Scudder
Global Bond
Fund
Annual Report
October 31, 1998
Pure No-Load(TM) Funds
A fund which seeks total return with an emphasis on current income by
investing primarily in high-grade bonds denominated in foreign currencies and
the U.S. dollar. Capital appreciation is a secondary objective.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder Global Bond Fund
- --------------------------------------------------------------------------------
Date of Inception: 3/1/91 Total Net Assets as of Ticker Symbol: SSTGX
10/31/98: $107.7 million
- --------------------------------------------------------------------------------
o Turbulence in the emerging markets and the prospects for a slowing global
economy provided a boost to the bond markets of developed countries. The
strong performance of the U.S. bond market in particular had a positive
effect on Fund performance during the period of this report.
o Scudder Global Bond Fund provided an 8.91% total return for the
twelve-month period through October, placing it in the top 27% of the 148
funds in its category, according to Lipper Analytical Services.
o The Fund employed a three-pronged strategy of managing currency risk,
focusing on high-quality bond markets, and using a research-driven approach
to find undervalued bonds.
Table of Contents
3 Letter from the Fund's Chairman 18 Financial Highlights
4 Performance Update 19 Notes to Financial Statements
5 Portfolio Summary 25 Report of Independent Accountants
6 Portfolio Management Discussion 28 Officers and Directors
10 Glossary of Investment Terms 29 Investment Products and Services
12 Investment Portfolio 30 Scudder Solutions
15 Financial Statements
2 - Scudder Global Bond Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for Scudder Global Bond Fund
for the fiscal year ended October 31, 1998.
The past twelve months have been a period of extraordinary volatility in
the financial markets. As the economic crisis that began in Asia spread
across the globe, investors staged a "flight to quality" into assets with a
lower perceived level of risk, such as U.S. Treasury bonds. While the search
for relative safety led to substantial corrections in global equity markets
and higher-yielding bonds, it provided a significant lift to the government
bond markets of the world's established economies. By utilizing a rigorous
process of fundamental research and risk management while focusing primarily
on bonds from developed countries, Scudder Global Bond Fund was well
positioned for this tumultuous period. For details of the events of the past
12 months and the outlook for the year ahead, please turn to the discussion
beginning on page 6.
For those of you who are interested in new Scudder products, we recently
introduced the Scudder Tax Managed Growth Fund, investing in medium- to
large-sized U.S. companies, and Scudder Tax Managed Small Company Fund, which
invests in stocks of small U.S. companies. Using a combination of
quantitative and fundamental research, the funds will focus on companies with
strong earnings growth, reasonable valuations, and favorable risk profiles.
Both funds strive to maximize after tax returns by systematically analyzing
the tax implications of portfolio transactions and seeking to offset capital
gains by realizing losses when appropriate.
Thank you for your continued investment in Scudder Global Bond Fund. If
you have any questions about your investment, please call Scudder Investor
Relations at 1-800-225-2470, or visit our Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman
Scudder Global Bond Fund
3 - Scudder Global Bond Fund
<PAGE>
Performance Update as of October 31, 1998
- ----------------------
Fund Index Comparisons
- ----------------------
Total Return
- ---------------------------------------------------
Period Ended Growth of Average
10/31/98 $10,000 Cumulative Annual
- ---------------------------------------------------
Scudder Global Bond Fund
- ---------------------------------------------------
1 Year $ 10,891 8.91% 8.91%
5 Year $ 11,987 19.87% 3.69%
Life of Fund* $ 14,769 47.69% 5.21%
- ---------------------------------------------------
Salomon Brothers World Government Bond Index
- ---------------------------------------------------
1 Year $ 11,254 12.54% 12.54%
5 Year $ 14,527 45.27% 7.75%
Life of Fund* $ 20,326 103.26% 9.79%
- ---------------------------------------------------
* The Fund commenced operation on March 1, 1991.
Index comparisons begin March 31, 1991.
- ------------------------------
Growth of a $10,000 Investment
- ------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
<TABLE>
<CAPTION>
Salomon Brothers Currency-
Salomon Brothers World Hedged World Government
Government Bond Index Scudder Global Bond Fund Bond Index (1-3 years)**
<S> <C> <C> <C>
3/91* 10000 10000 10000
'91 10970 10653 10075
'92 12493 11487 10896
'93 13992 12307 11702
'94 14499 12277 12058
'95 16704 12944 12748
'96 17601 13458 13625
'97 18061 13546 0
'98 20326 14753 0
</TABLE>
Yearly periods ended October 31
The unmanaged Salomon Brothers World Govenment 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
- ---------------------------------
Yearly periods ended October 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1991* 1992 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 12.01 $ 11.84 $ 11.68 $ 10.78 $ 10.53 $ 10.25 $ 9.71 $ 9.92
- -----------------------------------------------------------------------------------------------------------------
Income Dividends $ .76 $ 1.08 $ .95 $ .87 $ .80 $ .67 $ .59 $ .62
- -----------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ .02 $ -- $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 6.65 7.83 7.14 -.25 5.43 3.97 .66 8.91
- -----------------------------------------------------------------------------------------------------------------
Index Total Return (%) 5.56 7.56 6.08 1.87 9.68 5.36 2.62 12.54
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
On December 27, 1995, the Fund adopted its current name and objectives. Prior to
that date, the Fund was known as the Scudder Short Term Global Income Fund and
its investment objective was to provide high current income through short-term
instruments. Since adopting its current objectives, the cumulative return is
12.32.
