SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND/GLOBAL
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Scudder Global Bond
Fund
Fund #061
Semiannual Report
April 30, 2000
The fund seeks to provide total return with an emphasis on current income.
Capital appreciation is a secondary objective.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
16 Glossary of Investment Terms
18 Investment Portfolio
22 Financial Statements
25 Financial Highlights
26 Notes to Financial Statements
34 Officers and Directors
35 Investment Products and Services
37 Scudder Solutions
2
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Scudder Global Bond Fund
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ticker symbol SSTGX fund number 061
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Date of o Scudder Global Bond Fund provided a total return of
Inception: -2.60% for the six-month period ended April 30, 2000,
3/1/91 outperforming the -4.35% return of the Salomon Brothers
World Government Bond Index.
Total Net o The strength of the U.S. dollar versus the euro and the
Assets as of yen was a major contributor to volatility in global
4/30/00: bond markets during the period.
$70 million
o The fund's U.S. exposure contributed to performance, as
yields in the United States, as well as other
dollar-bloc countries such as Canada and Australia have
been the highest in the Salomon Index. The strong
dollar has also made holding U.S. bonds attractive for
investors outside of the United States.
3
<PAGE>
Letter from the Fund's President
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Dear Shareholders,
Over the past six months, global bond markets have experienced above-average
volatility particularly due to significant swings in currency values against the
U.S. dollar. The yen moved in a 10% range, and the euro fell by over 10% during
the period. In this environment, Scudder Global Bond Fund provided a total
return of -2.60%, outperforming the -4.35% return of the Salomon Brothers World
Government Bond Index.
As Portfolio Managers Jan Faller and Jeremy Ragus discuss in the interview that
begins on page 8, the fund has benefited from currency hedging and country
selection. The fund maintained hedges on both the yen and the euro, while
remaining underweight in underperforming markets such as Japan. The fund also
benefited from being overweight in the dollar-bloc countries of the United
States and Canada early in the year when these countries were strong performers.
Going forward, we expect that the U.S. dollar will continue to benefit from the
strong U.S. economy, as well as global interest rate differentials. However, the
balance of trade, combined with volatile equity markets, could be less favorable
for the dollar in the medium term. Thus, Scudder Global Bond Fund will continue
to rely on rigorous fundamental and quantitative research, combined with
disciplined risk management, to look for opportunities that may develop in other
global markets.
4
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Thank you for your continued investment in Scudder Global Bond Fund. If you have
any questions about your investment, please call Scudder Investor Information at
1-800-SCUDDER (1-800-728-3337), or visit our Web site at www.scudder.com.
Sincerely,
/S/Nicholas Bratt
Nicholas Bratt
President,
Scudder Global Bond Fund
5
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Performance Update
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April 30, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
Salomon Brothers
Currency-Hedged World
Scudder Global Salomon Brothers World Government Bond Index
Bond Fund Government Bond Index* (1-3 years)**
3/91*** 10000 10000 10000
'91 10072 10154 10075
'92 11087 11408 10896
'93 11859 13304 11072
'94 12169 14028 12058
'95 12282 16202 12748
'96 12733 16683 13625
'97 12856 16808 0
'98 13878 18156 0
'99 14952 19645 0
'00 14228 18964 0
Yearly periods ended April 30
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 4/30/2000 $10,000 Cumulative Annual
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Scudder Global Bond Fund
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1 year $ 9,515 -4.85% -4.85%
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5 year $ 11,584 15.84% 2.98%
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Life of Fund*** $ 14,243 42.43% 3.93%
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Salomon Brothers World Government Bond Index*
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1 year $ 9,654 -3.46% -3.46%
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5 year $ 11,705 17.05% 3.20%
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Life of Fund*** $ 18,965 89.65% 7.29%
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* The unmanaged Salomon Brothers World Govenment Bond Index consists of
worldwide fixed-rate government bonds with remaining maturities greater
than one year. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
** On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current income
through short-term instruments. Since adopting its current objectives, the
cumulative return is 8.32%. Prior to December 27, 1995, the Salomon
Brothers Currency-Hedged World Government Bond Index (1-3 years) was used
as a comparative index.
*** The Fund commenced operations on March 1, 1991. Index comparisons begin
March 31, 1991.
6
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Returns and Per Share Information
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Yearly periods ended April 30
Scudder Global Salomon Brothers
Bond Fund World Government Bond Index*
1991*** .83 .75
1992 10.08 8.15
1993 6.97 7.40
1994 2.61 3.04
1995 .93 5.72
Salomon Brothers
Currency-Hedged World
Scudder Global Government Bond Index
Bond Fund (1-3 years)**
1996 3.67 2.97
1997 0.97 0.75
1998 7.95 8.02
1999 7.74 8.21
2000 -4.85 -3.46
<TABLE>
<CAPTION>
1991*** 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) .83 10.08 6.97 2.61 .93 3.67 .97 7.95 7.74 -4.85
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Index Total
Return (%) .75 8.15 7.40 3.04 5.72 2.97 .75 8.02 8.21 -3.46
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Net Asset
Value ($) 11.93 11.95 11.72 11.12 10.39 10.00 9.51 9.62 9.80 8.87
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Dividends ($) .17 1.14 1.01 .91 .84 .76 .60 .63 .55 .45
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Capital Gains
Distributions ($) -- -- .02 -- -- -- -- -- -- --
------------------------------------------------------------------------------------
</TABLE>
* The unmanaged Salomon Brothers World Govenment Bond Index consists of
worldwide fixed-rate government bonds with remaining maturities greater
than one year. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
** On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current income
through short-term instruments. Since adopting its current objectives, the
cumulative return is 8.32%. Prior to December 27, 1995, the Salomon
Brothers Currency-Hedged World Government Bond Index (1-3 years) was used
as a comparative index.
