823
-------------------------------------------------------------------------------------------
Net assets, at market value $ 177,259,600
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($177,259,600 / 17,447,208 shares of capital stock
outstanding, $.01 par value, 200,000,000 shares ----------------
of capital stock authorized) ...................................... $10.16
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14-Scudder International Bond Fund
<PAGE>
Statement of Operations
six months ended December 31, 1997
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest ............................................................. $ 7,522,694
-----------------
Expenses:
Management fee ....................................................... 863,573
Services to shareholders ............................................. 477,824
Custodian and accounting fees ........................................ 158,688
Directors' fees and expenses ......................................... 25,052
Reports to shareholders .............................................. 39,119
Auditing ............................................................. 42,637
Legal ................................................................ 8,562
Registration fees .................................................... 12,484
Interest expense ..................................................... 7,228
Other ................................................................ 33,558
-----------------
1,668,725
--------------------------------------------------------------------------------------------
Net investment income 5,853,969
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... (4,017,355)
Options .............................................................. (248,605)
Futures contracts .................................................... (343,117)
Foreign currency related transactions ................................ (869,274)
-----------------
(5,478,351)
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments .......................................................... (2,309,349)
Options .............................................................. 160,621
Futures contracts .................................................... (100,943)
Foreign currency related transactions ................................ 436,429
-----------------
(1,813,242)
--------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (7,291,593)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (1,437,624)
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15-Scudder International Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
December 31, June 30, 1997
Increase (Decrease) in Net Assets 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ......................................... $ 5,853,969 $ 19,109,198
Net realized gain (loss) from investment transactions ......... (5,478,351) (16,656,519)
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................. (1,813,242) 4,833,059
---------------- ---------------
Net increase (decrease) in net assets resulting from
operations ................................................. (1,437,624) 7,285,738
---------------- ---------------
Distributions to shareholders:
From net investment income .................................... (5,853,969) (19,109,198)
---------------- ---------------
Fund share transactions:
Proceeds from shares sold ..................................... 27,912,884 53,550,698
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 4,703,164 13,116,739
Cost of shares redeemed ....................................... (84,058,040) (334,293,130)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... (51,441,992) (267,625,693)
---------------- ---------------
Increase (decrease) in net assets ............................. (58,733,585) (279,449,153)
Net assets at beginning of period ............................. 235,993,185 515,442,338
Net assets at end of period (including accumulated
distributions in excess of net investment income of ---------------- ---------------
$23,214,640 for each period) ............................... $ 177,259,600 $ 235,993,185
---------------- ---------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ..................... 22,435,381 46,922,766
---------------- ---------------
Shares sold ................................................... 2,697,699 4,932,206
Shares issued to shareholders in reinvestment of
distributions .............................................. 456,924 1,206,004
Shares redeemed ............................................... (8,142,796) (30,625,595)
---------------- ---------------
Net increase (decrease) in Fund shares ........................ (4,988,173) (24,487,385)
---------------- ---------------
Shares outstanding at end of period ........................... 17,447,208 22,435,381
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16-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
Six Months (commencement
Ended Years Ended June 30, of operations)
December 31, to June 30,
1997 1997 1996 1995 1994(a) 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ----------------------------------------------------------------------------------------------------
of period ............... $10.52 $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 ...... .30 .58 .73 .98 .92 1.03 1.08 1.21 1.10 1.00
Net realized and unrealized
gain (loss) on
investment
transactions (b) ........ (.36) (.46) (.45) (.54) (1.22) .52 2.15 .56 .80 (.73)
Total from investment ----------------------------------------------------------------------------------------------------
operations .............. (.06) .12 .28 .44 (.30) 1.55 3.23 1.77 1.90 .27
Less distributions: ----------------------------------------------------------------------------------------------------
From net investment income.. (.30) (.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 ........ (.30) (.58) (.73) (.98) (1.30) (1.66) (1.90) (1.50) (1.09) (1.00)
----------------------------------------------------------------------------------------------------
Net asset value, end of ----------------------------------------------------------------------------------------------------
period .................. $10.16 $10.52 $10.98 $11.43 $11.97 $13.57 $13.68 $12.35 $12.08 $11.27
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (c) ....... (.60)** 0.94 2.59 3.92 (2.83) 12.24 28.25 14.88 17.59 2.16**
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............ 177 236 515 910 1,231 1,017 542 144 73 13
Ratio of operating
expenses, net to average
daily net assets (%) .... 1.61* 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 (%) .... 1.61* 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 daily
net assets (%) .......... 5.66* 5.28 6.50 8.52 6.86 7.69 8.31 9.48 9.57 8.58*
Portfolio turnover
rate (%) ................ 180.6* 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
17-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 other than money market securities
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. 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.
