Scudder
International
Bond Fund
Semiannual Report
April 30, 1999
No-Load Funds
For investors seeking an easy and low-cost way to broaden their income-oriented
investments beyond U.S. borders. Invests primarily in high-grade bonds
denominated in foreign currencies.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder International Bond Fund
- --------------------------------------------------------------------------------
Date of Inception: 7/6/88 Total Net Assets as of Ticker Symbol: SCIBX
4/30/99: $130.3 million
- --------------------------------------------------------------------------------
o Scudder International Bond Fund provided a total return of -0.70% for the
six-month period ended April 30, 1999, significantly ahead of the -4.30% return
of the Salomon Brothers ex-U.S. World Government Bond Index.
o The global bond markets over the past six months have been characterized by a
gradually increasing appetite for risk, as subsiding volatility has led
investors to move out of "flight-to-quality" positions assumed in the wake of
last summer's turmoil.
o In Europe, Fund holdings in "peripheral" countries such as Norway and Sweden
are overweighted, while the portfolio's weighting in Japan was increased over
the period.
Table of Contents
3 Letter from the Fund's Chairman 17 Financial Highlights
4 Performance Update 18 Notes to Financial Statements
5 Portfolio Summary 24 Report of Independent Accountants
6 Portfolio Management Discussion 25 Stockholder Meeting Results
10 Glossary of Investment Terms 28 Officers and Directors
11 Investment Portfolio 29 Investment Products and Services
14 Financial Statements 30 Scudder Solutions
2 - Scudder International Bond Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to report the results of Scudder International Bond Fund's
most recent semiannual period. The Fund returned -0.70% for the six-month period
ended April 30, 1999, outpacing the -4.30% return of the Salomon Brothers
ex-U.S. World Government Bond Index.
International bonds have staged a gradual recovery since the Russian
currency devaluation sparked intense global market volatility last summer. With
first-hand knowledge of the inherent risks, investors are once again displaying
optimism concerning the international fixed-income markets. As portfolio
managers M. Isabel Saltzman and Jan Faller discuss in the interview that begins
on pageNO TAG, this was evidenced over the past several months by the gradual
unwinding of "flight-to-quality" trades, especially following Brazil's
devaluation of the real.
For those interested in new Scudder products, we are pleased to introduce
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both funds are
managed with the goal of pursuing long-term outperformance compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
As always, please call a Scudder Investor Information representative at
1-800-225-2470 if you have questions about your Fund. Or visit Scudder's Web
site at www.scudder.com. Page 30 provides more information on how to contact
Scudder. Thank you for choosing Scudder International Bond Fund to help meet
your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Bond Fund
3 - Scudder International Bond Fund
<PAGE>
Performance Update as of April 30, 1999
- -----------------------
Fund Index Comparisons
- -----------------------
Total Return
--------------------------------------------------
Period Growth of Average
Ended 4/30/1999 $ 10,000 Cumulative Annual
--------------------------------------------------
Scudder International Bond Fund
--------------------------------------------------
1 Year $ 10,800 8.00% 8.00%
5 Year $ 11,259 12.59% 2.40%
10 Year $ 21,674 116.74% 8.04%
-------------------------------------------------
Salomon Brothers Non-U.S. Dollar World
Government Bond Index
--------------------------------------------------
1 Year $ 10,906 9.06% 9.06%
5 Year $ 13,771 37.71% 6.60%
10 Year $ 23,217 132.17% 8.78%
- -------------------------------
Growth of a $10,000 Investment
- -------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Salomon Brothers Non-U.S.
Scudder International Dollar World Government
Bond Fund Bond Index
'89 10000 10000
'90 10827 9562
'91 13609 11439
'92 15597 13059
'93 18732 15577
'94 19250 16859
'95 18762 20356
'96 19587 20423
'97 19107 20001
'98 20069 21288
'99 21674 23217
Yearly periods ended April 30
The unmanaged Salomon Brothers Non-U.S. Dollar World Government Bond Index
consists of worldwide fixed-rate government bonds with remaining maturities
greater than one year. Index returns assume reinvestment of dividends, and
unlike Fund returns, do not reflect any fees or expenses.
- ----------------------------------
Returns and Per Share Information
- ----------------------------------
Yearly periods ended April 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 11.57 $ 12.94 $ 12.77 $ 13.55 $ 12.66 $ 11.31 $ 11.05 $ 10.21 $ 10.12 $ 10.37
- ------------------------------------------------------------------------------------------------------------------------------
Income Dividends $ 1.07 $ 1.20 $ 1.12 $ 1.04 $ .91 $ 1.02 $ .75 $ .59 $ .55 $ .53
- ------------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ .29 $ .81 $ .62 $ .39 $ -- $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 8.27 25.70 14.60 20.10 2.76 -2.53 4.40 -2.45 5.03 8.00
- ------------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) -4.38 19.63 14.16 19.28 8.23 20.74 .33 -2.07 6.43 9.06
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. If the Adviser had not maintained the Fund's
expenses, the total return for the one year, five year and ten year periods
would have been lower.
