[LOGO] SCUDDER
INVESTMENTS (SM)
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BOND/GLOBAL
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Scudder Global Bond
Fund
Fund #061
Annual Report
October 31, 1999
The fund seeks to provide total return with an emphasis on current income.
Capital appreciation is a secondary objective.
A no-load fund with no commissions to buy, sell, or exchange
shares.
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Contents
4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
17 Investment Portfolio
21 Financial Statements
24 Financial Highlights
25 Notes to Financial Statements
33 Report of Independent Accountants
34 Tax Information
35 Officers and Directors
36 Investment Products and Services
38 Scudder Solutions
2
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Scudder Global Bond Fund
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ticker symbol SSTGX fund number 061
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Date of Inception: o Scudder Global Bond Fund provided a total return of
3/1/91 -0.99% for the 12-month period ended October 31, 1999,
outperforming the -2.46% return realized by the Salomon
Total Net Assets as Brothers World Government Bond Index.
of 10/31/99:
$85 million o A year ago, investors had a low appetite for risk
following Russia's bond default and the sell-off in
emerging markets. However, accommodative monetary policies
from major central banks helped restore a bullish
environment for U.S. and overseas markets.
o The fund's U.S. exposure evolved from being underweight
early in the period to being overweight late in the
period. This reflected a change in our forecast for higher
relative returns for the United States versus other
dollar-bloc countries.
3
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Letter from the Fund's President
Dear Shareholders,
Over the past 12 months, global bond investors have taken a more favorable
attitude toward risk, as major central banks have worked to keep rising interest
rates from hampering growth. In this environment, Scudder Global Bond Fund
provided a total return of -0.99%, outperforming the -2.46% return realized by
the Salomon Brothers World Government Bond Index.
As Portfolio Managers Jan Faller and Jeremy Ragus discuss in the interview that
begins on page 9, the fund has benefited from its exposure to emerging markets,
which have significantly outperformed developed markets over the past year, an
indication of how the general improvement in economic growth has bolstered these
markets. Through its use of a rigorous fundamental and quantitative research
combined with disciplined risk management, Scudder Global Bond Fund was well
positioned to take advantage of opportunities in these markets.
Finally, it should be noted that Daniel Pierce retired in June of this year as
President of Scudder Global Bond Fund, at which time I assumed that role and its
responsibilities. We are fortunate that Dan's longstanding affiliation with
Scudder is ongoing, and that we will continue to benefit from his counsel going
forward. I am pleased to join the Global Bond Fund's team in this capacity, and
look forward to serving your interests.
4
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Thank you for your continued investment in Scudder Global Bond Fund. If you have
any questions about your investment, please call Scudder Investor Information at
1-800-SCUDDER (1-800-728-3337), or visit our Web site at www.scudder.com.
Sincerely,
/s/Nicholas Bratt
Nicholas Bratt
President,
Scudder Global Bond Fund
5
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Performance Update
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October 31, 1999
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Growth of a $10,000 Investment
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THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Salomon Brothers
Currency-Hedged
World Government Salomon Brothers
Scudder Global Bond Index World Government
Bond Fund (1-3 years)** Bond Index*
3/91*** 10000 10000 10000
'91 10653 10970 10075
'92 11487 12493 10896
'93 12307 13992 11702
'94 12277 14499 12058
'95 12944 16704 12748
'96 13458 17601 13625
'97 13546 18061
'98 14753 20326
'99 14607 19827
Yearly periods ended October 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 10/31/1999 $10,000 Cumulative Annual
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Scudder Global Bond Fund
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1 year $ 9,901 -0.99% -0.99%
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5 year $ 11,898 18.98% 3.54%
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Life of Fund*** $ 14,623 46.23% 4.48%
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Salomon Brothers World Government Bond Index*
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1 year $ 9,754 -2.46% -2.46%
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5 year $ 13,675 36.75% 6.46%
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Life of Fund*** $ 19,827 98.27% 8.29%
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* 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.
** 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 11.21%. Prior to December 27, 1995, the Salomon
Brothers Currency-Hedged World Government Bond Index (1-3 years) was used
as a comparative index.
*** The Fund commenced operation on March 1, 1991. Index comparisons begin
March 31, 1991.
6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURNS (%)
CHART DATA:
Yearly periods ended October 31
Scudder Global Bond Salomon Brothers World Government
Fund Bond Index*
1991*** 0.83 0.75
1992 10.08 8.15
1993 6.97 7.40
1994 2.61 3.04
1995 0.93 5.72
Scudder Global Bond Salomon Brothers Currency-Hedged
Fund World Government Bond Index (1-3 years)**
1996 3.97 5.36
1997 0.66 2.62
1998 8.91 12.54
1999 -0.99 -2.46
1991*** 1992 1993 1994 1995 1996 1997 1998 1999
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Fund Total
Return (%) 6.65 7.83 7.14 -.25 5.43 3.97 .66 8.91 -.99
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Index Total
Return (%) 5.56 7.56 6.08 1.87 9.68 5.36 2.62 12.54 -2.46
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Net Asset
Value ($) 12.01 11.84 11.68 10.78 10.53 10.25 9.71 9.92 9.34
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Dividends ($) .76 1.08 .95 .87 .80 .67 .59 .62 .49
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Capital Gains
Distributions ($) -- -- .02 -- -- -- -- -- --
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* 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.