**Prior to December 27, 1995, the Salomon Brothers Currency-Hedged World
Government Bond Index (1-3 years) was used as a comparative index.
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. If the Adviser had not maintained expenses, the
total returns for the Fund for the one year, five year, and life of Fund periods
would have been lower.
4 - Scudder Global Bond Fund
<PAGE>
Portfolio Summary as of October 31, 1998
- ---------------------
Geographical Exposure
- ---------------------
U.S. 35.6%
France 14.3%
U.K. 13.9%
Spain 11.0%
Canada 10.8%
Norway 4.2%
Japan 4.0%
Greece 3.1%
Denmark 1.3%
Argentina 0.8%
Panama 0.7%
Mexico 0.2%
New Zealand 0.1%
---------------------------------------------
100.0%
---------------------------------------------
The majority of the Fund's assets were concentrated in the
more established markets, allowing it to benefit from the
"flight to quality" that drove bond market performance for
much of the year.
- ----------------------
Interest Rate Exposure
- ----------------------
U.S. 35.6%
U.K. 15.6%
Spain 11.0%
France 7.8%
European Currency Units 6.6%
New Zealand 6.0%
Canada 4.6%
Norway 4.2%
Japan 4.0%
Greece 3.1%
Denmark 1.3%
Mexico 0.2%
---------------------------------------------
100.0%
---------------------------------------------
The Fund increased its exposure to U.S. government bonds,
and trimmed its weighting in Japan.
- ---------------------
Currency Exposure (a)
- ---------------------
U.S. 47.3%
Japan 19.0%
France 7.8%
European Currency Units 6.6%
U.K. 6.1%
Greece 3.1%
New Zealand 3.1%
Canada 2.6%
Spain 2.0%
Denmark 1.3%
Hungary 0.8%
Mexico 0.5%
Norway -0.2%
---------------------------------------------
100.0%
---------------------------------------------
Fund management strives to minimize risk by pursuing a
hedging strategy designed to limit the impact of short-term
currency fluctuations.
(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 12. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Global Bond Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Gary P. Johnson, Lead Portfolio Manager of
Scudder Global Bond Fund, discusses the Fund's current investment strategy
and the market environment for global fixed income securities.
Q: How did the Fund perform in the twelve-month period ended October 31, 1998?
A: The 8.91% return of Scudder Global Bond Fund trailed the 12.54% return of
its unmanaged benchmark, the Salomon Brothers World Government Bond Index,
but significantly outperformed the 4.28% return of the global bond fund peer
group, as calculated by Lipper Analytical Services. This return placed the
Fund in the top 27% of the 148 funds in this category. In a time period where
currency fluctuations are unusually dramatic, as they have been throughout
1998, the relative performance of the benchmark is skewed by the fact that
while most global bond funds actively hedge against currency risk, the index
does not. In other words, a U.S. investor holding an unhedged overseas
position will receive a greater benefit from periods of weakness in the
dollar than an investor who is hedged.
Q: How would you characterize market conditions in this period?
A: For several years, bonds have been out of favor with many investors due to
strong economic growth and unusually high returns from global stock markets.
In 1998, this sentiment began to change, as the intensifying crisis in the
emerging markets sparked fears of a global recession. The prolonged drop in
equities and high-risk bonds drove rallies in the sovereign debt of more
financially sound nations, particularly the United States, as investors
sought the "safe haven" of investments considered to be free of credit risk.
In addition, the crisis eliminated the inflation fears that had been hurting
bond performance since 1994. Bond prices, which are sensitive to the interest
rate decisions of the world's central banks, tend to rise when the banks are
lowering rates, and fall when the banks are raising rates. Since a slowdown
often leads central banks to stimulate growth by cutting rates, bonds become
an attractive investment in periods of economic turmoil. Hopes for lower
rates were validated in October when the U.S. Federal Reserve twice cut the
Federal Funds rate by one quarter of a percentage point. With growth showing
signs of slowing throughout Europe, this decision fueled speculation that
foreign central banks would soon follow the Fed in cutting rates, lending
additional positive sentiment to the global bond markets. Reacting to these
developments, investors drove the yield on the benchmark 30-year U.S.