4 - Scudder International Bond Fund
<PAGE>
Portfolio Summary as of April 30, 1999
- ------------------------------
Geographical Exposure
- ------------------------------
United States 22.3%
Canada 13.8%
Norway 13.1%
Sweden 10.8%
United Kingdom 9.0%
Netherlands 7.2%
Spain 5.5%
France 4.8%
Philippines 2.6%
Ireland 2.3%
Argentina 1.9%
Mexico 1.9%
Panama 1.4%
Australia 1.1%
Brazil 1.1%
Other 1.2%
--------------------------------------
100.0%
--------------------------------------
Exposure to Japan was increased over the period but remains underweight.
- ------------------------------
Interest Rate Exposure
- ------------------------------
Euro 19.7%
United Kingdom 18.2%
United States 17.3%
Norway 13.1%
Sweden 10.8%
Canada 10.2%
Japan 5.3%
New Zealand 3.7%
Australia 1.1%
Other 0.6%
--------------------------------------
100.0%
--------------------------------------
Inflation and interest rates have remained generally benign.
- ------------------------------
Currency Exposure (a)
- ------------------------------
United States 29.8%
Euro 28.5%
Japan 17.6%
Canada 7.2%
United Kingdom 5.8%
Norway 4.2%
Sweden 3.5%
Australia 1.1%
Other 2.3%
--------------------------------------
100.0%
--------------------------------------
Hedging the Fund's exposure to Japanese and European currencies helped fund
performance.
(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 11. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder International Bond Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager M. Isabel Saltzman and
Portfolio Manager Jan Faller discuss Scudder International Bond Fund's strategy
and the market environment for the six-month period ended April 30, 1999.
Q: How did the Fund perform in the six-month period ended April 30,1999?
A: The Scudder International Bond Fund had a total return of -0.70%,
outperforming the -4.30% return realized by the Salomon Brothers ex-U.S. World
Government Bond Index. The index is an unmanaged and unhedged benchmark
containing the government bonds of seventeen high credit quality countries. The
most significant contributor to the negative return of the index was the drop in
value of the euro relative to the dollar, which fell by more than 9% since its
introduction in January. This has a large effect on the performance of the
benchmark, as euro-denominated bonds represent over half of the index.
In this market environment the Fund's results benefited from Scudder's
philosophy of active management, emphasis on relative value, and use of hedging.
These factors are responsible for the Fund's outperformance relative to the
Salomon Brothers' Index.
Q: How would you describe the market environment during the past six months?
A: The international bond markets over the past six months have been
characterized by a gradually increasing appetite for credit products. Reduced
volatility led investors to unwind "flight-to-quality" trades, trades in which
riskier credit assets are sold in favor of securities with little or no credit
risk. Instead, particularly once Brazil demonstrated a commitment to financial
reform after the devaluation of the real, investors began moving out of lower
risk assets in favor of securities with more credit risk and more yield.
Inflation remained tame throughout the developed markets over the past six
months. Indeed, the Fed was able to lower rates by 25 additional basis points in
November after its cuts in September and October. These cuts created no concerns
about inflation, even with U.S. GDP growth at 3.5%, but simply served to calm a
market that had become extremely risk averse. Every other developed market
central bank had either a neutral or easing bias over the past six months, and
just before the end of April, the European Central Bank cut its rates by 50
basis points to 2.5%. As liquidity and stability returned to developing markets,
however, concerns about inflation in the U.S. began to arise.
A significant contributor to the benign global inflation environment has been
falling commodity prices. Oil reached historical lows in December, and the CRB
index was at its lowest level for all of the 1990s in February. However, a sharp
turnaround in oil prices over the past two months may be seen as a harbinger of
increasing inflation. We are watching this trend in commodity prices closely,
increasing our exposure to currencies or bonds that benefit from increases in
commodity prices.
Q: What were the key factors affecting the Fund's performance?
A: Our philosophy of actively managing the portfolio, identifying relative
value, and hedging
6 - Scudder International Bond Fund
<PAGE>
currency exposure all contributed to the Fund's strong performance relative to
its peers and the index.
The most significant factor in our management of the Fund was country
allocation. The Fund's country allocation differed significantly from the index.
Certainly, we were overweighted in those countries we thought represented
relative value and underweighted in those countries we thought were overpriced.
Japan was our most notable divergence from the index. In the beginning of the
period it accounted for a very small percentage of our portfolio versus 30% for
the index. As we felt that yen denominated bonds became more reasonably priced,
we increased the portfolio's weighting of those bonds substantially, but still
remain underweight relative to the index. This was in response to initial
indications that Japan is taking the need for corporate restructuring and bank
reform seriously.