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.
18-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
19-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, 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 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. It appears likely that a portion of the Fund's
income distributions for the fiscal year ending June 30, 1998 will be treated as
a non-taxable return of capital.
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.
20-Scudder International Bond Fund
<PAGE>
B. Purchases and Sales of Securities
For the six months ended December 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $163,331,155 and
$202,813,770, respectively.
The aggregate face value of futures contracts opened and closed during the six
months ended December 31, 1997 was $200,313,830 and $190,015,295, respectively.
Transactions in written options for the six months ended December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Option Contracts Options on Currencies (000 omitted)
----------------------------- ------------------------------------------ ----------------
Number of Premiums Premiums
Contracts Received ($) AUD GBP ITL Received ($)
----------------------------- ------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of
Period ....... 161 260,719 12,000 -- -- $ 45,000
Written ...... 323 347,091 38,800 19,750 73,594,625 909,523
Closed ....... (200) (290,773) (33,000) (3,000) (47,300,000) (500,610)
Exercised .... (284) (317,037) -- -- -- --
Expired ...... -- -- (17,800) -- -- (91,400)
------------ ------------ ----------- ------------ ------------ ------------
End of
Period ....... -- -- -- 16,750 26,294,625 $ 362,513
============ ============ =========== ============ ============ ============
-------------------------------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------
Options on Currencies (000 omitted) (continued)
----------------------------------------------- ---------------
Premiums
NZD SEK GBP/DEM Received ($)
----------------------------------------------- ---------------
Beginning of
Period ....... 16,099 -- 7,275 $ 186,374
Written ...... 44,082 75,000 1,800 338,525
Closed ....... (27,800) (75,000) -- (211,195)
Exercised .... -- -- (7,275) (71,981)
Expired ...... (32,381) -- (1,800) (241,723)
------------ ------------ ------------ ------------
End of
Period ....... -- -- -- $ --
============ ============ ============ ============
----------------------------------------------------------------
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
21-Scudder International Bond Fund
<PAGE>
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, the Adviser directs the
investments of the Fund in accordance with its investment objective, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 0.85% on the first $1,000,000,000 of average daily net assets and 0.80% of
such net assets in excess of $1,000,000,000, computed and accrued daily and
payable monthly. For the six months ended December 31, 1997, the fee pursuant to
these agreements amounted to $863,573, which is equivalent to an annual
effective rate of 0.85% of the Fund's average daily net assets.
Effective January 1, 1998, the Adviser has agreed to maintain expenses at not
more than 1.50% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended December 31, 1997, the amount charged by SSC aggregated
$258,794, of which $35,369 is unpaid at December 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 six months ended December
31, 1997, the amount charged to the Fund by STC aggregated $41,445, of which
$6,618 is unpaid at December 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 six months
ended December 31, 1997, the amount charged to the Fund by SFAC aggregated
$84,293, of which $12,571 is unpaid at December 31, 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 December 31, 1997, the
Special Servicing Agreement expense charged to the Fund amounted to $9,157.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the six
months ended December 31, 1997, Directors' fees and expenses aggregated $25,052.