** 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 11.21%. Prior to December 27, 1995, the Salomon
Brothers Currency-Hedged World Government Bond Index (1-3 years) was used
as a comparative index.
*** The Fund commenced operation on March 1, 1991. Index comparisons begin
March 31, 1991.
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. Portfolio Summary
7
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Portfolio Summary
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October 31, 1999
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Geographical Exposure
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The Fund's U.S. exposure increased during
the period, reflecting our outlook for
higher relative returns for the United
States.
U.S. 36.9%
Germany 19.1%
France 12.7%
Japan 9.3%
Norway 9.1%
U.K. 6.5%
Mexico 1.4%
Turkey 0.7%
Argentina 0.5%
Brazil 0.5%
Bulgaria 0.5%
Panama 0.5%
Jamaica 0.4%
Other 1.9%
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100.0%
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Interest Rate Exposure
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The inflation and interest rate environments
have remained generally benign.
U.S. 39.2%
Euro 33.0%
Japan 9.3%
Norway 9.1%
U.K. 9.1%
Other 0.3%
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100.0%
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Currency Exposure (a)
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The fund maintained partial hedges on the
Euro and on the Yen, which benefited overall
return.
U.S. 58.9%
Euro 21.8%
Japan 7.3%
Norway 5.7%
U.K. 3.5%
Other 2.8%
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100.0%
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(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 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
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October 31, 1999
In the following interview, lead portfolio manager Jan Faller and portfolio
manager Jeremy Ragus discuss Scudder Global Bond Fund's strategy and the market
environment for the 12-month period ended October 31, 1999.
Q: How did the fund perform over the past year?
A: The Scudder Global Bond Fund had a return of -0.99%, outperforming the -2.46%
return for the Salomon Brothers World Government Bond Index. The index is an
unmanaged and unhedged benchmark containing the government bonds of 18 high
credit quality countries. The fund's return also compared favorably with its
competitors as it ranked in the second quartile of its Lipper peer group.
The positive relative performance for the fund can broadly be attributed to
three factors: the use of currency hedging, selective exposure to emerging
markets, and country allocation.
Q: How would you characterize market conditions during this period?
A: Market conditions changed dramatically over the past 12 months. In October,
1998, investors still had a very low appetite for risk and there was substantial
nervousness in response to Russia's default and the significant sell-off in
emerging markets. In the United States, the corporate bond market sold off in
sympathy which widened credit spreads. The Federal Reserve Board (the Fed)
lowered short-term interest rates by 75 basis points (0.75%), essentially
injecting liquidity into unstable global financial markets.
The market's appetite for risk gradually returned as we began 1999, thanks to
Fed policy. The first evidence of this was reflected in the lack of a negative
reaction to Brazil's devaluation of its currency, the real, early in the year.
As the year progressed, U.S. equity markets rallied, which proved to be bullish
both for emerging markets and U.S. corporate debt. Economic growth remained
strong in the
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United States and improved in every other major region around the globe.
The positive economic growth picture, combined with increasing risk tolerance
among market participants, led nearly all central banks to change their stances
since mid-1999. The Fed raised short-term rates by 50 basis points (0.50%),
taking back 50 of the 75 basis points it gave last year, while news of renewed
growth led the market to expect a rate hike by the European Central Bank,
reversing its easing of 50 basis points in the first quarter of this year. The
only major central bank which has maintained an accommodative monetary policy is
the Bank of Japan (BOJ). Although the Japanese economy appears to have
stabilized, the economic recovery has not firmed enough for the BOJ to change
its zero interest-rate policy.
Q: What were some of the key factors affecting performance?
A: As mentioned earlier, the key factors affecting performance were the currency
hedges, exposure to emerging markets, and country weightings. The Salomon
Brothers World Government Bond Index was down 2.46% in unhedged terms, but in
hedged terms it actually was up by 1.33%. Clearly, hedging helped performance
over the past 12 months. The fund maintained partial hedges both on the Euro and
on the Yen, which benefited overall return. Much of the dollar's strength is
attributable to the strong performance of the U.S. equity market; demand from
foreign buyers helped the U.S. dollar to rally. Meanwhile the Euro fell
significantly after its introduction at the beginning of 1999, due to the
combination of anemic growth in major Euro-bloc countries and low interest rates
in the region. However, the strength of the U.S. dollar against the Yen and the
Euro has waned somewhat in the past several months as a result of the
deterioration of the U.S.-Japan trade balance, a rally in Japanese equities, and
renewed economic growth in the Euro-bloc.