The portfolio's composition also looked significantly different from the index
in our European weightings. In the "core-Europe" countries such as Germany,
France, and Italy we were under-weighted versus the index. Conversely, in the
"periphery-Europe" countries such as Norway and Sweden, we were overweighted
versus the index. As the likelihood of certain peripheral countries entering the
EMU increased, these countries became more attractive on a relative value basis.
Our pursuit of relative value also led us to be overweighted versus the index in
Australian and New Zealand dollar denominated bonds. This overweighting allowed
us to take advantage of the correlation between improving commodity prices and
these bonds.
In addition to significant divergences from the index in our country weightings,
we also realized significant benefit from hedging the euro. As we noted above,
the euro lost over 9% of its value in this period. By hedging half of our euro
position we diminished the effects of this volatility on the portfolio.
Q: You mentioned the benefits of hedging the euro. Could you discuss your
hedging activity in more detail?
A: Hedges generally worked to our benefit over the past six months. The euro
represents the largest single currency exposure in the Fund's benchmark,
representing more than one-half of the index against which the Fund is measured.
As mentioned earlier, we were underweight in Euro-bloc countries in favor of
Sweden and Norway. Similarly, we reduced our euro currency holdings relative to
the benchmark because the combination of structural rigidities in the labor
market and falling interest rates gave us a negative outlook for the euro.
High yen volatility combined with a very weak Japanese economy led us to
increase our hedge out of yen into U.S.dollar in order to reduce the currency
risk of the Fund. The yen is the second largest currency in the index with a
weight of 30% of the total. The yen hedge benefited the Fund in two ways. First,
the yen weakened slightly, so the hedge enhanced returns. More importantly, with
interest rates lower in Japan than in the U.S., we
7 - Scudder International Bond Fund
<PAGE>
gained from the interest rate differential or "carry trade."
Conversely, we did not hedge our currency exposure to the Australian dollar,
because of the favorable effects of the commodity trend we cited above. This
currency rallied significantly against the U.S. dollar over the past six months
contributing positively to the performance of the Fund.
Q: What has been the effect of the European Monetary Union on European Bonds?
A: So far, EMU has had very little effect. Market participants, however,
anticipate that a liquid Euro-bloc corporate market will develop over time. If
this occurs, the country of issue will matter far less than the industry and
rating of the issuer. We are monitoring the growth of this market as these
corporate issues will offer additional opportunities for the Fund to add yield
by owning debt of high quality corporate issuers.
Q: In our discussion so far there has been no mention of the emerging markets.
What percentage of the Fund's portfolio consists of these bonds?
A: Prior to the devaluation of the Brazilian real we had virtually no exposure
to the emerging markets. After Brazil devalued the real and finally gave
credible indications of serious fiscal reform, we reconsidered those markets on
a very selective basis. At that time we felt there were some bonds, most notably
those of Mexico, Panama, and the Philippines, that had relative value, and we
added them to the portfolio. We like to think of these as "high-quality"
emerging market debt. It is important to note that all emerging market debt we
hold is sovereign debt.
Q: What do you expect from the markets looking forward?
A: With volatility dropping around the globe, and liquidity returning to
markets, the Fed can change its focus from being a liquidity provider to being
more vigilant about inflation. First quarter growth in the United States
continued to be very strong, which may lead the Fed to raise rates if any sign
of inflationary pressure begins to appear. While an increase in short rates
should help the U.S. dollar, it may limit the growth of the domestic equity
market.
Growth remains restrained in the Euro-bloc countries. Unemployment
remains over 10% in Germany and France, and with current structural rigidities,
the level looks unlikely to change. The structural constraints cannot change
quickly, which should prevent growth from picking up anytime soon. This should
keep yields in the Euro-bloc within their current trading range. Conversely,
Japanese yields could be quite volatile over the next several months. If fiscal
stimulus is limited, yields will most likely remain low, as negative GDP growth
would continue. If, on the other hand, the government spends money in an effort
to stimulate the economy, it will have to issue more debt to finance the
spending. With yields on government bonds so low, they are difficult to sell.
Yields may have to rise significantly for the Japanese to finance their
spending.
As long as economic growth remains constrained in the Euro-bloc, we
expect that the euro will remain at its current level or weaken further. Also,
the
8 - Scudder International Bond Fund
<PAGE>
Kosovo crisis has exerted negative pressure on the value of the euro, and on
Euro-bloc growth. We would, however, expect intervention on the part of the
European Central Bank to defend the level of the euro, which could cushion the
downside. Domestic weakness has also put downward pressure on the Japanese yen,
while the balance of trade with the U.S. has supported its level. We expect that
the yen will remain in its current range over the short-term, but are watching
the competing pressures on the currency to ensure that they do not move out of
balance, prompting a significant move.
