SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND
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Scudder International
Bond Fund
Fund #018
Annual Report
October 31, 1999
The fund seeks to provide income. As a secondary objective, the fund seeks
protection and possible enhancement of principal.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Content
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 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 SCUDDER INTERNATIONAL BOND FUND
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Scudder International Bond Fund
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ticker symbol SCIBX fund number 018
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Date of Inception:
7/6/88
o Scudder International Bond Fund provided a total
return of -2.70% for the 12-month period ended
October 31, 1999, outperforming the -2.98% return
realized by the Salomon Brothers non-U.S. World
Government Bond Index.
Total Net Assets as of 10/31/99:
$115 million
o A year ago, investors had a low appetite for risk
following Russia's bond default and the selloff in
emerging markets. However, accommodative monetary
policies from major central banks helped restore a
bullish environment for U.S. and overseas markets.
o The acceleration in global growth and the good
stabilization of commodity prices are both positive
for emerging markets. We are, therefore, considering
an increase in the fund's exposure to emerging
markets debt.
SCUDDER INTERNATIONAL BOND FUND 3
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Letter from the Fund's President
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[PHOTO]
Nicholas Bratt,
President,
Scudder International
Bond Fund
Dear Shareholders,
Over the past 12 months, international 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
International Bond Fund provided a total return of -2.70%, outperforming the
- -2.98% return realized by the Salomon Brothers non-U.S. World Government Bond
Index.
As portfolio managers Jan Faller and Jeremy Ragus discuss in the interview that
begins on page 10, 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 rigorous fundamental and quantitive research,
combined with disciplined risk management, Scudder International 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 International 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 International Bond Fund's team in this
capacity, and look forward to serving your interests.
4 SCUDDER INTERNATIONAL BOND FUND
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Thank you for your continued investment in Scudder International 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 International Bond Fund
SCUDDER INTERNATIONAL 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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[LINE GRAPH: PLOT POINTS TO COME]
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 International Bond Fund
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1 year $ 9,730 -2.70% -2.70%
5 year $ 11,433 14.33% 2.72%
10 year $ 20,575 105.75% 7.48%
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Salomon Brothers Non-U.S. Dollar World Government Bond Index*
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1 year $ 9,702 -2.98% -2.98%
5 year $ 13,250 32.50% 5.79%
10 year $ 23,887 138.87% 9.09%
* The unmanaged Salomon Brothers Non-U.S. Dollar World Government Bond Index
consists of worldwide fixed-rate government bonds with remaining maturities
greater than one year. Index returns assume reinvestment of dividends, and
unlike Fund returns, do not reflect any fees or expenses.
6 SCUDDER INTERNATIONAL BOND FUND
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Returns and Per Share Information
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Yearly periods ended October 31
[BAR CHART: PLOT POINTS TO COME]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 24.65 15.08 17.17 14.77 -6.71 5.44 4.80 -2.19 8.72 -2.70
Index Total
Return (%) 17.03 8.33 17.53 11.21 8.81 15.18 5.44 -.32 12.81 -2.98
Net Asset
Value ($) 13.02 12.63 13.44 13.88 11.70 11.41 11.26 10.44 10.70 9.96
Dividends ($) 1.14 1.19 1.08 .95 .96 .89 .67 .57 .60 .46
Capital Gains
Distributions ($) .08 1.02 .21 .46 .34 -- -- -- -- --
</TABLE>
* The unmanaged Salomon Brothers Non-U.S. Dollar World Government Bond Index
consists of worldwide fixed-rate government bonds with remaining
maturities greater than one year. Index returns assume reinvestment of
dividends, and unlike Fund returns, do not reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when
redeemed, may be worth more or less than when purchased. If the Adviser
had not maintained the Fund's expenses, the total return for the one year,
five year and ten year periods would have been lower.
SCUDDER INTERNATIONAL BOND FUND 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 benefited from its exposure to emerging markets, which have
significantly outperformed developed markets over the past year.
