SCUDDER
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EQUITY/GLOBAL
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Scudder Global Fund
Fund #007
Annual Report
August 31, 1999
A fund seeking long-term growth of capital through investment primarily in
global equity securities.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's Chairman
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
23 Financial Statements
26 Financial Highlights
27 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 Fund
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ticker symbol SCOBX fund number 007
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Date of o Over the past year, the recovery in the
Inception: global economy has facilitated a powerful
7/23/86 rally in stock prices in virtually all areas
of the world. In recent months, however, the
fear that stronger growth will lead to
Total Net Assets as higher interest rates has capped the
of 8/31/99: markets' advance, and caused a significant
$1.6 billion increase in volatility.
o Uncertainties regarding future growth and
price levels have led the management team to
balance the portfolio around several major
themes.
o The fund was given an overall Morningstar
Rating(TM) of four stars, as of the period
ended August 31, 1999.^1
^1 Morningstar proprietary rankings reflect historical risk-adjusted
performance as of August 31, 1999. The ratings are subject to change every
month. Morningstar ratings are calculated from the funds' 3-, 5-, and
10-year average annual returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. Past performance is no guarantee
of future results. Scudder Global Fund received 4 stars for the 3-, 5-, and
10-year periods. The top 10% of funds in a broad asset class receive 5
stars, the next 22.5% receive 4 stars, and the next 35% receive 3 stars.
Scudder Global Fund was rated among 1001, 535 , and 117 international
equity funds in its broad asset class for the 3-, 5-, and 10-year periods,
respectively.
3
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Letter from the Fund's Chairman
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Dear Shareholders,
Throughout the 1990s, one of the primary drivers of global stock prices has been
the push for greater efficiency on the corporate level. Restructuring,
outsourcing, and technological advances have all played a part in the process of
cost-cutting, which in turn has boosted corporate earnings. The companies that
have established themselves at the forefront of these trends, either by
streamlining their own operations or facilitating that process for other firms,
have been some of the best performers in the market. Using a theme-driven
approach, the management team of Scudder Global Fund strives to unearth the
companies that are best-positioned to capitalize on these and other similarly
powerful trends in the global economy. We believe that in a market environment
that has become increasingly volatile, a focus on long-term trends will allow
the fund to outperform both the market and its peers over time. For more
information on recent market conditions and the fund's unique approach to global
investing, please turn to the portfolio management discussion that begins on
page 10.
We have changed the fund's fiscal year-end from June 30 to August 31 as part of
a larger effort to create efficiencies and reduce the costs of producing Scudder
fund regulatory materials such as fund reports and prospectuses. Going forward,
you will receive regular reports following the fund's annual and semiannual
periods ending in August and February.
4
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Finally, it should be noted that Daniel Pierce retired in June of this year as
President of Scudder Global 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 Scudder Global Fund's team in this capacity, and
look forward to serving your interests.
Thank you for your continued investment in Scudder Global 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/Lynn S. Birdsong
Lynn S. Birdsong
Chairman,
Scudder Global Fund
5
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Performance Update
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August 31, 1999
Growth of a $10,000 Investment
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Global Fund MSCI World Index*
'89 10000 10000
'90 10151 9019
'91 10848 9789
'92 11746 10036
'93 14288 12183
'94 15982 13208
'95 17182 14294
'96 19118 16092
'97 23579 19681
'98 23733 20417
'99 29543 27167
Yearly periods ended August 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 8/31/1999 $10,000 Cumulative Annual
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Scudder Global Fund
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1 year $ 12,448 24.48% 24.48%
5 year $ 18,485 84.85% 13.07%
10 year $ 29,543 195.43% 11.44%
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MSCI World Index*
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1 year $ 13,306 33.06% 33.06%
5 year $ 20,569 105.69% 15.51%
10 year $ 27,167 171.67% 10.50%
* The Morgan Stanley Capital International (MSCI) World Index is an unmanaged
capitalization- weighted measure of global stock markets including the U.S.,
Canada, Europe, Australia, and the Far East. Index returns assume dividends
reinvested net of withholding tax and, unlike Fund returns, do not reflect
any fees or expenses.
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 RETURN (%)
Scudder Global Fund
MSCI World Index*
<TABLE>
<CAPTION>
Yearly periods ended August 31
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 (%) 1.51 6.87 8.28 21.64 11.85 7.51 11.27 23.33 .65 24.48
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Index Total
Return (%) -9.81 8.54 2.52 21.39 8.41 8.22 12.58 22.30 3.74 33.06
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Net Asset Value
($) 18.20 18.97 19.50 23.12 25.32 26.73 28.57 33.06 27.87 31.25
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Income
Dividends ($) .23 .43 .31 .16 .24 .11 .25 .28 .88 .55
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Capital Gains
Distributions
($) .92 -- .66 .34 .26 .34 .84 1.53 4.58 2.61
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</TABLE>
* The Morgan Stanley Capital International (MSCI) World Index is an unmanaged
capitalization-weighted measure of global stock markets including the U.S.,
Canada, Europe, Australia, and the Far East. Index returns assume dividends
reinvested net of withholding tax 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.
7
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Portfolio Summary
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August 31, 1999
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Geographical
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(Excludes 8% Cash Equivalents)
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
PIE CHART DATA:
United States and Canada 38%
Europe 38%
Japan 15%
Pacific Basin 5%
Africa 2%
Latin America 2%
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100%
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Recently, management has
reduced its weighting in
the United States, and
added to its holdings in
Europe and Japan.