We are constructive on emerging markets fundamentals, but view the Fund's
position as tactical. Given the high correlation of emerging markets with U.S.
equity markets, if domestic equities respond negatively to a move by the Fed, we
will consider whether or not the emerging markets' exposure should be reduced.
9 - Scudder International Bond Fund
<PAGE>
Glossary of Investment Terms
FUNDAMENTAL RESEARCH Analysis of a security based on the projected
economic health of the issuer. To determine whether
a government bond is attractively priced,
information such as inflation, gross domestic
product, and money flows into and out of the country
will be analyzed. Distinct from technical analysis,
which evaluates the attractiveness of a security
based on historical price and trading volume
movements, rather than the financial results of the
underlying issuer.
HEDGING A strategy used to offset investment risk.
Investment managers frequently hedge their exposure
to currency changes by buying or selling futures or
options contracts. For example, an investor who
wishes to buy British bonds but feels that the value
of the pound will fall versus the U.S. dollar may
buy futures or options on the pound to offset the
projected decline in the currency.
INVERTED YIELD CURVE An unusual situation where short-term interest rates
are higher than long-term interest rates. An
inverted curve results when a surge in demand for
short-term credit drives up short-term rates, while
long-term rates move up more slowly since borrowers
are not willing to commit themselves to pay high
rates for many years. This scenario is often
indicative of negative sentiment concerning a
country's economic health.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings capability of every holding in a
given fund's portfolio, net of expenses, assuming
each is held to maturity.
TOTAL RETURN The most common yardstick to measure the performance
of a fund or investment. Total return-- annualized
or compounded-- is based on a combination of share
price changes plus income and capital gain
distributions, if any, expressed as a percentage
gain or loss in value.
YIELD CURVE A graph plotting the yields of all bonds of the
same quality with maturities ranging from the
shortest to the longest available. The resulting
curve shows the relationship between short-,
intermediate-, and long-term interest rates.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
10 - Scudder International Bond Fund
<PAGE>
Investment Portfolio as of April 30, 1999
<TABLE>
<CAPTION>
Principal Market
Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 1.7%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 4/30/1999 at 4.87%, to be
repurchased at $1,937,786 on 5/3/1999, collateralized by $1,959,000 U.S. Treasury Bond, -----------
3.875%, 4/15/2029 (Cost $1,937,000) ...................................................... 1,937,000 1,937,000
-----------
Government National Mortgage Association 1.7%
- ------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-thru, 7.0% with various maturities to -----------
3/15/2029 (Cost $2,024,992) .............................................................. 1,993,225 2,022,500
-----------
Foreign Denominated Debt Obligations 82.7%
- ------------------------------------------------------------------------------------------------------------------------
Australian Dollars 1.1%
Commonwealth of Australia, 9%, 9/15/2004 ................................................... 1,700,000 1,317,233
-----------
British Pounds 18.2%
Federal Home Loan Bank, 5.625%, 6/10/2003 .................................................. 1,970,000 3,196,081
Federal National Mortgage Association Global Issue, 7.125%, 8/10/1999 ...................... 2,700,000 4,368,682
General Electric Capital Corp., 8%, 12/29/2000 ............................................. 1,800,000 3,050,646
United Kingdom Treasury Bond, 6%, 8/10/1999 ................................................ 6,400,000 10,326,551
-----------
20,941,960
-----------
Canadian Dollars 10.2%
Newcourt Credit Group, Inc., 6.45%, 6/28/2002 .............................................. 2,300,000 1,590,149
Newcourt Credit Group, Inc., 6.3%, 6/2/2003 ................................................ 2,700,000 1,845,966
Newcourt Credit Group, Inc., 6.2%, 9/1/2004 ................................................ 2,850,000 1,957,897
PanCanadian Petroleum Ltd., 8.75%, 11/9/2005 ............................................... 3,000,000 2,371,701
Province of Nova Scotia, 7.25%, 10/11/2006 ................................................. 5,200,000 3,960,72
-----------
11,726,440
-----------
Costa Rican Colon 0.1%
Citibank Time Deposit, 20.5%, 5/26/1999 .................................................... 32,794,572 116,852
-----------
El Salvadoran Colon 0.1%
Citibank Time Deposit, 10%, 8/23/1999 ...................................................... 570,055 65,112
-----------
Euro 19.7%
Government of France, 4.5%, 7/12/2003 ...................................................... 2,362,959 2,632,757
Government of France STRIP (Principal Only), 4/25/2023 ..................................... 9,400,000 2,885,920
Government of Ireland, 6%, 8/18/2008 ....................................................... 2,145,857 2,635,903