United States 21.4%
Japan 15.3%
France 14.8%
Germany 14.1%
Spain 12.1%
Norway 9.9%
United Kingdom 6.5%
Mexico 1.2%
Turkey 0.6%
Panama 0.5%
Argentina 0.5%
Brazil 0.4%
Bulgaria 0.4%
Jamaica 0.3%
South Africa 0.3%
Colombia 0.3%
Venezuela 0.3%
Philippines 0.3%
Other 0.8%
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100.0%
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8 SCUDDER INTERNATIONAL BOND FUND
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Interest Rate Exposure
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The inflation and interest rate enevironment have remained generally benign.
Euro 43.9%
Japan 18.1%
United States 16.4%
United Kingdom 11.3%
Norway 9.9%
Other 0.4%
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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.
United States 40.1%
Euro 33.3%
Japan 14.7%
United Kingdom 5.1%
Norway 3.7%
Sweden 1.3%
Other 1.8%
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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.
SCUDDER INTERNATIONAL BOND FUND 9
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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 International 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 International Bond Fund had a total return of -2.70% over
the last twelve months, compared with a return of -2.98% for its
benchmark, the Salomon Brothers non-U.S. World Government Bond Index. The
fund's return compared favorably with its competitors as it ranked in the
second quartile of its Lipper peer group. The fund benefited from its 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 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
10 SCUDDER INTERNATIONAL BOND FUND
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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.
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
SCUDDER INTERNATIONAL BOND FUND 11
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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 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
12 SCUDDER INTERNATIONAL BOND FUND
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whose central banks are being very pre-emptive in raising rates, such as
the United States and the United Kingdom. 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.
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
SCUDDER INTERNATIONAL BOND FUND 13
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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: 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 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
14 SCUDDER INTERNATIONAL BOND FUND
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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 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.
SCUDDER INTERNATIONAL BOND FUND 15
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Scudder International Bond Fund:
A Team Approach to Investing
Scudder International 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.
[PHOTO]
Jan C. Fuller
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.
[PHOTO]
Jeremy L. Ragus
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 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
Investment Portfolio as of October 31, 1999
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Principal Market
Amount Value ($)
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Repurchase Agreements 3.3%
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Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 10/29/1999 at 5.2%, to be repurchased at
$3,953,713 on 11/1/1999, collateralized by a
$3,956,000 U.S. Treasury Inflationary Index Note, -----------
3.625%, 1/15/2008 (Cost $3,952,000) ............. 3,952,000 3,952,000
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Short Term Notes 4.4%
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Federal Home Loan Mortgage Corp., 5.16%, 11/1/1999 . 5,000,000 5,000,000
U.S. Treasury Bill, 4.6%, 11/12/1999 ............... 205,000 204,719
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Total Short Term Notes (Cost $5,204,712) ........... 5,204,719
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Foreign Denominated Debt Obligations 83.6%
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British Pounds 11.3%
General Motors Acceptance Corp., 6.875%, 9/9/2004 .. 3,530,000 5,735,306
United Kingdom Treasury Bond, 8%, 6/10/2003 ........ 4,400,000 7,646,735
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13,382,041
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Costa Rican Colon 0.1%
Citibank Time Deposit, 16.25%, 11/1/1999 ........... 35,540,954 120,693
Citibank Time Deposit, 16.25%, 12/1/1999 ........... 15,340,000 52,093
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172,786
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Euro 43.9%
Caisse D'Amort Dette Cades, 3.375%, 7/12/2004 ...... 6,150,000 6,107,225
Depfa Pfandbrief Bank, 4.75%, 7/15/2008 ............ 2,350,000 2,354,715
Federal Republic of Germany, 5%, 5/21/2001 ......... 8,300,000 8,910,824
Federal Republic of Germany, 6.25%, 1/4/2024 ....... 4,880,000 5,416,277
French Treasury Note, 4.5%, 7/12/2003 .............. 2,300,000 2,424,162
Government of France, 5.5%, 4/25/2007 .............. 8,300,000 9,028,083
Kingdom of Spain, 4.5%, 7/30/2004 .................. 13,820,000 14,354,778
Tokyo Electric Power Co., 4.375%, 5/14/2009 ........ 3,600,000 3,444,017
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52,040,081
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Japanese Yen 18.1%
Federal National Mortgage Association Global Issue
2.125%, 10/9/2007 ............................... 680,000,000 6,761,486
Japan Development Bank, 2.875%, 12/20/2006 ......... 1,400,000,000 14,688,106
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21,449,592
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The accompanying notes are an integral part of the financial statements.