*** The Fund commenced operations on March 1, 1991. Index comparisons begin
March 31, 1991.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained expenses, the total returns for the Fund for the one year, five
year, and life of Fund periods would have been lower.
7
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Portfolio Summary
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April 30, 2000
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Geographical Exposure
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U.S. 49.6%
Germany 15.9%
Canada 9.7%
Norway 9.6%
U.K. 5.1%
France 2.8%
Argentina 1.5%
Brazil 1.5%
Mexico 1.4%
Bulgaria 0.6%
Turkey 0.4%
Venezuela 0.4%
Peru 0.3%
Other 1.2%
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100.0%
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The fund's U.S. exposure contributed to performance, as yields in the United
States and other dollar-bloc countries became more attractive.
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Interest Rate Exposure
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U.S. 47.1%
Euro 19.9%
Japan 9.6%
Norway 9.5%
U.K. 8.0%
Canada 5.7%
Other 0.2%
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100.0%
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We are currently in a period where interest rates are moving in response to
short-term factors, which increases volatility.
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Currency Exposure (a)
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U.S. 54.3%
Euro 21.6%
U.K. 6.8%
Norway 6.8%
Japan 5.6%
Other 4.9%
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100.0%
----------------------------------
The strength of the dollar versus the euro and the yen was a major contributor
to volatility in global bond markets.
(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 18. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
April 30, 2000
In the following interview, lead portfolio manager Jan Faller and portfolio
manager Jeremy Ragus discuss Scudder Global Bond Fund's strategy and the market
environment for the six-month period ended April 30, 2000.
Q: How did the fund perform over the six months ended April 30, 2000?
A: The fund returned -2.60%, outperforming the Salomon Brothers World Government
Bond Index (the Salomon Index), which had a -4.35% return over the same period.
A significant portion of this negative return is attributable to the strength of
the U.S. dollar versus both the euro and the yen. The euro dropped by over 15%
during the past six months, and the yen fell by over 3.5%. Thus, even though
bonds without the effect of currency provided positive returns over the past six
months, the negative currency returns dominated performance.
Q: How would you characterize market conditions during this period?
A: The market demonstrated volatility in a variety of ways. Currency returns
were not only negative, as noted above, but also very volatile. The value of the
yen against the dollar varied by almost 10% during that time, initially selling
off at the beginning of the calendar year and then going up in value
dramatically as the Japanese repatriated assets for their fiscal year-end in
March. The euro was less volatile simply because it stayed with its downtrend
over the entire period. Emerging markets generally were also volatile over the
past six months. Initially, Y2K fears kept many participants on the sidelines.
Once those fears proved unfounded, many emerging markets bonds performed quite
well at the beginning of 2000. More recently, however, rising interest rates
around the globe combined with deteriorating fundamentals in a number of
countries led to negative returns for emerging markets. Also, volatility for
emerging markets has risen notably over the past few months.
9
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Bond markets across the globe were also volatile between countries. Over the
past six months, for example, Japan has oscillated between being the best and
worst performer in different months. Similarly, the United States also has been
among the best and worst performers in different months. Rather than being in an
environment where bond returns are dominated by long-term business cycle
effects, we are currently in a period where interest rates appear to be moving
in response to short-term factors, which increases volatility.
Q: What were some of the key factors affecting the fund's performance?
A: The two key factors were currency hedging and country selection. The fund
outperformed its benchmark because we maintained hedges on both the yen and the
euro. The hedge on the yen was greater than that on the euro, unfortunately; the
yen fell less in value relative to the dollar. We hedged less against the euro
because we felt that it had been oversold and anticipated an increase in value
relative to the dollar. While we do anticipate a turn over the medium term, we
currently have a substantial hedge on our euro position because capital flows,
technical factors, and the struggle by the European Central Bank to gain market
influence all are conspiring to keep the euro low.
Fund performance also benefited from country selection. Year-to-date Japan was
the second-worst performer in the index. The fund has been consistently
underweight in Japanese government bonds because we found their yields
unattractive and because we were concerned about the increasing supply of
Japanese debt. The fund was overweight in the United Kingdom early in the year
when a limited supply of long-term bonds prompted a rally in the long end of the
curve even though the curve is significantly inverted. Another benefit was
holding an overweight position in the dollar-bloc countries of the United States
and Canada early in the year when these countries were strong performers.
10
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Q: How has renewed global growth, along with rising prices for such commodities
as oil and gold, affected your strategy?
A: The traditional relationship between growth and inflation, and hence rising
global bond yields, has been called into question in this market environment.
Certainly in the United States, we have heard much talk of a new paradigm,
though more recently we have begun to see a more vigilant Federal Reserve Bank.
The question we are currently addressing is whether stable growth with little
inflation can manifest itself in the euro-bloc as that area continues to
recover. The continued weakness of the euro causes us some concern, however;
currently core inflation remains very low in that region. We are not fearful
that global growth will lead to rampant inflation in the near term, so we are
not particularly bearish in our outlook for global yields. Economic evidence
suggests that inflation is currently under control around the globe.
Another reason for a relatively positive outlook for bonds, even with renewed
growth, is shrinking supply. With the exception of Japan, every major country is
currently reducing its outstanding debt due to a stable fiscal picture and a
combination of one-time events which are producing income for the governments.
Thus, the environment has led us to pay close attention to the central bank
effort to make sure inflation does not get out of control. This environment also
has caused us to consider factors other than the traditional growth/inflation
relationship that dominates global bond markets.
Renewed global growth has led to rising short-term interest rates around the
globe. This monetary tightening could have negative implications for holdings
with credit exposure in the portfolio such as corporate bonds or emerging
markets debt. Increasing rates tend to decrease risk appetite in the market,
leading to wider spreads. Evidence of this phenomenon is already apparent in
wider swap spreads, emerging markets spreads, and underperformance of U.S.
corporate bonds. We continue to increase the average quality of bonds in the
fund and
11
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reduce the overall credit exposure as we believe this is an environment
where risk appetite could deteriorate further.