Government of the Netherlands STRIP (Principal Only), 1/15/2023 ............................ 26,771,319 8,298,465
Kingdom of Spain, 5.25%, 1/31/2003 ......................................................... 5,559,362 6,332,379
-----------
22,785,424
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Japanese Yen 5.3%
Federal National Mortgage Association Global Issue, 2.125%, 10/9/2007 ............................. 680,000,000 6,140,392
-----------
Mexican Pesos 0.4%
Certificado de la Tesoraria, Zero Coupon, 7/8/1999 ................................................ 1,893,170 196,051
Citibank Time Deposit, 22.7%, 10/29/1999 .......................................................... 1,819,248 196,224
-----------
392,275
-----------
New Zealand Dollars 3.6%
Government of Canada, 6.625%, 10/3/2007 ........................................................... 7,400,000 4,208,238
-----------
Norwegian Kroner 13.1%
Kingdom of Norway, 7%, 5/31/2001 .................................................................. 90,200,000 12,064,047
Kingdom of Norway, 5.75%, 11/30/2004 .............................................................. 11,500,000 1,553,576
Kingdom of Norway, 5.5%, 5/15/2009 ................................................................ 11,000,000 1,496,603
-----------
15,114,226
-----------
Swedish Kronor 10.8%
Kingdom of Sweden, 5%, 1/15/2004 .................................................................. 42,200,000 5,335,516
Kingdom of Sweden, 5%, 1/28/2009 .................................................................. 56,900,000 7,178,210
-----------
12,513,726
-----------
Turkish Lire 0.1%
J.P. Morgan Time Deposit, 71%, 5/3/1999 ........................................................... 18,036,960,000 46,007
J.P. Morgan Time Deposit, 69%, 5/17/1999 .......................................................... 19,175,292,587 48,910
-----------
94,917
- ------------------------------------------------------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $97,377,350) 95,416,795
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated Debt Obligations 13.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Argentina, Bonos de Consolidacion de Deudas Previsionales Pre 2 (BOCON), Variable
Interest Rate Bond, 4.93%, 4/1/2001 ............................................................. 1,164,033 1,125,821
Argentine Republic, 11.375%, 1/30/2017 ............................................................ 1,100,000 1,097,250
Federative Republic of Brazil, IDU Floating Rate Bond, LIBOR plus .8125% (6.0625%), 1/1/2001 ...... 442,800 420,937
Federative Republic of Brazil, Eligible Interest, Floating Rate Bond, LIBOR plus .8125% (5.875%),
4/15/2006 ....................................................................................... 380,000 303,288
Federative Republic of Brazil C Bond, 5% with 3% Interest Capitalization, 4/15/2014 ............... 778,162 540,045
General Motors Acceptance Corp., 5.33%, 10/20/2000 ................................................ 5,000,000 4,980,300
Government of Jamaica, 10.875%, 6/10/2005 ......................................................... 700,000 630,000
Republic of Bulgaria, Interest Arrears Bond, LIBOR plus .8125% (5.875%), 7/28/2011 ................ 750,000 507,188
Republic of Panama, Interest Reduction Bond, Step-up Coupon, 4%, 7/17/2014 ........................ 750,000 588,750
Republic of Panama, Past Due Interest Bond, LIBOR plus .8125% (5.9375%), with
interest capitalization, 7/17/2016 ................................................................ 1,347,014 1,057,406
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Republic of the Philippines, 8.875%, 4/15/2008 ................................. 2,950,000 3,001,625
United Mexican States, 11.5%, 5/15/2026 ........................................ 1,500,000 1,784,250
- --------------------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Debt Obligations (Cost $15,771,210) 16,036,860
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $117,110,552) (a) 115,413,155
- --------------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $117,110,552. At April 30,
1999, net unrealized depreciation for all securities based on tax cost was
$1,697,397. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $1,641,082 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$3,338,479
</TABLE>
Transactions in written options during the six months ended April 30, 1999 were:
Options on Currency (NZD)
------------------------------------------
Par Amount Premiums Received ($)
-------------------- --------------------
Outstanding at October 31, 1998 12,200,000 72,471
Written 41,900,000 261,685
Closed (6,000,000) (36,180)
Exercised (17,700,000) (89,416)
Expired (30,400,000) (208,560)
------------- -------------
Outstanding at April 30, 1999 -- --
============= =============
Currency Abbreviation
ARA Argentine Pesos JPY Japanese Yen
CAD Canadian Dollar KRW South Korean Won
CLP Chilean Peso MXP Mexican Peso
CNR Chinese Renminbi NOK Norwegian Kroner
DKK Danish Kroner NZD New Zealand Dollar
EGP Egyptian Pounds PHP Philippine Pesos
EUR Euro PLZ Polish Zlotys
GBP British Pounds SEK Swedish Kroner
HUF Hungarian Forints THB Thai Bahts
ILS Israeli Shekel USD U.S. Dollar
IND Indonesian Rupiahs ZAR South African Rands
The accompanying notes are an integral part of the financial statements.