SCUDDER INTERNATIONAL BOND FUND 17
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Principal Market
Amount Value ($)
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Norwegian Kroner 9.9%
Kingdom of Norway, 7%, 5/31/2001 ................ 90,200,000 11,705,102
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El Salvadoran Colon 0.1%
Citibank Time Deposit, 8.25%, 11/22/1999 ........ 603,082 68,814
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Turkish Lire 0.2%
J.P. Morgan Time Deposit, 65%, 11/26/1999 ....... 47,518,325,225 98,838
J.P. Morgan Time Deposit, 68%, 11/12/1999 ....... 46,348,461,448 96,405
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195,243
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Total Foreign Denominated Debt Obligations (Cost $97,784,582) 99,013,659
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U.S. Dollar Denominated Debt Obligations 8.7%
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Argentine Republic, 11%, 12/4/2005 ................ 230,000 219,650
Argentine Republic, Floating Rate Bond, Series L, LIBOR
plus .8125% (6.8125%), 3/31/2005 ............... 374,000 331,065
Federative Republic of Brazil, "New" Money Bond, Floating
Rate Bond, LIBOR plus .875% (7%), 4/15/2009 .... 370,000 271,950
Federative Republic of Brazil Global Bond, 10.125%,
5/15/2027 ...................................... 350,000 274,750
Government of Jamaica, 10.875%, 6/10/2005 ......... 425,000 397,375
Government of Malaysia, 8.75%, 6/1/2009 ........... 150,000 154,125
Petroliam Nasional BHD, 8.875%, 8/1/2004 .......... 125,000 128,475
Republic of Bulgaria, Interest Arrears Bond, LIBOR plus
.8125% (6.5%), 7/28/2011 ....................... 575,000 438,438
Republic of Colombia, 7.625%, 2/15/2007 ........... 275,000 226,361
Republic of Colombia, 9.75%, 4/23/2009 ............ 130,000 118,300
Republic of Panama, Interest Reduction Bond, Step-up
Coupon, 4.25%, 7/17/2014 ....................... 450,000 335,250
Republic of Panama, Past Due Interest Bond, LIBOR plus
.8125 (6.5%), 7/17/2016 ........................ 380,647 285,485
Republic of Peru, Floating Rate Interest Reduction Bond,
3.75%, 3/7/2017 ................................ 375,000 206,250
Republic of South Africa, 8.5%, 6/23/2017 ......... 400,000 351,000
Republic of Turkey, 9.875%, 2/23/2005 ............. 560,000 518,000
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 254,000 170,942
Republic of the Philippines, 9.875%, 1/15/2019 .... 330,000 320,100
The accompanying notes are an integral part of the financial statements.
18 SCUDDER INTERNATIONAL BOND FUND
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Principal Market
Amount Value ($)
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Slovak Republic, 9.5%, 5/28/2003 .................. 150,000 151,875
U.S. Treasury Bond, 8.5%, 2/15/2020 ............... 1,015,000 1,240,046
U.S. Treasury Note, 5.625%, 12/31/2002 ............ 2,520,000 2,499,512
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery
Rights), Series D, LIBOR plus .8125% (6.0675%),
12/31/2019 ..................................... 800,000 700,000
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery
Rights), Series A, LIBOR plus .8125% (6.9325%),
12/31/2019 ..................................... 250,000 218,750
United Mexican States, 11.5%, 5/15/2026 ........... 500,000 558,400
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Total U.S. Dollar Denominated Debt (Cost $10,222,514) 10,278,671
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Purchased Options 0.0%
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Put on Japanese Yen, strike at JPY 107.71, expires -----------
11/19/1999 (Cost $78,130) ...................... 601,000,000 10,025
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Total Investment Portfolio -- 100% (Cost $117,241,938) (a) 118,459,074
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(a) The cost for federal income tax purposes was $117,241,938. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$1,217,136. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,463,272 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$2,246,136.
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At October 31, 1999, outstanding written options were as follows:
Principal
Amount Expiration Market
Call Options (000's) Date Strike Price Value ($)
------------------------- ------------ ------------ ------------ ----------
JPY ..................... 601,000 11/19/1999 JPY 97.63 9,682
-----------
Total outstanding written options (Premiums received $78,130).... 9,682
-----------
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The accompanying notes are an integral part of the financial statements.