Q: The European Monetary Union (EMU) has been in existence for over a year. What
effect has the EMU had on European bonds?
A: Certainly the most noticeable effect has been on returns within the euro-bloc
countries. Since the introduction of the single currency, the range of returns
for the major participant countries has been very narrow. Returns differed
across some of the peripheral participant countries due to differences in
business cycle, unusual supply-demand dynamics and other country specific
factors. So far this year, the range of returns across all the participant
countries has been only 0.47%.
While the euro bloc has not dramatically underperformed relative to other
regions around the globe, certainly it has been held back by the weakness of the
euro. The euro weakness makes bonds less attractive for two reasons. First, a
weak currency can potentially be inflationary, which is undesirable for a
bondholder. Second, a falling currency hurts the returns of an unhedged
bondholder. As long as the negative euro trend continues, buyers of
euro-denominated bonds who are taking on currency risk are less likely to be
active in the market.
The single currency has helped European corporate issuers reach a broader
market. Buyers across all participant countries can now buy corporate debt
without currency risk, which has substantially increased the demand for
euro-denominated corporates. With demand comes supply, and we have seen a
dramatic increase in issuance of corporate debt in the euro bloc over the past
year. Similarly, a high yield corporate market has developed over the past year
and has performed very well, as again, demand for the high yielding securities
has outstripped supply.
12
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Q: What percentage of the portfolio consists of emerging market bonds, and what
impact have they had on the fund?
A: Over the past six months, the fund has held about 5% in emerging market
bonds, though the amount has varied somewhat as the outlook for emerging markets
evolved during the period. Our holdings are concentrated in higher quality
issues whose credit spreads tend to be less volatile such as Mexico, Jamaica and
Panama. Over the past six months the return on the J.P. Morgan EMBI+ Index was
over 11%, so the emerging markets holdings have had a positive impact on the
fund's performance. More recently, we have reduced our emerging markets exposure
in light of increased Fed vigilance and widening swap spreads which reflect a
market environment which could put pressure on emerging markets spreads.
Q: How significant was the fund's U.S. exposure?
A: The fund's U.S. exposure was substantial during much of the past six months.
The United States has been attractive for several reasons. Yields in the United
States and other dollar-bloc countries such as Canada and Australia have been
the highest in the Salomon Index. Even after taking into account inflation, real
yields have been quite attractive in the United States. The strong dollar has
also made holding U.S. bonds attractive for investors outside of the United
States. In addition, the strong dollar has helped keep inflation at bay,
preventing yields from rising significantly. Also helping on the inflation front
has been the relatively vigilant Fed, which increased interest rates three times
over the period, raising the Fed Funds rate from 5.25% to 6.00%.
Further, the budget surplus and Treasury buybacks are putting pressure on the
long end of the U.S. yield curve, which has been inverted since mid-January of
this year. The lack of inflationary pressure, combined with continued buybacks,
suggests that we may have an inverted curve in the U.S. for some time. The
United States was one of the best performing markets in the Salomon
13
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Index over the past six months, so owning U.S. bonds helped performance.
Q: Can you discuss some investments that did not fare well?
A: Managing the euro hedge over the past six months has been difficult. The euro
fell further than we anticipated, and in two instances when we thought that it
would turn and recover, we reduced the hedge only to see it continue to fall
further. The pickup in European growth, increase in interest rates and lack of
significant inflation in the euro-bloc all appeared to indicate that the
currency had potential to increase against the U.S. dollar. Also, it had fallen
below nearly any measure of fair value; using the Deutsche mark as a proxy for
the euro, the exchange rate is now lower than it has been since the end of 1986.
Our performance would have been better if we had simply remained more hedged
rather than attempting to call a turn in the currency.
Early this year our active country weights hurt the performance of the fund. We
were underweight in Japan because we were concerned about fiscal spending
leading to supply pressure in that country; in fact, Japan is the only major
country in the index whose outstanding debt is actually increasing. Also, the
weakening yen made it appear that the bond market could significantly
underperform. Instead, in the month of January, Japan was the second best
performing country behind the United States, as the supply was easily absorbed
by local buyers even with yields below 2% on their ten-year bonds.
Conversely, we were overweight in the United Kingdom because the lack of supply,
strong pound and lack of inflationary pressure made the market appear to be
attractive. However, news that substantial changes to the regulations affecting
U.K. pension funds caused a significant sell-off in the long end of that market,
making the United Kingdom the worst performer in January. We felt that
fundamentally the market remained attractive and the sell-off was more than what
was justified by the news
14
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and held the position, which helped performance in February as the U.K.
rebounded to be the third best performer in the Salomon Index in February.
Q: What is your strategy going forward?
A: For the short term, we continue to expect that the U.S. dollar will remain
quite strong. Continued economic strength in the United States and current
interest rate differentials both favor the dollar. However, the balance of trade
and volatile equity markets could be less favorable for the dollar in the medium
term. Thus, we remain quite hedged currently, but are looking for signs that the
euro will appreciate in value relative to the dollar and once we see a clear
reversal in that trend we will consider reducing the hedge. Interest rate
differentials and slow growth will continue to put pressure on the yen so we
anticipate remaining hedged in that currency for a longer time.
As long as the Fed continues its restrictive monetary policy we feel that credit
spreads will remain under pressure. Growth continues to be strong in the United
States and at least two more rate hikes by the Fed are expected. Thus we are
continuing to opportunistically reduce our exposure to corporate debt and
emerging markets. We will continue to emphasize a heavier weighting in
government bonds until we see clear indications that the risk aversion now
characterizing the market has passed.
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.