Treasury Bond from 6.15% on October 31, 1997, to 5.16% on October 31, 1998.
Q: What was your strategy for the Fund?
A: We utilize a three-pronged strategy designed to maximize risk-adjusted
returns in all market conditions, although our approach worked particularly
well in the unsettled environment of the past year. The first aspect of our
strategy is to invest the majority of the Fund's assets in the largest, most
stable countries in the developed world; specifically, the twenty largest
industrialized nations. While we seek to add diversification and higher yield
to the portfolio by investing a small percentage of assets in the emerging
markets, the Fund held only a very limited position there as of October 31.
6 - Scudder Global Bond Fund
<PAGE>
By concentrating our investments in the more established markets, we were
able to benefit from the "flight to quality" that drove bond market
performance for much of this year.
Second, we strive to minimize risk by pursuing a hedging strategy that is
designed to limit the short-term impact of foreign currency fluctuations.
Changes in currencies can have a significant impact on U.S. holders of
foreign bonds. When the value of the U.S. dollar rises against the currency
in which an investment is held, the value of the position decreases. We
employ 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. As a standing
policy, we begin each calendar quarter with 50% of the Fund's currency
exposure hedged to U.S. dollars. We then increase or decrease exposure based
on our outlook for the U.S. dollar. In the twelve month period, this strategy
provided protection from the surge in the value of the dollar through the
first half of 1998, but also reduced the extent to which the Fund benefited
from the dollar's third quarter collapse.
The third aspect of the Fund's strategy is to use intensive fundamental
research to construct a portfolio that is heavily weighted in the countries
that we believe offer the best value within the developed markets. For
example, we feel that the New Zealand economy will be adversely affected by
the fallout from the Asian crisis, creating a favorable climate for falling
interest rates. Since New Zealand's bonds still offer a high relative yield,
we have established an overweighted position there to benefit from both the
higher income and the potential for capital appreciation.
Q: Please discuss other positions the Fund has taken as a result of your
strategy.
A: Our investment in 2- to 3-year government bonds from the United Kingdom is
another example of our search for strong relative values. Despite increasing
signs of a slowing economy, the Bank of England had not been aggressive in
cutting rates; instead, they were still raising them as late as June 4, 1998.
The disparity between the actions of the central bank and the sentiment of
market participants led to an inverted yield curve, which means that
investors could receive higher rates by investing their money for shorter
periods of time. Normally, longer-term bonds provide higher yields. Using
fundamental research, we determined that these shorter-term bonds offered
excellent value, so we established a position and locked in the higher rates.
Our position call options on five-year U.S. government bonds also provided a
boost to the Fund's performance. As chaos began to grip the financial markets
in the summer, the bond market was pricing short- to intermediate-term notes
at levels that indicated very little expectation for a rate cut by the
Federal Reserve. Feeling that this sentiment was illogical given the high
level of instability in the emerging markets, we established a position and
benefited accordingly.
An example of a country we underweighted was Japan, since the extended
collapse of their economy has sent yields under 1% on all bonds with
maturities of ten years or less. The poor value offered by this paltry income
7 - Scudder Global Bond Fund
<PAGE>
stream led us to cut our position in Japanese government bonds by nearly 50%
from the beginning of the calendar year.
Q: Can you give us examples of investments that did not fare well?
A: Yes. Although the majority of our assets remained invested in AAA-rated
government debt, we also sought to augment the Fund's yield through
investments in mortgage-backed securities, corporate bonds, and the emerging
markets. In an environment that was characterized by a swift flight from
higher-risk assets, the poor performance of some of these holdings detracted
from the Fund's returns throughout the summer months. We took advantage of
the subsequent rebound in the emerging markets to trim our exposure, based on
our analysis that in many cases the ongoing risks were not sufficiently
outweighed by the higher yields. Despite the weaker performance of corporate
bonds during this period, we remain on the lookout for opportunities in
investment grade credits that we believe offer higher expected returns than
sovereign debt.
Q: What is your strategy going forward?
A: Looking ahead, it is reasonable to expect that bond market returns will be
somewhat muted since yields are already extremely low by historical
standards. Given the continued instability in the global economy, however, we
feel that Scudder Global Bond Fund should continue to hold an important place
in investors' portfolios by providing meaningful diversification. As one of
the few asset classes that stand to benefit from continued turmoil, the
government bonds of developed countries can provide crucial balance to
8 - Scudder Global Bond Fund
<PAGE>
investors whose portfolios are heavily weighted in other areas. We will
continue to pursue our strategy of managing currency risk, investing in high
quality bonds, and using fundamental research to uncover exceptional values
around the globe.
Scudder Global
Bond Fund:
A Team Approach to Investing
Scudder Global Bond Fund Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays 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 the Adviser's large staff of economists,
research analysts, traders, and other investment specialists who work in
our offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging our extensive resources.