SCUDDER INTERNATIONAL BOND FUND 19
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Currency Abbreviation
-------------------------------------------------------------------------
ARA Argentine Peso MXP Mexican Peso
CAD Canadian Dollar NOK Norwegian Kroner
CLP Chilean Peso NZD New Zealand Dollar
CNR Chinese Renminbi PHP Philippine Pesos
COP Colombian Peso PLZ Polish Zlotys
EUR Euro PSS Peruvian New Sol
GBP British Pound SEK Swedish Kroner
GRD Greek Drachma SKK Slovakian Koruna
HUF Hungarian Forints THB Thai Bahts
ILS Israeli Shekel TWD Taiwan Dollar
IND Indonesian Rupiahs USD U.S. Dollar
JPY Japanese Yen ZAR South African Rands
KRW South Korean Won
The accompanying notes are an integral part of the financial statements.
20 SCUDDER INTERNATIONAL BOND FUND
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Financial Statements
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Statement of Assets and Liabilities as of October 31, 1999
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at market (identified cost $117,241,938) ......... $ 118,459,074
Receivable for investments sold ............................... 23,406,734
Interest receivable ........................................... 2,601,275
Receivable for Fund shares sold ............................... 275,900
Unrealized appreciation on forward foreign currency exchange
contracts .................................................. 241,708
Other assets .................................................. 1,847
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Total assets .................................................. 144,986,538
Liabilities
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Due to custodian bank ......................................... 1,818,482
Payable for investments purchased ............................. 26,762,972
Payable for Fund shares redeemed .............................. 130,998
Dividends payable ............................................. 74,555
Net payable for closed forward foreign currency
exchange contracts ......................................... 76,559
Unrealized depreciation on forward foreign currency exchange
contracts .................................................. 254,606
Written options, at value (premiums received $78,130) ......... 9,682
Accrued management fee ........................................ 61,814
Other payables and accrued expenses ........................... 327,373
-------------
Total liabilities ............................................. 29,517,041
- --------------------------------------------------------------------------------
Net assets, at market value $ 115,469,497
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income .. (1,197,147)
Net unrealized appreciation (depreciation) on:
Investments ................................................. 1,217,136
Written options ............................................. 68,448
Foreign currency related transactions ....................... 36,268
Accumulated net realized gain (loss) .......................... (71,399,662)
Paid-in capital ............................................... 186,744,454
- --------------------------------------------------------------------------------
Net assets, at market value $ 115,469,497
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
NetAsset Value, offering and redemption price per share
($115,469,497 / 11,597,052 shares of capital stock
outstanding, $.01 par value, 200,000,000 shares of --------------
capital stock authorized) .................................. $ 9.96
--------------
The accompanying notes are an integral part of the financial statements.
SCUDDER INTERNATIONAL BOND FUND 21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 1999
- --------------------------------------------------------------------------------
Investment Income
- -------------------------------------------------------------------------------
Income:
Interest (net of foreign taxes withheld of $40,051) .............. $ 7,747,622
-----------
Expenses:
Management fee ................................................... 1,070,886
Services to shareholders ......................................... 533,317
Custodian and accounting fees .................................... 265,434
Directors' fees and expenses ..................................... 49,498
Reports to shareholders .......................................... 49,372
Auditing ......................................................... 88,742
Legal ............................................................ 23,432
Registration fees ................................................ 24,831
Other ............................................................ 16,790
-----------
Total expenses before reductions ................................. 2,122,302
Expense reductions ............................................... (166,835)
-----------
Expenses, net .................................................... 1,955,467
- --------------------------------------------------------------------------------
Net investment income 5,792,155
- --------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ...................................................... (6,427,572)
Written options .................................................. 265,438
Futures contracts ................................................ 539,202
Foreign currency related transactions ............................ 2,010,919
-----------
(3,612,013)
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... (3,243,056)
Written options .................................................. 66,223