13 - Scudder International Bond Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 1999
<TABLE>
<CAPTION>
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $117,110,552) ............................... $ 115,413,155
Receivable for investments sold ..................................................... 14,454,724
Interest receivable ................................................................. 2,105,051
Receivable for Fund shares sold ..................................................... 19,079
Unrealized appreciation on forward currency exchange contracts ...................... 1,242,199
Other assets ........................................................................ 3,467
-------------
Total assets ........................................................................ 133,237,675
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Due to custodian bank ............................................................... 173,857
Payable for investments purchased ................................................... 652,704
Payable for Fund shares redeemed .................................................... 269,639
Dividends payable ................................................................... 88,895
Unrealized depreciation on forward currency exchange contracts ...................... 1,411,484
Accrued management fee .............................................................. 83,159
Other payables and accrued expenses ................................................. 255,842
-------------
Total liabilities ................................................................... 2,935,580
------------------------------------------------------------------------------------------------------
Net assets, at market value $ 130,302,095
------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ........................ (2,545,416)
Net unrealized appreciation (depreciation) on:
Investments ......................................................................... (1,697,397)
Foreign currency related transactions ............................................... (208,868)
Accumulated net realized gain (loss) ................................................ (67,077,366)
Paid-in capital ..................................................................... 201,831,142
------------------------------------------------------------------------------------------------------
Net assets, at market value $ 130,302,095
------------------------------------------------------------------------------------------------------
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($130,302,095 / 12,561,328
shares of capital stock outstanding, $.01 par value, 200,000,000 shares of capital -------------
stock authorized) ................................................................ $ 10.37
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder International Bond Fund
<PAGE>
Statement of Operations
six months ended April 30, 1999
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest (net of foreign taxes withheld of $40,051) ........... $ 4,309,293
-----------
Expenses:
Management fee ................................................ 592,440
Services to shareholders ...................................... 277,425
Custodian and accounting fees ................................. 132,574
Directors' fees and expenses .................................. 24,564
Reports to shareholders ....................................... 24,438
Auditing ...................................................... 43,970
Legal ......................................................... 11,602
Registration fees ............................................. 12,273
Other ......................................................... 5,652
-----------
Total expenses before reductions .............................. 1,124,938
Expense reductions ............................................ (79,308)
-----------
Expenses, net ................................................. 1,045,630
-------------------------------------------------------------------------------
Net investment income 3,263,663
-------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ................................................... 1,814,542
Options ....................................................... 344,740
Futures contracts ............................................. 487,294
Foreign currency related transactions ......................... 2,257,904
-----------
4,904,480
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments ................................................... (5,471,672)
Options ....................................................... (688,143)
Futures contracts ............................................. (114,788)
Foreign currency related transactions ......................... (2,920,445)
-----------
(9,195,048)
-------------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,290,568)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(1,026,905)
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder International Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Four Months
Six Months Ended
Ended October 31,
April 30, 1998 Year Ended
Increase (Decrease) in Net Assets 1999 (Note F) June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ........................................ $ 3,263,663 $ 2,524,839 $ 10,863,087
Net realized gain (loss) from investment transactions ........ 4,904,480 (743,681) (8,465,656)
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................ (9,195,048) 11,598,063 (2,412,343)
------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations ............................................... (1,026,905) 13,379,221 (14,912)
------------- ------------- -------------
Distributions to shareholders:
From net investment income ................................... (3,263,663) -- --
------------- ------------- -------------
Tax return of capital ........................................ -- (2,524,839) (10,863,087)
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold .................................... 17,563,726 15,356,428 44,825,847
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................... 2,673,505 2,041,754 8,732,391
Cost of shares redeemed ...................................... (35,577,021) (24,138,878) (132,854,657)
------------- ------------- -------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. (15,339,790) (6,740,696) (79,296,419)
------------- ------------- -------------
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 ------------- ------------- -------------
$2,545,416 $2,545,416, and $8,174,452, respectively) ...... $ 130,302,095 $ 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 .................................................. 1,651,703 1,491,084 4,361,357
Shares issued to shareholders in reinvestment of
distributions.............................................. 253,113 201,162 856,845
Shares redeemed .............................................. (3,358,031) (2,374,752) (12,956,534)
------------- ------------- -------------
Net increase (decrease) in Fund shares ....................... (1,453,215) (682,506) (7,738,332)
------------- ------------- -------------
Shares outstanding at end of period .......................... 12,561,328 14,014,543 14,697,049