Lead Portfolio Manager Gary P. Johnson assumed responsibility for the
Fund's day-to-day management and investment strategies in 1997. Gary, who
has 16 years of investment industry experience, joined the Adviser in 1987.
Adam M. Greshin, Portfolio Manager, joined the Adviser in 1986 as an
international bond analyst and is Product Leader for Scudder's global and
international fixed-income investing.
9 - Scudder Global Bond Fund
<PAGE>
Glossary of Investment Terms
CURRENCY EXCHANGE RATE The price at which one country's currency can be
exchanged into another currency. From the
perspective of a U.S. investor in overseas
securities, a weakening U.S. dollar adds to total
returns, as assets denominated in foreign currencies
then translate into more in dollar terms; a
strengthening dollar relative to foreign currencies
reduces returns to U.S. investors.
FUNDAMENTAL RESEARCH Analysis of a security based on the projected
economic health of the issuer. To determine whether
a government bond is attractively priced,
information such as inflation, gross domestic
product, and money flows into and out of the country
will be analyzed. Distinct from technical analysis,
which evaluates the attractiveness of a security
based on historical price and trading volume
movements, rather than the financial results of the
underlying issuer.
HEDGING A strategy used to offset investment risk.
Investment managers frequently hedge their exposure
to currency changes by buying or selling futures or
options contracts. For example, an investor who
wishes to buy British bonds but feels that the value
of the pound will fall versus the U.S. dollar may
buy futures or options on the pound to offset the
projected decline in the currency.
INVERTED YIELD CURVE An unusual situation where short-term interest rates
are higher than long-term interest rates. An
inverted curve results when a surge in demand for
short-term credit drives up short-term rates, while
long-term rates move up more slowly since borrowers
are not willing to commit themselves to pay high
rates for many years. This scenario is often
indicative of negative sentiment concerning a
country's economic health.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings capability of every holding in a
given fund's portfolio, net of expenses, assuming
each is held to maturity.
10 - Scudder Global Bond Fund
<PAGE>
TOTAL RETURN The most common yardstick to measure the performance
of a fund or investment. Total return-- annualized
or compounded-- is based on a combination of share
price changes plus income and capital gain
distributions, if any, expressed as a percentage
gain or loss in value.
YIELD CURVE A graph plotting the yields of all bonds of the
same quality with maturities ranging from the
shortest to the longest available. The resulting
curve shows the relationship between short-,
intermediate-, and long-term interest rates.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
11 - Scudder Global Bond Fund
<PAGE>
Investment Portfolio as of October 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 2.2%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/30/1998 at 5.4%,
to be repurchased at $2,307,038 on 11/2/1998, collateralized by a $2,301,000 -----------
U.S. Treasury Bond, 3.625%, 4/15/2028 (Cost $2,306,000) ............................. 2,306,000 2,306,000
-----------
Foreign Denominated Debt Obligations 64.4%
- ------------------------------------------------------------------------------------------------------------------------------
British Pounds 15.6%
Federal National Mortgage Association Global Issue, 7.125%, 8/10/1999 ................. 2,000,000 3,361,896
United Kingdom Treasury Bond, 6%, 8/10/1999 ........................................... 4,050,000 6,774,614
United Kingdom Treasury Bond, 8%, 6/10/2003 ........................................... 3,385,000 6,351,388
-----------
16,487,898
-----------
Canadian Dollars 4.6%
Newcourt Credit Group, Inc., 6.2%, 9/1/2004 ........................................... 1,170,000 683,107
PanCanadian Petroleum Ltd., 8.75%, 11/9/2005 .......................................... 1,500,000 1,122,667
TransCanada PipeLines, 5.84%, 6/27/2008 ............................................... 4,063,000 2,579,657
TransCanada PipeLines, 10.625%, 10/20/2009 ............................................ 590,000 508,126
-----------
4,893,557
-----------
Danish Kroner 1.3%
Nykredit A/S, 7%, 10/1/2026 ........................................................... 8,532,000 1,366,395
-----------
European Currency Units 6.6%
Government of France, 4.5%, 7/12/2002 ................................................. 2,780,000 3,390,325
Government of France, 5.5%, 4/25/2007 ................................................. 2,750,000 3,570,214
-----------
6,960,539
-----------
French Francs 7.8%
Government of France STRIP (Principal Only), 10/25/2019 ............................... 143,000,000 8,218,118
-----------
Greek Drachmas 3.1%
Deutsche Bank Time Deposit linked to Greek Drachma, 11.375%, 11/19/1998 ............... 59,318,457 210,918
Republic of Greece, 8.9%, 4/1/2003 .................................................... 860,000,000 3,048,713
-----------
3,259,631
-----------
Japanese Yen 4.0%
Japan Development Bank, 2.875%, 12/20/2006 ............................................ 430,000,000 4,255,731
-----------
Mexican Pesos 0.2%
Certificados de la Tesoreria, Zero Coupon, 7/8/1999 ................................... 2,711,650 217,105
-----------
New Zealand Dollars 6.0%