Currency A significant decline of a currency's value relative to
Devaluation other currencies, such as the U.S. dollar, typically
resulting from the cessation of a country's central bank
intervention in the currency markets. For U.S. investors who
are investing overseas, a devaluation of a foreign currency
can reduce the total return of their investment.
Currency The price at which one country's currency can be exchanged
Exchange Rate into another currency. When a country's currency rises
relative to other currencies, this decreases the buying
power of foreign purchasers of that country's goods and
services and tends to hurt the earnings of companies that
export; by contrast, a weak currency promotes exports. From
the perspective of a U.S. investor in overseas securities, a
weakening U.S. dollar adds to total returns, as assets
denominated in foreign currencies then translate into more
in dollar terms; a strengthening dollar relative to foreign
currencies reduces returns to U.S. investors.
EMU The integration of European economies involving, among other
(European changes, a move to a single currency for member nations. To
Monetary qualify for EMU membership, nations will be required to meet
Union) certain guidelines concerning total governmental debt and
annual budget deficits, designed to ensure a strong common
currency.
16
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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 An unusual situation where short-term interest rates are
Curve 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.
Monetary Policy The decision of a central bank to control the level of
economic activity by either supplying credit through lower
interest rates or open market purchases, or by restricting
credit through higher rates or open market sales. Looser
credit tends to stimulate the economy, while tighter credit
tends to calm inflationary forces.
Total Return The most common yardstick to measure the performance of a
fund. 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.
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.
Yield Spread The difference in yield between two types of bonds. A
mortgage-backed security's yield is often measured against
the yield of a Treasury bond of similar maturity as a market
yardstick. If GNMA yield spreads are "narrow," for example,
it typically means that GNMA yields have been declining and
prices rising, compared with Treasury bonds of similar
maturities.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
17
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<TABLE>
<CAPTION>
Investment Portfolio as of April 30, 2000 (Unaudited)
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Principal
Amount Value ($)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Repurchase Agreements 3.0%
--------------------------------------------------------------------------------------------------
<S> <C>
Donaldson, Lufkin & Jenrette, 5.68%,
to be repurchased at $2,080,985 on 5/1/2000*
(Cost $2,080,000) ...................................... 2,080,000 2,080,000
--------------------------------------------------------------------------------------------------
Foreign Denominated Debt Obligations 52.9%
--------------------------------------------------------------------------------------------------
British Pounds 8.0%
General Motors Acceptance Corp., 6.875%, 9/9/2004 .......... 2,250,000 3,491,153
United Kingdom Treasury Bond, 9%, 7/12/2011 ................ 1,000,000 2,044,820
--------------
5,535,973
--------------
Canadian Dollars 5.7%
Government of Canada, 8.5%, 4/1/2002 ....................... 5,550,000 3,896,200
--------------
Costa Rican Colon 0.1%
Citibank Time Deposit, 14.5%, 8/1/2000 ..................... 11,669,990 38,306
--------------
Euro 19.9%
Depfa Pfandbrief Bank, 4.75%, 7/15/2008 .................... 1,900,000 1,624,183
Federal Republic of Germany, 5%, 5/21/2001 ................. 1,700,000 1,554,003
Federal Republic of Germany, 6.25%, 1/4/2024 ............... 4,000,000 3,911,918
Ford Motor Credit Corp., 3.75%, 7/12/2004 .................. 930,000 790,699
Government of France Treasury Note, 4.5%, 7/12/2003 ........ 2,170,000 1,948,911
Rheinische Hypo Bank, 4.5%, 8/26/2003 ...................... 4,300,000 3,836,482
--------------
13,666,196
--------------
Japanese Yen 9.6%
Federal National Mortgage Association, 2.13%,
10/9/2007 ............................................... 400,000,000 3,828,160
Province of Ontario, 1.875%, 1/25/2010 ..................... 300,000,000 2,766,907
--------------
6,595,067
--------------
Norwegian Kroner 9.5%
Kingdom of Norway, 7%, 5/31/2001 ........................... 58,500,000 6,557,831
--------------
Turkish Lire 0.1%
J. P. Morgan Time Deposit, 28%, 5/17/2000 .................. 32,801,006,898 53,660
J. P. Morgan Time Deposit, 32%, 5/30/2000 .................. 31,122,573,703 50,916
--------------
104,576
--------------
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Total Foreign Denominated Debt Obligations (Cost $41,785,729) 36,394,149
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Principal
Amount Value ($)
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
U.S Denominated Debt Obligations 44.1%
------------------------------------------------------------------------------------
Argentine Republic, Collateralized Par Bond, Series L,
Step-up Coupon, 6%, 3/31/2023 ....................... 320,000 223,600
Banco Nacional de Comercio Exterior S.N.C., 7.25%,
2/2/2004 ............................................ 87,000 82,976
DaimlerChrysler AG, 7.45%, 3/1/2027 .................... 1,825,000 1,758,990
Federal National Mortgage Association, 5.125%,
2/13/2004 ........................................... 2,593,000 2,413,513
Federative Republic of Brazil, 11.625%, 4/15/2004 ...... 232,000 230,376
Federative Republic of Brazil, 12.75%, 1/15/2020 ....... 550,000 527,175
Federative Republic of Brazil, "New" Money Bond,
Floating Rate Bond, LIBOR plus .875% (7.44%),
4/15/2009 ........................................... 155,000 128,263
Federative Republic of Brazil Global Bond, 10.125%,
5/15/2027 ........................................... 140,000 109,200
Government National Mortgage Association
Pass-thru 7% with various maturities to 3/15/2029 ... 4,495,038 4,323,664
Government of Jamaica, 10.875%, 6/10/2005 .............. 100,000 98,500
IBM Corp., 5.375%, 2/1/2009 ............................ 2,300,000 2,000,908
Midland Bank PLC, 7.625%, 6/15/2006 .................... 1,500,000 1,481,190
Petroliam Nasional BHD, 8.875%, 8/1/2004 ............... 100,000 101,396
Republic of Argentina, 11%, 12/4/2005 .................. 180,000 175,950
Republic of Argentina, 11.75%, 4/7/2009 ................ 110,000 107,938
Republic of Argentina, 12%, 2/1/2020 ................... 550,000 543,950
Republic of Bulgaria, Collateralized Floating Rate
Interest Reduction Bond, "A", Step-up Coupon,
2.75%, 7/28/2012 .................................... 350,000 243,250
Republic of Bulgaria, Interest Arrears Bond, LIBOR plus
.8125% (7.065%), 7/28/2011 .......................... 240,000 181,200
Republic of Colombia, 7.625%, 2/15/2007 ................ 80,000 58,400
Republic of Colombia, 9.75%, 4/23/2009 ................. 120,000 94,800