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Sectors
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(Excludes 8% Cash Equivalents)
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
PIE CHART DATA:
Manufacturing 16%
Financial 13%
Energy 11%
Metals and Minerals 10%
Health 7%
Technology 7%
Consumer Staples 6%
Service Industries 5%
Transportation 5%
Other 20%
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100%
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Sector weightings are a
function of the fund's
theme-based approach.
8
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Ten Largest Equity Holdings
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(15% of Portfolio) The fund's top holdings
reflect its high level
of diversification.
1. Immunex Corp.
Pharmaceutical company in the United States
2. Sony Corp.
Manufacturer of consumer electronic products in Japan
3. Enron Corp.
Producer of natural gas and electricity in the United States
4. Rio Tinto plc
Mining company in the United Kingdom
5. Bayer AG
Chemical producer in Germany
6. Sharp Corp.
Manufacturer of consumer and industrial electronics in
Japan
7. International Business Machines Corp.
Manufacturer of computers and servicer of information
processing units in the United States
8. Electronic Data Systems Corp.
Provider of information technology systems in the
United States
9. Yamanouchi Pharmaceutical Co., Ltd.
Pharmaceutical company in Japan
10. USEC Inc. Provider of enriched uranium products and services in the
United States
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
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Portfolio Management Discussion
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August 31, 1999
In the following interview, lead portfolio manager William Holzer discusses
Scudder Global Fund's strategy and the market environment in the twelve-month
period ended August 31, 1999.
Q: What is your take on the recent performance of the global stock markets?
A: Although the overall trend in the global markets remains positive, volatility
has been steadily on the rise. When we last spoke two months ago, we said that
the cause of the markets' fluctuations was the lack of clarity with respect to
the direction of the global economy. That has remained the case throughout the
summer, as market participants have continued to weigh the impact of higher
interest rates and stronger corporate earnings growth. Investors' unease was
reflected by the fact that in July, credit spreads widened to levels higher than
they reached during the crisis phase last fall. August was also a volatile
month, as the markets absorbed the impact of a U.S. rate increase, then rallied
briefly on the belief that no further rate hikes would be forthcoming. By late
in the month, however, investors were once again focused on the potential for an
additional increase in the fall. We believe that such volatility is likely to
continue as long as there is a lack of a firm consensus with regard to the
interest rate outlook.
The fundamental framework behind our investment strategy has been our desire to
keep the portfolio positioned for unforeseen changes in the global economy. At
this time, we continue to see reasons for caution across all regions of the
world. European stocks, for example, continue to be plagued by the lack of
meaningful structural reform and the weak performance of the euro. Although a
pickup in growth should, at long last, put the wind at the back of European
businesses, the potential for higher rates on the continent should also remain a
cause for concern into next year. Meanwhile, Japanese equities have continued to
rebound through the summer, with signs of an economic recovery and the growing
influence of corporate restructuring attracting foreign investors and
10
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pushing up the value of the yen. Still, it remains to be seen how much of
Japan's nascent recovery has been driven by government stimulus programs, which
cannot be sustained at current levels without harmful increases to the country's
debt load. Consumers will have to increase their spending substantially in order
for Japan's economy to fully break out of its doldrums, but so far the evidence
of such activity is spotty. Finally, the U.S. stock market remains susceptible
to negative surprises (particularly on the interest rate front) due to the
excessive valuations of many large-cap stocks.
In light of the potential for further market turbulence in the months ahead, we
continue to focus on the themes that we believe will transcend the short-term
fluctuations of the markets. To that end, we have constructed a portfolio of
companies that are positioned to increase their earnings by capitalizing on
important secular trends. Over time, we believe that such an approach will allow
the fund to outperform the broader market no matter what direction the global
economy may take.
Q: How did the fund perform over the period?
A: For the twelve-month period ended August 31, 1999, the fund returned 24.48%,
trailing the 33.06% of its unmanaged benchmark, the MSCI World Index. The
reasons for the fund's underperformance are the same as those we cited when we
last spoke two months ago. The fourth quarter of 1998 saw a narrow group of
expensive, high-risk stocks spark a quarterly advance of 20% in the MSCI World
Index, a phenomenal gain. Since then, the weakness of the broader market in
relation to this small group of growth stocks continued to hurt the fund's
performance in relation to the index. Over the long term, however, we feel that
our approach will add value for shareholders, particularly if the bull market
begins to cool off. The results of the past three months have been encouraging,
as the fund's return of 5.15% outpaced the 4.13% return of the MSCI World Index.
11
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Q: Has your underlying philosophy changed in recent months?
A: No -- our "top-down" approach has allowed us to uncover several important
trends that we believe stand out above the noise. Most important, we are focused
on the role of technology in society. The Internet enables both businesses and
consumers to leap geographic boundaries and physical barriers, and creates new
markets for consumer-to-business and business-to-business commerce. Over time,
this has been, and will continue to be, a powerful driver of falling prices as
competition increases and corporations become more efficient. The legacy of
excess industrial capacity in Asia and Europe after the long period of
globalization in the 1990s has also contributed to weak prices. Technology is
both a source of secular growth and a driver of fundamental, and deflationary,
corporate change. Our investment themes seek to achieve balanced exposure to
these processes of change by focusing on the companies that can enable and adapt
to the Internet world, and those companies in traditional industries that can
adapt successfully to the shifting global business environment.
Q: What are some of the most important new investment themes in the portfolio?
A: The themes we have developed recently are consistent with our goal of
constructing a portfolio that should deliver outperformance in any environment.