Government of Canada, 6.625%, 10/3/2007 ............................................... 11,789,000 6,405,882
-----------
Norwegian Kroner 4.2%
Kingdom of Norway, 6.75%, 1/15/2007 ................................................... 30,000,000 4,406,595
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Global Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Spanish Pesetas 11.0%
Kingdom of Spain, 6.75%, 4/15/2000 .................................................... 790,000,000 5,868,010
Kingdom of Spain, 5.25%, 1/31/2003 .................................................... 705,000,000 5,301,279
Kingdom of Spain, 5.15%, 7/30/2009 .................................................... 68,730,000 492,052
-----------
11,661,341
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $66,503,281) 68,132,792
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated Debt Obligations 32.7%
- ------------------------------------------------------------------------------------------------------------------------------
Cedulas Hipotecarias, LIBOR plus .29% (8.699%), 9/1/2000 .............................. 900,000 799,016
Federal National Mortgage Association, 5.8%, 12/10/2003 ............................... 2,500,000 2,610,150
General Motors Acceptance Corp., 5.33%, 10/20/2000 .................................... 1,500,000 1,505,250
Government National Mortgage Association Pass-thru, 7.0%, 7/15/2028 ................... 10,493,916 10,743,147
Midland Bank PLC, 7.625%, 6/15/2006 ................................................... 1,500,000 1,617,375
PacifiCorp, 6.15%, 1/15/2008 .......................................................... 2,300,000 2,275,850
Puget Sound Energy, Inc., 7.02%, 12/1/2027 ............................................ 2,000,000 2,037,620
Republic of Panama, Past Due Interest Bond, LIBOR plus .8125%, 4% with 2.688%
Interest Capitalization (6.688%), 7/17/2016 ......................................... 1,063,089 781,370
Time Warner Inc., 9.125%, 1/15/2013 ................................................... 1,000,000 1,207,270
U.S. Treasury Bond, 7.25%, 5/15/2016 .................................................. 1,480,000 1,800,050
U.S. Treasury Note, 6.5%, 10/15/2006 .................................................. 5,400,000 6,057,288
U.S. Treasury Note, 5.5%, 2/15/2008 ................................................... 2,575,000 2,751,233
Webster Financial Corp., 9.36%, 1/29/2027 ............................................. 500,000 522,970
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Debt Obligations (Cost $34,411,229) 34,708,589
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost $103,220,510) 105,147,381
- ------------------------------------------------------------------------------------------------------------------------------
Purchased Options 0.7%
- ------------------------------------------------------------------------------------------------------------------------------
Put on Canadian Dollars, strike price 1.5384, expires 12/24/1998 ......................CAD 7,750,000 96,100
Put on New Zealand Dollars, strike price .508, expires 11/25/1998 .....................NZD 5,700,000 14,683
Put on New Zealand Dollars, strike price .5252, expires 11/18/1998 ....................NZD 6,200,000 38,626
<CAPTION>
Number of
Contracts
-----------
<S> <C> <C> <C>
Call on 5 Year U.S. Treasury Note, strike price 110, expires 11/21/1998 ...............USD 130 603,281
- ------------------------------------------------------------------------------------------------------------------------------
Total Purchased Options (Cost $201,492) 752,690
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $103,422,002) (a) 105,900,071
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Global Bond Fund
<PAGE>
(a) The cost for federal income tax purposes was $103,422,002. At October 31,
1998, net unrealized appreciation for all securities based on tax cost was
$2,478,069. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $4,004,603 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,526,534.
At October 31, 1998, open futures contracts sold short were as follows:
<TABLE>
<CAPTION>
Aggregate Market
Futures Expiration Contracts Face Value($) Value($)
- ------------ ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 Year U.S. Treasury Note December 22, 1998 130 14,988,545 14,903,281
---------- ----------
Total net unrealized appreciation on open futures contracts sold short ................... 85,264
==========
</TABLE>
At October 31, 1998, outstanding written options were as follows:
<TABLE>
<CAPTION>
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value($)
- ------------ ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAD 6,890 12/24/1998 CAD 1.488 26,182
NZD 6,200 11/18/1998 NZD .547 14,880
NZD 5,700 11/25/1998 NZD .5291 54,646
<CAPTION>
Number of
Contracts
-------------
<S> <C> <C> <C> <C> <C>
10-Year U.S. Treasury Note 95 11/21/1998 USD 121 56,406
---------
Total outstanding written options (Premiums received $197,425) ........................... 152,114
=========
</TABLE>
Currency Abbreviations
- -----------------------------------------------------------------------
AUD Australian Dollar ITL Italian Lira
CAD Canadian Dollar JPY Japanese Yen
DEM Deutsche Mark MXP Mexican Peso
ESP Spanish Peseta NZD New Zealand Dollar
GBP British Pound NOK Norwegian Kroner
HUF Hungarian Forint PSS Peruvian Sol
IEP Irish Punt USD U.S. Dollar
The accompanying notes are an integral part of the financial statements.