10
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emerging markets significantly outperformed developed markets over the past
year. The return on the J.P. Morgan emerging markets Bond Index Plus was almost
20% for the past 12 months. This performance is an indication of the degree to
which an appetite for risk has returned to the market, as well as how the
general improvement in economic growth has bolstered emerging markets. The fund
has had a tactical exposure to emerging markets for most of 1999 and clearly
benefited from this allocation. It is important to note that all emerging market
debt we hold is sovereign debt.
Country allocation also contributed to performance. Our relative positions in
the United States versus peripheral dollar bloc countries -- New Zealand,
Australia, and Canada -- had a positive impact on the fund. Early in the year,
the fund was neutral to the dollar-bloc, overweight New Zealand, Australia, and
Canada, but underweight the United States. We had forecast that the peripheral
countries would outperform relative to the United States because they were not
as far along in their business cycle. As the year progressed, we shifted out of
the peripheral countries into the United States as growth began to accelerate
significantly in the peripheral countries. Our underweighting in Japanese
government bonds (JGBs) did not help the fund's performance. We did not favor
JGBs as yields are the lowest in the index by a significant margin, making the
country unattractive. While bond yields are rising in other developed countries,
JGB yields remain unchanged due to the fragility of the economy in Japan. Thus,
Japan has been the best performing country relative to others in the Salomon
Brothers index.
Q: How has renewed global growth, along with rising prices for such commodities
as oil and gold, affected your strategy?
A: Renewed global economic growth has made us more cautious about the impact of
major central bank policy on developed bond markets, and has prompted us to be
more favorable toward emerging markets. We are investing in
11
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countries where the markets have already priced in rate hikes to avoid an
aggressive sell-off resulting from a central bank tightening. For this reason,
we like countries whose central banks are being very preemptive in raising
rates, such as the United States and the United Kingdom. We have also begun to
favor U.S. Treasuries as we expect growth rates in other developed countries to
begin to approach those of the United States, which could lead to rising yields
relative to the United States.
Meanwhile, climbing commodity prices induce us to increase our exposure to
emerging market countries which benefit from rising raw material prices.
Furthermore, global growth in general benefits equity markets, and emerging
market returns are positively correlated with equity returns. The renewal of
global growth, therefore, could also continue to benefit emerging markets.
Q: The European Monetary Union (EMU) has been in existence for almost a year.
What effect has the EMU had on European bonds?
A: The EMU remains young, thus we are closely watching developments in that
market to monitor how various factors might affect relative performance. As
anticipated, government bond returns among EMU countries are highly correlated,
apart from a few isolated incidents that prompted brief nervousness about the
EMU's stability. An unknown issue is how differing rates of inflation among the
member countries will influence their bond returns.
Also as anticipated, corporate issuance has increased significantly in
Euro-denominated bonds. Growing deal size improves the liquidity of bonds in the
Euro-corporate market. Nevertheless, broad diversification of corporate holdings
is somewhat difficult as the predominant issuers remain in the finance and
utility industries. We anticipate the ability to diversify will improve as the
market matures.
12
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Q: What percentage of the portfolio consists of emerging-market bonds, and what
impact have they had on the fund?
A: Emerging-market exposure has varied from zero to 9% over the past year. We
view the position as tactical rather than strategic, so we reduce the weight
whenever we believe emerging markets represent too much risk for the portfolio.
Another way we control the risk associated with emerging markets debt is to
concentrate our holdings on the highest quality, lower volatility countries such
as Mexico, Panama, and Argentina. As already noted, emerging markets have
performed exceptionally well over the past 12 months, so the impact of these
holdings on the fund has been quite positive.
Q: How significant was the fund's U.S. exposure?
A: The fund's U.S. exposure evolved from being underweight early in the period
to being overweight late in the period. This reflected a change in our forecast
for higher relative returns for the United States versus other dollar-bloc
countries. As far as the dollar-bloc as a whole, we tended to be neutral or
slightly overweight. Two competing tensions brought us to this position. The
yield of the dollar-bloc countries is the highest of all the countries in the
index. This made the dollar bloc attractive. Conversely, every piece of growth
news out of the United States seemed to make yields rise even further, which was
evidence of a weak technical environment. Thus, we have remained fairly close to
the benchmark weight in an effort to benefit from the higher yield while
protecting ourselves from any additional sell-off.
Q: Can you discuss some investments that did not fare well?
A: The two investments that have not worked well for the fund were the
underweight position in JGBs, and the decreased currency hedge of Euro against
U.S. dollars. As mentioned earlier, JGBs have the lowest yield in the index, and
we had forecast that the yields would rise in nearly
13
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any economic scenario that played out in Japan. If evidence of growth had
materialized, yields were expected to rise as a result of inflation fears.
Conversely, continued weakness would lead to a fiscal stimulus package that
would increase the supply of JGBs, making yields rise and hurting returns.
However, the Japanese economy has simply muddled through, not weak enough for
significant stimulus packages -- though a moderate spending package is currently
in discussion -- but not strong enough to generate inflation fears. Thus, JGBs
have performed better than the government bonds of other countries in the index,
which have sold off as global growth has begun to pick up.