22-Scudder International Bond Fund
<PAGE>
D. Commitments
As of December 31, 1997 the Fund had entered into the following forward currency
exchange contracts resulting in net unrealized appreciation of $442,148.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
------------------------- ------------------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
USD 129,708 JPY 16,616,950 1/7/98 (2,215)
USD 79,616 JPY 10,188,100 1/14/98 (1,366)
AUD 5,800,000 USD 3,810,600 1/28/98 29,899
DEM 17,710,250 USD 10,000,000 2/3/98 135,268
DEM 3,529,740 USD 2,000,000 2/3/98 33,910
USD 1,622,081 DEM 2,900,848 2/3/98 (6,288)
DEM 10,586,330 USD 6,029,280 3/2/98 124,148
FIM 25,224,320 USD 4,768,302 3/2/98 128,792
------------
442,148
============
</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.
The weighted average outstanding balance of all loans (based on the number of
days the loans were outstanding) was $2,084,000 with a weighted average interest
rate of 6.67%. Interest expense for the six months ended December 31, 1997 was
$7,228 (less than $.005 per share). The maximum month-end borrowings outstanding
during the six months ended December 31, 1997 was $2,000,000.
23-Scudder International Bond Fund
<PAGE>
Report of Independent Accountants
To the Directors of Scudder Global Fund, Inc. and to the Shareholders of Scudder
International Bond Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
International Bond Fund including the investment portfolio, as of December 31,
1997, and the related statement of operations for the six-month period then
ended, the statements of changes in net assets for the six-month period then
ended and for the year ended June 30, 1997, and the financial highlights for the
six months ended December 31, 1997, for each of the eight years in the period
ended June 30, 1997 and for the period July 6, 1988 (commencement of operations)
to June 30, 1989. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 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 International Bond Fund as of December 31, 1997, the results of its
operations for the six-month period then ended, the changes in its net assets
for the six-month period then ended and for the year ended June 30, 1997, and
the financial highlights for the six months ended December 31, 1997, for each of
the eight years in the period ended June 30, 1997 and for the period July 6,
1988 (commencement of operations) to June 30, 1989, in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 23, 1998
24-Scudder International Bond Fund
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder International Bond
Fund (the "Fund") was held on October 27, 1997, at the office of Scudder Kemper
Investments, Inc. (formerly 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
shareholders (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 shareholders 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 11,003,619 568,900
Sheryle J. Bolton 11,006,659 565,860
William T. Burgin 10,979,428 593,091
Thomas J. Devine 11,003,272 569,247
Keith R. Fox 11,017,121 555,398
William H. Gleysteen, Jr. 11,001,448 571,071
William H. Luers 11,006,735 565,784
Daniel Pierce 11,008,710 563,809
Kathryn L. Quirk 10,999,375 573,144
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*
--- ------- ------- -----------------
10,640,248 563,378 368,893 758,317
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*
--- ------- ------- -----------------
10,204,061 1,138,304 600,754 677,205
25-Scudder International Bond Fund
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ---------
<S> <C> <C> <C> <C>
4.1 Diversification 9,516,871 756,703 540,628 758,317
4.2 Borrowing 9,367,487 883,800 562,915 758,317
4.3 Senior securities 9,472,190 774,233 567,779 758,317
4.4 Purchase of physical 9,461,485 795,736 556,981 758,317
commodities
4.5 Concentration 9,462,246 795,860 556,096 758,317
4.6 Underwriting of securities 9,477,859 775,020 561,323 758,317
4.7 Investment in real estate 9,488,260 698,394 627,548 758,317
4.8 Lending 9,468,058 712,487 633,657 758,317
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
10,871,478 311,490 389,551
* 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.
26-Scudder International Bond Fund
<PAGE>
This Page
intentionally
left blank.
27-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
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, Visiting
Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman
of the Board and Director, Kirby
Corporation
Susan E. Dahl*
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
Thomas F. McDonough*
Vice President and Secretary
Edward J. O'Connell*
Vice President and Assistant
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28-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
- -------------
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
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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 Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.
29-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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 previously designated.
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 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
</TABLE>
31-Scudder International Bond Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
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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