14 - Scudder Global Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1998
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $103,220,510) ................. $ 105,147,381
Purchased options, at market (identified cost $201,492) ............... 752,690
Foreign currency holdings, at market (identified cost $3,863) ......... 3,873
Cash .................................................................. 10,789
Interest receivable ................................................... 1,861,918
Receivable for investments sold ....................................... 540,302
Receivable for Fund shares sold ....................................... 586,275
Receivable for daily variation margin on open futures contracts ....... 89,468
Unrealized appreciation on forward currency exchange contracts ........ 1,052,292
Other assets .......................................................... 57,308
----------------
Total assets .......................................................... 110,102,296
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ..................................... 1,237,198
Dividends payable ..................................................... 123,085
Payable for Fund shares redeemed ...................................... 20,523
Accrued management fee ................................................ 29,875
Other payables and accrued expenses ................................... 254,174
Written options, at market (premiums received $197,425) ............... 152,114
Unrealized depreciation on forward currency exchange contracts ........ 560,932
----------------
Total liabilities ..................................................... 2,377,901
-------------------------------------------------------------------------------------------
Net assets, at market value $ 107,724,395
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Unrealized appreciation (depreciation) on:
Investments ........................................................ 1,926,880
Options ............................................................ 596,509
Futures contracts .................................................. 85,264
Foreign currency related transactions .............................. 517,398
Accumulated net realized gain (loss) .................................. (7,777,198)
Paid-in capital ....................................................... 112,375,542
-------------------------------------------------------------------------------------------
Net assets, at market value $ 107,724,395
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($107,724,395 / 10,857,540 shares of capital stock ----------------
outstanding, $.01 par value, 300,000,000 shares authorized) ......... $9.92
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Global Bond Fund
<PAGE>
Statement of Operations
year ended October 31, 1998
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest (net of foreign taxes withheld of $15,928) ................... $ 8,612,830
----------------
Expenses:
Management fee ........................................................ 869,131
Services to shareholders .............................................. 397,855
Custodian and accounting fees ......................................... 215,067
Directors' fees and expenses .......................................... 62,343
Reports to shareholders ............................................... 40,470
Auditing .............................................................. 77,743
Legal ................................................................. 12,655
Registration fees ..................................................... 21,261
Other ................................................................. 16,640
----------------
Total expenses before reductions ...................................... 1,713,165
Expense reductions .................................................... (554,345)
----------------
Expenses, net ......................................................... 1,158,820
-------------------------------------------------------------------------------------------
Net investment income 7,454,010
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................... (2,875,232)
Options ............................................................... (126,971)
Futures contracts ..................................................... (370,636)
Foreign currency related transactions ................................. 989,437
----------------
(2,383,402)
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... 2,526,184
Options ............................................................... 822,049
Futures contracts ..................................................... 85,264
Foreign currency related transactions ................................. 963,996
----------------
4,397,493
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 2,014,091
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 9,468,101
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Global Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ......................................... $ 7,454,010 $ 10,145,927
Net realized gain (loss) from investment transactions ......... (2,383,402) (6,797,404)
Net unrealized appreciation (depreciation) on
investment transactions during the period ................... 4,397,493 (3,581,203)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations .................................................. 9,468,101 (232,680)
---------------- ----------------
Distributions to shareholders from:
Net investment income ......................................... (7,192,075) (2,459,944)
---------------- ----------------
Tax return of capital ......................................... (261,935) (7,685,983)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ..................................... 18,630,293 26,565,023
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 5,303,498 7,206,681
Cost of shares redeemed ....................................... (53,336,952) (105,683,539)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ................................................ (29,403,161) (71,911,835)
---------------- ----------------
Increase (decrease) in net assets ............................. (27,389,070) (82,290,442)
Net assets at beginning of period ............................. 135,113,465 217,403,907
---------------- ----------------