Recent reductions in our currency hedge on the Euro have also not helped the
fund's performance. In the first six months of its existence, the Euro fell by
over 10%, nearly reaching parity with the dollar. At that point we forecast that
it would turn around and appreciate for two reasons. First, we believed that it
was being overly punished for seemingly inconsistent and unclear communication
by the European Central Bank, a situation that has improved markedly over the
past few months. Second, economic growth in the Euro-bloc clearly began to turn
up during the summer, and currency returns are positively correlated with
economic strength.
As the Euro stabilized and technicals suggested that it could rally, we began to
reduce our hedge on the currency. Over the past several weeks, the Euro has
again weakened and languishes within a few percent of its lows. The sell- off
has been attributable to the strength in the U.S. asset markets that have helped
to sustain a buoyant U.S. dollar.
Q: What is your strategy going forward?
A: We continue to expect the Euro to strengthen relative to the dollar. We are
maintaining our current hedge ratios while waiting for technical factors to
indicate that the Euro is going to strengthen further.
In Japan, although we expect higher yields in the long-term, we are considering
increasing our exposure to JGBs. The market dynamics described above should
14
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continue to hold for the medium term, leading us to believe that yields should
remain stable in Japan. We therefore would like to be closer to the benchmark
weight until further evidence of the solid economic recovery is apparent.
We are also considering an increase in our tactical weight to emerging markets
debt. As noted earlier, the increase in global growth and stabilizing commodity
prices are both positive for the emerging markets outlook. Furthermore,
volatility levels have decreased dramatically over the past year, making the
risk profile of emerging markets more attractive.
Finally, we continue to monitor the relative growth of the United States
compared to other regions. As other economies begin to approach the U.S. growth
rate, and if the Fed rate hikes begin to slow the U.S. economy, Treasuries
should become more attractive.
15
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Scudder Global Bond Fund:
A Team Approach to Investing
Scudder Global Bond 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 Jan C. Faller, who joined the Adviser in 1999, assumed
responsibility for the fund's day-to-day management and overall investment
strategies in 1999. Mr. Faller was part of the global fixed income portfolio
management team at an unaffiliated investment management company. Mr. Faller
began his investment career in 1988.
Portfolio manager Jeremy L. Ragus joined the Adviser in 1990 and the team in
1999. Mr. Ragus is the director of Derivatives Trading, where he is responsible
for all fixed income, equity, and currency derivatives. Mr. Ragus began his
investment career in 1988.
16
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<TABLE>
<CAPTION>
Investment Portfolio as of October 31, 1999
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Principal Market
Amount Value ($)
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<S> <C> <C>
Repurchase Agreements 1.7%
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Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 10/29/1999 at 5.2%, to be repurchased at
$1,431,620 on 11/1/1999, collateralized by a
$1,475,000 U.S. Treasury Inflationary Index Bond, -----------
3.375%, 1/15/2007 (Cost $1,431,000) ................. 1,431,000 1,431,000
-----------
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Foreign Denominated Debt Obligations 60.8%
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British Pounds 9.0%
General Motors Acceptance Corp., 6.875%, 9/9/2004 .... 2,250,000 3,655,648
United Kingdom Treasury Bond, 8%, 6/10/2003 .......... 2,265,000 3,936,331
-----------
7,591,979
-----------
Costa Rican Colon 0.1%
Citibank Time Deposit, 16.25%, 11/1/1999 ............. 26,501,104 89,994
Citibank Time Deposit, 16.25%, 12/1/1999 ............. 11,210,000 38,068
-----------
128,062
-----------
El Salvadoran Colon 0.1%
Citibank Time Deposit, 8.25%, 11/22/1999 ............. 452,311 51,610
-----------
Euro 33.0%
Depfa Pfandbrief Bank, 4.75%, 7/15/2008 .............. 1,900,000 1,903,812
Federal Republic of Germany, 5%, 5/21/2001 ........... 1,700,000 1,825,109
Federal Republic of Germany, 6.25%, 1/4/2024 ......... 4,000,000 4,439,571
Ford Motor Credit Corp., 3.75%, 7/12/2004 ............ 930,000 921,629
Government of France Treasury Note, 4.5%, 7/12/2003 .. 5,170,000 5,449,094
Government of France, 5.5%, 4/25/2007 ................ 4,750,000 5,166,674
Republic of Deutschland, 7.25%, 10/21/2002 ........... 3,000,000 3,408,974
Rheinische Hypo Bank, 4.5%, 8/26/2003 ................ 4,300,000 4,485,887
-----------
27,600,750
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Japanese Yen 9.3%
Japan Development Bank, 2.875%, 12/20/2006 ........... 740,000,000 7,763,713
-----------
Norwegian Kroner 9.1%
Kingdom of Norway, 7%, 5/31/2001 ..................... 58,500,000 7,591,446
-----------
Turkish Lire 0.2%
J.P. Morgan Time Deposit, 65%, 11/26/1999 .......... 36,296,403,525 75,496
The accompanying notes are an integral part of the financial statements.