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder International Bond Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period (b) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Four
Months Ended
Six Months Ended October 31,
April 30, 1999 1998 Years Ended June 30,
1999 (Note F) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Net asset value, beginning of period .......... $ 10.70 $ 9.92 $ 10.52 $ 10.98 $ 11.43 $ 11.97 $ 13.57
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income ......................... .25 .18 .61 .58 .73 .98 .92
Net realized and unrealized gain (loss) on
investment transactions...................... (.33) .78 (.60) (.46) (.45) (.54) (1.22)
-------------------------------------------------------------------------------
Total from investment operations .............. (.08) .96 .01 .12 .28 .44 (.30
-------------------------------------------------------------------------------
Less distributions:
From net investment income .................... (.25) -- -- (.58) (.12) -- (.91)
In excess of net realized gains on investment
transactions ................................ -- -- -- -- -- -- (.39)
Tax return of capital ......................... -- (.18) (.61) -- (.61) (.98) --
-------------------------------------------------------------------------------
Total distributions ........................... (.25) (.18) (.61) (.58) (.73) (.98) (1.30)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net asset value, end of period ................ $ 10.37 $ 10.70 $ 9.92 $ 10.52 $ 10.98 $ 11.43 $ 11.97
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .............................. (.70)(a)** 9.76(a)** .10(a) .94 2.59 3.92 (2.83)(a)
Ratios and Supplemental Data
Net assets, end of period
($ millions)................................. 130 150 146 236 515 910 1,231
Ratio of operating expenses, net to average
daily net assets (%)......................... 1.50* 1.50* 1.56 1.36 1.26 1.30 1.27
Ratio of operating expenses before expense
reductions, to average daily net assets (%).. 1.61* 1.58* 1.62 1.36 1.26 1.30 1.29
Ratio of net investment income to average daily
net assets (%)............................... 4.68* 5.20* 5.91 5.28 6.50 8.52 6.86
Portfolio turnover rate (%) ................... 169.8* 303.5* 190.1 298.2 275.7 318.5 232.9
(a) Total returns for certain periods would have been lower had certain expenses not been reduced.
(b) Based on monthly average of shares outstanding during the period.
* Annualized
** Not annualized
</TABLE>
17 - Scudder International Bond Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder International Bond Fund (the "Fund") is a non-diversified series of
Global/International Fund, Inc. (the "Corporation"), a Maryland corporation
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles which require the use
of management estimates. The policies described below are followed consistently
by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio debt securities other than money market
instruments with an original maturity over sixty days are valued by pricing
agents approved by the officers of the 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 debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value is equal to at least the repurchase price.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on securities and
currencies primarily as a hedge against potential adverse price movements in the
value of portfolio assets. In addition, during the period, the Fund purchased
call options and wrote put options on securities and currencies to lock in the
exchange rate component of the purchase price of securities expected to be
purchased in the near future and to enhance potential gain.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
18 - Scudder International Bond Fund
<PAGE>
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased interest rate futures to manage the duration of the portfolio. In
addition, the Fund sold interest rate futures to hedge against declines in the
value of portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts, including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and certain
expenses at the rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund
19 - Scudder International Bond Fund
<PAGE>
utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of
the underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes, and no federal
income tax provision was required. At October 31, 1998, the Fund had a net tax
basis capital loss carryforward of approximately $71,000,000, which may be
applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until June 30, 2003 ($64,300,000), June 30, 2004
($6,100,000), and October 31, 2006 ($600,000), the respective expiration dates,
whichever occurs first.
Distribution of Income and Gains. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is distributed to shareholders monthly. During any particular year
net realized gains and certain unrealized gains (which for federal income tax
reporting purposes may be considered realized) from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed and, therefore, will be distributed to shareholders. An
additional distribution may be made to the extent necessary to avoid the payment
of a four percent federal excise tax. Distributions of net realized gains to
shareholders are recorded on the ex-dividend date.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in options, futures, forward
contracts, foreign denominated investments and certain securities sold at a
loss. As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Other. Investment security transactions are accounted for on a trade date basis.
Interest income is recorded on the accrual basis. All discounts are accreted for
both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the six months ended April 30, 1999, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $102,165,844 and $119,362,481, respectively. Sales of U.S. Government
obligations aggregated $99,633.
20 - Scudder International Bond Fund
<PAGE>
The aggregate face value of futures contracts opened and closed during the six
months ended April 30, 1999 was $6,334,755 and $13,842,143, respectively.
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. Effective March 1, 1999, the Adviser has agreed not to impose a
portion of its management fee until February 28, 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 six months ended April 30, 1999, the
Adviser did not impose a portion of its management fee aggregating $79,308 and
the amount imposed aggregated $513,132, which was equivalent to an annual
effective rate of .74% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1999, the amount charged by SSC aggregated $165,251,
of which $26,518 is unpaid at April 30, 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 six months ended April 30,
1999, the amount charged to the Fund by STC aggregated $39,575, of which $6,500
is unpaid at April 30, 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 six months
ended April 30, 1999, the amount charged to the Fund by SFAC aggregated $61,521,
of which $19,766 is unpaid at April 30, 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 April 30, 1999, the Special
Servicing Agreement expense charged to the Fund amounted to $8,605.