Republic of Panama, Interest Reduction Bond, Step-up
Coupon, 4.25%, 7/17/2014 ............................ 135,000 106,313
Republic of Peru, Floating Rate Interest Reduction Bond,
3.75%, 3/7/2017 ..................................... 340,000 206,975
Republic of South Africa, 8.5%, 6/23/2017 .............. 150,000 131,070
Republic of Turkey, 9.875%, 2/23/2005 .................. 175,000 171,938
Republic of Venezuela, Debt Conversion Bond, Floating
Rate Bond, Series DL, LIBOR plus .875%, (7%),
12/18/2007 .......................................... 190,475 149,047
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Principal
Amount Value ($)
------------------------------------------------------------------------------------
Republic of Venezuela Global Bond, 9.25%, 9/15/2027 ..... 160,000 102,200
Republic of the Philippines, 9.875%, 1/15/2019 .......... 110,000 97,075
Slovak Republic, 9.5%, 5/28/2003 ........................ 100,000 101,375
U.S. Treasury Bond, 7.5%, 11/15/2016 .................... 3,300,000 3,696,528
U.S. Treasury Bond, 8.5%, 2/21/2020 ..................... 795,000 990,896
U.S. Treasury Note, 7.875%, 8/15/2001 ................... 2,100,000 2,130,513
U.S. Treasury Note, 5.625%, 12/31/2002 .................. 1,970,000 1,921,361
U.S. Treasury Note, 5.75%, 8/15/2003 .................... 1,560,000 1,520,516
U.S. Treasury Note, 6%, 8/15/2004 ....................... 1,485,000 1,453,904
U.S. Treasury Note, 6.5%, 10/15/2006 .................... 1,725,000 1,721,222
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery Rights),
Series D, LIBOR plus .8125% (6.90%), 12/31/2019 ...... 500,000 489,375
United Mexican States Global Bond, 11.375%, 9/15/2016 ... 150,000 169,688
United Mexican States, 11.5%, 5/15/2026 ................. 200,000 235,750
------------------------------------------------------------------------------------
Total U.S. Denominated Debt Obligations (Cost $31,190,740) 30,280,985
------------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $75,056,469) (a) 68,755,134
------------------------------------------------------------------------------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $75,056,469. At April 30,
2000, net unrealized depreciation for all securities based on tax cost was
$6,301,335. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$234,013 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value of $6,535,348.
<TABLE>
------------------------------------------------------------------------------------
At April 30, 2000, open futures contracts purchased were as follows:
Aggregate Unrealized
Expiration Face Appreciation
Futures Date Contracts Value ($) Value ($) (Depreciation)
----------------- ------------ --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Euro Bond 6/8/2000 90 8,657,250 8,595,340 (61,910)
At April 30, 2000, open futures contracts sold were as follows:
Aggregate Unrealized
Expiration Face Appreciation
Futures Date Contracts Value ($) Value ($) (Depreciation)
----------------- ------------ --------- ----------- ----------- ------------
U.S. 10-Year Bond 6/1/2000 75 7,397,597 7,271,484 126,113
</TABLE>
Total net unrealized appreciation on open futures contracts ............ 64,203
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Currency Abbreviation
---------------------------------------------------------------------------
ARA Argentine Peso JPY Japanese Yen
BRC Brazilian Real KRW South Korean Won
CAD Canadian Dollar MXP Mexican Peso
CLP Chilean Peso NOK Norwegian Kroner
CNR Chinese Renminbi PHP Philippine Peso
COP Colombian Peso PLZ Polish Zloty
EUR Euro SGD Singapore Dollar
GBP British Pound SKK Slovakia Koruna
GRD Greek Drachmas THB Thai Bahts
HUF Hungarian Forint USD U.S. Dollar
ILS Israeli Shekel ZAR South African Rand
IND Indonesian Rupiah
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $75,056,469) ..................... $ 68,755,134
Foreign currency, at value ................................................. 9,002
Receivable for investments sold ............................................ 1,473
Interest receivable ........................................................ 1,501,172
Receivable for Fund shares sold ............................................ 206
Unrealized appreciation on forward currency exchange contracts ............. 535,062
------------
Total assets ............................................................... 70,802,049
Liabilities
--------------------------------------------------------------------------------------------
Due to custodian bank ...................................................... 16,991
Payable for investments purchased .......................................... 74,236
Dividends payable .......................................................... 265,542
Payable for Fund shares redeemed ........................................... 14,221
Payable for daily variation margin on open futures contracts ............... 280
Unrealized depreciation on forward currency exchange contracts ............. 144,059
Accrued management fee ..................................................... 53,496
Accrued reorganization costs ............................................... 26,007
Accrued Directors' fees and expenses ....................................... 34,955
Other accrued expenses and payables ........................................ 111,728
------------
Total liabilities .......................................................... 741,515
--------------------------------------------------------------------------------------------
Net assets, at value $ 70,060,534
--------------------------------------------------------------------------------------------
Net Assets
--------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income (1,004,163) Net
unrealized appreciation (depreciation) on:
Investment securities .................................................... (6,301,335)
Futures .................................................................. 64,203
Foreign currency related transactions .................................... 292,400
Accumulated net realized gain (loss) ....................................... (6,276,766)
Paid-in capital ............................................................ 83,286,195
--------------------------------------------------------------------------------------------
Net assets, at value $ 70,060,534
--------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------------------------------------------------------------------
NetAsset Value, offering and redemption price per share ($70,060,534 /
7,894,147 shares of capital stock outstanding, $.01 par value, unlimited ------------
number of shares authorized) ............................................ $ 8.87
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Interest ....................................................... $ 2,346,373
-----------
Expenses:
Management fee ................................................. 285,107
Services to shareholders ....................................... 120,040
Custodian and accounting fees .................................. 90,053
Auditing ....................................................... 33,676
Legal .......................................................... 8,308