Net assets at end of period ................................... $ 107,724,395 $ 135,113,465
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ..................... 13,913,602 21,216,085
---------------- ----------------
Shares sold ................................................... 1,923,075 2,733,367
Shares issued to shareholders in reinvestment of
distributions ............................................... 551,892 736,022
Shares redeemed ............................................... (5,531,029) (10,771,872)
---------------- ----------------
Net increase (decrease) in Fund shares ........................ (3,056,062) (7,302,483)
---------------- ----------------
Shares outstanding at end of period ........................... 10,857,540 13,913,602
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Global Bond Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended October 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------
Net asset value, beginning of period .......................... $ 9.71 $ 10.25 $ 10.53 $ 10.78 $ 11.68
----------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .................................. .62 .59 .67 .80 .87
Net realized and unrealized gain (loss) on investment
transactions ................................................ .21 (.54) (.28) (.25) (.90)
----------------------------------------------------------
Total from investment operations .............................. .83 .05 .39 .55 (.03)
----------------------------------------------------------
Less distributions from:
Net investment income ......................................... (.60) (.14) (.42) (.36) (.02)
Net realized gains on investment transactions ................. -- -- -- -- --
Tax return of capital ......................................... (.02) (.45) (.25) (.44) (.85)
----------------------------------------------------------
Total distributions ........................................... (.62) (.59) (.67) (.80) (.87)
----------------------------------------------------------
----------------------------------------------------------
Net asset value, end of period ................................ $ 9.92 $ 9.71 $ 10.25 $ 10.53 $ 10.78
----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) .......................................... 8.91 0.66 3.97 5.43 (.25)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................ 108 135 217 357 560
Ratio of operating expenses, net to average daily net
assets (%) .................................................. 1.00 1.00 1.00 1.00 1.00
Ratio of operating expenses before expense reductions, to
average daily net assets (%) ................................ 1.48 1.39 1.28 1.20 1.15
Ratio of net investment income to average daily net
assets (%) .................................................. 6.43 6.00 6.67 7.73 7.76
Portfolio turnover rate (%) ................................... 218.3 256.5 335.7 182.8 272.4
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current
income through short-term instruments. Financial information prior to
December 27, 1995 should not be considered representative of the present
Fund.
18 - Scudder Global Bond Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Global Bond Fund (the "Fund") is a non-diversified series of
Global/International Fund, Inc. (formerly 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
instruments with an original maturity over sixty days are valued by pricing
agents approved by the officers of the Fund, whose quotations reflect
broker/dealer-supplied valuations and electronic data processing techniques. If
the pricing agents are unable to provide such quotations, the most recent bid
quotation supplied by a bona fide market maker shall be used. Money market
instruments purchased with an original maturity of sixty days or less are valued
at amortized cost. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
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 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 currencies as a
hedge against potential adverse price movements in the value of portfolio
assets. In addition, during the period, the Fund purchased call options on
currencies to lock in the purchase price of a security or currency which it
expects to purchase in the near future and to enhance potential gain.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised, the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked prices are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
19 - Scudder Global 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,
and as a temporary substitute for purchasing selected investments and 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 daily rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
20 - Scudder Global Bond Fund
<PAGE>
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes, and no federal
income tax provision was required. At October 31, 1998, the Fund had a net tax
basis capital loss carryforward of approximately $6,433,000, which may be
applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until October 31, 2002 ($686,000), October 31, 2003
($5,010,000) and October 31, 2004 ($737,000), the respective expiration dates,
whichever occurs first.
Distribution of Income and Gains. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is distributed to shareholders monthly. During any particular year
net realized gains and certain unrealized gains (which for federal income tax
reporting purposes may be considered realized) from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed and, therefore, will be distributed to shareholders. An
additional distribution may be made to the extent necessary to avoid the payment
of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in options, futures, forward
currency contracts and foreign currency denominated investments. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are accreted for both tax and financial reporting purposes.
21 - Scudder Global Bond Fund
<PAGE>
B. Purchases and Sales of Securities
For the year ended October 31, 1998, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $200,013,878 and $213,084,601, respectively. Purchases and sales of
U.S. Government obligations aggregated $30,485,925 and $34,862,836,
respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1998 was $121,129,882 and $106,141,337, respectively.