The Corporation pays each Director not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the six months ended April 30, 1999, Directors' fees and expenses aggregated
$24,564.
21 - Scudder International Bond Fund
<PAGE>
D. Commitments
As of April 30, 1999 the Fund had entered into the
following forward currency exchange contracts resulting in net unrealized
depreciation of $169,285.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Deliver In Exchange For Settlement Date (Depreciation) (U.S.$)
- -------------------- ------------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
USD 7,392,000 JPY 871,442,880 5/6/99 (90,249)
USD 3,463,785 JPY 409,765,822 5/6/99 (30,390)
JPY 398,000,000 USD 3,299,591 5/6/99 (35,219)
USD 132,000 PLZ 526,574 5/12/99 890
USD 5,265,844 EUR 4,874,969 5/17/99 (102,228)
USD 63,406 PHP 2,439,871 5/17/99 625
USD 6,467,292 JPY 785,387,892 5/18/99 124,291
USD 9,917,981 JPY 1,166,126,487 5/18/99 (130,946)
JPY 648,407,300 USD 5,300,000 5/18/99 (141,935)
JPY 500,463,600 USD 4,255,643 5/18/99 55,365
USD 79,303 KRW 96,630,669 5/19/99 1,968
USD 204,520 THB 7,599,963 5/19/99 912
USD 48,102 THB 1,804,322 5/19/99 670
USD 67,333 ILS 273,574 5/24/99 (1,812)
USD 34,793 PHP 1,327,337 5/24/99 2
SEK 71,776,992 USD 9,033,097 5/25/99 495,933
USD 54,886 KRW 65,616,679 5/26/99 289
USD 23,961,139 EUR 22,159,361 5/28/99 (472,654)
USD 130,000 CLP 63,336,000 5/28/99 (171)
USD 48,255 CNR 399,988 5/28/99 12
USD 100,000 IND 863,500,000 5/28/99 6,321
EUR 6,171,926 USD 6,747,581 5/28/99 205,462
EUR 11,404,178 USD 12,259,720 5/28/99 171,516
USD 67,590 ZAR 412,707 6/3/99 (138)
NOK 53,584,492 USD 6,901,838 6/7/99 47,481
NOK 26,310,000 USD 3,372,688 6/7/99 7,197
USD 10,553,603 GBP 6,563,186 6/9/99 5,626
GBP 15,383,028 USD 24,644,688 6/9/99 (104,408)
USD 5,153,866 DKK 35,402,938 6/15/99 (102,895)
USD 154,260 EGP 530,669 6/15/99 (1,011)
DKK 35,402,938 USD 5,157,771 6/15/99 106,800
USD 65,000 MXP 715,520 7/6/99 9,715
CAD 3,330,000 USD 2,222,371 7/6/99 (61,337)
CAD 1,661,270 USD 1,118,550 7/6/99 (20,746)
NZD 828,001 USD 454,043 7/6/99 (9,518)
NZD 6,700,000 USD 3,674,012 7/6/99 (77,017)
USD 53,321 ARA 53,748 7/12/99 353
USD 100,000 ZAR 619,550 7/29/99 (75)
USD 63,406 PHP 2,498,204 10/15/99 770
USD 34,793 PHP 1,353,432 10/22/99 (58)
USD 127,658 HUF 29,951,209 1/25/00 (9,179)
USD 290,024 HUF 68,419,670 1/27/00 (19,497)
------------
(169,285)
============
</TABLE>
22 - Scudder International Bond Fund
<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 1/3 percent of its net assets under the agreement.
F. Year End Change
On September 15, 1998, the Board of Directors of the Portfolio changed the
fiscal year end from June 30 to October 31.
23 - Scudder International Bond Fund
<PAGE>
Report of Independent Accountants
To the Directors of 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 April 30, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for each of 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 April
30, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
June 16, 1999 PricewaterhouseCoopers LLP
24 - Scudder International Bond Fund
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder International Bond
Fund (the "Fund") was held on December 15, 1998, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
7,162,031 338,894 298,553 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,420,033 444,910 383,073 551,461
- -------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
25 - Scudder International Bond Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder International Bond Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder International Bond Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board,
Vice President and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Consultant and
Venture Capitalist
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Keith R. Fox
Director; Private Equity
Investor
William H. Luers
Director; Chairman and
President, U.N. Association of
the U.S.A.
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Joan E. Spero
Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Director; Consultant
William H. Gleysteen, Jr.
Honorary Director; Consultant;
Guest Scholar, Brookings
Institute
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus of the Board and
Director, Kirby Corporation
Susan E. Dahl*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder International Bond Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
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**
Scudder Pennsylvania 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
Scudder Pathway International 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 Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
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
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
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.
29 - Scudder International Bond Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder International Bond Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
31 - Scudder International Bond Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $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.
SCUDDER