Directors' fees and expenses ................................... 77,971
Reports to shareholders ........................................ 17,922
Registration fees .............................................. 66,847
Reorganization ................................................. 28,384
Other .......................................................... 7,591
-----------
Total expenses, before expense reductions ...................... 735,899
Expense reductions ............................................. (196,842)
-----------
Total expenses, after expense reductions ....................... 539,057
--------------------------------------------------------------------------------
Net investment income (loss) 1,807,316
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... (78,075)
Futures ........................................................ 296,559
Written options ................................................ 3,856
Foreign currency related transactions .......................... 240,186
-----------
462,526
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (4,635,849)
Futures ........................................................ 64,203
Options ........................................................ (31,035)
Foreign currency related transactions .......................... 244,973
-----------
(4,357,708)
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions (3,895,182)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(2,087,866)
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Statements of Changes in Net Assets
---------------------------------------------------------------------------------------
Six Months
Ended April 30, Year Ended
2000 October 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
---------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) ...................... $ 1,807,316 $ 4,917,726
Net realized gain (loss) on investment transactions 462,526 (1,150,008)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (4,357,708) (4,713,075)
------------- -------------
Net increase (decrease) in net assets resulting ... (2,087,866) (945,357)
from operations
------------- -------------
Distributions to shareholders from:
Net investment income ............................. (1,859,267) (3,413,831)
Tax return of capital ............................. -- (1,499,196)
------------- -------------
Fund share transactions:
Proceeds from shares sold ......................... 1,640,754 14,334,815
Reinvestment of distributions ..................... 1,140,240 3,565,063
Cost of shares redeemed ........................... (13,737,070) (34,802,146)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (10,956,076) (16,902,268)
------------- -------------
Increase (decrease) in net assets ................. (14,903,209) (22,760,652)
Net assets at beginning of period ................. 84,963,743 107,724,395
Net assets at end of period (including accumulated
distributions in excess of net investment
income of $1,004,163 and $952,212, ------------- -------------
respectively) .................................. $ 70,060,534 $ 84,963,743
------------- -------------
Other Information
---------------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 9,093,351 10,857,540
------------- -------------
Shares sold ....................................... 180,094 1,462,774
Shares issued to shareholders in reinvestment of
distributions .................................. 125,351 368,311
Shares redeemed ................................... (1,504,649) (3,595,274)
------------- -------------
Net increase (decrease) in Fund shares ............ (1,199,204) (1,764,189)
------------- -------------
Shares outstanding at end of period ............... 7,894,147 9,093,351
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
------------------------------------------------------------------------------------
Years Ended October 31, 2000(a) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.34 $ 9.92 $ 9.71 $10.25 $10.53 $10.78
-----------------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) .22 .49 .62 .59 .67 .80
------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.47) (.58) .21 (.54) (.28) (.25)
-----------------------------------------------------
------------------------------------------------------------------------------------
Total from investment
operations (.25) (.09) .83 .05 .39 .55
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.22) (.33) (.60) (.14) (.42) (.36)
------------------------------------------------------------------------------------
Tax return of capital -- (.16) (.02) (.45) (.25) (.44)
-----------------------------------------------------
------------------------------------------------------------------------------------
Total distributions (.22) (.49) (.62) (.59) (.67) (.80)
------------------------------------------------------------------------------------
Net asset value, end of period $ 8.87 $ 9.34 $ 9.92 $ 9.71 $10.25 $10.53
-----------------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (b) (2.60)** (.99) 8.91 0.66 3.97 5.43
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 70 85 108 135 217 357
------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.81(c)* 1.41 1.48 1.39 1.28 1.20
------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 1.34(c)* 1.16 1.00 1.00 1.00 1.00
------------------------------------------------------------------------------------
Ratio of net investment income
(loss) (%) 4.80* 5.04 6.43 6.00 6.67 7.73
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 64.1* 148.5 218.3 256.5 335.7 182.8
------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended April 30, 2000 (Unaudited).
(b) Total returns would have been lower had certain expenses not been reduced.
(c) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.69% and
1.25%, respectively.
* Annualized
** Not annualized
On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current income
through short-term instruments. Financial information prior to December 27,
1995 should not be considered representative of the present Fund.
25
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Global Bond Fund (the "Fund") is a non-diversified series of
Global/International Fund, Inc., (the "Corporation") which is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company organized as a Maryland corporation.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments stated at value determined as of the close of
regular trading on the New York Stock Exchange. Portfolio debt securities
purchased with an original maturity greater than sixty days are valued by
pricing agents, approved by the officers of the Corporation, whose quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
26
<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on currencies as a
hedge against potential adverse price movements in the value of portfolio
assets. In addition, during the period, the Fund purchased call options on
securities to lock in the purchase price of a security which it expects to
purchase in the near future and to enhance potential gain.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
prices or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations. Gain or loss is recognized when the
option contract expires or is closed.