Specifically, we have been adding what we call "virtual companies," those that
retain control over the highest level of intellectual content and value-added
activities, and outsource all other functions to companies with the strongest
competencies in those functions. The investment potential of virtual companies
lies in their ability to create brand names, new franchises, and monopoly power,
as well as their potential to achieve immediate "first mover" advantages. The
extreme case of the virtual company is the Internet firm with no hard assets,
where all production is contracted in order to increase flexibility. We believe
that
12
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over time, the virtual company will develop into the superior institution for
wealth creation in the global marketplace. Examples of fund holdings that fit
within this theme are Sabre Group Holdings, a U.S. travel services firm, and
EDS, a U.S. provider of technology systems. Although the investible universe
under this theme is still limited, we expect it, and our exposure to it, to
increase in the coming months.
We also continued to build on a theme called "The Ultimate Subcontractor," which
focuses on the companies whose low costs and superior efficiencies have made
them the leading beneficiaries of the trend toward outsourcing. Woodside
Petroleum, an Australian oil concern, and Rio Tinto, a U.K. mining company, are
examples of such companies.
Q: In the last report, you discussed themes called "The Empowered Consumer" and
"Secure Streams of Income." Are these two concepts still playing an important
role in the portfolio?
A: Yes. We have maintained substantial holdings in stocks that fit within both
categories. The Empowered Consumer involves companies that provide
consumer-enabling technologies related to the Internet. We believe that the
companies that are building electronic infrastructure and/or creating the
content for the new medium, such as AT&T, Sony, and America Online, are poised
for significant growth in the years ahead. Many of the stocks we hold within
this theme benefited from the strong rally in technology and media shares over
the past year, which prompted us to trim our positions in a few of the fund's
top performers. The Empowered Consumer, at 21% of equity as of August 31, is
still a core theme. Secure Streams of Income (15% of equity) includes companies
that should have the ability to produce stable returns even in a world where
prices are falling. We expect that utility companies such as National Grid in
the U.K. and Enron in the U.S. will both provide strong returns and cushion the
portfolio in the event of a downturn in the world markets.
13
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Q: What is your outlook for equities from here?
A: The longstanding tendency of market participants to gravitate to a small
group of growth names slowly reasserted itself as the summer progressed. We
believe, however, that this narrow rally will be difficult to sustain if
interest rates continue to rise.
The portfolio's strategic positioning is therefore unchanged, and turnover
remains low. Our strategy will continue to develop around several main themes:
The Empowered Consumer and Virtuality, which provides exposure to secular growth
from technology, the Ultimate Subcontractor, which provides exposure to the
winners of the process of rationalization in cyclical industries, and Secure
Streams of Income, which provides both defensive qualities in a deflationary
environment and exposure to winners in the rapidly deregulating utility sector.
Going forward, we intend to maintain a strategy that keeps the portfolio
balanced thematically and positioned for further changes in the global economy.
14
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Scudder Global Fund:
A Team Approach to Investing
Scudder Global 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 William E. Holzer has had day-to-day responsibility for
the fund's worldwide strategy and investment themes since its inception in 1986.
Mr. Holzer, who has over 22 years of experience in global investing, joined the
Adviser in 1980.
Portfolio manager Diego Espinosa joined the team in 1997 and the Adviser in
1996. Mr. Espinosa is also responsible for development of the fund's strategy
and management of the portfolio on a daily basis. Mr. Espinosa has seven years
of investment industry experience.
Portfolio manager Nicholas Bratt directs the Adviser's overall global equity
investment strategies. Mr. Bratt joined the Adviser in 1976 and the team in
1993.
15
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Glossary of Investment Terms
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Credit Spread The difference in yield between non-Treasury bonds, such
as corporate bonds or mortgage-backed securities, and
Treasury bonds of comparable maturity. If credit spreads
are said to be "narrow," for example, it typically means
that the yields of non-government issues have been
declining, and their prices rising, compared with Treasury
bonds of similar maturity. Such a condition is considered
positive for the bond market. In contrast, "widening"
spreads are considered to be negative.
Cyclical Stocks Companies whose earnings are closely tied to the business
cycle. Cyclical industries include steel, cement, paper,
machinery, and autos.
Defensive Stocks and bonds that are more conservative than average,
Securities and tend to perform better than the overall market when
that market is weak. Often, non-cyclical stocks are used
to establish a defensive position, since they tend not to
be as severely affected during economic slowdowns.
Deflation A decline in the prices of goods and services. The
opposite of inflation, deflation usually has a negative
effect on output and employment.
Growth Stock Stock of a company that has displayed above-average
earnings growth and is expected to continue to increase
profits faster than the overall market. Stocks of such
companies usually trade at higher valuations and
experience more price volatility than the market as a
whole. Distinct from value stock.