17
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Principal Market
Amount Value ($)
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J.P. Morgan Time Deposit, 68%, 11/12/1999 .......... 35,402,814,630 73,638
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149,134
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Total Foreign Denominated Debt Obligations (Cost $52,042,025) 50,876,694
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U.S. Denominated Debt Obligations 37.5%
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Argentine Republic, Floating Rate Bond, Series L, LIBOR
plus .8125% (6.1825%), 3/31/2005 ................. 242,000 214,218
DaimlerChrysler AG, 7.45%, 3/1/2027 ................ 1,825,000 1,829,179
Federal National Mortgage Association, 5.125%,
2/13/2004 ........................................ 2,593,000 2,464,958
Federative Republic of Brazil, "New" Money Bond,
Floating Rate Bond, LIBOR plus .875% (7%), 4/15/2009 300,000 220,500
Federative Republic of Brazil Global Bond, 10.125%,
5/15/2027 ........................................ 280,000 219,800
Government National Mortgage Association Pass-thru, 7%
with various maturities to 3/15/2029 ............. 4,651,758 4,563,811
Government of Jamaica, 10.875%, 6/10/2005 .......... 350,000 327,250
Government of Malaysia, 8.75%, 6/1/2009 ............ 100,000 102,750
IBM Corp., 5.375%, 2/1/2009 ........................ 2,300,000 2,073,128
Midland Bank PLC, 7.625%, 6/15/2006 ................ 1,500,000 1,524,600
Petroliam Nasional BHD, 8.875%, 8/1/2004 ........... 100,000 102,780
Republic of Argentina, 11%, 12/4/2005 .............. 190,000 181,450
Republic of Bulgaria, Interest Arrears Bond, LIBOR plus
.8125%, (6.5%), 7/28/2011 ........................ 490,000 373,625
Republic of Colombia, 7.625%, 2/15/2007 ............ 200,000 164,626
Republic of Colombia, 9.75%, 4/23/2009 ............. 120,000 109,200
Republic of Panama, Interest Reduction Bond, Step-up
Coupon, 4.25%, 7/17/2014 ......................... 300,000 223,500
Republic of Panama, Past Due Interest Bond, LIBOR
plus .8125%, 4% with 2.5% Interest Capitalization
(6.5%), 7/17/2016 ................................ 271,906 203,930
Republic of Peru, Floating Rate Interest Reduction Bond,
3.75%, 3/7/2017 .................................. 275,000 151,250
Republic of South Africa, 8.5%, 6/23/2017 .......... 300,000 263,250
Republic of Turkey, 9.875%, 2/23/2005 .............. 425,000 393,125
Republic of Venezuela, Debt Conversion Bond, Floating
Rate Bond, Series DL, LIBOR plus .875% (6.3125%),
12/18/2007 ....................................... 202,380 162,572
Republic of Venezuela Global Bond, 9.25%, 9/15/2027 160,000 107,680
Republic of the Philippines, 9.875%, 1/15/2019 ..... 220,000 213,400
Slovak Republic, 9.5%, 5/28/2003 ................... 100,000 101,250
The accompanying notes are an integral part of the financial statements.
18
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Principal Market
Amount Value ($)
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U.S. Treasury Bond, 8.5%, 2/21/2020 ................ 795,000 971,267
U.S. Treasury Note, 5.625%, 12/31/2002 ............. 1,970,000 1,953,984
U.S. Treasury Note, 5.75%, 8/15/2003 ............... 3,560,000 3,533,300
U.S. Treasury Note, 6%, 8/15/2004 .................. 1,485,000 1,488,475
U.S. Treasury Note, 6.5%, 10/15/2006 ............... 1,725,000 1,755,464
U.S. Treasury Note, 7.875%, 8/15/2001 .............. 4,100,000 4,240,302
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery Rights),
Series D, LIBOR plus .8125% (6.0675%), 12/31/2019 500,000 437,500
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery Rights),
Series A, LIBOR plus .8125% (6.9325%), 12/31/2019 325,000 284,375
United Mexican States, 11.5%, 5/15/2026 ............ 400,000 446,720
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Total U.S. Dollar Denominated Debt Obligations (Cost $31,872,494) 31,403,219
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Purchased Options 0.0%
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Put on Japanese Yen, strike price at 107.71, expires -------------
11/19/1999 (Cost $35,425) ....................... JPY 272,500,000 4,545
-------------
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Total Investment Portfolio-- 100% (Cost $85,380,944) (a) 83,715,458
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</TABLE>
(a) The cost for federal income tax purposes was $85,380,944. At October 31,
1999, net unrealized depreciation for all securities based on tax cost was
$1,665,486. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$1,082,966 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $2,748,452.