If the Fund writes a covered call option, the Fund foregoes, in exchange for the
premium, the opportunity to profit during the option period from an increase in
the market value of the underlying security above the exercise price. If the
Fund writes a put option it accepts the risk of a decline in the market value of
the underlying security below the exercise price. Over-the-counter options have
the risk of the potential inability of counterparties to meet the terms of their
contracts. The Fund's maximum exposure to purchased options is limited to the
premium initially paid. In addition, certain risks may arise upon entering into
option contracts including the risk that an illiquid secondary market will limit
the Fund's ability to close out an option contract prior to the expiration date
and that a change in the value of the option contract may not correlate exactly
with changes in the value of the securities or currencies hedged.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the
27
<PAGE>
buyer or seller agrees to take or make a delivery of a specific amount of a
financial instrument at a specified price on a specific date (settlement date).
During the period, the Fund purchased interest rate futures to manage the
duration of the portfolio and as a temporary substitute for purchasing selected
investments and the Fund also sold interest rate futures to hedge against
declines in the value of portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund dependent upon
the daily fluctuations in the value of the underlying security and are recorded
for financial reporting purposes as unrealized gains or losses by the Fund. When
entering into a closing transaction, the Fund will realize a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price.
Certain risks may arise upon entering into futures contracts, including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with the changes in the value of
the securities or currencies hedged. When utilizing futures contracts to hedge,
the Fund gives up the opportunity to profit from favorable price movements in
the hedged positions during the term of the contract.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge against changes in the exchange rates
relating to foreign currency denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Sales and
purchases of forward contracts having the same settlement date and broker are
offset and any gain (loss) is realized on the date of offset; otherwise, gain
(loss) is realized on settlement date. Realized and unrealized gains and losses
which represent the difference between the value of a forward contract to buy
and a forward contract to sell are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
28
<PAGE>
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At October 31, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $7,990,000, which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until October 31, 2002
($686,000), October 31, 2003 ($5,010,000), October 31, 2004 ($737,000), and
October 31, 2007 ($1,557,000), the respective expiration dates, whichever occurs
first.
Distribution of Income and Gains. All of the net investment income of the Fund
is declared as a daily dividend and is distributed to shareholders monthly. Net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed, and, therefore,
will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in options, futures, forward foreign
currency exchange contracts, and foreign currency denominated investments. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis.
All discounts are accreted for both tax and financial reporting purposes.
29
<PAGE>
B. Purchases and Sales of Securities
During the six months ended April 30, 2000, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $19,719,637 and $30,039,249, respectively. Purchases and sales of
U.S. Government obligations aggregated $3,612,469 and $4,031,250, respectively.
The aggregate face value of futures contracts opened and closed during the six
month ended April 30, 2000 was $53,124,772 and $51,452,108, respectively.
Transactions in written options for the six months ended April 30, 2000 are
summarized as follows:
Over-the-Counter
Options on Currencies
(000 omitted)
-----------------------
JPY Premiums
----------------------- --------------------
Beginning of Period ......... 272,500 $ 35,425
Written ..................... 272,500 28,612
Closed ...................... (272,500) (35,425)
Exercised ................... -- --
Expired ..................... (272,500) (28,612)
End of Period ............... -- $ --
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.75% of the first
$1,000,000,000 of average daily net assets and 0.70% of such assets in excess of
$1,000,000,000, computed and accrued daily and payable monthly. Effective March
1, 1999, the Adviser agreed not to impose all or a portion of its management fee
until February 28, 2001 in order to maintain the annualized expenses of the Fund
at not more than 1.25% of average daily net assets. Certain expenses incurred in
connection with the reorganization are excluded from the expense limitation. For
the six months ended April 30, 2000, the Adviser did not impose a portion of its
management
30
<PAGE>
fee aggregating $168,069 and the amount imposed aggregated $117,038. This was
equivalent to an annual effective rate of 0.31% 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, 2000, the amount charged to the Fund by SSC
aggregated $56,563, of which $9,757 is unpaid at April 30, 2000.
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,
2000, the amount charged to the Fund by STC aggregated $5,888, of which $3,661
is unpaid at April 30, 2000.
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, 2000, the amount charged to the Fund by SFAC aggregated $38,694,
of which $5,435 is unpaid at April 30, 2000.
The Fund pays each of its Directors not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the six months ended April 30, 2000, Directors' fees and expenses aggregated
$20,426. In addition, a one-time fee of $57,545 was accrued for payment to those
Directors not affiliated with the Adviser who are not standing for re-election,
under the reorganization discussed in Note F. Inasmuch as the Adviser will also
benefit from administrative efficiencies of a consolidated Board, the Adviser
has agreed to bear $28,773 of such costs.
D. Commitments
As of April 30, 2000, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of
$391,003.