Top-Down A method in which the investor first looks at trends in
Investing Style the general economy (or, in the case of international
investing, the economies of several countries), and next
selects companies or industries that stand to benefit from
those trends. Opposite of bottom-up investing.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
16
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<TABLE>
<CAPTION>
Investment Portfolio as of August 31, 1999
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Principal Market
Amount (c) Value ($)
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<S> <C> <C>
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Repurchase Agreements 4.4%
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Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 8/31/1999 at 5.42%,
to be repurchased at $36,506,495 on 9/1/1999, collateralized by a $37,894,000
U.S. Treasury Bond, 3.625%, 4/15/2028
(Cost $36,501,000) ........................................................... 36,501,000 36,501,000
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 8/31/1999 at 5.42%, to be repurchased at
$33,900,103 on 9/1/1999, collateralized by a
$34,060,000 U.S. Treasury Bond, 3.875%, 1/15/2009
(Cost $33,895,000) ........................................................... 33,895,000 33,895,000
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Total Repurchase Agreements (Cost $70,396,000) 70,396,000
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Commercial Paper 3.6%
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United States
UBS Finance Corp., 5.17%**, 9/17/1999 .......................................... 30,000,000 29,931,067
Wal-Mart Stores, Inc., 5.23%**, 9/7/1999 ....................................... 28,000,000 27,975,593
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Total Commercial Paper (Cost $57,906,660) 57,906,660
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Bonds 2.9%
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Germany
Federal Republic of Germany, 4%, 3/17/2000 -------------
(Cost $46,919,371) .........................................................EUR 44,600,000 47,425,224
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Participating Loan Notes 0.4%
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Luxembourg
Eurotunnel Finance Ltd., Step-up coupon, 1.0% to 12/31/2005, 1% plus 26.45% of -------------
net available cash flow to 4/30/2040 (Cost $6,183,494) ....................... 4,617(d) 6,349,923
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</TABLE>
The accompanying notes are an integral part of the financial statements.
17
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<TABLE>
<CAPTION>
Market
Shares Value ($)
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Common Stocks 88.7%
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<S> <C> <C>
Australia 2.8%
Broken Hill Proprietary Co., Ltd. (Petroleum, mineral, and
steel exploration and production) ...................... 718,800 7,752,144
Foster's Brewing Group, Ltd. (Brewery) ................... 2,832,000 8,319,933
WMC Ltd. (Mineral exploration and production) ............ 2,021,351 8,936,039
Woodside Petroleum Ltd. (Oil and gas producer) ........... 2,763,700 19,378,367
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44,386,483
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Austria 0.4%
Flughafen Wien AG (Operator of terminals and facilities at
Vienna International Airport) ............................ 146,627 5,809,397
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Brazil 1.6%
Aracruz Celulose S.A. (ADR) (pfd.) "B" (Producer of
eucalyptus kraft pulp) ................................. 605,400 11,994,488
Companhia Vale do Rio Doce (pfd.) "A" (Diverse mining
and industrial complex) ................................ 621,200 13,786,423
-----------
25,780,911
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Canada 3.8%
Barrick Gold Corp. (Gold exploration and production in
North and South America) ............................... 857,800 16,619,875
BCE, Inc. (Provider of telecommunication services) ....... 235,000 10,951,456
Canadian National Railway Co. (Railroad operator) ........ 169,300 10,751,995
Canadian Pacific Ltd. (Transportation and natural resource
conglomerate) .......................................... 492,656 11,578,323
Molson Cos., Ltd. "A" (Brewery) .......................... 484,000 8,280,013
Noranda, Inc. (International mining and metals
company) ............................................... 269,000 3,629,294
-----------
61,810,956
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China 0.5%
American Standard China "B"* (Plumbing products) (b) ..... 526 3,419,000
Huaneng Power International, Inc. "N" (ADR) (Developer
and operator of large coal-fired power plants) ......... 319,300 3,991,250
-----------
7,410,250
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France 2.1%
Canal Plus (Provider of television programs) ............. 222,980 15,380,794
Compagnie de Saint-Gobain (Manufacturer of engineered
materials) ............................................. 97,773 18,929,332
-----------
34,310,126
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Germany 9.8%
BASF AG (International chemical producer) ................ 424,799 19,279,956
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Bayer AG (Chemical producer) .............................. 551,474 24,008,230
Heidelberger Druckmaschinen AG (Manufacturer of
commercial printing presses) ............................ 75,651 4,802,100
Hoechst AG (Chemical producer) ............................ 483,993 20,481,621
HypoVereinsbank AG (Bank) ................................. 200,654 11,909,018
Muenchener Rueckversicherungs-Gesellschaft AG
(Registered) (Insurance company) ........................ 41,231 7,842,939
RWE AG (pfd.) (Producer of petroleum and chemical
products) ............................................... 382,775 16,542,490
Schering AG (Pharmaceutical and chemical producer) ........ 143,705 15,993,845
VEBA AG (Electric utility, distributor of oil and
chemicals) .............................................. 277,482 17,701,798
VIAG AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics and
glass) .................................................. 896,376 19,108,673
-------------
157,670,670
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Hong Kong 1.5%
Citic Pacific Ltd. (Diversified holding company) .......... 2,521,000 7,840,636
Hutchison Whampoa, Ltd. (Diversified investment holding
company) ................................................ 1,725,000 16,828,022
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24,668,658
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Hungary 0.3%
The First Hungary Fund Limited "A"* (Investment
company) ................................................ 3,619 4,397,085
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Japan 13.8%
Bank of Tokyo-Mitsubishi, Ltd. (Provider of financial
services) ............................................... 647,000 9,658,039
Daiwa Securities Co., Ltd. (Provider of brokerage and other
financial services) ..................................... 1,844,000 16,684,050
East Japan Railway Co. (Railroad operator) ................ 2,803 16,966,941
Fuji Bank, Ltd. (Commercial bank) ......................... 1,074,000 11,080,252
Mitsubishi Estate Co., Ltd. (Real estate company) ......... 1,643,000 16,980,517
Mitsui Fudosan Co., Ltd. (Real estate company) ............ 984,000 8,004,601
Nissan Motor Co., Ltd. (Manufacturer of motor vehicles) ... 1,576,000 9,180,024
Sanwa Bank, Ltd. (Bank) ................................... 775,000 10,613,531
Sharp Corp. (Manufacturer of consumer and industrial
electronics) ............................................ 1,556,000 23,724,276
Shohkoh Fund & Co., Ltd. (Finance company for small and
medium-sized firms) ..................................... 15,600 11,294,440