- --------------------------------------------------------------------------------
At October 31, 1999, outstanding written options were as follows:
Call Options Principal
Amount Expiration Strike Market
(000's) Date Price Value ($)
- ---------------------------- ------------ ------------ ------------ -----------
JPY ....................... 272,500 11/19/1999 JPY 97.63 4,390
-----------
Total outstanding written options (Premiums received $35,425) ... 4,390
-----------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Currency Abbreviation
- --------------------------------------------------------------------------------
ARA Argentine Peso KRW South Korean Won
AUD Australian Dollar MXP Mexican Peso
CAD Canadian Dollar NOK Norwegian Kroner
CLP Chilean Peso NZD New Zealand Dollar
CNR Chinese Renminbi PHP Philippine Peso
COP Colombian Peso PLZ Polish Zloty
EUR Euro PSS Peruvian New Sol
GBP British Pound SEK Swedish Kroner
GRD Greek Drachmas SKK Slovakia Koruna
HUF Hungarian Forint THB Thai Bahts
ILS Israeli Shekel TWD Taiwanese Dollar
IND Indonesian Rupiah USD U.S. Dollar
JPY Japanese Yen ZAR South African Rand
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
- ------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $85,380,944) ........... $ 83,715,458
Cash ........................................................... 151,276
Interest receivable ............................................ 1,592,601
Receivable for investments sold ................................ 8,761,922
Receivable for Fund shares sold ................................ 1,703
Unrealized appreciation on forward foreign currency exchange ... 167,990
contracts
Other assets ................................................... 610
---------------
Total assets ................................................... 94,391,560
Liabilities
- ------------------------------------------------------------------------------------
Payable for investments purchased .............................. 8,743,849
Dividends payable .............................................. 95,383
Payable for Fund shares redeemed ............................... 93,006
Unrealized depreciation on forward foreign currency exchange ... 138,402
contracts
Net payable on closed forward foreign currency exchange contracts 56,344
Written options, at market (premiums received $35,425) ......... 4,390
Accrued management fee ......................................... 127,303
Other payables and accrued expenses ............................ 169,140
---------------
Total liabilities .............................................. 9,427,817
- ------------------------------------------------------------------------------------
Net assets, at market value $ 84,963,743
- ------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ... (952,212)
Unrealized appreciation (depreciation) on:
Investments .................................................... (1,665,486)
Written options ................................................ 31,035
Foreign currency related transactions .......................... 47,427
Accumulated net realized gain (loss) ........................... (6,739,292)
Paid-in capital ................................................ 94,242,271
- ------------------------------------------------------------------------------------
Net assets, at market value $ 84,963,743
- ------------------------------------------------------------------------------------
Net Asset Value
- ------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($84,963,743 /
9,093,351 shares of capital stock outstanding, $.01 par value, ---------------
300,000,000number of shares authorized) ...................... $ 9.34
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------
Income:
<S> <C>
Interest (net of foreign taxes withheld of $16,996) ............ 6,050,194
---------------
Expenses:
Management fee ................................................. 731,743
Services to shareholders ....................................... 234,751
Custodian and accounting fees .................................. 189,323
Directors' fees and expenses ................................... 41,982
Reports to shareholders ........................................ 34,482
Auditing ....................................................... 105,202
Legal .......................................................... 14,597
Registration fees .............................................. 18,473
Other .......................................................... 8,919
---------------
Total expenses before reductions ............................... 1,379,472
Expense reductions ............................................. (247,004)
---------------
Expenses, net .................................................. 1,132,468
- ------------------------------------------------------------------------------------
Net investment income 4,917,726
- ------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... (3,861,716)
Written options ................................................ 299,116
Futures contracts .............................................. 418,221
Foreign currency related transactions .......................... 1,994,371
---------------
(1,150,008)
---------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (4,143,564)
Written options ................................................ (14,276)
Futures contracts .............................................. (85,264)
Foreign currency related transactions .......................... (469,971)
---------------
(4,713,075)
- ------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (5,863,083)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (945,357)
- ------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Years Ended October 31,
1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................... $ 4,917,726 $ 7,454,010
Net realized gain (loss) from investment
transactions ................................... (1,150,008) (2,383,402)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (4,713,075) 4,397,493
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations ................................ (945,357) 9,468,101
--------------- ---------------
Distributions to shareholders from:
Net investment income ........................... (3,413,831) (7,192,075)
Tax return of capital ........................... (1,499,196) (261,935)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ....................... 14,334,815 18,630,293
Net asset value of shares issued to shareholders
in reinvestment of distributions ............... 3,565,063 5,303,498
Cost of shares redeemed ......................... (34,802,146) (53,336,952)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (16,902,268) (29,403,161)
--------------- ---------------
Increase (decrease) in net assets ............... (22,760,652) (27,389,070)
Net assets at beginning of period ............... 107,724,395 135,113,465
Net assets at end of period (including
accumulated distributions in excess of
net investment income of $952,212 -------------- ---------------
at October 31, 1999) ........................... $ 84,963,743 $ 107,724,395
-------------- ---------------
Other Information
- ------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ....... 10,857,540 13,913,602
--------------- ---------------
Shares sold ..................................... 1,462,774 1,923,075
Shares issued to shareholders in reinvestment of
distributions .................................. 368,311 551,892
Shares redeemed ................................. (3,595,274) (5,531,029)