Futures contracts ................................................ (114,788)
Foreign currency related transactions ............................ (2,675,309)
-----------
(5,966,930)
- -------------------------------------------------------------------------------
Net gain (loss) on investment transactions (9,578,943)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(3,786,788)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
22 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Four Months
Year Ended Ended
October 31, October 31, Year Ended
Increase (Decrease) in Net Assets 1999 1998 June 30, 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ................ $ 5,792,155 $ 2,524,839 $ 10,863,087
Net realized gain (loss) from
investment transactions ........... (3,612,013) (743,681) (8,465,656)
Net unrealized appreciation
(depreciation) on investment
transactions during the period .... (5,966,930) 11,598,063 (2,412,343)
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations ........................ (3,786,788) 13,379,221 (14,912)
------------- ------------- -------------
Distributions to shareholders:
From net investment income ........... (270,659) -- --
------------- ------------- -------------
Tax return of capital ................ (5,521,496) (2,524,839) (10,863,087)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ............ 42,572,195 15,356,428 44,825,847
Net asset value of shares issued
to shareholders in
reinvestment of distributions ..... 4,745,145 2,041,754 8,732,391
Cost of shares redeemed .............. (72,201,353) (24,138,878) (132,854,657)
------------- ------------- -------------
Net increase (decrease) in net
assets from Fund share
transactions ...................... (24,884,013) (6,740,696) (79,296,419)
------------- ------------- -------------
Increase (decrease) in net assets .... (34,462,956) 4,113,686 (90,174,418)
Net assets at beginning of period .... 149,932,453 145,818,767 235,993,185
Net assets at end of period
(including accumulated
distributions in excess of net
investment income of
$1,197,147, $2,545,416, and ------------- ------------- -------------
$8,174,452, respectively) ......... $ 115,469,497 $ 149,932,453 $ 145,818,767
------------- ------------- -------------
Other Information
- ----------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning
of period ......................... 14,014,543 14,697,049 22,435,381
------------- ------------- -------------
Shares sold .......................... 4,149,793 1,491,084 4,361,357
Shares issued to shareholders in
reinvestment of distributions ..... 461,026 201,162 856,845
Shares redeemed ...................... (7,028,310) (2,374,752) (12,956,534)
------------- ------------- -------------
Net increase (decrease) in Fund
shares ............................ (2,417,491) (682,506) (7,738,332)
Shares outstanding at end of ------------- ------------- -------------
period ............................ 11,597,052 14,014,543 14,697,049
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER INTERNATIONAL BOND FUND 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>
- ---------------------------------------------------------------------------------------------------
1999(c) 1998(b) 1998(a) 1997(a) 1996(a) 1995(a)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $10.70 $ 9.92 $10.52 $10.98 $11.43 $11.97
------------------------------------------------------------
Income from investment operations:
Net investment income .46 .18 .61 .58 .73 .98
Net realized and unrealized
gain (loss) on investments (.74) .78 (.60) (.46) (.45) (.54)
------------------------------------------------------------
Total from investment
operations (.28) .96 .01 .12 .28 .44
Less distributions:
From net investment income (.02) -- -- (.58) (.12) --
Tax return of capital (.44) (.18) (.61) -- (.61) (.98)
------------------------------------------------------------
Total distributions (.46) (.18) (.61) (.58) (.73) (.98)
Net asset value, end of period $ 9.96 $10.70 $ 9.92 $10.52 $10.98 $11.43
============================================================
Total Return (%) -2.70(d) 9.76(d)** .10(d) .94 2.59 3.92
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 115 150 146 236 515 910
Ratio of operating expenses
to average daily net assets (%) 1.50 1.50* 1.56 1.36 1.26 1.30
Ratio of operating expenses,
before expense reductions, to
average daily net assets (%) 1.63 1.58* 1.62 1.36 1.26 1.30
Ratio of net investment
income to average daily net
assets (%) 4.44 5.20* 5.91 5.28 6.50 8.52
Portfolio turnover rate (%) 193.7 303.5* 190.1 298.2 275.7 318.5
</TABLE>
(a) For the years ended June 30.
(b) For the four months ended October 31, 1998. On September 15, 1998, the
Board of Directors of the Fund changed the fiscal year end from June 30 to
October 31.
(c) For the year ended October 31, 1999.
(d) Total returns for certain periods would have been lower had certain
expenses not been reduced.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
24 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1999
A. Significant Accounting Policies
Scudder International 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 trust.
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 are 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 Trustees/Directors.
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.
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
SCUDDER INTERNATIONAL BOND FUND 25
<PAGE>
- --------------------------------------------------------------------------------
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.