Sony Corp. (Manufacturer of consumer electronic
products) ............................................... 209,800 27,161,180
Sumitomo Metal Mining Co., Ltd. (Gold, nickel and copper
mining company) ......................................... 1,427,000 5,550,096
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
TDK Corp. (Manufacturer of magnetic tapes and floppy
discs) ............................................... 100,000 12,142,792
Toshiba Corp. (Manufacturer of electric machinery) ..... 2,401,000 21,329,070
Yamanouchi Pharmaceutical Co., Ltd. (Pharmaceutical
company) ............................................. 497,000 22,143,340
------------
222,513,149
------------
South Africa 1.7%
Anglo American Platinum Corp., Ltd. (Platinum producer) 60,000 1,364,107
Anglo American Platinum Corp., Ltd. (ADR) .............. 462,586 10,639,478
Impala Platinum Holdings Ltd. (ADR) (Miner and marketer
of platinum group metals) ............................ 468,500 15,062,275
------------
27,065,860
------------
Switzerland 5.0%
Clariant AG (Registered) (Manufacturer of color
chemicals) ........................................... 29,883 14,369,104
Nestle SA (Registered) (Food manufacturer) ............. 6,863 13,553,745
Novartis AG (Registered) (Pharmaceutical company) ...... 9,812 14,128,243
Roche Holdings AG (Producer of drugs and medicines) .... 1,462 16,918,256
Swisscom AG (Operator of telecommunication networks
and network application services) .................... 36,953 12,191,561
UBS AG (Registered) (Provider of banking and asset
management services) ................................. 36,616 10,339,062
------------
81,499,971
------------
United Kingdom 13.7%
BOC Group plc (Producer of industrial gases) ........... 806,556 16,961,140
Carlton Communications plc (Television post production
products and services) ............................... 1,806,896 13,686,605
Enterprise Oil plc (Oil and gas exploration and
production) .......................................... 1,166,447 8,479,387
Gallaher Group plc (Manufacturer of tobacco products) .. 1,494,152 10,081,495
General Electric Co., plc (Manufacturer of power,
communications and defense equipment) ................ 1,534,658 15,310,314
Great Universal Stores plc "A" (Catalog home shopping) . 1,083,880 10,900,249
J Sainsbury plc (Retail distributor of food through
supermarkets) ........................................ 2,601,086 17,905,498
LASMO plc (Oil production and exploration) ............. 1,136,744 2,812,317
National Grid Group plc (Owner and operator of electric
transmission systems) ................................ 2,048,142 13,531,528
Prudential Corporation plc (Provider of broad range of
financial services) .................................. 1,135,546 16,783,148
Railtrack Group plc (Operator of railway infrastructure) 788,955 15,044,710
Reuters Group plc (International news and information
organization) ........................................ 1,445,469 21,212,810
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Rio Tinto plc (Mining company) .......................... 1,351,548 24,209,578
Shell Transport & Trading plc (Petroleum company) ....... 2,015,280 16,050,146
SmithKline Beecham plc (Manufacturer of ethical drugs
and healthcare products) ................................ 1,323,035 17,194,943
-------------
220,163,868
-------------
United States 31.7%
Amerada Hess Corp. (Exploration, production and
transmission of crude oil and natural gas) ............ 194,800 12,089,775
America Online Inc.* (Provider of online computer
services) ............................................. 65,800 6,008,363
AT&T Corp. (Provider of telecommunication services) ..... 290,301 13,063,544
AT&T Corp -- Liberty Media Group* (Holding company of
entertainment networks) ............................... 523,476 16,751,232
Azurix Corp.* (Provider of wastewater related services) . 411,400 7,636,613
Biogen Inc.* (Biotechnology research and development
company) .............................................. 111,940 8,591,395
CSX Corp. (International transportation company) ........ 307,100 13,416,431
Conoco Inc. "A" (Explorer of crude oil, natural gas, and
natural gas liquids) .................................. 442,800 11,844,900
Electronic Data Systems Corp. (Provider of information
technology systems) ................................... 403,100 22,623,988
Enron Corp. (Producer of natural gas and electricity) ... 602,600 25,233,875
Equity Residential Properties Trust (REIT) (Owner of
apartment properties) ................................. 363,300 15,985,200
Freeport McMoRan Copper & Gold, Inc. "B" (Copper, gold
and silver mining in Indonesia) ....................... 69,100 1,109,919
Homestake Mining Co. (International gold producer) ...... 1,377,800 11,711,300
Immunex Corp.* (Pharmaceutical company) ................. 463,200 31,179,150
International Business Machines Corp. (Manufacturer
of computers and servicer of information
processing units) ..................................... 187,580 23,365,434
Lockheed Martin Corp. (Manufacturer of aircraft, missiles
and space equipment) .................................. 490,900 18,163,300
Motorola Inc. (Manufacturer of telecommunication
products and semiconductors) .......................... 189,400 17,472,150
Newmont Mining Corp. (International gold exploration
and mining company) ................................... 804,800 16,448,100
Northrop Grumman Corp. (Manufacturer of aircraft,
aircraft assemblies and electronic systems for military
and commercial use) ................................... 255,900 18,552,750
Oracle Systems Corp.* (Database management software) .... 433,600 15,826,400
PacifiCorp (Electric utility) ........................... 854,400 17,461,800
Parametric Technology Corp.* (Mechanical design software
producer) ............................................. 529,400 7,411,600
Peco Energy Co. (Electric and gas utility) .............. 416,900 16,936,563
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Phillips Petroleum Co. (Petroleum exploration, production
and refining) .............................................. 247,700 12,632,700
ProLogis Trust (REIT) (Global owner of corporate
distribution facilities) ................................... 219,800 4,313,575
Progressive Corp. (Property and casualty insurance
company) ................................................... 45,300 4,620,600
Sabre Group Holdings Inc. "A"* (Travel reservation
system provider) ........................................... 251,900 14,106,400
Sterling Commerce, Inc.* (Producer of electronic data
interchange products and services) ......................... 451,500 8,634,938
Stillwater Mining Co.* (Exploration and development of
mines in Montana producing platinum, palladium and
associated metals) ......................................... 647,050 14,275,541
Sun Microsystems, Inc.* (Producer of high-performance
workstations, servers and networking software) ............. 233,900 18,595,050
US Airways Group, Inc.* (Airline) ............................ 265,100 8,168,394
USEC Inc. (Provider of enriched uranium products and
services) .................................................. 1,978,200 21,389,288
Unocal Corp. (Explorer and producer of oil and gas) .......... 295,400 12,369,875
UnumProvident Corp. (Provider of group disability and
special risk insurance) .................................... 349,200 12,593,025
Williams Cos., Inc. (Gas pipeline operator and petroleum
producer) .................................................. 430,700 17,766,375
XL Capital Ltd. "A" (Provider of insurance) .................. 236,933 11,920,691
-------------
510,270,234
-------------
- --------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,082,832,880) 1,427,757,618
- --------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,264,238,405) (a) 1,609,835,425
- --------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate (unaudited).