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
--------------------------------------------------------------------------------
USD 51,177 COP 101,074,773 5/8/2000 (876)
USD 46,693 HUF 12,521,726 5/8/2000 (2,658)
USD 26,812 ILS 109,671 5/9/2000 308
USD 51,177 COP 101,074,773 5/10/2000 (884)
31
<PAGE>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
--------------------------------------------------------------------------------
USD 65,321 KRW 72,833,117 5/10/2000 313
USD 27,199 PLZ 114,395 5/10/2000 (1,677)
USD 52,330 SGD 89,338 5/10/2000 12
COP 101,074,773 USD 51,177 5/10/2000 884
USD 48,606 IND 370,137,660 5/15/2000 (1,961)
USD 1,460,000 JPY 154,649,040 5/15/2000 (27,930)
GBP 940,317 USD 1,516,168 5/15/2000 56,305
NOK 22,331,384 USD 2,742,066 5/15/2000 244,439
JPY 501,034,117 USD 4,662,951 5/15/2000 23,311
USD 25,268 CNR 209,409 5/17/2000 (5)
USD 34,214 ILS 138,600 5/17/2000 38
USD 26,106 THB 988,376 5/22/2000 (120)
USD 39,059 COP 78,352,354 5/24/2000 (119)
USD 52,584 ILS 214,163 5/24/2000 310
USD 73,874 PHP 3,032,528 5/24/2000 (556)
USD 25,388 SGD 42,978 5/24/2000 (208)
USD 40,752 CLP 21,007,656 5/26/2000 (103)
USD 53,612 IND 427,288,437 5/30/2000 155
USD 44,900 KRW 49,749,200 5/30/2000 (61)
USD 32,047 PHP 1,333,155 5/30/2000 168
USD 116,509 ZAR 796,224 5/30/2000 554
USD 49,006 ARA 49,060 5/31/2000 40
USD 42,674 GRD 15,797,729 6/2/2000 (8)
CAD 4,251,374 USD 2,920,000 6/12/2000 47,584
USD 45,732 GRD 15,855,305 6/20/2000 (2,941)
USD 112,975 PLZ 473,986 6/20/2000 (8,635)
USD 24,371 SKK 1,047,933 6/20/2000 (1,526)
EUR 37,937 USD 37,000 6/21/2000 2,384
USD 55,000 BRC 105,875 6/23/2000 2,674
USD 56,847 BRC 104,030 6/23/2000 (177)
USD 81,850 THB 3,086,563 6/23/2000 (623)
USD 123,937 SKK 5,394,234 6/26/2000 (6,381)
USD 61,726 HUF 16,633,305 6/27/2000 (3,592)
USD 1,730,906 EUR 1,805,002 6/30/2000 (83,012)
EUR 870,000 USD 839,289 6/30/2000 45,016
EUR 1,805,002 USD 1,741,285 6/30/2000 93,395
USD 52,418 CLP 27,702,971 7/24/2000 875
USD 69,518 CNR 584,246 7/24/2000 658
USD 13,000 MXP 143,618 9/15/2000 1,743
USD 25,258 ARA 25,538 10/6/2000 21
USD 50,000 ARA 53,925 10/26/2000 3,272
32
<PAGE>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
--------------------------------------------------------------------------------
USD 75,000 MXP 842,250 10/31/2000 10,374
USD 25,520 ARA 26,515 2/23/2001 223
391,003
E. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $1 billion
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated, pro rata based on net assets, among each of the
Participants. Interest is calculated based on the market rates at the time of
the borrowing. The Fund may borrow up to a maximum of 33 percent of its net
assets under the agreement.
F. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
33
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Nicholas Bratt* Robert G. Stone, Jr.
o President o Honorary Director; Chairman
Emeritus of the Board and
Sheryle J. Bolton Director, Kirby Corporation
o Director; Chief Executive Officer,
Scientific Learning Corporation Susan E. Dahl*
o Vice President
William T. Burgin
o Director; General Partner, Jan C. Faller*
Bessemer Venture Partners o Vice President
Keith R. Fox Ann M. McCreary*
o Director; General Partner, o Vice President
The Exeter Group of Funds
Gerald J. Moran*
William H. Luers o Vice President
o Director; Chairman and President,
U.N. Association of America M. Isabel Saltzman*
o Vice President
Kathryn L. Quirk*
o Director, Vice President and John Millette*
Assistant Secretary o Vice President and Secretary
Joan E. Spero John R. Hebble*
o Director; President, Doris Duke o Treasurer
Charitable Foundation
Caroline Pearson*
Paul Bancroft III o Assistant Secretary
o Honorary Director; Consultant
*Scudder Kemper Investments, Inc.
Thomas J. Devine
o Honorary Director; Consultant
William H. Gleysteen, Jr.
o Honorary Director; Consultant;
Guest Scholar, Brookings Institution
34
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
The Scudder Family of Funds+++
--------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Growth
Tax Free Money Market+ Scudder Classic Growth Fund***
Scudder Tax Free Money Fund Scudder Large Company Growth Fund***
Scudder California Tax Free Money Fund** Scudder Select 1000 Growth Fund
Scudder New York Tax Free Money Fund** Scudder Development Fund
Scudder 21st Century Growth Fund
Tax Free+
Scudder Limited Term Tax Free Fund Global Equity
Scudder Medium Term Tax Free Fund Worldwide
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder High Yield Tax Free Fund Scudder International Value Fund
Scudder California Tax Free Fund** Scudder International Growth and
Scudder Massachusetts Limited Term Income Fund
Tax Free Fund** Scudder International Fund++
Scudder Massachusetts Tax Free Fund** Scudder International Growth Fund
Scudder New York Tax Free Fund** Scudder Global Discovery Fund***
Scudder Ohio Tax Free Fund** Scudder Emerging Markets Growth Fund
Scudder Gold Fund
U.S. Income
Scudder Short Term Bond Fund Regional
Scudder GNMA Fund Scudder Greater Europe Growth Fund
Scudder Income Fund Scudder Pacific Opportunities Fund
Scudder Corporate Bond Fund Scudder Latin America Fund
Scudder High Yield Bond Fund The Japan Fund, Inc.
Global Income Industry Sector Funds
Scudder Global Bond Fund Choice Series
Scudder International Bond Fund Scudder Financial Services Fund
Scudder Emerging Markets Income Fund Scudder Health Care Fund
Scudder Technology Fund
Asset Allocation
Scudder Pathway Conservative Portfolio Preferred Series
Scudder Pathway Balanced Portfolio Scudder Tax Managed Growth Fund
Scudder Pathway Growth Portfolio Scudder Tax Managed Small Company Fund
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
</TABLE>
35
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Closed-End Funds#
-----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder
Kemper Investment'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 Kemper Investment'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.
36
<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 exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
37
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
38
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
RT061400
61-6-40
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