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 on currencies 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 as a temporary substitute for purchasing selected
investments 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.
26 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
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 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. In
addition, the Fund also sold interest rate futures to hedge against declines in
the value of portfolio securities and as a hedge against currency exchange rate
fluctuations on securities held.
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
SCUDDER INTERNATIONAL BOND FUND 27
<PAGE>
- --------------------------------------------------------------------------------
and a 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, 1999 the Fund had a net tax
basis capital loss carryforward of approximately $73,227,000 which may be
applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until October 31, 2002 ($64,329,000), October 31, 2003
($6,093,000), October 31, 2006 ($494,000) and October 31, 2007 ($2,311,000), the
respective expiration dates.
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 investment in options, futures, forward foreign
currency exchange contracts, foreign denominated investments and certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
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.
28 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
All premiums and original issue discounts are amortized/accreted for both tax
and financial reporting purposes.
B. Purchases and Sales of Securities
For the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $216,162,918 and $235,783,752, respectively. Purchases and sales of
U.S. Government obligations aggregated $10,671,323 and $7,008,811, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1999 was $5,366,741 and $17,135,869, respectively.
Transactions in written options for the year ended October 31, 1999 are
summarized as follows:
Over-the-Counter
Options on Currencies
(000 omitted)
-----------------------------------
NZD JPY Premiums
----------------------------------- ------------
Beginning of Period 12,200 -- $ 72,471
Written 49,350 601,000 373,713
Closed (6,000) -- (36,180)
Exercised (17,700) -- (89,416)
Expired (37,850) -- (242,458)
-----------
End of Period -- 601,000 $ 78,130
-----------
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Fund has agreed to
pay to the Adviser a fee equal to an annual rate of 0.85% of the first
$1,000,000,000 of average daily net assets and 0.80% of such net assets in
excess of $1,000,000,000, computed and accrued daily and payable monthly. 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. In addition, the Adviser has agreed not to impose a portion of its
management fee until February 29, 2000, and during such period to maintain the
annualized expenses of the Fund at not more than 1.50% of the Fund's average
daily net assets. For the year ended October 31,
SCUDDER INTERNATIONAL BOND FUND 29
<PAGE>
- --------------------------------------------------------------------------------
1999, the Adviser did not impose a portion of its management fee aggregating
$166,835 and the amount imposed aggregated $904,051, which was equivalent to an
annual effective rate of 0.69% 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 by SSC aggregated $315,573, of
which $46,673 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 $78,041, of which $18,815
is unpaid at October 31, 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 $114,645, of
which $17,386 is unpaid at October 31, 1999.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At October 31, 1999, the
Special Servicing Agreement expense charged to the Fund amounted to $17,341.
The Corporation pays each Director 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
$49,498.
30 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
D. Commitments
As of October 31, 1999 the Fund had entered into the following forward currency
exchange contracts resulting in net unrealized depreciation of $12,898.
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- --------------------------------------------------------------------------------
USD 68,085 HUF 16,552,711 11/4/1999 57
USD 33,000 ILS 141,679 11/8/1999 364
USD 70,595 ZAR 426,043 11/8/1999 (1,288)
USD 1,526,826 SEK 12,425,314 11/12/1999 (11,300)
USD 115,293 IND 907,587,834 11/15/1999 17,368
USD 61,754 PHP 2,510,308 11/15/1999 780
USD 133,666 PLZ 548,911 11/15/1999 (4,032)
USD 33,000 SKK 1,352,769 11/15/1999 (348)
USD 66,000 THB 2,620,860 11/15/1999 1,839
USD 33,000 TWD 1,049,400 11/15/1999 95
USD 69,097 GRD 21,167,095 11/18/1999 (1,604)
USD 66,439 PLZ 272,599 11/18/1999 (2,113)
USD 33,000 ARA 33,321 11/19/1999 175
USD 93,789 CNR 782,432 11/22/1999 615
USD 33,459 PHP 1,351,759 11/22/1999 195
USD 155,613 SKK 6,316,315 11/22/1999 (3,155)
USD 60,336 THB 2,394,137 11/22/1999 1,627