(a) The cost for federal income tax purposes was $1,272,293,518. At August 31,
1999, net unrealized appreciation for all securities based on tax cost was
$337,541,907. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $395,247,802 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$57,705,895.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $3,419,000 (0.22% of net assets). Their
values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at August 31, 1999 aggregated $5,260,000. These securities may
also have certain restrictions as to resale.
(c) Principal amount stated in U.S. dollars unless otherwise noted.
(d) Represents number of contracts. Each contract equals a nominal value of EUR
2,931.
Currency Abbreviation
---------------------------
EUR Euro
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
- ---------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of August 31, 1999
- ---------------------------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $1,264,238,405) ................... $ 1,609,835,425
Cash ...................................................................... 386
Receivable for Fund shares sold ........................................... 534,712
Dividends and interest receivable ......................................... 3,176,899
Unrealized appreciation on forward currency exchange contracts ............ 409,558
Foreign taxes recoverable ................................................. 844,965
Other assets .............................................................. 1,241
---------------
Total assets .............................................................. 1,614,803,186
Liabilities
- ---------------------------------------------------------------------------------------------
Payable for investments purchased ......................................... 47,719,181
Payable for Fund shares redeemed .......................................... 4,182,254
Unrealized depreciation on forward currency exchange contracts ............ 8,303,676
Accrued management fee .................................................... 1,274,398
Other payables and accrued expenses ....................................... 806,599
---------------
Total liabilities ......................................................... 62,286,108
- ---------------------------------------------------------------------------------------------
Net assets, at market value $ 1,552,517,078
- ---------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------
Net assets consists of:
Undistributed net investment income ....................................... 8,435,573
Net unrealized appreciation (depreciation) on:
Investments ............................................................... 345,597,020
Foreign currency related transactions ..................................... (7,818,910)
Accumulated net realized gain (loss) ...................................... 177,610,219
Paid-in capital ........................................................... 1,028,693,176
- ---------------------------------------------------------------------------------------------
Net assets, at market value $ 1,552,517,078
- ---------------------------------------------------------------------------------------------
Net Asset Value
- ---------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($1,552,517,078 /
49,687,211 shares of capital stock outstanding, $.01 par value, 100,000,000 ---------------
shares authorized) ........................................................ $ 31.25
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statements of Operations
- ------------------------------------------------------------------------------------
Two Months
Ended
August 31, Year Ended
Investment Income 1999 (Note A) June 30, 1999
- ------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends (net of withholding taxes of $273,141
and $1,880,981, respectively) ................. $ 4,131,654 $ 25,583,903
Interest ........................................ 721,528 8,332,797
------------- -------------
4,853,182 33,916,700
------------- -------------
Expenses:
Management fee .................................. 2,547,570 14,936,557
Services to shareholders ........................ 852,884 4,784,033
Custodian and accounting fees ................... 182,815 1,077,981
Directors' fees ................................. -- 47,073
Reports to shareholders ......................... 10,404 250,977
Legal ........................................... 9,077 25,320
Auditing ........................................ 46,500 111,361
Registration fees ............................... -- 49,603
Other ........................................... 20,781 131,347
------------- -------------
3,670,031 21,414,252
- ------------------------------------------------------------------------------------
Net investment income 1,183,151 12,502,448
- ------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment
transactions
- ----------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ..................................... 40,192,368 186,056,003
Foreign currency related transactions (includes
CPMF tax of $0 and $3,047, respectively) ...... (75,564) (8,180,121)
------------- -------------
40,116,804 177,875,882
------------- -------------
Net unrealized appreciation (depreciation) during
the period on:
Investments ..................................... (35,264,085) (90,456,649)
Foreign currency related transactions ........... (7,701,187) 440,449
------------- -------------
(42,965,272) (90,016,200)
- ------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (2,848,468) 87,859,682
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $ (1,665,317) $ 100,362,130
- ------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------
Two Months
Ended Years Ended June 30,
Increase (Decrease) in August 31,
Net Assets 1999 (Note A) 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ........... $ 1,183,151 $ 12,502,448 $ 19,606,752
Net realized gain (loss) from
investment transactions ....... 40,116,804 177,875,882 212,859,587
Net unrealized appreciation
(depreciation) on investment
transactions during the period (42,965,272) (90,016,200) (2,170,185)
--------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from operations (1,665,317) 100,362,130 230,296,154
--------------- --------------- ---------------
Distributions to shareholders from:
Net investment income ........... -- (27,785,964) (41,122,886)
--------------- --------------- ---------------
Net realized gains from