--------------- ---------------
Net increase (decrease) in Fund shares .......... (1,764,189) (3,056,062)
-------------- ---------------
Shares outstanding at end of period ............. 9,093,351 10,857,540
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<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, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.92 $ 9.71 $10.25 $10.53 $10.78
--------------------------------------------
- ------------------------------------------------------------------------------------
Income (loss) from investment
operations:
- ------------------------------------------------------------------------------------
Net investment income .49 .62 .59 .67 .80
- ------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions (.58) .21 (.54) (.28) (.25)
--------------------------------------------
- ------------------------------------------------------------------------------------
Total from investment operations (.09) .83 .05 .39 .55
- ------------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------------
Net investment income (.33) (.60) (.14) (.42) (.36)
- ------------------------------------------------------------------------------------
Tax return of capital (.16) (.02) (.45) (.25) (.44)
--------------------------------------------
Total distributions (.49) (.62) (.59) (.67) (.80)
- ------------------------------------------------------------------------------------
Net asset value, end of period $ 9.34 $ 9.92 $ 9.71 $10.25 $10.53
--------------------------------------------
- ------------------------------------------------------------------------------------
Total Return (%) (a) (.99) 8.91 0.66 3.97 5.43
- ------------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 85 108 135 217 357
- ------------------------------------------------------------------------------------
Ratio of operating expenses to average
daily net assets (%) 1.16 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------
Ratio of operating expenses, before
expense reductions, to average daily
net assets (%) 1.41 1.48 1.39 1.28 1.20
- ------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 5.04 6.43 6.00 6.67 7.73
- ------------------------------------------------------------------------------------
Portfolio turnover rate (%) 148.5 218.3 256.5 335.7 182.8
- ------------------------------------------------------------------------------------
</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.
24
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1999
A. Significant Accounting Policies
Scudder Global Bond Fund (the "Fund") is a non-diversified series of
Global/International Fund, Inc., (the "Corporation") which is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company organized as a Maryland corporation.
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. Investments stated at value determined as of the close of
regular trading on the New York Stock Exchange. Portfolio debt securities
purchased with an original maturity greater than sixty days are valued by
pricing agents, approved by the officers of the Corporation, 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 securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
25
<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, 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 is equal to at least the
principal amount of the repurchase price plus accrued interest.
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
securities to lock in the purchase price of a security which it expects to
purchase in the near future and to enhance potential gain.
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
prices 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. Gain or loss is recognized when the
option contract expires or is closed.
If 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 above the exercise price. If the
Fund writes a put option it accepts the risk of a decline in the market value of
the underlying security 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
26
<PAGE>
buyer or seller agrees to take or make a delivery of a specific amount of a
financial instrument 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 also 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 dependent upon
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 the 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.
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 against changes in the 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. Sales and
purchases of 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 a forward contract to buy
and a forward contract to sell are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
27
<PAGE>
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, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $7,990,000, which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until October 31, 2002
($686,000), October 31, 2003 ($5,010,000), October 31, 2004 ($737,000), and
October 31, 2007 ($1,557,000), the respective expiration dates, whichever occurs
first.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. Net
realized gains 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 at least annually.
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 primarily relate to investments in options, futures, forward foreign
currency exchange 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis.
All discounts are accreted for both tax and financial reporting purposes.
28
<PAGE>
B. Purchases and Sales of Securities
During the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $120,260,954 and $135,106,366, respectively. Purchases and sales of
U.S. Government obligations aggregated $20,776,429 and $16,751,289,
respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1999 was $5,085,380 and $14,979,834, respectively.
Transactions in written options for the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
Over-the-Counter
Exchange Traded Options on Currencies
Options (000 omitted)
------------------ --------------------------------------
Number
of
Contracts Premiums NZD CAD JPY Premiums
----------------------- ----------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Beginning
of Period ... 95 $ 82,403 11,900 6,890 -- $ 115,022
Written ..... -- -- 35,420 11,300 272,500 284,321
Closed ...... (95) (82,403) (6,200) -- -- (37,386)
Exercised ... -- -- (11,500) (11,300) -- (101,671)
Expired ..... -- -- (29,620) (6,890) -- (224,861)
End of
Period ...... -- $ -- -- -- 272,500 $ 35,425
</TABLE>
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is 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. Until February
28, 1999, the Adviser agreed not to impose all or a portion of its management
fee in order to maintain the annualized expenses of the Fund at not more than
1.00% of average daily net
29
<PAGE>
assets. Effective March 1, 1999, the Adviser agreed not to impose all or a
portion of its management fee until February 29, 2000 in order to maintain the
annualized expenses of the Fund at not more than 1.25% of average daily net
assets. For the year ended October 31, 1999, the Adviser did not impose a
portion of its management fee aggregating $247,004 and the amount imposed
aggregated $484,739. This was equivalent to an annual effective rate of 0.50% 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
year ended October 31, 1999, the amount charged to the Fund by SSC aggregated
$201,430, of which $30,794 is unpaid at October 31, 1999.