Transactions in written options for the year ended October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Exchange Traded Options Over-the-Counter Options on Currencies (000 omitted)
---------------------------- -------------------------------------------------------
Number of
Contracts Premiums AUD CAD DEM Premiums
---------------------------- ------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Beginning
of Period... 84 $ 38,460 3,500 -- -- $ 26,425
Written....... 635 544,330 7,677 46,950 18,240 325,875
Closed........ (500) (440,004) (7,320) (16,610) -- (120,917)
Exercised..... (124) (60,383) -- (7,750) -- (35,600)
Expired....... -- -- (3,857) (15,700) (18,240) (151,342)
-------- --------- -------- -------- --------- ----------
End of
Period...... 95 $ 82,403 -- 6,890 -- $ 44,441
======== ========= ========= ======== =========== ===========
------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------
Over-the-Counter Options on Currencies (000 omitted)
-------------------------------------------------------
GBP ITL IEP NZD GBP/DEM Premiums
---------------------------------------------------------------------- --------------
<S> <C> <C> <C> <C> <C>
Beginning
of Period... -- -- -- 14,777 -- $ 86,101
Written....... 24,450 50,451,375 2,350 88,987 14,600 1,523,083
Closed........ (19,900) (50,451,375) (2,350) (20,408) -- (791,111)
Exercised..... -- -- -- (9,713) -- (51,479)
Expired....... (4,550) -- -- (61,743) (14,600) (696,013)
--------- ---------- --------- --------- -------- ----------
End of
Period...... -- -- -- 11,900 -- $ 70,581
========= ========== ========= ========= ======== ===========
-------------------------------------------------------------------------------------
</TABLE>
22 - Scudder Global Bond Fund
<PAGE>
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
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 was 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 Fund has agreed to pay
to the Adviser a fee equal to an annual rate of 0.75% of the first
$1,000,000,000 of average daily net assets and 0.70% of such assets in excess of
$1,000,000,000, computed and accrued daily and payable monthly. The Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Management Agreement. The Adviser has agreed not to impose all or a portion of
its management fee until February 28, 1999, and during such period to maintain
the annualized expenses of the Fund at not more than 1.00% of average daily net
assets. For the year ended October 31, 1998, the Adviser did not impose a
portion of its management fee aggregating $554,345 and the amount imposed
aggregated $314,786, of which $29,875 is unpaid at October 31, 1998. This was
equivalent to an annual effective rate of .27% of the Fund's average daily net
assets.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. The Board of Directors of the
Fund has approved a new investment management agreement with Scudder Kemper,
which is substantially identical to the former Management Agreement, except for
the dates of execution and termination. The Board of Directors of the Fund will
seek shareholder approval of the new investment management agreement through a
proxy solicitation that is currently scheduled to conclude in mid-December.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1998, the amount charged to the Fund by SSC aggregated
$250,999, of which $19,166 is unpaid at October 31, 1998.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1998, the amount charged to the Fund by STC aggregated $13,787, of which $1,102
is unpaid at October 31, 1998.
23 - Scudder Global Bond Fund
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1998, the amount charged to the Fund by SFAC aggregated $105,220, of
which $16,353 is unpaid at October 31, 1998.
The Fund pays each of its Directors not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the year ended October 31, 1998, Directors' fees and expenses aggregated
$62,343.
D. Commitments
As of October 31, 1998, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of
$491,360.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
<S> <C> <C> <C> <C> <C>
JPY 475,895,000 USD 3,519,933 11/5/98 581,131
USD 4,600,000 NOK 34,005,500 11/5/98 (32,819)
MXP 1,661,080 USD 158,955 11/16/98 4,904
ESP 200,000,000 USD 1,455,180 11/19/98 (32,956)
JPY 583,850,000 USD 5,000,000 11/19/98 41,438
USD 5,000,000 ESP 690,550,000 11/19/98 89,414
USD 6,000,000 ESP 846,870,000 11/19/98 (22,197)
JPY 354,807,000 USD 3,000,000 11/24/98 65,878
JPY 426,470,000 USD 3,740,965 11/24/98 (55,849)
PSS 147,696 USD 48,000 11/27/98 (232)
HUF 87,437,743 USD 398,931 11/30/98 531
USD 5,626,173 GBP 3,416,013 12/9/98 (82,071)
USD 4,362,773 GBP 2,582,730 12/9/98 46,966
NZD 5,000,000 USD 2,491,000 12/14/98 158,647
NZD 5,720,774 USD 2,968,224 12/14/98 63,383
USD 1,874,515 NZD 3,706,774 12/14/98 (89,813)
USD 3,471,930 NZD 7,014,000 12/14/98 (244,995)
----------
491,360
==========
</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 1/3 percent of its net assets under the agreement. In addition,
the Fund also maintains an uncommitted line of credit.
24 - Scudder Global Bond Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Global/International Fund, Inc. and to the
Shareholders of Scudder Global Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Global Bond Fund (the
"Fund") at October 31, 1998, the results of its operations for the year then
ended and the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 15, 1998
25 - Scudder Global Bond Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder Global Bond Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder Global Bond Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board, Director
and Vice President
Nicholas Bratt*
President
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
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
Joan Spero
Director; President, Doris Duke
Charitable Foundation
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Susan E. Dahl*
Vice President
Gary P. Johnson*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
Thomas F. McDonough*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder Global Bond Fund
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Investment Products and Services
The Scudder Family of Funds+++
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Money Market
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Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
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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+
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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
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Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond 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
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Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
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Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
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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 Equity
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Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
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Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
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Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
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Retirement Programs
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Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
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Education IRA
UGMA/UTMA
Closed-End Funds#
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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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Global Bond Fund
<PAGE>
Scudder Solutions
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Convenient ways to invest, quickly and reliably:
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<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:
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Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.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:
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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.
Distributions Direct
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
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30 - Scudder Global Bond Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
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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 8,000 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
800 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 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
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Additional Information on How to Contact Scudder:
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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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31 - Scudder Global 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 $230 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
United States.
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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