investment transactions ....... -- (132,754,958) (214,025,939)
--------------- --------------- ---------------
Fund share transactions:
Proceeds from shares sold ....... 80,900,406 713,598,163 528,099,294
Net asset value of shares issued
to shareholders in reinvestment
of distributions .............. -- 153,008,888 242,394,548
Cost of shares redeemed ......... (137,216,950) (962,137,062) (583,899,199)
--------------- --------------- ---------------
Net increase (decrease) in net
assets from Fund share
transactions .................. (56,316,544) (95,530,011) 186,594,643
--------------- --------------- ---------------
Increase (decrease) in net assets (57,981,861) (155,708,803) 161,741,972
Net assets at beginning of period 1,610,498,939 1,766,207,742 1,604,465,770
Net assets at end of period
(including undistributed net
investment income of $8,435,573
and $19,397,657, for the periods
ended August 31, 1999 and June
30, 1998, respectively, and
accumulated distributions in
excess of net investment income
of $3,209,389 for the year ended
June 30, 1999) ................ $ 1,552,517,078 $ 1,610,498,939 $ 1,766,207,742
Other Information
- -----------------------------------------------------------------------------------------
Shares outstanding at beginning
of period ..................... 51,461,588 54,499,264 47,646,208
--------------- --------------- ---------------
Shares sold ..................... 2,573,566 23,857,882 16,505,655
Shares issued to shareholders in
reinvestment of distributions . -- 5,351,753 8,610,819
Shares redeemed ................. (4,347,943) (32,247,311) (18,263,418)
--------------- --------------- ---------------
Net increase (decrease) in Fund
shares ........................ (1,774,377) (3,037,676) 6,853,056
Shares outstanding at end of
period ........................ 49,687,211 51,461,588 54,499,264
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<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 June 30, 1999(a)(b) 1999(b) 1998(b) 1997(b) 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $31.30 $32.41 $33.67 $28.73 $25.64 $23.93
--------------------------------------------------
Income from investment operations:
Net investment income .02 .23 .38 .17 .24 .25
Net realized and unrealized gain
(loss) on investments (.07) 1.82 3.82 6.58 3.94 1.91
--------------------------------------------------
Total from investment operations (.05) 2.05 4.20 6.75 4.18 2.16
Less distributions from:
Net investment income -- (.55) (.88) (.28) (.25) (.11)
Net realized gains from
investment transactions -- (2.61) (4.58) (1.53) (.84) (.34)
--------------------------------------------------
Total distributions -- (3.16) (5.46) (1.81) (1.09) (.45)
Net asset value, end of period $31.25 $31.30 $32.41 $33.67 $28.73 $25.64
--------------------------------------------------
Total Return (%) (.16)** 7.18 14.93 24.91 16.65 9.11
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1,553 1,610 1,766 1,604 1,368 1,168
- ------------------------------------------------------------------------------------------
Ratio of operating expenses to
average daily net assets (%) 1.36* 1.35 1.34 1.37 1.34 1.38
- ------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) .44* .79 1.19 .59 .84 1.03
- ------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 28.8* 70.2 51.3 40.5 29.1 44.4
- ------------------------------------------------------------------------------------------
</TABLE>
(a) For the two months ended August 31, 1999 (Note A).
(b) Per share amounts have been calculated using average shares outstanding.
* Annualized
** Not annualized
26
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
August 31, 1999
A. Significant Accounting Policies
Scudder Global Fund (the "Fund") is a 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.
On June 7, 1999, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes to August 31 from June 30, which became
effective subsequent to June 30, 1999.
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. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board of Directors.
27
<PAGE>
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.
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.
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.
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
28
<PAGE>
opportunity to profit from favorable exchange rate movements during the term of
the contract.
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.
The Fund is subject to a 0.38% Contribuicao Provisoria sobre Movimentacao
Financiera (CPMF) tax which is applied to foreign exchange transactions
representing capital inflows or outflows to the Brazilian market.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. 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 foreign denominated investments,
forward contracts, passive foreign investment companies, 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. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. 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.
B. Purchases and Sales of Securities
For the two months ended August 31, 1999, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $73,606,985 and $192,103,939, respectively. For the year ended
29
<PAGE>
June 30, 1999, purchases and sales of investment securities (excluding
short-term investments and U.S. Government obligations) aggregated $768,428,551
and $923,755,660, respectively. Purchases and sales of U.S. Government
obligations for the year ended June 30, 1999 aggregated $309,134,395 and
$411,742,405, respectively.
C. Related Parties
Under the 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 1% of the first
$500,000,000 of average daily net assets, 0.95% of the next $500,000,000 of such
net assets, 0.90% of the next $500,000,000 of such net assets and 0.85% on such
net assets in excess of $1,500,000,000 computed and accrued daily and payable
monthly. For the two months ended August 31, 1999, the fee pursuant to such
Agreement amounted to $2,547,570, which was equivalent to an annual effective
rate of 0.94% of the Fund's average daily net assets. For the year ended June
30, 1999, the fee pursuant to such Agreement amounted to $14,936,557, which was
equivalent to an annual effective rate of 0.94% 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
two months ended August 31, 1999, the amount charged to the Fund by SSC
aggregated $368,471, of which $179,331 is unpaid at August 31, 1999. For the
year ended June 30, 1999, the amount charged to the Fund by SSC aggregated
$2,380,471.