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,
1999, the amount charged to the Fund by STC aggregated $11,702, of which $2,890
is unpaid at October, 1999.
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, 1999, the amount charged to the Fund by SFAC aggregated $89,318, of
which $13,332 is unpaid at October 31, 1999.
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, 1999, Directors' fees and expenses aggregated
$41,982.
D. Commitments
As of October 31, 1999, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of $29,588.
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USD 50,062 HUF 12,171,112 11/4/1999 42
USD 25,000 ILS 107,333 11/8/1999 276
USD 53,218 ZAR 321,171 11/8/1999 (971)
USD 819,358 SEK 6,667,939 11/12/1999 (6,064)
30
<PAGE>
Net
Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- ------------------------------------------------------------------------------------
USD 86,470 IND 680,690,974 11/15/1999 13,026
USD 47,113 PHP 1,915,143 11/15/1999 595
USD 100,249 PLZ 411,683 11/15/1999 (3,024)
USD 25,000 SKK 1,024,825 11/15/1999 (264)
USD 50,000 THB 1,985,500 11/15/1999 1,393
USD 25,000 TWD 795,000 11/15/1999 72
USD 50,806 GRD 15,564,042 11/18/1999 (1,180)
USD 48,852 PLZ 200,441 11/18/1999 (1,554)
USD 25,000 ARA 25,168 11/19/1999 133
USD 68,577 CNR 572,101 11/22/1999 450
USD 25,738 PHP 1,039,814 11/22/1999 150
USD 116,709 SKK 4,737,237 11/22/1999 (2,366)
USD 46,031 THB 1,826,515 11/22/1999 1,241
USD 50,000 COP 98,450,000 11/26/1999 (394)
USD 48,875 ILS 209,791 11/26/1999 378
USD 25,000 PSS 87,400 11/26/1999 (97)
USD 41,035 KRW 49,282,723 11/29/1999 98
USD 90,060 CLP 49,586,876 11/30/1999 57
USD 76,857 ZAR 475,323 11/30/1999 204
USD 50,000 GRD 15,565,000 12/2/1999 (477)
USD 12,219 CLP 6,736,285 12/3/1999 17
USD 36,833 CNR 307,843 1/6/2000 237
USD 98,199 HUF 23,039,393 1/25/2000 (5,153)
EUR 8,922,740 USD 9,475,058 1/31/2000 4,282
GBP 2,817,618 USD 4,657,523 2/14/2000 20,009
NOK 22,331,384 USD 2,860,248 2/14/2000 10,094
JPY 110,305,858 USD 1,049,532 2/14/2000 (27,740)
USD 4,417,411 CAD 6,570,103 3/7/2000 62,011
CAD 6,570,103 USD 4,409,465 3/7/2000 (69,957)
USD 1,487,640 AUD 2,300,000 4/12/2000 (19,161)
AUD 2,300,000 USD 1,519,898 4/12/2000 51,418
USD 13,000 MXP 143,618 9/15/2000 112
USD 13,000 MXP 143,962 9/18/2000 128
USD 13,000 MXP 143,195 9/20/2000 48
USD 50,000 ARA 53,925 10/26/2000 879
USD 75,000 MXP 842,250 10/31/2000 640
-----------
29,588
-----------
</TABLE>
31
<PAGE>
E. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $850
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, pro rata based on net assets, 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.
32
<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, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 17, 1999
33
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
October 31, 1999
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
34
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Nicholas Bratt*
o President
Sheryle J. Bolton
o Director; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
o Director; General Partner,
Bessemer Venture Partners
Keith R. Fox
o Director; Private Equity
Investor
William H. Luers
o Director; Chairman and President,
U.N. Association of America
Kathryn L. Quirk*
o Director, Vice President and
Assistant Secretary
Joan E. Spero
o Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
o Honorary Director; Consultant
William H. Gleysteen, Jr.
o Honorary Director; Consultant;
Guest Scholar, Brookings
Institution
Robert G. Stone, Jr.
o Honorary Director; Chairman
Emeritus of the Board and
Director, Kirby Corporation
Susan E. Dahl*
o Vice President
Ann M. McCreary*
o Vice President
Gerald J. Moran*
o Vice President
M. Isabel Saltzman*
o Vice President
John Millette*
o Vice President and Secretary
John R. Hebble*
o Treasurer
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
35
<PAGE>
Investment Products and Services
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1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
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The Scudder Family of Funds+++
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<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
36
<PAGE>
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1-800-SCUDDER www.scudder.com
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Retirement Programs and Education Accounts
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Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
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Closed-End Funds#
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<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
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 or classes thereof 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.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold 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.
37
<PAGE>
Scudder Solutions
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1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
38
<PAGE>
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1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
39
<PAGE>
About the Fund's Adviser
[LOGO] SCUDDER
INVESTMENTS (SM)
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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.