USD 68,000 COP 133,892,000 11/26/1999 (535)
USD 65,832 ILS 282,575 11/26/1999 509
USD 35,000 PSS 122,360 11/26/1999 (136)
USD 914,087 EUR 853,848 11/29/1999 (12,173)
USD 54,371 KRW 65,299,571 11/29/1999 129
EUR 853,848 USD 902,346 11/29/1999 432
USD 117,078 CLP 64,462,938 11/30/1999 75
USD 102,476 ZAR 633,764 11/30/1999 273
USD 68,000 GRD 21,168,400 12/2/1999 (649)
USD 15,979 CLP 8,808,991 12/3/1999 23
USD 49,110 CNR 410,457 1/6/2000 316
USD 127,658 HUF 29,951,209 1/25/2000 (6,699)
EUR 894,025 USD 949,365 1/31/2000 429
EUR 11,128,031 USD 11,779,577 1/31/2000 (31,939)
USD 8,399,121 GBP 5,120,947 2/14/2000 29,438
JPY 420,198,109 USD 3,998,079 2/14/2000 (105,671)
GBP 7,545,460 USD 12,472,646 2/14/2000 53,583
NOK 57,525,252 USD 7,367,948 2/14/2000 26,001
SCUDDER INTERNATIONAL BOND FUND 31
<PAGE>
- --------------------------------------------------------------------------------
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- --------------------------------------------------------------------------------
GBP 2,053,416 USD 3,419,965 2/14/2000 40,250
USD 4,607,150 CAD 6,852,307 3/7/2000 64,677
CAD 6,852,306 USD 4,598,863 3/7/2000 (72,964)
USD 17,000 MXP 187,808 9/15/2000 146
USD 17,000 MXP 188,258 9/18/2000 167
USD 17,000 MXP 187,255 9/20/2000 62
USD 70,000 ARA 75,495 10/26/2000 1,230
USD 100,000 MXP 1,123,000 10/31/2000 853
-----------
(12,898)
-----------
E. Line of Credit
The Fund and several Scudder 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 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 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of Scudder Global/International Fund, Inc.
and to the Shareholders of Scudder International 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 International 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 20, 1999
SCUDDER INTERNATIONAL BOND FUND 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 SCUDDER INTERNATIONAL BOND FUND
<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.
SCUDDER INTERNATIONAL BOND FUND 35
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
The Scudder Family of Funds[
- --------------------------------------------------------------------------------
Money Market
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+
Scudder Tax Free Money Fund
Scudder Tax Free Money Market
Series -- Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term
Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
U.S. Income
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
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
Choice Series
Scudder Financial Services Fund
Scudder Heath Care Fund
Scudder Technology Fund
Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
36 SCUDDER INTERNATIONAL BOND FUND
<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
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**[[
Scudder Horizon Advantage**[[[
Education Accounts
Education IRA
UGMA/UTMA
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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.
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.
SCUDDER INTERNATIONAL BOND FUND 37
<PAGE>
Scudder Solutions
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1-800-SCUDDER www.scudder.com
Convenient ways to invest, quickly and reliably
Automatic Investment Plan
A convenient investment program in which money is 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-clock electronic account service and information, including some
transactions
Scudder Automated Information Line: SAIL(TM) -- 1-800-343-2890
Personalized account information, the ability to exchange or redeem
shares, and information on other Scudder funds and services via touchtone
telephone.
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 SCUDDER INTERNATIONAL BOND FUND
<PAGE>
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1-800-SCUDDER www.scudder.com
Retirees and those who depend on investment proceeds can enjoy these convenient,
timely, and reliable automated withdrawal programs
Automatic Withdrawal Plan
You designate the bank account, determine the schedule (as frequently as
once a month) and amount of the redemptions, and Scudder does the rest.
Distributions Direct
Automatically deposits your fund distributions into the bank for living
expenses account you designate within three business days after each
distribution is paid.
QuickSell
Provides speedy access to your money by electronically crediting your
redemption proceeds to the bank account you previously designated.
For more information about these services
Call a Scudder representative at
1-800-SCUDDER
Or visit our Web site at
www.scudder.com
Please address all written correspondence to
The Scudder Funds
PO Box 2291
Boston, Massachusetts
02107-2291
SCUDDER INTERNATIONAL BOND FUND 39
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
About the Fund's Adviser
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.
RT0181099
86-6-109
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