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 two months ended August 31,
1999, the amount charged to the Fund by STC aggregated $235,738, of which
$119,042 is unpaid at August 31, 1999. For the year ended June 30, 1999, the
amount charged to the Fund by STC aggregated $1,427,397.
30
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the two months
ended August 31, 1999, the amount charged to the Fund by SFAC aggregated
$97,186, all of which is unpaid at August 31, 1999. For the year ended June 30,
1999, the amount charged to the Fund by SFAC aggregated $585,537.
The Fund pays each Director not affiliated with the Adviser an annual retainer,
divided equally among the series of the Corporation, plus specified amounts for
attended board and committee meetings. For the two months ended August 31, 1999,
the Fund incurred no Directors' fees and expenses. For the year ended June 30,
1999, Directors' fees and expenses aggregated $47,073.
D. Commitments
As of August 31, 1999, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$7,894,118.
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 405,504,200 U.S. Dollars 3,470,000 9/1/1999 (232,220)
Japanese Yen1,872,108,000 U.S. Dollars 15,750,000 9/10/1999 (1,363,600)
U.S. Dollars 4,130,000 Japanese Yen 495,125,050 9/29/1999 409,558
Japanese Yen8,109,287,715 U.S. Dollars 67,642,221 9/29/1999 (6,707,856)
-------------
(7,894,118)
-------------
</TABLE>
As of June 30, 1999, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of $54,673.
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 405,504,200 U.S. Dollars 3,470,000 9/1/1999 88,577
Japanese Yen1,872,108,000 U.S. Dollars 15,750,000 9/10/1999 116,781
U.S. Dollars 4,130,000 Japanese Yen 495,125,050 9/29/1999 16,909
Japanese Yen8,109,287,715 U.S. Dollars 67,642,221 9/29/1999 (276,940)
-------------
(54,673)
-------------
</TABLE>
31
<PAGE>
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 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 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 Fund (the "Fund") at
August 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 August 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
October 12, 1999
33
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
August 31, 1999
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$34,978,000 as capital gain dividends for the two months ended August 31, 1999,
of which 100% represents 20% rate gains.
The Fund paid foreign taxes of $273,140 and earned $273,140 of foreign source
income during the two months ended August 31, 1999. Pursuant to section 853 of
the Internal Revenue Code, the Fund designates $0.01 per share as foreign taxes
paid and $0.01 per share as income earned from foreign sources for the two
months ended August 31, 1999.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have a specific
questions about your account, please call 1-800-SCUDDER.
34
<PAGE>
<TABLE>
<CAPTION>
Officers and Directors
- --------------------------------------------------------------------------------
<S> <C>
Lynn S. Birdsong* William H. Gleysteen, Jr.
o Chairman of the Board o Honorary Director; Consultant;
and Director Guest Scholar, Brookings Institute
William E. Holzer* Robert G. Stone, Jr.
o President o Honorary Director; Chairman
Emeritus of the Board and Director,
Paul Bancroft III Kirby Corporation
o Director; Venture Capitalist and
Consultant Susan E. Dahl*
o Vice President
Sheryle J. Bolton
o Director; Chief Executive Officer, Ann M. McCreary*
Scientific Learning Corporation o Vice President
William T. Burgin Gerald J. Moran*
o Director; General Partner, o Vice President
Bessemer Venture Partners
M. Isabel Saltzman*
Keith R. Fox o Vice President
o Director; Private Equity Investor
John Millette*
William H. Luers o Vice President and Secretary
o Director; Chairman and President,
U.N. Association of America John R. Hebble*
o Treasurer
Kathryn L. Quirk*
o Director; Vice President and Caroline Pearson*
Assistant Secretary o Assistant Secretary
Joan E. Spero *Scudder Kemper Investments, Inc.
o Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
o Honorary Director; Consultant
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Investment Products and Services
- ----------------------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- ----------------------------------------------------------------------------------------------
The Scudder Family of Funds+++
- ----------------------------------------------------------------------------------------------
<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 Series -- Scudder Small Company Value Fund
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 Health 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>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- -------------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- -------------------------------------------------------------------------------------
<S> <C>
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**+++ +++ +++
- --------------------------------------------------------------------------------
Closed-End Funds#
- -------------------------------------------------------------------------------------
The Argentina Fund, Inc. Scudder Global High Income Fund, Inc.
The Brazil Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Montgomery Street Income Securities, 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
- --------------------------------------------------------------------------------
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
information, exchange or redeem shares, and information on other
including some Scudder funds 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 you need
them. Scudder's Site also provides news about Scudder
funds, retirement planning information, and more.
38
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who
depend on You designate the bank account, determine the
investment schedule (as frequently as once a month) and amount
proceeds for of the redemptions, and Scudder does the rest.
living expenses
can enjoy these Distributions Direct
convenient,
timely, and Automatically deposits your fund distributions into
reliable the bank account you designate within three business
automated days after each distribution is paid.
withdrawal
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 1-800-SCUDDER
about these
services Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written P.O. Box 2291
correspondence Boston, Massachusetts
to 02107-2291
39
<PAGE>
About the Fund's Adviser
SCUDDER
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 $280 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 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.
<PAGE>
